Despite the many obstacles to growth in its path, crypto has shown itself to be quite resilient. Whenever crypto has fallen, it has always gotten back up, even stronger than it was before. That is why many enthusiasts and advocates have proudly identified Bitcoin as a “safe-haven” asset.
However, the 2020 global economic crisis, caused by the outbreak of COVID-19, is a different beast altogether, and one capable of revealing some major flaws in the blockchain system. But if you thought that the end of crypto had finally come with a “Black Thursday” type drawdown, like it has shown in the past, crypto has other plans.
It seems like blockchain just took a little time to activate its inner potential and turn into a very good use case for various areas suffering from the pandemic, including supply chain infrastructure, e-commerce, education, healthcare and information delivery.
At the same time some governments, redefining the idea behind the distributed ledger technology, have started deploying blockchain-powered surveillance systems, using what is aimed to protect us against us. So, it is obviously too early to say “goodbye” to crypto, but there are a few different scenarios possible for its post-pandemic future.
Already envisioned a digitized world where paper-based processes are no longer needed? Well, it could be a comfort to revitalize, reorganize or plan your business knowing that now every contract can be stored in a safe and transparent location, free from any fraudulent interference and that all operations, be it a data transfer or a payment transaction, are borderless and intermediary free.
Sounds rather optimistic, and indeed it is, considering the fact that an overall blockchain-led transformation of the global economy is still many years away.
However, COVID-19 has forced people to look at blockchain differently and stopped them from viewing the technology as disruptive. It is not a hedge on traditional business models anymore, as it is taking a more foundational character which means cooperation and working out brand-new solutions for currently existing sectors of society.
The idea is that the blockchain economy is not limited to cryptocurrencies. Blockchain can serve as a way to support either enterprises or parts of the general population that are on the verge of being tapped out with the help of short-term lending options in the form of Universal Basic Income (UBI).
By developing appropriate decentralized identity standards (DIDs), it could be much easier to simplify and oversee loans for Central Banks issuing their own digital currencies, which may well become a reality in China or the USA.
Adjusting to the new environment, cryptocurrencies themselves will gradually turn into a powerful alternative to both financial services and traditional cashless payments. This will result in skyrocketing demand for stablecoins.
For instance, owners of Tether (USDT), which is backed by the value of the American dollar, are more likely to be sheltered from high volatility and negative interest rates during critical periods because they will be provided with a 5% and additional annual percentage yield rate of return no matter what is happening around banking fields or the bond market.
Using stablecoins like Dai (DAI) as a payment method can help ease the burdens related to ongoing contactless payments, like risky, slow and expensive transactions.
By combining blockchain technology with traditional credit cards, people will still be able to pay for goods and services right from home while managing their crypto in one place via safe and user-friendly mobile wallet apps.
Thus, the rising popularity of blockchain technology, with DeFi and cryptocurrencies gaining momentum, may eventually see it rewriting the rules of how finance is done. Should blockchain take precedence in the post-coronavirus world, Bitcoin would stand to regain its status as “digital gold.”
Blockchain technology may take up a new role as the glue that can piece together the structures of economic globalization that has been crumbling due to the anti COVID-19 measures enforced by governments all over the world.
Thanks to its decentralized nature, independent of any ideology, blockchain can build bridges between different countries strongly held in their own patterns of economic order. And after the virus is defeated, blockchain can be used to create a novel global market for everyone, driven by a new economic thinking based on the idea of the ledger as a worldwide database.
Although the technology is not strong enough yet to be a real game changer, it has already grabbed this opportunity to re-establish communications that are currently down via the digitization of supply processes and by giving many companies a chance to try taking on remote and decentralised working.
Imagine a completely transparent virtual workspace without any central office but with hundreds of staff members each taking part in running the whole operating system by being able to interact and cooperate with each other, wherever they are.
The same is true for cross-entities collaborations, so the working approach towards dealing with partner organizations is unchanging even in times of crisis. People setting their own timetable without compromising their productivity and daily commitments, modernized social chats and virtual meetings to keep the communities engaged and fair salary calculating formulas addressing many important criteria such as employee's skills, experience, performance and market value, are quite common.
What everyone gets out is in direct proportion to what he or she puts in. Flexibility like that is a true lifeboat should anything untoward happen and blockchain is capable of converting this vision into reality.
DLT is about ambitious people who are passionate about cutting-edge technologies and our future is more up to them than we can foresee. And getting these people together is what may also contribute to mass adoption of blockchain as a global interoperability provider.
The coronavirus case has created a precedent in which blockchain is implemented into massive tracking systems to identify and monitor citizens suspected to be infected.
And despite the fact that the goal itself seems to be relevant amidst the outbreak of quite a severe disease, there is a risk that governments will grow too fond of their new authority and not relinquish it once the pandemic is over.
We have a precursor of what this would look like in authoritarian China with its social credit system functioning with the use of AI and numerous surveillance cameras enabling facial recognition. As a result, local authorities have a special rating where every single individual is evaluated for his public behaviour which may lead to both perks and penalties.
But if the adoption of such a drastic reform at a national level is no surprise in China, a similar initiative violating the fundamentals of modern democracy from the US, inspired by Israel’s surveillance measures, may cause widespread outrage.
Among other things, this will have an impact on the new digital currencies backed by central banks. Staunch defenders of privacy are concerned about the appearance of government-pegged stablecoins as they may inevitably result in total control over private fortunes from the authorities due to physical cash getting phased out of circulation forever.
Following China’s lead, Western countries like Canada and England, and Asian giants, like Japan, in order to develop the new virtual assets concept, may intensify their surveillance over people’s incomes and activities, and use blockchain technology in order to make these systems operate. This kind of all encompassing surveillance would be right at home in the pages of an Orwell, Huxley or Strugatsky brothers novel.
If government surveillance flourishes, we may witness an increasing surge in the value of already existing cryptocurrencies if they can develop into a means of circumventing high taxes, censorship and any other unwanted government reach in both underdeveloped and wealthy countries. In order to keep financial transactions untraceable people will have to go underground, where shadow markets stretch beneath the legal system.
So, along with the theories of a financial reset coming in force owing to the issue of state centralised currencies and so-called “hyberbitcoinization” that will make the pioneer of digital assets the most used money on the planet, there is a fear that crypto will be a major impetus to expanding hazardous activities.
These not only include trades occurring in the darknet, where drugs, weapons and other forbidden goods are trafficked, but also money laundering and tax evasion, resulting in disrupting the benchmark rates of legal tenders and global money inflows, not to mention cybercrimes like terrorism financing.
Long before the coronavirus appeared, the Organisation for Economic Co-operation and Development (OECD), in response to the launch of Bitcoin, forecast that in 2020 more than two-thirds of its whole working power would be concentrated in the shadow economy.
And if it turns out to be true, cryptocurrencies will be welcomed to the dark side and remain far from any legal adoption for many decades to come. Regardless of all of the positives blockchain can saturate the traditional financial system with, the possibility that Bitcoin will never become a friend to white markets cannot be ruled out, and, moreover, most of its enthusiasts will be absolutely fine with that.
It is very hard to bet on one of these scenarios as all of them are projections of an industry that changes by the minute. Whether blockchain becomes an antidote to the setbacks experienced by the traditional financial system and the de-globalisation caused by COVID-19, a prized tool of authoritarian governments seeking to extend their surveillance capabilities or the fuel of the underground shadow markets, is unclear.
But as a matter of fact, the ongoing pandemic will definitely boost the adoption of blockchain technology and cryptocurrencies, be it legal or illegal, and attract many new faces to the community.
So investors, who prefered to wipe crypto out of their portfolios, obviously jumped the gun a little bit, as any possible course of events will present blockchain as a valuable technology in the future.
Many governments across the world have already recognized that and now they are releasing sustainable frameworks for regulatory sandboxes by facilitating various crypto operations, including trading activities, without sacrificing safety, which increases the importance of the most credible exchanges like Coinbase or Bitstamp.
However, fraudulent behaviour is a main side effect of a decentralized economy, and security measures are an aspect that still needs to be improved. In the history of crypto only a few exchanges like HitBTC have never been hacked, which means that blockchain is not yet ready to take its place at the center of the global market simply due to a lack of trust from everyday people.
But who said that the fundamentally different world that we will see once the pandemic is behind our backs for good will never fix that?