Evaluating Drivers of Cryptocurrency Mass Adoption

The current massive downturn in cryptocurrency markets feels strikingly different than previous ones.

Amidst the all too familiar proclamations of Bitcoin’s death and assertions that cryptocurrency is a scam, I’m starting to see clear signs of meaningful adoption beyond speculation.

These are some of the forces that I believe will gradually propel cryptocurrency across the chasm that separates starry-eyed early adopters from the pragmatic members of the early majority whose support is required for mainstream adoption.

Institutional Adoption

Some of the world’s largest and most influential institutions are embracing cryptocurrency with open arms.

Bakkt is a startup owned by the operator of the New York Stock Exchange. With help from Microsoft, Starbucks, and the Boston Consulting Group, Bakkt is launching a suite a products that will help institutions and consumers easily store and spend digital currencies. Bakkt’s CEO recently stated that Starbucks intends to give customers the ability to pay with Bitcoin.

Fidelity Investments (responsible for over $2 trillion in assets), has launched a Digital Assets Platform to provide enterprise-grade custody and execution services for institutional investors.

Nasdaq’s CEO has stated the exchange is open to becoming a platform for trading cryptocurrencies. Nasdaq is providing its market surveillance technology for cryptocurrency exchange Gemini and is planning to list Bitcoin futures next year.

The Chicago Board Options Exchange, TD Ameritrade, Nasdaq, and Fidelity have all invested in cryptocurrency exchange ErisX.

Yale’s endowment manager recently invested in two crypto funds, and Stanford University is one of many prominent schools that has launched an academic research center and courses focused on cryptocurrency and blockchain technology.

The state of Ohio is allowing businesses and individuals to pay taxes with Bitcoin.

Square has made small profits on Bitcoin sales since adding it to its Cash App in January. Robinhood, one of the most popular investment apps for millennials, added support for cryptocurrencies this year.

Continued adoption of cryptocurrency by respected institutions will gradually increase trust in the technology.

Decentralized Applications

Ethereum was designed to serve as a decentralized world computer, powered by a cryptocurrency (Ether), on which anyone could build and access unstoppable applications. After years of development, we’re finally starting to see some of these applications go live.

Augur is a decentralized prediction market where users can bet on the outcome of any event. The platform has a small user base, but saw a surge of activity during the 2018 U.S. midterm elections. There is an abundance of literature demonstrating the societal value of prediction markets beyond making it easy for people to bet. Augur launched on Ethereum’s Mainnet in July 2018 and Guesser recently published a great overview of the state of the project.

Golem is a distributed supercomputing network. Users can outsource computational tasks to a global network of computers, and earn money for renting out their computer’s processing power to the network. The platform should provide an environment where computing tasks can be completed more quickly, and at a lower cost than when relying on a single computer. Golem is currently in public beta.

StorJ is a decentralized file storage system. Instead of hosting files in “the cloud” (server farms managed by large corporations) files are spliced up, spread across a peer-to-peer global network of computers, and can only be re-assembled by the owner. Users could benefit from cheaper costs, increased privacy, and the ability to earn money by renting out idle hard drive space. Former Docker CEO Ben Golub is the current Executive Chairman and interim CEO of StorJ. StorJ is currently in public alpha.

Current usage of Dapps is negligible, but these are still early days.

Economic Crises

Venezuelan citizens have been using cryptocurrency to survive as the government has destroyed the value of their national currency through hyperinflation.

Cryptocurrency trading activity has surged in Turkey and Zimbabwe as both countries have been plagued with economic and political crises.

Ray Dalio, founder of the world’s largest hedge fund, is one of the more prominent voices warning that the U.S. dollar’s status as world reserve currency is in danger. He believes Federal Reserve policies could lead to a 30% depreciation of the dollar.

If one of the world’s major currencies suffers from a loss of confidence, some people are likely to start taking a closer look at cryptocurrencies.

Social Media Networks

Steemit, Cent, Y’alls, Minds, Bitchute, and Peepeth are cryptocurrency-powered social networks that have achieved varying levels of usage.

These sites allow users to earn money for sharing and curating content, and Cent makes it incredibly easy for users to earn crypto without having to purchase it, eliminating one of the major barriers to entry.

If these platforms users allow users to easily earn money while creating and sharing valuable content, they will grow.

Entertainment/Media Platforms and Applications

SingularDTV is an entertainment studio that has launched a crowdfunding portal for artists called Tokit and is building a peer-to-peer content distribution platform powered by an Ethereum-based cryptoasset.

DJ and electronic music producer Gramatik raised $2.25 million in less than a day using Tokit. The studio’s first film, a documentary called Trust Machine premiered in October. SXSW award-winning indie science fiction film Prospect premiered in theaters in November, has received positive reviews from critics so far, and will make its digital debut on SingularDTV.

Audius is a platform for audio distribution, attestation, and monetization that uses two Ethereum-based cryptoassets as the foundation for an open-source alternative to Spotify and SoundCloud. The team has backing from Kleiner Perkins, Lightspeed Venture Partners, and employees and advisors that have worked at Twitch, EA Games, Google, Microsoft, and Bittorrent.

Video games like Zombie BattleGround, God’s Unchained, Crypto Space Commander, and Project Genesis are demonstrating how cryptocurrency-powered open blockchains could enable true ownership of game assets for players and the creation of assets that can be carried across different game worlds.

Quality content, enjoyable user experiences, and increased control and revenues from successfully cutting out middlemen will attract content creators and consumers.

Supply Chain Management Solutions

Sweetbridge is building a platform that uses Ethereum’s blockchain to keep all parties involved in a transaction in sync and removes the friction and obstacles of traditional commerce. Their system makes use of two Ethereum-based cryptoassets.

They are one of the first companies to be accepted into the state of Arizona’s FinTech sandbox program, and a winner of Lufthansa’s Aviation Blockchain challenge. Former director of the U.S. Mint Ed Moy recently joined Sweetbridge as an advisor.

Blockshipping is working with Ethereum-based decentralized organization MakerDAO to integrate the stable cryptocurrency DAI into their operations. Their CEO is a former CIO at Maersk (the world’s largest shipping company) and the team includes several other former employees of the shipping giant.

Tradeshift is a cloud-based business platform focused on supply chain payments, marketplaces, and applications. Their platform currently serves 1.5 million companies across the globe, have customers such as HSBC, Siemens and Volvo, and process over half a trillion dollars in transaction value annually. They are also working with MakerDAO, leveraging DAI in order to democratize access to to financing for the world’s small businesses.

Cryptocurrencies hold enormous potential to increase the efficiency of supply chain operations by decreasing transaction fees, time to complete payments, and reliance on central intermediaries to facilitate transactions.

Energy Production and Distribution Systems

Grid+ has developed a suite of products that aim to lower costs, increase efficiency, and drive green energy usage by helping consumers access wholesale energy markets. Their platform makes use of two Ethereum-based cryptoassets to facilitate access to their network.

They’ve received a grant from the United States Department of Energy, a license to sell retail energy in the state of Texas, and have already started supplying energy to customers in Texas who prefer the service to traditional energy providers.

The Sun Exchange allows investors across the globe to buy and lease solar cells and receive rental income from their holdings (in Bitcoin or national currencies) through a blockchain-based payment system.

If these types of services are able to provide increased access to energy and lower costs of obtaining energy, consumers will adopt them.

Conclusion

A recently published global benchmarking study conducted by researchers at The University of Cambridge estimates that there are over 139 million cryptocurrency users (38% of which are “active”), up from less than 10 million that were measured in the 2017 version of the study.

I’ve only highlighted a sample of the areas where cryptocurrencies are starting to provide some value beyond speculation to a small group of users.

So long as entrepreneurs and technologists continue making steady progress towards addressing scaling limitations and improving user experiences, and regulators don’t take extreme measures to stifle the technology’s adoption, there’s no reason not to expect continued growth.

For me, the question isn’t if mass adoption will take place but rather when, and in what form?