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Crypto’s Darkest Hour: Finding Hope in Technological Innovation and Institutional Adoption

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It’s no secret that the world of crypto has experienced its fair share of ridicule and skepticism within traditional finance circles. Once seen as the smart, wealthy newcomer at the party, crypto has now taken on the role of the clown in the corner, complete with questionable personal hygiene. The ongoing trial of Sam Bankman-Fried only reinforces this perception. However, in the midst of this darkness, there is always the promise of a new day. So, how can we usher in a new era of growth and optimism?

The answer lies in a combination of innovative technology, real-world asset adoption, and the growing involvement of mature institutions.

The Importance of a Blockchain-First Mentality

First and foremost, it’s crucial to understand that salvation will not come from a bitcoin spot ETF. The belief that BlackRock selling a few ETFs on centralized exchanges is the key to crypto’s future is misguided. The true future lies in embracing a β€œblockchain first” mentality. Recent partnerships between Chainlink and other financial institutions exemplify this shift towards meaningful innovation. Through their cross-chain interoperability protocol, these collaborations allow financial institutions to launch their own private blockchains that can interact with decentralized, public blockchains like Ethereum. With projects already announced with Swift, Google, ANZ, and DTCC, it’s clear that this is a viable endgame for the industry. Financial institutions will transition their rails to private blockchains used by both retail and wholesale customers, while public, permissionless blockchains exist as alternatives for crypto-savvy users.

We must also acknowledge the considerable progress we’ve made thus far. The surpassing of both PayPal and Mastercard in value transfer through stablecoins in 2022 is a testament to the potential of blockchain-based financial rails.

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Real-World Assets on the Blockchain

Another significant development is the increasing deployment of real-world assets (RWAs) on the blockchain. This opens up the possibility of trillions of dollars of value being transferred on-chain. In fact, decentralized blockchains have already facilitated over $3 billion worth of RWAs purchases this year, creating a range of cashflow-generating businesses with promising futures.

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It’s not just financial assets like real estate and government bonds that can benefit from blockchain adoption. Entire industries, such as music and film royalties, stand to gain transparency, fractionalization, wider access, and fewer intermediaries. The concept of β€œSocialFi” is also tantalizing – a decentralized, transparent world of social media where users truly own their own data and identity, free from the whims of figures like Zuck or Elon. Base’s Friendtech, for instance, has already generated over $40 million in fees in under three months, potentially paving the way for this vision.

There is undoubtedly a bright future to fight for in the crypto space. But to achieve it, we must shed the clown outfit and embrace the potential of technological innovation and institutional adoption.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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