Blockchain Events
$174 Billion In Blockchain Tolls And Trolling
Blockchain connects assets, communications, data, and users. According to our base assumption, the bridging business might be worth $174 billion by 2030.
Blockchain bridges are the technology’s final frontier. Bridges allow assets, communications, data, and users to be exchanged. Despite billions of dollars in breaches, bridges have been skillfully used. Bridges were utilized by Solana (SOL-USD) and Avalanche (AVAX-USD) to quickly onboard hundreds of thousands of extra clients and billions of dollars in assets.
According to our discounted cash flow analysis, the blockchain bridging business will be worth $174.1 billion by 2030. We’ll talk about growth, significant developments, the future, and how we arrived at our base case.
Blockchain for goal-achieving
Users, investors, apps, and ecosystems face risks and advantages while using bridges. Bridges benefit from a fragmented economy because they collect tolls on blockchain information. We live in a multi-chain world where $54.2 billion is distributed over 12 smart contract platforms. Because blockchains are closed-loop value systems, assets are restricted to their original blockchains. Asset prices and liquidity vary by the ecosystem. Interest rates for the same asset differ even within the same application. By harmonizing prices based on transparent data, a successful set of blockchain bridges could boost capital efficiency in DeFi.
Bridging infrastructure intends to connect blockchain asset markets via electronic trading, allowing capital to be truly convertible and transportable. Bridges (or centralized exchanges or stablecoin issuers) must provide trustworthy blockchain-to-blockchain asset transfer methods while minimizing complexity and time. The end state should provide a few-click user experience where safety meets blockchain bridging. A consumer should not have to understand how assets perform a specific function or which blockchains are used. If bridges overcome their safety issues and their technology is properly applied, block space may become a commodity.
Blockchain Security for Growth
Despite the fact that there is a large commercial possibility, bridge safety limits prevent them from reaching their full potential. Hackers stole more than $2 billion in the last year alone. Vitalik Buterin, the co-founder of Ethereum (ETH-USD), expresses concern about bridge safety. Bridges are ideal targets for hackers because they feature cutting-edge designs and a lot of money.
Over 100 bridge projects have resulted from the benefits of a strong bridge combined with greenfield design. The bridge ecosystem currently resembles early cryptocurrency exchanges, where competitors battled for market domination despite safety, practicality, and operational problems. One of the most fragmented blockchain components is the bridge space.
We regard the numerous bridges as a transitory period. If safer, more adaptable bridges are established, economic activity may concentrate on a few winners. Each bridge creates synthetic assets such as Liquid Staking. In DeFi, synthetic asset integration prefers one version of a synthetic asset over others. In traditional finance, multiple sites create US Treasury Futures, but the majority use CME derivatives. The most successful bridge initiatives will create competitive moats by emphasizing safety, user experience, application integration, and synthetic asset proliferation.
Creating and implementing blockchain bridges
Due to the infancy and complexity of bridges, even experienced smart contract developers struggle to examine their security. Bridges must mathematically prove the most recent transaction history of different blockchains, translate that proof data, lock assets, and then correctly transit and deliver verification between blockchains. Each level adds a new component to the tech stack, often a new design, which can be compromised. In the adversarial nature of blockchain, this is analogous to airlines flying passengers on experimental airframes with new engines.
Lessons learned will improve bridge implementation, and bridge development will most likely coincide with developments in DeFi smart contract security. Over time, the best bridge designs decentralize and minimize trust. Third-party computer nodes are typically used by bridges to verify bridged blockchains, authenticate transactions, and secure locked value. Although some of these networks are as sophisticated as layer-1 blockchains, they all have trust design issues that rely on third-party networks.
A simple majority of a bridge’s nodes can be manipulated in order to steal all bridge cash or create fictitious assets. The most secure bridging solutions rely solely on the trust assumptions of the blockchains being bridged, rather than on a third-party network.
Cosmos’ (ATOM-USD) IBC is the closest thing to a “trustless” roll-up bridge, as it currently exclusively connects Cosmos blockchains. Composable Finance (PICA), which we will discuss further below, is the only program that comes close to IBC’s security.
Our Base Case for Bridging
Based on discounted cash flow analysis, we estimate the bridge sector to be worth $174.1 billion by 2030. At 27% inflation, that comes to $25.7 billion. This represents 8.75% of our $2 trillion smart contract blockchain prediction. Our analysis is based on a discounted cash flow valuation with a 30.8x exit multiple, a terminal yearly cash flow of $5.66B, and GDP+20% terminal growth.
Bridge revenue is made up of tolls and the maximum amount of extractable value (MEV). We calculate their share of blockchain revenue and value locked (TVL). How fees are calculated and who pays them may vary substantially when the bridges’ users migrate from consumers to blockchains and applications as the market evolves (from B2C to B2B). Bridges are used to route assets and communications between chains in order to capitalize on arbitrage opportunities. Bridges can directly bid on block space from the MEV tech stack.
The bridging sector is unfavorable to token investment when compared to layer 1 smart contact protocols and other proven decentralized applications. There is too much rivalry, there is too much uncertainty about safety, and there is too much tokenomics. The capacities, TVL, safety record, and fee structure of top-tier bridges vary. On these features, no project has a moat. We anticipate that numerous solutions will be launched in the coming year because the design area is still in its early stages and no bridge has garnered user traction or application integration.
Look out for Blockchain bridge initiatives.
Although Multichain (MULTI) and Synapse (SYN) produce significant usage fees, their projects are difficult to evaluate due to insufficient token distribution, limited token value accrual, and a lack of transparency. LayerZero’s Stargate Finance (STG) token has a clear value accrual and positive tokeconomics, but it is tied to the Stargate Finance application rather than the bridge. A wormhole has a large user base and an excellent team, however, it has been hacked and does not have a token. Axelar (AXL) has a token with high demand and strong developer tools, however, it has an unfavorable token distribution and a huge near-term token supply. Despite delivering good tokeconomics through community-focused distribution and a token value accrual approach similar to Polkadot, Composable Finance failed to make its debut (DOT-USD).
Despite our reservations, Axelar and Composable Finance show promise. The latter is especially intriguing if even a portion of its goals is met. Axelar appears to be strong once tokens are unlocked since their bridge is well-positioned in the Cosmos ecosystem, with asset integrations in the majority of Cosmos DEXes and great links with USDC (USDC-USD) and Polygon (MATIC-USD). Composable Finance has enormous potential due to its elite staff, incredible technical feats, trustless bridge design, and high-utility, integrated apps.
People who want to become “well-informed digital asset investors” need to know about the bridging space. Bridges are a new and important component of the blockchain technology stack that could be extremely lucrative. The astute investor must also apply his or her conclusions to the debate over centralized versus decentralized custodianship, user interaction with blockchains, and user “ownership.”
Users can utilize self-custody wallets and permissionless protocols to exchange and hold assets, or they can use Coinbase (COIN). To move assets across several blockchains, Coinbase’s frontend links to backend bridges. In the future, Coinbase may use its own centralized database and enormous pool of liquidity to transfer assets across chains. Customers may be persuaded to utilize Coinbase’s app to connect to blockchains via a “walled garden” method involving a semi-self-custody wallet and white-listed dApps. Because Coinbase dominates the user journey from fiat on-ramp through custody to protocol use, this strategy would be detrimental to bridges and other apps.
Circle (USDC creator) has now launched its Cross-Chain Transfer Protocol, which employs verified bridging projects to facilitate cross-chain USDC use. This innovative approach allows USDC interchangeability across blockchains by utilizing approved bridges. Safe bridges would transmit USDC in this circumstance. While USDC is “burned” on one chain and “minted” on another, Circle’s centralized USDC database would assure the safety of bridging USDC tokens. This judgment indicates that bridge assets, at least USDC, can no longer be used to differentiate bridges, and it ensures that arbitrageurs will use them. Users may quickly and safely add value to linked blockchains in order to resolve asset price and interest rate differentials, thereby contributing to a unified blockchain financial system.
Contrary to popular belief, bridge projects such as Synapse are distributing true multi-chain assets known as xAssets to distribute canonical tokens of multi-chain apps such as Sushi (SUSHI-USD). xAssets would provide applications with simpler access to users of other blockchains, as well as a point of differentiation and assured utilization for bridges. If blockspace on one blockchain becomes too expensive, xAssets could allow apps to move assets, execution, and settlement to another.
Disclosures
Ethereum (ETH-USD) is a blockchain that is decentralized and uses smart contracts. Ether is a platform-native cryptocurrency. The market capitalization of Ether is second only to that of Bitcoin.
Solana is a public blockchain platform (SOL-USD) To reach an agreement, evidence of stake and proof of history are used. Internally, it employs SOL.
- Avalanche (AVAX-USD) is a decentralized finance platform and enterprise blockchain installation that is open source.
- Aave (AAVE-USD) is a non-custodial open-source protocol for earning interest on deposits and borrowing assets.
- Optimism (OP-USD) is a cryptocurrency based on Ethereum. Optimism scales Ethereum by making use of the mainnet’s security.
- Polygon (MATIC-USD) is the first Ethereum platform that is well-structured and simple to use. Its core component is Polygon SDK, a modular, extensible framework.
Cosmos (ATOM-USD) allows for the creation of a scalable blockchain ecosystem. The team’s goal is to build a decentralized Internet of Blockchains. Cosmos makes use of proof-of-stake. ATOM holders can stake tokens to help keep the network running and earn extra money.
Multichain (MULTI) is a Web3 router and on-chain asset interoperability platform.
Synapse (SYN) is a protocol that allows arbitrary data to be sent between blockchains. 1. Communication across multiple chains 2. Optimistic Security Model BridgeSTG
Axelar (AXL) is a proof-of-stake and permissionless overlay network. Axelar assists developers in developing dApps that integrate users, features, and assets throughout the decentralized web.
The Picasso parachain, built on the Kusama network, employs parachains to promote interoperability, customization, and security.
Polkadot (DOT-USD) is a multi-chain sharded heterogeneous architecture that connects external networks with layer one “parachains.”
- USD Coin (USDC-USD) is a stablecoin that is tied to the US dollar 1:1.
- Uniswap (UNI-USD) is a decentralized trading system that automates token trading in decentralized finance (defi).
- Stargate Finance (STG) provides consistent liquidity and immediately assured finality. indigenous token (STG)
- VanEck may invest in the asset classes or industries discussed in this article.
This is not a solicitation to buy or sell securities or financial instruments. This information is not intended to provide personalized investment, financial, legal, or tax advice. Certain comments may be predictions, forecasts, or other forward-looking statements that do not represent actual results. These statements are valid as of the date of this communication and are subject to change without notice. Although third-party sources are considered credible, their accuracy and completeness cannot be guaranteed. VanEck does not guarantee third-party data. This is the author’s point of view, not that of VanEck or its employees.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, the unit of account, or value storage. Although cryptocurrency can be exchanged for US dollars or other currencies, it is not backed by any government or central bank. Their worth is determined by supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from market participants’ willingness to exchange fiat currency for cryptocurrency, which may result in a cryptocurrency losing all of its value if its market vanishes. Cryptocurrencies are not insured by the FDIC or SIPC. Legislative and regulatory changes or actions at the state, federal, or international levels may have an impact on bitcoin use, transfer, trading, and value.
Investing in cryptocurrencies exposes you to price volatility, flash crashes, market manipulation, and cybersecurity risks. Cryptocurrency markets and exchanges are not subject to the same rules or customer safeguards as equity, option, futures, or forex trading. A person who accepts cryptocurrencies now may not accept them in the future.
Before buying, investors should investigate the credibility and platform of each cryptocurrency. The features, functions, quality, operation, and use of cryptocurrencies may be complex or difficult to comprehend or evaluate. Attacks on the coin’s security, integrity, or functioning may occur, including those that overload the blockchain or other underlying technology. Some bitcoin transactions are considered completed when they are recorded on a public ledger, rather than when they began.
Investors must be financially capable, knowledgeable, and willing to lose their entire cryptocurrency investment. Bitcoin is not for everyone. The history and performance of cryptocurrency are limited. Cryptocurrency fees and expenses may be prohibitively expensive. The lack of regulation for cryptocurrencies may offer risks, and future legislative developments may have an impact on their profitability and growth.
Do your homework before investing in cryptocurrencies. Van Eck’s information is not intended to be financial, tax, or legal advice. It is not recommended to buy or sell cryptocurrency.
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DAVOS 2023: At #WEF23, policymakers and business leaders were eager to distinguish between distributed ledgers and cryptocurrencies. Not crypto, but blockchain.
From climate solutions to humanitarian aid to moving on from FTX’s stunning collapse, the second day of the World Economic Forum’s 2023 annual conference saw discussions focused on the promise of the technology underlying cryptocurrencies, rather than the often speculative financial assets themselves.
The day opened with a panel of traditional banking professionals seeking to draw a line under the FTX issue, noting that, while the cryptocurrency industry is in crisis, other products founded on distributed ledger technology are not.
“It’s critical not to mix cryptocurrencies with CBDCs, stablecoins, and DLT… they’re all quite distinct,” PayPal President and CEO Dan Schulman stated. Despite the bitcoin crisis, “the underlying tech has operated well,” according to Schulman.
“The promise of a distributed ledger is that it may be faster and cheaper to settle transactions concurrently with no middlemen. That is really significant.”
Importantly, unlike past waves of “blockchain, not bitcoin,” which generally referred to permissioned blockchains, the talks on Tuesday were OK with public ledgers such as Ethereum and the Stellar network. Lynn Martin, President of the New York Stock Exchange, seems to adopt a similar stance, citing the potential benefits of blockchain in making share issuance more efficient or allowing financial exchanges to be settled quickly rather than days later.
“Some of the technologies have now been embraced and used to truly make processes considerably more efficient,” Martin added.
Former Indian central bank governor Raghuram Rajan later repeated that promise of broader blockchain uses.
However, TradFi’s commitment to the industry may eventually be tested: When questioned, Schulman, Martin, and State Street’s Ronald O’Hanley all claimed artificial intelligence, not blockchain, was the most exciting technology.
Carmen Hutt, treasurer for the United Nations High Commissioner for Refugees, detailed such an application – a recently launched blockchain payment solution for distributing humanitarian aid in Ukraine – just across the street from the forum’s main congress center, in a historic church transformed into a neon hub for hosting discussions about the future.
Hutt revealed during a panel discussion hosted by CoinDesk chief content officer Michael Casey that the pilot project, which was launched in December using the blockchain platform Stellar network, is significantly more sophisticated than one might assume.
Donations via the blockchain promise “transparency and visibility,” and the Commission has a platform ready to send relief immediately, according to Hutt. “What an incredible offer… We can deploy $500 million today if we acquire $500 million. So this isn’t going to take weeks or months,” Hutt explained. (Later that day, Ukraine’s deputy prime minister praised the contribution of virtual money to the military effort.)
Further along the legendary “promenade,” industry heavyweights ranging from Solana and Ripple to the Global Blockchain Business Council teamed together to develop a climate project that would use blockchain’s transparent record-keeping to assist in improving carbon emissions and credit tracking.
Although authorities have mostly focused on the potential of crypto contagion to financial stability, a string of bankruptcies last year that wiped out billions of dollars in retail investments, most notably Sam Bankman-FTX, Fried’s may have underlined the need for a shift in their focus.
For the lone banker on the conventional finance panel, the events of 2022 must shift regulators’ focus away from the risk of lenders bringing down the whole financial system and toward the risk of individual customers being duped by crypto frauds. “It’s not that regulators have disregarded [financial innovations], but if it’s not going to generate systemic danger, I’m not sure why we should focus on it.” For More Blockchain News, Click Here.
Blockchain has become increasingly prevalent in recent years, with applications spanning from new cryptocurrencies to their potential uses in various sectors, making it important for business leaders, industries, and regulators to have a deeper understanding of the technology and its potential applications.
While blockchain has yet to achieve widespread acceptance, it has the potential to drive significant digital transformative changes and generate new possibilities throughout the corporate landscape, from banking and finance to infrastructure and healthcare.
Blockchain is defined as “a distributed ledger that records transactions chronologically and publicly,” according to one source. Its database is shared across a network rather than being held in a single location, which enables a high level of information control and transaction transparency.
However, there has been so much hype surrounding blockchain on all sides of the debate, that it has become increasingly difficult to separate fact from fiction.
A study by Vorhaus Advisors, a Los Angeles-based digital media consulting firm, found that only 25% of people in the United States understand what blockchain is.
According to the same poll, 62% of people believe blockchain is the same as cryptocurrency, and 48% believe it is the same as bitcoin.
This lack of understanding of blockchain has caused confusion, skepticism, and fear about its use, which spreads across all sectors of industry and government, influencing not only business but also policy.
The fact is that blockchain technology has the potential to fundamentally alter how organizations and individuals trade products and information, and part of that revolution is already underway.
Blockchain has the potential to improve any business in which transactions require a permanent record and the confidence of many parties. Furthermore, it has the potential to dramatically simplify paper-intensive enterprises that require an accounting ledger.
Here are three real-world blockchain use cases to illustrate how adaptive, widespread, and disruptive it can be:
- Banking and Finance: Finance and banking have received the most attention regarding blockchain and for good reason. It’s an entirely transactional industry. For example, blockchain can convert paper-based functions such as letters of guarantee (documents provided by a bank that assure suppliers be paid for the goods or services they supply in the event that the payor is unable to pay) into a totally paperless, digital, and transparent process, helping to eradicate fraud and forgeries.
- Rethinking Healthcare: The pandemic’s unexpected demand for remote healthcare and other medical-related activities has moved the emphasis on delivering clinical treatment in a virtual or data-driven manner. As a result, the various medical data silos across healthcare providers can be integrated into a single shared blockchain network for secure and efficient data sharing.
- Supply Chain: Blockchain can also be used to improve supply chain management. A blockchain network can provide a single source of truth for the entire supply chain, from the origin of raw materials to the final delivery of goods to the customer. This can help to improve transparency, traceability, and efficiency in the supply chain.
In conclusion, blockchain is a powerful technology that has the potential to transform many industries, but it is important to separate the hype from reality. It is essential for business leaders, industries, and regulators to have a deeper understanding of the technology and its potential applications to fully harness its potential.
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According to the findings of a recent survey that was carried out by CasperLabs, it is anticipated that business adoption of blockchain technology will increase over the course of the following year in the United States, the United Kingdom, and China.
This is the case even though there are knowledge gaps.
Despite the fact that the cryptocurrency and blockchain industries have undergone significant change over the course of the past year, people and companies continue to display an interest in the area.
The results of a recent poll that was conducted by CasperLabs and Zogby Analytics revealed that businesses had a particularly upbeat outlook on the potential applications of blockchain technology.
The questionnaire was sent to a total of 603 “decision makers” employed by a variety of commercial firms in China, the United Kingdom, and the United States of America, in that order.
Almost all of the businesses that were asked about their usage of blockchain technology responded that they did so in some form, and almost all of those businesses (87%) also stated that they intend to make financial investments in blockchain technology during the next 12 months.
This phenomenon is especially widespread in China, where more than half of the respondents want to put money into blockchain technology by the year 2023.
According to Ralf Kubli, a member of the board of directors for the Casper Association, businesses are continuing to look to blockchain technology for solutions despite the recent turbulence:
“It is incredibly heartening to see businesses recognize that blockchain technology is not a threat but rather a solution,”
Companies who are now implementing the technology are reaping the benefits of two of its primary characteristics, namely security (42%) and copy protection (42%), both of which are proving to be highly useful for these organizations.
Those who work in IT-based operations are using blockchain technology for a variety of reasons, including but not limited to improving the efficiency of internal processes (for which 40% of users employ it), improving the efficiency of supply chain operations (34% of users employ it), and improving the efficiency of software development (30% of users employ it).
According to Kubli’s projections, the year 2023 will mark a pivotal turning point for the widespread use of blockchain technology, particularly in terms of offering practical answers to real-world challenges and producing long-term value.
In spite of this, a significant study shed light on the flaws that are commonly seen in CEOs of corporations. The vast majority of respondents (73%) feel confident in their comprehension of blockchain technology.
Despite this, 54% of those who replied continue to regard the words “blockchain” and “crypto” as being identical. In spite of the fact that the vast majority of respondents feel positive about their comprehension of blockchain technology, this is the result.
In a similar vein, it has been argued that the most significant obstacles to adoption are a lack of developer talent, a lack of tools, a lack of interoperability, and pessimism regarding the industry as a whole.
All of these factors contribute to a general sense of pessimism.
In spite of this, practically all of the people who took part in the survey stated that they would be more receptive to embracing blockchain technology if they had a better grasp of how their coworkers are utilizing it.
Education, in addition to accessibility, has been a challenge and a barrier for a significant amount of time for those people outside the space who seek to interact with the technology and engage with customers. This has been the case for many different causes throughout history.
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