Crypto Has Extended Its Reach Beyond Finance

By Alessandro Albano and Francesco Casarella

Investing.com – “Over the next 10 years, the crypto market will continue to experience alternating bull/bear market cycles, but investor adoption of digital currencies will continue to increase.” So said Charles Hoskinson, founder or co-founder of blockchain platforms Cardano and Ethereum, in an interview he gave to Investing.com this week during the Web Summit 2022 in Lisbon.

By 2025 there will be more than 1 billion people who have dealt with crypto in their lifetime, a number that Hoskinson says could increase to “2 billion by 2030.”

And yet, from its peak in November 2021 to the present, the market capitalization of non-fiat currencies has shrunk dramatically, from more than $3 billion to the current $1 billion.

But with the arrival of NFTs, the adoption of Bitcoin as legal tender by El Salvador, and the increased use of blockchain by corporations, crypto has taken more than financial value, a feature not seen in the past decade.

“In the last bull market of 2021, we realized that crypto is no longer just a speculative financial instrument, but also has reach outside the financial world,” the founder of the two blockchains explains.

The decentralization of finance and the digital banking revolution will also contribute, “enormously in the adoption of digital currencies,” as will the use by cyber security companies and the digitization of bureaucratic processes, according to Hoskinson.

The Climate Costs to Crypto

More complex, however, is the discourse related to ESG issues and the energy waste used to mine cryptocurrencies. After the Ethereum Merge, considered one of the most significant upgrades ever introduced to the crypto ecosystem, the Ethereum blockchain reduced network energy consumption by 99.9 percent in migrating from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism.

For Hoskinson, however, cryptos cannot solve climate change, a task instead to do “with cooperation between nation-states,” but can play an important role in helping emerging economies accelerate their development.

“Blockchain can help emerging and undeveloped economies accelerate their domestic development processes, which instead are now bound by international constraints and subject to the so-called world order.”

Cardano’s founder claims that El Salvador offers an example of how, through the creation of new protocols, states can create new forms of digital partnerships that go beyond traditional systems and rely instead on new digital infrastructure.

In more financial terms, however, Hoskinson sees cryptocurrencies as another asset class to round out a balanced portfolio, although recent volatility has blown away the previously established inverse relationship between cryptocurrency and stock performance.

“Crypto is the first meta asset, but the question for investors is how they want the assets in their portfolio to be represented. All assets have intrinsic value but are asymmetrically liquid.”

“But,” the founder of the world’s top two blockchains asks in conclusion, “what if all financial instruments, even those not traded, had their own form of liquid representation in international financial markets equivalent to their real value?”

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