Crypto’s Killer Use Case: A Multi-Trillion Dollar Opportunity

A recent institutional report on blockchain and cryptocurrency has highlighted the potential for asset tokenization, estimating that it could soon be worth trillions of dollars. However, this is just one small part of the report, which also contains bold projections for NFTs, Central Bank digital currencies (CBDCs), and decentralized social media.

The report, titled “Money, Tokens and Games: Blockchain’s Next Billion Users and Trillions in Value,” was published by Citibank on March 30, 2021. Although it is 165 pages long, we will summarize the most important parts of the report in this article.

The report was co-authored by some key figures in the crypto industry, including Silvio Mikali, the founder of Algorand, Stani Kolechov, the founder of Aave, John Wu, the president of Ava Labs, Ryan Watt, the president of Polygon Labs, and Zuko Wilcox, the founder of Zcash.

The report begins with an introduction from Kathleen Boyle, a managing editor at Citibank, who emphasizes that the potential of blockchain has been overlooked, primarily because it is a back-end technology, not a front-end technology. She states that true blockchain adoption will be achieved when it has over a billion users who don’t even realize they are using the technology. However, she does not believe this adoption will come from crypto; instead, she thinks it will come from CBDCs. Moreover, she seems to imply that the trillion-dollar opportunity of asset tokenization will come from the blockchains that power these CBDCs, not from cryptocurrency blockchains.

This is a stark contrast to what the crypto headlines say about the report and underscores an important point: whenever an institution, be it a mega bank or a government, talks about the benefits and potential of blockchain technology, they are not usually talking about cryptocurrency. In almost every case, they are talking about private and permissioned blockchains that they will control.

The report then goes on to discuss CBDCs. The authors project that between two and four billion people will voluntarily adopt CBDCs. This projection is inconsistent with the adoption projections from the Bank for International Settlements (BIS) and real CBDC adoption in countries like Nigeria, where adoption is at a fraction of a percent. The authors note that the obsession with CBDCs comes from the fact that they will allow governments and central banks to micromanage monetary and fiscal policy, giving them control over how much people can spend, save, and buy.

The authors estimate that as much as 20% of all the currency in circulation will be converted into CBDCs by 2030. However, governments and central banks are concerned about mass CBDC adoption because it would disrupt the existing financial system. The authors also note the risks associated with CBDCs, including competition between central banks, a loss of privacy, a loss of bank deposits leading to financial instability, and limited adoption.

The report also discusses decentralized social media or DeSo, which is essential due to the increasing efforts of governments to censor the internet. The authors note that blockchain’s ability to create a shared immutable digital record of transactions could also help users see where particular information originated to judge its credibility. This could help build trust. The authors also note that ownership of content and control over distribution channels remains with users. This is required to resist online censorship, and it’s the same principle that underlies all crypto.

Citibank’s recent report highlights the emergence of dystopian technologies inspired by crypto, such as centralized digital identity, smart legal contracts, and central bank digital currencies (CBDCs). The report suggests that CBDCs and digital IDs are the future of finance, indicating that institutional investors view the crypto industry differently than retail investors. The authors note that trust is important in the art world and that blockchain technology builds this trust, but only if the blockchain is truly decentralized. They also highlight that NFT infrastructure, such as decentralized storage and smart contract cryptos, will see the biggest gains from NFT growth.

The report acknowledges that NFTs have escaped regulatory scrutiny that the rest of the crypto industry is facing, likely due to their similarities to fine art. The authors mention the metaverse but do not provide much detail. They argue that decentralized digital ID is necessary to interact with regulatory-compliant blockchain protocols while still preserving anonymous or pseudonymous access. The report emphasizes the need for decentralized identity issuance and verification to avoid centralized parties revoking an individual’s ability to interact with online services.

The authors showcase the recently released Polygon ID as an example of a decentralized digital ID solution, which has a centralized issuer and verifier, raising concerns about centralized control. The report notes that most big tech companies collect data relentlessly and align with governments. The authors provide a list of examples of self-sovereign identities and refer to their version of decentralized digital ID as “self-sovereign identity.”

Regarding smart legal contracts, the report notes that 60 to 80 percent of all business transactions involve a contract. The authors claim that Nick Sabo, the creator of smart contracts, is also the creator of smart legal contracts, which are more dynamic to changing circumstances and legally enforceable in their countries of origin.

The report reveals the ongoing information war against cryptocurrency by The Establishment, with mainstream media articles stating that Bitcoin mining is killing the planet. When it becomes clear that they are losing this information war, they may resort to censorship to ensure trust in their increasingly unstable financial system. The report concludes by urging readers to remember that blockchain does not equal crypto and to take every statement about crypto from mega banks and central banks with a massive grain of salt.

In summary, Citibank’s report highlights the emergence of dystopian technologies inspired by crypto and suggests that digital IDs and CBDCs are the future of finance. The report raises concerns about centralized control of decentralized digital IDs, smart legal contracts, and the ongoing information war against cryptocurrency. The authors urge readers to remain vigilant and to approach statements about crypto from mega banks and central banks with caution.