Source: Tencent Technology
Author: Jinlu
Recently, Cathie Wood's Ark Investment Company (ARK) released its annual "Big Ideas 2023" investment research report. Since its launch in 2017, this series of reports has attracted a lot of attention from industry users.
This year's report is 153 pages long and provides an overview of the latest global innovative technology integration trends, covering 13 major innovation areas such as AI, digital wallets, electric vehicles, aerospace, etc.
① The report predicts that by 2030, AI training costs will continue to decrease by 70% per year. For example, to train a large language model to the level of GPT-3, it will cost nearly $4.6 million in 2020, and will drop sharply to $450,000 in 2022.
② In terms of digital cryptocurrency, Ark Investment pointed out in the report that cryptocurrency and smart contracts can respectively obtain a market value of 20 trillion US dollars and 5 trillion US dollars in the next decade, and by 2030, the price of Bitcoin will reach 1 million US dollars per coin.
③ In the field of electric vehicles, Ark Investment predicts that its prices will fall and sales will increase by more than 7 times, or grow at a rate of 50% per year, from approximately 7.8 million vehicles in 2022 to 60 million vehicles in 2027.
The following is the essence of the report. This article does not constitute investment advice, but is only used as a reference for industry development trends (click on the picture for a better horizontal reading experience):
01
Technology convergence creates exponential growth potential
According to ARK research, five major innovation platforms are converging to create an unprecedented growth trajectory. Artificial intelligence is the most important catalyst, and its speed cascades (1) into all other technologies. In this business cycle, the market value of disruptive innovation platforms will grow at a rate of 40% per year, from $13 trillion today to $200 trillion in 2030. By 2030, the market value associated with disruptive innovation may account for the vast majority of the global stock market capitalization.
// Editor's note 1: Cascade is an important concept in association mapping, which refers to whether the associated object executes the same operation synchronously when the active object executes the operation.
1. Public blockchain
After mass adoption, all funds and contracts will move to public blockchains, achieving and verifying digital scarcity and proof of ownership. The financial ecosystem may be reconfigured to accommodate the rise of cryptocurrencies and smart contracts. These technologies increase transparency, reduce the impact of capital and regulatory controls, and reduce the cost of contract enforcement. In such a world, as more assets become like money, businesses and consumers will adapt to the new financial infrastructure, and digital wallets will become increasingly important. Current corporate structures may also be questioned.
2. Artificial Intelligence
Computing systems and software based on growing amounts of data can be used to solve difficult problems, even drive the automation of knowledge work, and accelerate the integration of technology into every economic sector.
The adoption of neural networks should prove more significant than the introduction of the internet, with the potential to create $10 trillion in value.
At scale, these systems will require unprecedented computing resources, and AI-focused computing hardware may dominate the next generation of cloud data centers that train and operate AI models, which will ultimately bring huge benefits to end users: many AI-driven smart devices will penetrate into people's lives, changing the way they consume, work, and entertain. The application of AI will change every field, affect every business, and drive the development of every innovation platform.
3. Multi-omics sequencing (2)
The costs of collecting, sequencing, and understanding digital biological data are falling dramatically. Multi-omics technologies provide research scientists, treatment organizations, and health platforms with unprecedented access to DNA, RNA, proteins, and digital health data. Cancer care should change with the development of a pan-cancer blood test. Multi-omics data should inform new precision therapies leveraging emerging gene editing technologies to target and cure rare diseases, chronic conditions, and more. Multi-omics should unleash entirely new capabilities in programmable biology, including the design and synthesis of new biological structures with cross-industry applications, particularly in agriculture and food production.
// Editor's Note 2: Multi-omics sequencing refers to the simultaneous sequencing analysis of multiple omics levels, such as proteome, microbiome, transcriptome and metabolome sequencing, linking each omics level through gene expression rules.
4. Energy storage
Falling costs of advanced battery technology should enable dramatic changes in form factor, making autonomous mobility systems a reality, which will dramatically reduce the cost of transporting people and objects. Falling costs of electric drivetrains should unlock the potential for micromobility(3) and aerial systems, including flying taxis, enabling business models that will transform cities. Autonomous driving should help to drastically reduce the cost of taxis, deliveries, and surveillance, enabling frictionless transportation that will increase the speed of e-commerce and reduce car ownership. These innovations, combined with large-scale stationary batteries, should accelerate the energy transition, displacing liquid fuels and pushing generation infrastructure to the edge of the network.
// Editor's Note 3: Micromobility refers to mobility achieved by vehicles and equipment weighing less than 500 kilograms.
5. Robotics
Adaptive robots, catalyzed by AI, should be able to work closely with humans to help transform the way products are made and sold. 3D printing should aid the digitization of manufacturing, not only improving the performance and precision of end-use parts, but also increasing supply chain resiliency. Meanwhile, the world’s fastest robotic “reusable rocket” should continue to reduce the cost of launching satellite networks and enable uninterrupted connectivity. As an emerging innovation platform, robotics can significantly reduce the distance costs of hypersonic flight, the costs of manufacturing complexity of 3D printers, and the production costs of AI robots.
02
The fusion platform involves 14 investment technologies
The Convergent Innovation Platform involves 14 investable technologies whose costs are falling dramatically, impacting multiple industries and serving as a springboard for more innovation.
ARK's fusion scoring framework and network diagram:
1) Technologies are scored as a function of their potential to generate super-exponential growth when catalyzing other technologies.
2) The thickest line corresponds to the expectation of exponential growth in the potential of another technology.
3) These technologies have a catalytic directionality. For example, neural networks should catalyze autonomous mobility, and the data generated by autonomous mobility systems should help improve the capabilities of neural networks.
4) Node size corresponds to the technology’s estimated enterprise value in 2030.
5) Based on this network diagram, innovation platforms can be clearly classified.
1. Neural networks are the most important catalyst
2. Autonomous mobility systems fully reflect the integration of technologies
3. AI chatbots will “drive” self-driving taxis
Tesla applies transferable neural networks to language translation solutions to help its vehicles understand complex intersections and drivable roads. The pace of AI innovation increases our confidence in the commercial viability of self-driving taxis and other autonomous mobility systems. Neural networks are beginning to outperform humans in multiple domains, including autonomous driving. Improvements in neural network performance will make scalable self-driving taxi systems safer than humans in almost all situations.
4. Deep neural networks enable more accurate long-read DNA sequencing (4)
In 2021, Google researchers applied state-of-the-art transferable language models to long-read sequencing of genomic data from the PacBio Sequel II system. Not only did they reduce errors and increase quality-adjusted yield, but they also lowered the cost of long-read genome sequencing. In 2023, PacBio will build AI-specific computing hardware into its long-read sequencers to achieve the first high-quality, complete long-read genome at a price of less than $1,000.
// Editor's Note 4: Traditional genome sequencing technology cuts the genome into small pieces, while long-read sequencing retains long stretches of DNA consisting of tens of thousands of base pairs.
5. Thanks to advances in AI language models, robots can learn from experience
Advanced transferable AI architectures, already useful for language generation, are now controlling robots, giving them instructions and enabling them to encode complex actions into discrete tasks. Transferable architectures are also helping robots learn from examples and perform tasks they have never seen before.
6. Battery advances are crucial to augmented reality
Improvements in battery capacity and energy density are critical to the development of smart devices. To extend battery life, the displays of Apple's first four smartwatches automatically turned off unless the wearer raised their wrist. Similarly, smart glasses will be limited in power until battery energy density improves.
7. Reusable rockets provide satellite support for traditional smartphones
Satellite connectivity providers such as Iridium and Starlink use reusable rockets to help lower costs and make global connectivity a reality. The cost of satellite bandwidth has fallen 7,500 times in 19 years, allowing a record number of communications satellites to be launched in 2022. Smart devices rely on network access, and cheap access costs
It is the key to the popularization of the Internet.
8. Cryptocurrency mining could support larger solar cell installations
(Solar-electric powered) Bitcoin miners are a useful energy tool: modular, mobile, and flexible, they can be well combined with intermittent energy sources such as wind and solar installations. Incorporating Bitcoin mining into solar storage systems can enhance the scalability and reliability of the grid without increasing the equivalent levelized electricity cost. According to ARK's research, by increasing battery capacity by 4.6 times and adding Bitcoin mining, solar systems can meet more than 99% of end-user needs without sacrificing profitability.
9. Due to technical reasons, discontinuous changes in macroeconomic growth have become the norm
10. Disruptive innovation complicates the meaning of economic statistics
Consumers who pay more for electric vehicles get better-performing vehicles at a lower total cost of ownership (TCO), which reduces costs in the future. Buying an electric car today will result in lower "yield" in the future. Ditching cable TV and switching to streaming services may hurt some economic initiatives, but will increase the value of entertainment.
11. Today’s innovation platforms can improve consensus on GDP growth, thereby achieving the GDP growth reflected in technological history.
According to ARK research, technological breakthroughs related to energy storage and robotics alone could add 30% to real GDP by 2030, and AI’s contribution could be even higher. The impact of these technologies on GDP is unlikely to be captured by traditional economic production statistics. In particular, while AI’s impact on the productivity of knowledge workers will lead to substantial improvements in the software, administration, and management of complex systems, it is unclear how these improvements will be reflected in traditional macroeconomic growth measures.
12. By 2030, disruptive innovation platforms will account for a large proportion of global stock market value
Artificial intelligence, energy storage, robotics, multi-omics sequencing, and public blockchains could expand 15-fold over this business cycle, reaching $200 trillion in equity value. Even as non-innovation exposures in the market continue to accrue value, disruptive innovation platforms are expected to surge in global equity market value by 2030. Including crypto assets, disruptive innovation exposures could account for about 68% of risk asset value by 2030.
03
electric car
1. Beat the skeptics with exponential growth
Investors once questioned whether the future was electric. Demand for electric vehicles has expanded despite a commodity price shock that has put a pause on cost declines. Now, investors are wondering whether that growth can remain exponential.
The debate around electric vehicles has shifted from demand to supply. Based on Wright’s Law, ARK predicts that electric vehicle prices will fall and sales will increase more than sevenfold, or 50% per year, from approximately 7.8 million in 2022 to 60 million in 2027.
The biggest downside risks to our forecast are likely to come from supply constraints that continue to weigh on prices, as well as the speed at which traditional automakers transition to EVs.
2. Electric vehicle sales continue to take up more market share
3. Over the past four years, global automakers have increased their investment plans for electric vehicles and batteries by more than 10 times
At the auto industry's historical capital efficiency of $14,000 per unit of production capacity, $600 billion invested in EVs would equate to 43 million EVs produced per year. If all automakers were able to achieve the capital efficiencies associated with EVs, $600 billion would produce 86 million EVs, close to today's total vehicle production.
4. Falling battery costs should continue to drive exponential growth in EV sales
5. Despite exponential growth in EV sales, the consensus forecast is linear
In 2017, ARK predicted that global sales of electric vehicles with a range of more than 200 miles would approach 17 million by 2022. The global outbreak, supply challenges, soaring commodity prices, and consumer preference for longer distances have limited sales to about 8 million, still 4 times the consensus estimate in 2017. In other words, ARK's forecast was off by about 45%, but the consensus estimate was off by about 400%. Now, look at the difference in forecasts for 2027. Will electric vehicles account for 25% of total auto sales or 65%?
6. Fuel vehicles may lose a large amount of market share
By 2027, car buyers may decide that a used or new EV is a better value than a new ICE vehicle. If so, declining sales of combustion vehicles could send many existing automakers into a death spiral. In response to falling prices, consumers may delay buying EVs or buy used vehicles at the expense of new ICE vehicles.
7. Over the next five years, the planned investment level will support an increase in electric vehicle production from 7.8 million to 60 million, an increase of about 7 times
If ARK's 2027 forecast is correct, electric vehicle sales will grow 50% over the next five years, from around 7.8 million in 2022 to 60 million in 2027.
04
Digital consumption
1. Immersive virtual experience will give birth to the next wave of games
As the gaming industry transitions to an all-encompassing virtual world, video games and social media are likely to merge as consumers socialize and entertain themselves in virtual spaces in the form of games rather than in physical environments. According to ARK research, the convergence between gaming and social media should boost gaming revenue growth from a 7% compound annual rate over the past five years to 10% over the next five years.
2. Trading and creation of digital assets diverge in the bear market
In 2022, NFT trading volume increased by 15% year-on-year, mainly led by high-profile collectible projects such as Bored Ape Yacht Club and Crypto Punks. However, the share of minted NFTs shifted to utility-based projects such as on-chain domain names and digital memberships. Focusing on fundamental value rather than speculation, the shift towards utility is a healthy development trend.
3. Digital wallets: disintermediation of traditional banks
With billions of consumers and millions of merchants on board, digital wallets could transform the economic activities associated with traditional payment transactions, saving nearly $50 billion in costs.
Digital wallets currently have 3.2 billion users and have penetrated 40% of the world’s population. ARK research shows that the number of digital wallet users will grow at an annual rate of 8% and will penetrate 65% of the world’s population by 2030.
As consumers and merchants adopt digital wallets, the use of traditional checking accounts, credit and debit cards, and merchant accounts should decline, hitting traditional payment intermediaries - banks.
By eliminating middlemen, digital wallets can facilitate closed-loop transactions for more than 50% of payment volume, and by 2030, the current digital wallet enterprise value of US$1 trillion is expected to increase by another US$450 billion.
4. Digital wallets are increasing their share of online and offline transactions
In 2021, 49% of e-commerce transactions were based on digital wallets, up from 18% in 2016. Since 2016, the share of digital wallets has continued to grow, corresponding to the decline in the share of credit cards, bank transfers and cash transactions. In 2021, 29% of offline transactions were paid through digital wallets, almost double the 16% in 2018. During the 2020 epidemic, digital wallets surpassed cash and became the main means of offline transactions, and digital wallets continued to gain share.
5. Digital wallets create a closed-loop ecosystem for consumers and merchants
After acquiring billions of users, digital wallets are onboarding millions of merchants onto their platforms, enabling direct transactions between consumers and merchants away from traditional financial institutions.
6. By 2030, closed-loop transactions could account for more than 50% of digital wallet payments
Closed-loop transactions are common in mainland China, bypassing third-party involvement and saving nearly $50 billion in costs for digital wallet platforms, consumers and/or merchants outside mainland China. By 2030, the total enterprise value of digital wallet platforms will increase by another $450 billion on the current $1 trillion basis.
05
Public blockchain: gaining momentum in crisis
In 2022, contagious crashes from Terra/LUNA, Three Arrows Capital, Celsius, and FTX/Alameda devoured approximately $1.5 trillion in cryptocurrency market capitalization.
Despite the severe recession, public chains continue to promote monetary, financial and Internet changes. The long-term opportunities for Bitcoin, DeFi and Web3 are still growing.
Cryptocurrencies and smart contracts could gain market value of $20 trillion and $5 trillion, respectively, in the next decade.
1. Contagious crashes wiped out about $1.5 trillion in cryptocurrency market value in 2022
Bear Market Events:
— Crypto companies including FTX and Crypto.com dominated Super Bowl advertising, a sign of irrational exuberance
The Federal Reserve raised interest rates for the first time since 2018
——The collapse of Luna and UST became the most destructive event in the history of the crypto space
——Lending platform Celsius declares bankruptcy
——OFAC sanctioned the open source software Tornado Cash
——Crypto exchange FTX declares bankruptcy
- Major brokers Genesis and Gemini’s Earn suspend withdrawals
——Lending platform BlockFi declares bankruptcy
Bull Market Events:
Ethereum passes first major test of proof-of-stake transition
——Coinbase and BlackRock announced a partnership,
——Ethereum successfully transitions to proof of stake
——Bitcoin’s hash rate hits a record high
2. Despite the severe recession, public chains continue to promote a variety of changes: monetary finance, Internet transformation
3. Financial transformation: decentralized finance driven by the cryptocurrency crisis
question:
-- More than 2 billion people lack access to basic banking services, including account management and credit.
——The opacity of traditional financial institutions has caused catastrophic financial collapse.
——Counterparty risk between traditional financial institutions can lead to single points of failure (5).
// Editor's Note 5: Single point failure refers to a situation where the system cannot work properly when a resource (which can be hardware, software, or component) in the system architecture fails.
data:
——DeFi transaction volume is about 1.2 trillion US dollars, a 12-fold increase from 2020 to 2022.
——After the FTX crash, DeFi trading volume increased by 52% relative to total cryptocurrency trading volume.
$9 trillion in on-chain stablecoin transfers, more than card networks Mastercard, American Express, and Discover combined in 2022.
-- In 2022, ~$32 billion in withdrawals and nearly $1 billion in liquidations.
change:
——DeFi eliminates dependence on traditional intermediaries.
Automated smart contracts ensure execution without the need for trusted toll collectors.
——DeFi is global.
Financial services deployed on open protocols enable anyone with an internet connection to access custody, trading, and lending facilities.
——DeFi is interoperable.
Financial services are open source and interoperable, allowing for rapid innovation and experimentation.
——DeFi is auditable and transparent.
Users manage risk and functionality, while collateral and asset flows are public and available for inspection.
4. Internet Transformation: Web3 is reaching a turning point
question:
——The internet relies on technology monopolies that exploit, own and monetize user data.
——Online identity and reputation are not interchangeable.
——Centralized decision-makers dominate the discovery of information and subjectively regulate content and communication.
data:
——Issued 5 million unique IDs in the Ethereum Name Service and Unstoppable Domains.
——NFT’s annual trading volume is $22 billion, up 15% in 2022.
——Cumulative NFT creation income of US$127 million.
Major brands, including Starbucks, Adidas, Nike, Coca-Cola, and the NBA, partner with Web3 protocols.
——Major social platforms including Instagram, Twitter, and Reddit launch NFT-driven features.
change:
——Web3 is user-owned.
Web3 introduces digital property rights for the first time.
——Web3 relies on protocols, not platforms.
Decentralized protocols enable the management and open access of distributed data, limiting the control capabilities of platforms.
——Web3 proposes a new monetization model.
Web3 brings economic concepts to software, allowing users to participate in and profit from the development of the network.
——Web3 realizes the integration between consumption and investment.
As the economy digitizes, consumer behavior is changing, enabling new paradigms for purchasing, owning, and using goods and services.
5. Crypto assets can rival and redefine traditional asset classes
According to our research, cryptocurrencies and smart contracts can create market value of $20 trillion and $5 trillion, respectively.
6. Bitcoin: A durable network
We believe the long-term opportunity for Bitcoin is still growing. Despite a turbulent year, Bitcoin has not stagnated. Its network fundamentals have strengthened, and its holders have become more long-term focused.
Contagious crashes caused by centralized parties enhance Bitcoin’s value proposition: decentralization, auditability, and transparency.
The price of a single Bitcoin could exceed $1 million in the next decade.
7. From the decline of Bitcoin's historical peak, its market value shrinkage and downward cycle are the fifth and second largest in financial history respectively.
8. Despite severe drawdowns, Bitcoin’s long-term performance has outperformed all major asset classes.
Bitcoin’s volatility belies its long-term returns. Despite five declines of more than 75% since its creation in 2009, Bitcoin has posted positive annualized returns over three-, four-, and five-year timeframes.
9. Bitcoin liquidation behavior is correlated with past price lows
10. Exchanges have increased transparency in response to the collapse of trust in centralized crypto entities
In 2022, the net outflow from centralized exchanges reached 560,000 BTC, the largest in history.
A “bank run” forced a record number of exchanges to publish auditable financials and cryptographically verifiable proof of solvency, known as “Proof of Reserves” (PoR).
11. Bitcoin has the potential to expand into a multi-trillion dollar market
ARK Research Estimates That the Price of a Single Bitcoin Could Exceed $1 Million by 2030
06
Smart Contract Network: Promoting Financial and Internet Revolution
After the catastrophic failure of centralized cryptocurrency intermediaries last year, automated self-executing contracts on decentralized public blockchains have emerged as an alternative for transparent and non-custodial financial services.
Decentralization has proven to be even more critical to maintaining the original value proposition of public chain infrastructure.
According to ARK research, as the value of tokenized financial assets grows on-chain, decentralized applications and smart contract networks can drive these assets to generate $450 billion in annual revenue and reach a market value of $5.3 trillion by 2030.
1. The utility of smart contract networks is expanding and diversifying
Public chains like Ethereum, once dominated by simple asset transfers, have now diversified into decentralized financial services (DeFi) and the creation and ownership of NFT-based digital goods, among other applications.
2. Decentralized finance is a promising alternative to centralized intermediaries
Abandoning centralized intermediaries in favor of self-custodial solutions, traders are increasingly favoring the transparency of decentralized exchanges.
Since 2020, decentralized exchange (DEX) trading volume has been increasing as a percentage of total cryptocurrency trading volume.
The share fell over the summer, perhaps as speculative trading around long-tail assets restricted to DEXs faded after the collapse of Terra/Luna, Celsius, and Three Arrows Capital. However, after FTX collapsed in November, DEX market share soared 52%, from 9% of total trading volume to 14%.
3. The merger brings Ethereum into a new era
During the September 2022 merger, Ethereum transitioned from Proof of Work (PoW) to Proof of Stake (PoS). No longer having to pay energy-intensive miners for security, Ethereum strengthened its monetary policy and reduced the issuance of new tokens. Under the new token model, Ethereum's annual net issuance has flattened and is now lower than Bitcoin's 1.7% and Ethereum's previous PoW model's 4%. As the network continues to develop, Ethereum's supply will decline.
4. Ethereum’s second layer network is beginning to expand, but it’s still in its early stages
Challenged by severe congestion, Ethereum has developed a scaling solution - "second layer" networks are gaining meaningful momentum. The number of transactions on two popular "second layer" networks, Arbitrum and Optimism, are now comparable to Ethereum's base layer, and the number of active addresses on each network has increased by 11x and 19x respectively in 2022.
5. Post-merger scrutiny concerns heightened
Validator Centralization: As stakers prioritize convenience over decentralization, the top three staking services now account for roughly two-thirds of all ETH staked.
Transaction Censorship: Flashbots and other services that censor transactions are growing their share of new blocks as financial incentives to maximize rewards begin to outweigh censorship resistance.
6. True decentralization is more difficult for new networks
On layer-one blockchains, the proportion of token supply allocated to insiders - including founding teams, private investors, and privately controlled foundations and ecosystem funds - has been increasing. Since 2017, founders have been trying to build new chains to compete with existing rivals, and venture capital has actively invested in base-layer protocols. In addition, regulatory concerns have hindered initial coin offerings as an open distribution model. As a result, new networks cannot claim that they are fully decentralized based on token holders and may be vulnerable to pressure from within.
7. By 2030, smart contract networks could generate $450 billion in annual fees
Smart contracts can facilitate the origination, ownership, and management of tokenized assets at a fraction of the cost of traditional financial services. If financial assets migrate to blockchain infrastructure at a similar pace to early Internet adoption, and decentralized financial services charge one-third of the fees of traditional financial services, then by 2030, smart contracts could generate $450 billion in annual fees and create a $5.3 trillion market value.
