Author: 0xCousin, IOBC Capital
It takes a long time for a new technology to be widely adopted. In the United States, it took 78 years for cars to reach a 92% penetration rate, 48 years for household electricity to reach a 100% penetration rate, and 26 years for the Internet to reach an 88% penetration rate.
But what is exciting is that there are some signs in this bear market that are conducive to Crypto achieving Mass Adoption faster.
1. Bitcoin spot ETF: The entry channel for traditional funds is about to open, and it is expected to introduce tens of billions of funds
On August 11, the US SEC extended the review time for the Bitcoin spot ETF applications of Ark Investment Management and 21 Shares. However, everyone is very optimistic about the prospect of Bitcoin spot ETF approval. Galaxy CEO Mike Novogratz said in his earnings call that there is "inside information" from BlackRock and Invesco, and believes that it is only a matter of time before Bitcoin spot ETF is approved, and it may be approved within "four to six months."
After the Bitcoin spot ETF is listed, investing in Bitcoin will become easier. The U.S. stock market is dominated by institutions, with institutional investors represented by mutual funds accounting for 55%. Now, it is mainly several mutual funds that are seeking SEC approval for Bitcoin spot ETFs. Therefore, after the Bitcoin spot ETF is listed, it may not only bring in potential investors from the Nasdaq, NYSE, and CBOE, but more importantly, it will facilitate the entry of institutions with large capital scale.
If a Bitcoin spot ETF is listed, how much money will it bring? According to NYDIG's statistical analysis, the current Bitcoin-related products (including Grayscale Bitcoin Trust, Bitcoin Futures ETF, and Bitcoin spot ETFs in other countries) have assets under management of $28.8 billion. This data only counts the funds of publicly available products. Based on this, NYDIG believes that after the Bitcoin spot ETF is listed, it may bring in $30 billion in new demand.
2. PayPay USD Stablecoin: The entry channel for ordinary users has been opened, and it is expected to attract tens of millions of new users
PayPal is one of the most well-known global mobile payment companies, covering 202 countries and regions, supporting 24 currencies, millions of companies accepting Paypal as a payment method, and more than 400 million monthly active users worldwide.
On August 8, PayPal launched the US dollar stablecoin PayPal USD (PYUSD) on Ethereum for transfers and payments. The stablecoin is issued by Paxos Trust Company and is 100% supported by US dollar deposits, short-term US Treasury bonds and similar cash equivalents. PayPal has become the first large-scale financial technology company to embrace digital currency payment transfers.
Eligible PayPal customers will be able to transfer PYUSD between PayPal and compatible external wallets, use PYUSD for peer-to-peer payments, choose PYUSD to pay merchants at checkout, and exchange PYUSD with cryptocurrencies supported by PayPal. Jose Fernandez da Ponte, vice president of PayPay, said in an interview that PYUSD is currently only available through PayPal wallets, but the goal is to make PYUSD available on major centralized trading platforms.
PayPal's vision is to become a channel between legal tender and Web3, allowing the stablecoin payment system to be adopted by the mainstream. In this regard, compared with the existing US dollar stablecoins (USDT, USDC, etc.) in the Crypto industry, PayPal USD has a natural advantage in terms of its popularity. Relying on PayPay's 400 million monthly active users, it is expected to introduce tens of millions of new users to Crypto.
3. RWA craze: RWA is a tool for traditional institutions to enter and participate in the co-construction of Crypto
In the past six months, RWA has become a hot topic in the market, and community discussions about RWA have been very intense.
Supporters believe that RWA will introduce real-world assets and returns, which will greatly increase the scale of Crypto assets. In terms of the tokenization and clearing and settlement of off-chain RWA, although there is no way to achieve complete Trustless like Crypto Native Assets, there is also a more ingenious "clearing and settlement mechanism based on guarantees, pledges, arbitrage and gaming". It does make Crypto more connected with the real world, especially DeFi lending protocols, which benefit from the high interest rates of U.S. Treasury bonds during the Fed's interest rate hike cycle, and have found a business model for obtaining "risk-free" continuous income, at least in the short term.
Opponents believe that most RWA projects actually still have centralized trust in "compliance" and "audit", and there is no way to fully achieve Trustless, which is not in line with the spirit of Crypto. At the same time, the best direction for the development of RWA now is the tokenization of US Treasury bonds based on DeFi lending protocols. The high yield of the underlying asset of Treasury bonds just shows that inflation expectations are high. It seems that it is more appropriate to hold "Crypto digital gold" such as Bitcoin, which has the words "The Chancellor of the Exchequer is on the brink of a second round of bailouts for the banking industry" in the Genesis block.
We also published an article about RWA at the end of March. At that time, we thought that RWA might be the next engine of DeFi. Of course, we still feel that there will be some opportunities in the direction of RWA. In the bear market, we often hear various opinions in the industry, "there are no new asset targets"... In this case, it just so happens that traditional institutions have shown various signs of entering the market to deploy Crypto. If the next cycle is a bull market driven by traditional large institutions and large funds, we cannot completely ignore RWA.
RWA may be the first handle for traditional large institutions to participate in the co-construction of Crypto. Just like PayPal, which entered Crypto with the US dollar stablecoin PYUSD, it is actually a kind of RWA with "risk-free" US Treasury bond income, but at this stage, the income is not distributed to PYUSD holders. In the future, perhaps "interest-bearing stablecoins" will become mainstream projects.
When we look at some project decks, we often see visions like "revolutionizing something". Perhaps this cycle needs to give traditional institutions some time, or perhaps they have seen opportunities and have made up their minds to revolutionize themselves through blockchain and Crypto.
4. Chains that support multiple programming languages: expected to attract millions of Web2 developers
There are currently two logics running simultaneously in the industry for the Web3 programming language.
One is the exploration of new languages that have unique advantages in some new application scenarios, such as the Cairo language that is more friendly to ZK Application, the Move language that is more friendly to formal verification, and the DeepSEA functional programming language that puts security first.
The other is chains such as zkSync, Risczero, and VRRB that support multiple programming languages, which are conducive to millions of Web2 developers entering Web3. In order to attract more developers to develop and create applications in the ecosystem, Layer1 and Layer2 now need to use high hackathon rewards and ecological investment funds to attract a very limited number of developers. If the blockchain supports multiple programming languages, it will be a great advantage to attract more Web2 developers. After all, there are only about hundreds of thousands of Web3 developers, while there are more than 10 million Web2 developers. This will also make it more likely to create a more prosperous ecosystem and capture more value.
We agree with both of these logics, and both are beneficial to the development of the industry.
5. The infrastructure is about to be ready, and large-scale blockchain applications are expected to emerge
At the 2017 Shanghai Summit, in response to the question of "why we don't have real large-scale blockchain applications yet", Vitalik attributed it to "the most important factor hindering the large-scale application of blockchain is technical barriers." He also said that the top priority is to improve the scalability of blockchain.
After many years, the Ethereum ecosystem has developed a prosperous Layer 2 expansion matrix for scalability. The performance of Layer 2 such as Optimism, Arbitrum, StarkNet, zkSync, Polygon, Scroll, Taiko, etc. will be significantly improved compared to Ethereum Layer 1.
In addition, modular blockchain is also experiencing rapid development. Projects such as Celestia, Polygon Avail, and Rooch are likely to provide support for large-scale blockchain applications in their respective fields.
In short, compared with previous cycles, the development of Crypto Infra in this cycle has been greatly improved, and it is possible to support the birth of large-scale blockchain applications.
