Standard Kepler

Blockchain – A Game for Institutional Giants

12/17 – 12/23

Blockchain Scenario Planning
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WEEKLY RECAP

  • Total market cap. reached $134bn (a 29.4% increase), and 7-day trading volume surged 92.6% for top 100 crypto


WEEK AHEAD

  • 28 Dec: Last trade date of CME Bitcoin Futures
  • 29 Dec: Dapps platform open source for TRX


THOUGHTS OF THE WEEK

A brief but firm speculative look at the value being generated by public chains, and the public trust in existing institutions, reveals four possible scenarios for the adoption of blockchain (see chart of the week).

We view the current value being generated by public chains as low, defining “value” as the ability to both scale & present attractive use cases for that scalability. Public chains generally struggle to handle transaction volumes beyond those generated by niche demand. They are further difficult to update, as made evident by the many hard forks that result from proposed improvements to BTC and BCH. Chains that do offer sufficient scalability still fail to present valuable use cases, with circa 80% of volume on EOS being driven by gambling dApps of questionable value to the public.

Furthermore, surveyed global trust in institutions is still high, albeit weakened in several western nations. However the populations of China, India, and Indonesia (comprising ~40% of the global population) exhibit extremely high trust in existing institutions. Significantly, trust in financial institutions is the strongest among millennials, the same tech savvy group we would expect to first adopt public chain alternatives. The point is not whether these users could benefit from a public chain solution, but rather that they have very low incentive to consider one.

Blockchain hence finds itself in what we term “A Game for the Giants”, far from the perceived “Public Chain Utopia” that many crypto enthusiasts touted last year. We thus expect existing institutions to absorb blockchain, as opposed to being displaced by it. This will occur in the form of permissioned chains, and primarily for purposes of record keeping, accounting, and transaction settlement. 84% of surveyed executives around the world report having blockchain initiatives underway, and we expect trust in institutions to further rise as permissioned solutions are adopted.

We are of the mind that a move towards greater adoption of public chains is unlikely. Expect central bank digital currencies to make currency tokens irrelevant to the general public. We further struggle to find strong use cases for dApps,  and believe potential users to be more aware of the weaknesses of public chains. They would not be wrong to conclude that most if not all public chains are in fact institutions hidden behind the wrappings of “decentralization”, highly dependent on the efforts of development teams and key influencers such as Daniel Larimer and Vitalik Buterin.


CHART OF THE WEEK

Blockchain scenario planning

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