Niall Ferguson, the preeminent academic and economic historian, identified six killer apps that made the West better than the rest in his 2012 book, Civilization: The Six Killer Apps of Western Power: competition, science, democracy, medicine, consumerism and the Protestant work ethic.
In this year of the production scaling of digital assets and Distributed Ledger Technology (DLT), we have taken inspiration from the legend’s book to assemble Weapons of Mass Adoption: The Six Killer Apps Of Digital Assets, and identified what will make “the Best” better than the rest.
Jason Allegrante, chief legal and compliance officer at Fireblocks, says, “Weapons of mass adoption are more the killer products and services that serve as mass distribution channels for DLT and with new digital infrastructure and regulation, create the conditions for those channels to be mass scaled and realized.”
For more than a decade, the benefits of DLT and tokenization have been widely promoted across industries by pundits and practitioners alike. Yet many continue to query why this new technologies has not yet fully scaled?
A bit of patience might be due here as the world’s financial market infrastructure is being replumbed, no simple feat. While it took only 14 years for the mass adoption of social media, the darling of Web2, it took 25 years for the internet to reach fifty percent adoption.
Adds Allegrante, “DLT, at the core of Web3, is primarily an infrastructure innovation, just like the internet and Web1 was, and while it is poised to transform financial services and how market participants interact with each other, it will take sustained exposure to the technology with regulatory proportionality, and all of the benefits that come with this to convince society at large.”
Exchange Traded Products (ETPs)
The Securities and Exchange Commission’s (“SECs”) decision to approve bitcoin Exchange Traded Funds (ETFs), which are technically ETPs, has enabled mass participation of both institutional and retail clients in crypto markets. BlackRock’s Bitcoin ETP hit the $10 billion mark faster than any other in history. Other jurisdictions such as Hong Kong and the U.K. quickly followed the SEC in approving these types of products.
For retail investors, ETPs serve as a low barrier of entry for interaction with blockchain-based assets. Importantly, ETP products reframe the investment conversation around digital assets away from “dangerous cryptocurrencies” and towards more familiar concepts and products, such as trusted “vanilla” securities.
Ultimately, ETPs that allow investors to participate in the upside of this asset class could result in a subtle but profound shift in investor sentiment in favour of digital assets.
Fully Reserve-Backed Stablecoins
Fully reserve-backed stablecoins., the fiat on and off ramps to DLT and digital asset ecosystems are a weapon of mass adoption that provide tangible benefits to investors while delivering a product that supports financial stability and a de-risked alternative to deposits, for two key adoption factors.
First, they have the potential to meet a younger segment of retail market participants where they are leading digital and internet-connected and consuming lives. Second, as regulated bank-issued products, they have the potential to provide a natural point of entry to for traditional financial institutions to DLT.”
A fully reserve-backed stablecoin creates a new form of digital money that can reliable, trusted, and utilised in conjunction with monetary policy to support financial stability.
Digital Asset Custody
Whether investors choose to self-custody with a digital wallet for native cryptoassets like bitcoin or require a hosted wallet for digital assets and tokens such as stocks, bonds and property, until the people’s digital assets are safe from the sharks, few will venture into the digital asset ocean.
There is range of secure digital custody solutions emerging and many people already use digital wallets on their smartphone for payments, tickets, and identify like your driver’s license.
In regulated financial services, the safekeeping of your assets on a hosted wallet includes services so that when you sell your stocks and shares, the money is immediately available in your digital wallet, and doesn’t go astray.
Blockchain Interoperability
Interoperability, a word many find difficult to pronounce and most don’t want to hear about, is a bit of a bore but is critical to the mass adoption of digital assets. All of the network benefits of the blockchain and DLT don’t scale if they are not connected to each other, and to date over 1,000 distinct blockchains and DLTs have been identified.
Emails look the same to you regardless of the thousands of different email platforms used thanks to interoperable standards – SMTP (Simple Mail Transfer Protocol) which is a transmission Control Protocol/Internet Protocol (TCP/IP).
Whether you are buying or selling digital assets, you want it to work like email and not look the same not have to deal with different front-ends, onboarding, and used accounts.
Digital ID
The global financial system is held to account when it comes to identity, a process that is known as Know Your Customer or KYC. To open up a bank account, you need to provide proof of who you really are. This proof includes items like a birth certificate, driver’s licences, passport, and proof of your residential address.
Digital identity, wherein governments and enterprises collect, verify and manage citizens’ personal data on DLTs aims to replace the legacy of various storage systems and databases governed by unwieldy and often insecure centralized authorities and agencies.
Beyond financial services, this type of proof is required in many different settings where legal contracts and exchange of money is involved. Having Digital ID that can be used to validate you are really you is big enabler for the mass adoption of digital assets and for the mass reduction of online identity and financial fraud.
Staking
Staking is at the core of Web3’s economic development and the internet’s next scalable model to better incorporate money and payments. DeFi staking is a nuanced area, with many policymakers and regulators leaning towards the view that staking is either lending, or a collective investment scheme and thus the basis for a security – it is neither.
Staking is the process of distributing the economic incentives of Web3 across the network, while defraying and reducing the many risks of network participation, to help ensure the bedrock remains stable. New transactions are added to DLT networks through Proof-of-take (‘PoS’) consensus mechanisms, allowing users who stake tokens that they buy to earn rewards in return.
The most important thing to pay attention to is that staking to date, has been done by people like you and me, and has created the DeFi ecosystem without government and institutions.
Moving to Mass Adoption
“There’s an opportunity to initiate a virtuous cycle for the industry,” concludes Allegrante, “Moving further along the adoption curve to increasingly broad-based support will bolster the industry’s standing and enable it to better advocate for pro-innovation policy goals.”
