2022 has already been a year packed with major events for the global Blockchain & Crypto space. HAT’s Blockchain & Crypto Treasury Management working group, over the first few months since its conception, has been equally busy educating, researching and spreading the word among the Greek Treasury professionals, thus laying a small brick towards adoption in our country. Our working group with the immense contribution οf each and every one of its members, has already launched various activities including webinars, participation in international conferences and partnerships with leading global organizations of the Blockchain space.
Photo Credits: European Blockchain Convention As part of our constant effort to learn and create synergies, HAT had the honour to partner with the biggest and most influential Blockchain event in Europe and participate in the 2022 conference taking place in Barcelona.
I was lucky enough to be selected as the HAT’s delegate to the event and also make use of our working group’s annual budget to travel to Barcelona and attend this world class event in person. As a beginner in the Blockchain & Crypto space myself, I traveled to Barcelona with 2 clear goals in mind: to learn and connect. The 3-day event with 1.500+ attendees and 100+ prominent speakers discussing the current state and future of blockchain, crypto, DeFi, NFTs, and Web 3, was the perfect place to achieve both of my goals.
I had the chance to meet, discuss and exchange ideas with brilliant and enthusiastic people who are currently playing a key role in shaping the future. Starting from the all-star volunteers team where I could find start-up founders, researchers and scholars among them, to the fellow attendees and the esteemed speakers, I had the chance to embark on tons of networking and some literally eye opening discussions. But equally important are the lessons learned from the dozens of the panels, keynotes and workshops I had the chance to attend. Below, I’m trying to summarize in a short and concise manner the wealth of information I received. These are just some of the lessons learned and those that really caught my attention. INSTITUTIONALIZING CRYPTO A very commonly used buzz phrase in the Crypto space is mass adoption. However, mass adoption will only happen when the masses understand the basics of this technology. For that, education is vital. Another prerequisite for mass adoption is regulation. Regulation may sound as something inherently in contrast with the essence of Blockchain and Crypto. However, the truth is that only scammers and people who want to get advantage of others pitch about deregulation. Big institutions are currently holding trillions on the sidelines waiting for a regulated market to enter. VOLATILITY VS STABILITY Crypto equals volatility. However, that is not always a bad thing. Traders like the volatile markets because they can make short term returns. In similar fashion, funds look for the opportunities hiding in periods of extensive volatility. This volatility may slow down some of the big projects of the Crypto space but won’t stop them completely. Moreover, volatility will decrease as the size of the market becomes larger. This volatility and the subsequent market crashes are, to an extent, the by-product of the market abuse that we witnessed over the past couple of years. Everyone was talking about Crypto and everyone was invested in Crypto. However, market abuse was not invented with Crypto. Similar to the dot-com bubble in the late 90s that led to the internet’s global boom during the 00s, the Crypto space might benefit and ultimately come out of the Crypto-winter stronger thanks to new innovations. Even though institutions bring with them regulations, the innovations will always outpace the regulators. STAKING Consensus models are used to ensure the validity of block transactions. So far, the most widely used validity model was Proof of Work through which miners compete against each other to solve complex problems using high-powered computers. One of the hottest developments in the Crypto space is called Staking. Already some of the biggest tokens (including ETH), are moving from Proof of work to Proof of stake. With PoS consensus mechanism cryptocurrency owners validate block transactions based on the number of coins they stake. This transition will also be viewed as an opportunity for plenty of investors who want to get passive income by “lending” or staking their crypto deposits. In other words, validators could make their coins work in favor of them without even the need of expensive hardware infrastructure. Needless to say, that the PoS consensus model consumes considerably less energy thus having a lower environmental impact. A NEW ERA FOR FINANCIAL SERVICES Without a doubt we are entering into a new era in Financial Services. The rise of Blockchain Technology and Decentralized Finance (DeFi) will subsequently lead to the decrease of production cost for all financial instruments by capitalizing on Smart Contracts and Instant Payments technologies. The recent events that shaked up the Crypto industry will unavoidably force regulators to intervene in order to prevent a systematic risk from emerging. The overall Crypto market will benefit from the lessons learned during the Crypto winter as the exclusion of scammers will accelerate the mass adoption. In this new era of financial services where traditional Centralized Finance (CeFi) and DeFi will coexist and collaborate, a huge market of previously unbankable assets will open up to the masses. This could happen through the concept of tokenization where the ownership of an asset is split into digital tokens. These tokens can be perceived as “shares” of ownership. The holy grail of instant and cheap settlements will very much likely become a reality with DeFi. Instant settlement of payments will lead to merchants accepting Crypto as a form of payment. The current volatility along with the delay in settlement leads to skepticism towards Crypto as a payment means. STABLECOINS & CBDCs Stablecoins, the cryptocurrencies whose price is designed to be tied to a reference asset, have made headlines over the past few months for the wrong reasons. The abuse of the word stablecoin along with little to no research from the investors’ side led most of them to believe that stablecoins is a safe alternative that could protect them from the volatility of the typical cryptocurrencies. Central Bank Digital Currency (CBDC) is a form of money that exists only in digital form. Currently, around 90% of world central banks are working on CBDCs. Developing countries will be the first to adopt CBDCs but developed areas of the world are also working ontheir own digital currencies. The ECB is also moving towards the digitization of its monetary system with various initiatives that are already in place.
Photo Credits: European Blockchain Convention LEGAL LANDSCAPE There’s no 100k deposit guarantee in Cryptocurrencies and thousands of people learned this the hard way. This unregulated landscape resembles the Wild West in many cases, and everyone must protect themselves from the multiple risks. However, from now on the regulatory risk should also be considered. Sustainable finance & Crypto are the hottest topics right now and this attracts regulators. The first international regulations are already in place or are about to be launched. The Travel Rule is the first crypto regulation implemented globally. As an extension to the regulation already implemented on traditional financial institutions, the Travel Rule requires Crypto businesses to send, trace and sanction screen customer personal information alongside a Crypto transaction to prevent money laundering, terrorist financing, and other crimes. Just a few weeks ago, the EU also agreed on a landmark regulation called Markets in Crypto-Assets (MiCA). For the first time the European lawmakers gave the green light on a comprehensive regulatory framework the scope of which includes Crypto-assets Service Providers, Stablecoins, Consumer Protection, DeFi and Environmental footprint. The above regulations unavoidably also bring along criticism and the fear of losing privacy. MOVING FROM WEB2 TO WEB3 A huge transition which has the potential to change the way we work, shop, get entertained and ultimately live, is currently happening with web3. Web1, the first stage of the World Wide Web contained only static content and was mainly focused on communication. Web2 followed a few years later. This era revolves around consumption. It’s an internet dominated by companies who control our personal data. Web3 is a new vision of the World Wide Web with an emphasis on establishing consensus. During this new era of the web, Individual participants will own part of the network, and everyone will monetize their contribution. Rewards for contributing to the network will be granted, that is why a consensus among the users is needed. Decentralization and Blockchain will be the core concepts of the 3rd stage of the internet which will bring a revolution in every aspect of our lives. For example, people who do not have access to banks or loans will gain access to the monetary system and your web3 wallet will be your single identifier (there will be no need to log-in separately to different accounts and websites). WEB3 MEETS PAYMENTS Web3 is also expected to revolutionize the payments ecosystem. Blockchain can be viewed as a payments system while at the same time Payment Service Providers (PSPs)/Acquirersare already going Crypto. The above poses the question: Can Crypto be a form of payment? The capability of the network is there but the volatility is still too big. Stablecoins could be a solution, but a unified global solution has not been developed yet as each country has their own legal frameworks and inflation rates. Merchants still prefer to receive fiat money (paper money) but have the option to let their customers pay in either Crypto or fiat (hands off Crypto). For that reason, we need regulations that don’t kill innovation. INVENTION ≠ INNOVATION Invention is a totally different concept compared to innovation in the sense that the former does not necessarily create value. Over the last couple of years, we have a seen a meteoric rise of the Crypto space followed by thousands of new inventions of ambiguous commercial value. A Crypto-winter is without a doubt a really tough time for the whole ecosystem. However, a big opportunity lies ahead as the need to survive will push businesses to the creation of real commercial value thus leading to true innovation. At the same time cheaters and those who cannot adapt fast enough will be forced out of the market. As a result, the whole society will reap the benefits of an ecosystem focused on true innovation thus subsequently leading to the mass adoption. Entrepreneurs and innovators should aim to find the intersection between technology, capital, and culture. That’s exactly where the innovation, which has the potential to create commercial value, lies. METAVERSE Most people when they hear the word metaverse, instantly think of Meta and Marc Zuckerberg. However, the metaverse is a broad and vague term that usually refers to the virtual world being developed in web3 and far exceeds the scope of a single company or person. We are currently at the experimental phase of metaverse where a whole new financial system is going to be built. There is no infinite growth in a finite world. The metaverse will offer the infinite opportunities for growth and innovation. The industries which are going to pave the way in the early years are entertainment, gaming, and fashion. In the long term however, every single aspect of our lives has the potential to exist (entirely or to some extent) on the metaverse. The way of living of people in the future could require them to stay at least 1 day per week at home for environmental protection reasons or leave their cars for some days per week. People then, could very much likely work, meet their friends and attend concerts entirely on the metaverse. The opportunities are truly limitless. We must think: What it could be, what has to be done? SELF-SOVEREIGN IDENTITY The self-sovereign identity is a digital identity that gives individuals control over the information they use. Today, when you sign up for a website you must login through a social network, which immediately shares your data. In web3 however, third parties like Google, Meta etc will no longer control the information related to our personal identity to grant access to the respective users into their websites. Our digital wallet will be a central piece of decentralized digital economy and will act as a slickier, frictionless, proof once digital ID. The wallet will contain all your metaverse commodities (even your house). The fact that people will gain control over their personal data will not only enhance privacy but will also enable them to even sell them for profit. NON-FUNGIBLE TOKENS A non-fungible token (NFT) is a unique cryptographic token that exists on a blockchain and cannot be replicated. This blockchain record is associated with a particular digital or physical asset. The ownership of NFTs can be sold and traded. NFTs need to be viewed as art and not as just an asset; Buying NFTs is like buying artwork; you need to love and want to showcase the artwork because you are moved by the creation of the artist. In that sense you should never buy NFTs just because you expect short term returns by selling at a much higher price. It is possible that the artwork won’t even be sellable due to a shift in society’s perceptions or just because the artist has not gained wide recognition. Tokenizing something, does not bring liquidity magically. The NFT needs to be viewed as something with intrinsic value, as something that we would like to purchase as a gift. In that sense, in the near future, NFTs could also be collateralized and used as a security accepted by banks when someone wants to buy a new house. KEY TAKEAWAYS The European Blockchain Convention 2022 was concluded with great success. Speakers and attendees from all over the world gathered in Barcelona and exchanged views and opinions amid a very tough time for the Blockchain & Crypto ecosystem. Here are my key takeaways from this event: - The crypto winter is the perfect time to build, innovate and create value - Mass adoption requires clearly defined regulatory standards - Self-sovereign Identity and Web3 will be integral part of our lives really soon - In 5 years, it will be necessary to have a personal wallet that contains all the data generated by your online activity without infringing upon your ownership rights - Tokenization of assets will democratize the investment market. Retail investors will be able to differentiate their portfolios by holding fractions of digital assets in blockchain based wallets - People will demand 24/7, instant settlement, zero fee payments. This could become reality in web3 - It's all about trust. People want to put their money on technologies and services that can be trusted - Institutions are onboard for the long term. Short term volatility may slow them down but won’t keep them away - Education and privacy awareness is needed for the self-sovereign identity to be adopted - NFTs are much more than just pictures - Everybody will own a part of web3 Looking forward to the next EBC edition in 2023! Georgios Alexis Treasury Analyst - Beat Blockchain & Crypto Treasury Management Working Group member Hellenic Association of Treasurers