We are seeing the fourth industrial revolution unfold infront of us. Steam Engine, Electricity, then the Microchip - now Blockchain & Crypto will drive the fourth revolution.
Between 2018 to 2022, several applications of blockchain and DLT have brought life to many real-life use cases - from banking to commerce; from immersive social experiences to privacy; and from productivity to profitability.
As blockchain adoption becomes mainstream, many companies who will be at the cusp of this revolution, will decide the next world order.
Over the next decade Alternative Investment options is expected to form 15% of total portfolio, mainly driven by sub-optimal returns from traditional public equity & fixed income investments.
Between 2018 to 2022, just a 5% exposure to blockchain investments has led to 2X of overall returns (basis study by Grayscale).
As Web2 space matures, Blockchain / Web3 shall provide the next attractive growth option.
H1’ 2022 VC Funding in Web3. Expected to exceed $31 Bn raised in 2021
VC Funding in Web3 now contributes to 5% of overall VC funding – the highest ever
CAGR of Blockchain Market in the next decade – making it the fastest growing technology
Layer 1 / Layer 2s
In 2022, The L1 and L2 blockchain landscape underwent frequent evolution,
reflecting the constantly shifting demands of the crypto market in a period of extreme
volatility. These ecosystems broadly endured the negative effects of several major
collapses in the crypto industry. The shocking string of calamities that plagues
crypto in 2022 has forced this industry to confront the existing limitations of L1 & L2
networks that underpin the wide range of on-chain financial activities.
These limitations are best understood within the context of various functions that L1s serve, which grew increasingly complex with the adoption of smart contracts and DeFi applications in recent years. Functional blockchains require careful coordination of various tasks that can essentially be broken down into the following: Execution, Settlement Consensus and Data Availability. These are the key modules which make or break a smart contract capable blockchain. At present, all available blockchain networks are stuck in a trilemma, wherein optimizing for scalability, decentralization, or security in conjunction often necessitates sacrificing proficiency in at least one of the three key modules.
Now let's talk about modular blockchains, which in our opinion is what will define the blockchain ecosystem in 2023 and beyond. There is a growing number of alternative execution environments to EVM and a trend of app-chain affirms the need to abstract away the complexities of blockchain interactions for the benefit of both users and consumers. The future of blockchain is MODULAR with highly scalable and interoperable inter blockchain communications.
As we established above, if you try to run all four functionalities (consensus, execution, data availability, and settlement) at a chain’s base layer, this ultimately limits the system's capacity and, subsequently, its total throughput. A modular chain separates the system into several possible parts or additives that are independently developed.
In a modular blockchain structure, the execution layer is independent of the bottom consensus and data availability layers, permitting nodes to execute transactions separately rather than performing all the transactions to test validity within a limited space or block. Cosmos, Fuel, and Celestia blockchain can be said to be the most prominent examples of modular blockchain architectures. As a fund, we will invest in the future of blockchain technology.
Gaming / Metaverse / NFTs
Blockchain technology has the potential to revolutionize the online gaming industry by providing a more level playing field for competitors, enabling secure asset exchange and reward distribution, and allowing players to use their skills and assets across different digital worlds. Through the use of blockchain's distributed ledger, players can earn rewards more efficiently and exchange them through a decentralized platform. The rise of non-fungible tokens (NFTs) and the metaverse is also expected to drive the growth of the play-to-earn model, in which players can earn tokens that can be used in-game or traded on a cryptocurrency exchange for real money. One example of this trend is the popular NFT-based game Axie Infinity, which saw sales rise from around $20,000 at the beginning of 2021 to a peak of $246.32 million in November.
DeFi allows for financial transactions and services to be conducted in a decentralized and trustless manner. This means that you don't have to rely on traditional financial institutions or intermediaries to complete transactions or access financial services. Instead, you can use decentralized applications (dApps) built on blockchain technology to take control of your own finances.
By using smart contracts and other blockchain-based tools, DeFi allows for the automation and streamlining of financial processes. This not only reduces the cost and complexity of transactions, but also increases their speed and efficiency. And with the increasing adoption of cryptocurrencies and stablecoins, the use of DeFi for financial transactions is only set to grow.
The most exciting aspect of DeFi is its potential to democratize access to financial services. By eliminating the need for traditional intermediaries, DeFi has the potential to make financial services more accessible to those who may have been previously excluded from the financial system. And with the increasing adoption of DeFi in emerging markets, this could have a major impact on financial inclusion and economic development.
We think DeFi is essential in 2023 and beyond. From its ability to enable trustless and decentralized financial transactions to its potential to democratize access to financial services, DeFi is poised to play a major role in shaping the future of finance.
Building a sustainable cryptocurrency ecosystem requires a focus on decentralization and open design frameworks. This means ensuring that the infrastructure and tools used in the cryptocurrency space are not controlled by a few large tech giants, but are instead decentralized and open for all to use. This includes the use of decentralized hosting, decentralized browsers, and secure data pipes that are not reliant on big data companies. It also involves building hardware, wallets, and other tools that ensure cryptocurrency cannot be easily shut down.
Decentralized Infrastructure is a crucial component of the cryptocurrency ecosystem, as they provide the decentralized hardware infrastructure needed for things like file storage, wireless access, and cloud computing. Incentivizing the development of these networks through the use of tokens has proven effective in coordinating decentralized hardware investment at scale.
The sector is expected to grow exponentially in regions where governments crack down on dissent and free speech, and there is significant opportunity for catering to gray market customers. In the long term, it has the potential to disrupt the $5 trillion legacy cloud infrastructure market, making it an attractive area for investors. Other areas that may see significant growth include decentralized wireless networks, mobility sensor networks, and decentralized node and compute infrastructure. Additionally, the decentralization of energy networks, such as microgrids and storage and transmission networks, and the use of on-chain markets for renewable energy certificates and carbon credits may also be promising areas for Decentralized infrastructure development.
Blockchain technology has the opportunity to disrupt all tranches of the financial services industry, from banking, accounting, loans & credit to insurance by disintermediating the key services that all these institutions provide, from payments to clearance, to loans and settlement systems.
- Compared to the existing protocols like SWIFT, distributed ledger technology can enable you to settle and track cross border transactions significantly faster and cheaper
- Smart contracts enable you to replace the need for verification from third parties, replaces the middleman in the asset transfers (stocks, debt, commodities), makes the loan allocation process cheaper and efficient, makes the insurance claim process faster
- Bank KYC process run on blockchain technology can bring down costs upto $200M annually, KYC information stored on different blocks also provides greater security against information hacks
From Daimler to GM, to BMW, almost all big automotive industry stakeholders have started building efficient processes on top of blockchain technology. Some are building things in house, some are partnering up with other blockchain protocols. The tamper-proof nature of this technology makes it very useful in the following ways:
- Tracking supply chain between manufacturing hubs and partners
- Weeding out counterfeits
- Car leasing, sales and registration management
- Within public transportation sector information can be stored and monitored for vehicle / route efficiency and if we go a level deeper we could even understand how city residents are utilizing public transportation option
- Within Trucking, it instantly improves shipment tracking, fleet management and helps analyze bring efficiency to the operations
- Airline ticketing, loyalty programs and personalized, verified experiences for customers. Singapore Airlines’s Kris+ Lifestyle app is a perfect example
Real Estate and Large scale construction design & building benefit tremendously from a blockchain based ecosystem.
- Buying and Selling of real estate is not smooth in any country and entails a huge amount of paperwork. Applications built on blockchain technology help keep record, track and transfer land titles, property deeds etc. And can help ensure that all documents are accurate and verifiable
- Large scale construction sites can improve project management across segments, they can ensure construction materials are sourced from the right places and are of the appropriate quality, while smart contracts may make it simpler to automatically issue timely payments linked to project milestones
Oil & Gas
This is one of those industries that has already implemented blockchain technology and has been very early to adopt. A digital ledger system can be used to track production quantities and execute transactions during different stages of oil and gas production, from the production side to the customer side. This reduces the time it takes to complete transactions, and it also improves transparency. The Abu Dhabi group -
Energy management and distribution has been traditionally centralized in nature. The energy goes through power distribution companies or through a reseller who purchases from a big power distribution company. Through an open distribution ledger customers to produce, consume, store and sell energy to others. With readings from tenant submeters, building parent meters all stored on blockchain ledger. This is a solid path to providing access to renewable energy.
Members from the plastic / waste management value chain can be brought together to enable circularity, tracking and sorting of recycled plastics. Blockchain ledger technology can enable a cleaner future, here’s how:
- Increasing the rate of recyclability
- Increase the auditability of recycled content
- Initiate attractive incentive system that promote recycling, rewarding people / companies who properly sort their waste
The institutions are plagued with an inability to securely share data across platforms, which is the need of the hour. We live in a world where we can deliver accurate diagnoses, effective treatments and cost effective care. However, a universal health data layer does not exist. The use of the blockchain ledger system can solve all that. It can bring together hospitals, doctors, care providers and patients to one single health value chain without compromising data security and integrity.
Research & Clinical Trials
A large-scale medical research and clinical trial operation entails the coordination of multiple research sites / trial patient engagement centers, stakeholders management and management of massive amounts of sensitive data coming from different sources. The data management layer is where blockchain technology can be so advantageous. It would prevent the need to reconcile seperate databases to create traceable records of what a participant did. It can also make the audit trail easy and compatible with all regulatory parties, auditors and other research professionals.
Vaccine Distribution & Monitoring
Vaccine distribution is all about real-time visibility into the supply chain, identifying supply disruptions and enabling faster response. Blockchain technology enables all of that and more. making it crucial to the distribution of vaccines during a pandemic. Such visibility will also help with identifying any vaccine batches that need to be recalled in an adverse event.
Governments in Malaysia and Singapore are already employing blockchain to authenticate vaccine certificates, using systems that can trace the exact vaccine batch of the vial used for an individual. The two countries aim to make their systems interoperable so that certificates can be quickly verified when their residents travel across each other’s borders.
Health Insurance Claims
A general health insurance claim transaction goes through the following lifecycle : data submitted for review, the review itself, approval or denial. The speed of processing these transactions as it goes through each stage depends on various factors, is very complex in nature, the variables for each procedure are different and there is no standardized data available. This industry currently employs millions of middlemen across each step. Blockchain technology and smart contracts have the potential to disrupt this space, speed up the transaction processing times and reduce costs.
Public services is a vast space in itself which to some extent still runs on paper. Blockchain technology can help transition to paperless processes, minimize fraud and increase efficiency and accountability between authorities and the citizens.
- Land registry on blockchain ledger can eliminate fraud and disputes over land ownership
- Using smart contracts to execute property sales / purchase transactions
- Securely store and track government records
- Cast, Track and Counting of Votes would eliminate the need for recounts and eradicate foul play
- Provides an additional layer of security and integrity for Law enforcement professionals during their evidence handling process
Food & Beverage
Platforms built on top of blockchain technology can serve as accountability platforms that help manufacturers reduce mislabeled products, package recalls and shed light on where the issue arose within the food supply chain. Tracking the product's full journey from a manufacturing hub to the customer's cart can be implemented on a blockchain based tracking system similar just as a QR code but much much more enhanced.
- Carrefour https://www.carrefour.com/en and Nestle already implemented blockchain projects within their organization to track the product from Farmers to Factories to Retail stores
Mining industry requires a significant amount of coordination and cooperation by many different intermediaries involved in the day to day operations for a company or organization to be successful. The scale of operations and lack of data transparency have always be a hiccup. A blockchain enabled traceability system can help track metals, minerals from mines to factories to buyers bringing a noticeable improvement in collaboration and traceability up the entire supply chain. Diamond industry example - https://www.tracr.com/
There are over 11 Billion smartphones across the world according to GSMA (GSMA.com)
real time data. Each smartphone with at least 1 live connection with a telecoms company.
The sheer amount of data these companies can capture on subscriber habits is mind blowing.
Where do I spend most of my time, what videos do I watch, what phone do I use etc.
This data can be leveraged to offer customers a blockchain based identity management
solution that would allow the customers to share behavioral information with certain
companies in the form of an access token and earn royalties whenever their data is used in
decision making. Web3 and Blockchain at its best.
Another use case would be to enable and automate smart contracts that negotiate, settle and implement service level agreements with customers and other coverage partners. Bringing efficiency on a scale that was never before imagined.
Education & Academia
Across the globe academic credentials issued by governing educational institutions need to be verified and recognized. From primary schools to secondary schools to universities, the process remains a manual process. The verification procedures on educational qualifications and credits can be enabled through blockchain solutions.
Music / Entertainment / Video Streaming
- Entertainment entrepreneurs are turning to blockchain technology to make content sharing fairer for creators using smart contracts, whereby the revenue on purchases of creative work can be automatically disseminated according to predetermined licensing agreements. One of our investments, FanTiger, is a perfect example.
- Blockchain could help dramatically reduce the cost of video traffic by decentralizing video encoding, storage, and content distribution. This could disrupt Netflix, YouTube, and other players in the video distribution ecosystem.
- Livepeer is another decentralized network, built on the Ethereum blockchain, that allows users to share live videos with their peers. Users can earn Livepeer Tokens by performing video transcoding.