According to a new report by Citi Global Perspectives and Solutions, central bank digital currencies (CBDCs), tokenized assets in gaming and blockchain-based payments on social media could skyrocket blockchain adoption, reaching up to almost $4 trillion in value by 2030.
But is that a lofty target or could blockchain-based payment mechanisms really remodel the financial systems before the decade is out?
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From a technology standpoint, Michael Gronager, CEO and Co-Founder of Chainalysis, says that there’s no doubt that blockchain could radically remodel and enhance financial systems, which is something that’d make sense from a socio-economic perspective as well.
“The existing financial system isn’t working for most people; globally, 1.4 billion people remain unbanked. Cryptocurrencies offer these masses convenient access to financial services while minimizing associated overheads — for example the ability to transfer funds instantly across borders without the bureaucratic hurdles of traditional banking,” explains Gronager.
Crossing the chasm
Despite the growth potential of a blockchain-powered payments mechanism, experts believe there are still several obstacles that need to be addressed before it becomes mainstream.
Issues such as poor user experience, lack of interoperability, and concerns about privacy need to be overcome for blockchain technology to achieve its full potential, says Ace Desai, Founder of String.
Seamless payment experiences for both Web2 and Web3 users, is another major hurdle Desai insists. “This implies a scenario in which users may not even be aware that blockchain is behind the process but are reaping its benefits. Achieving this level of seamless integration will play a significant role in driving mainstream adoption of blockchain technology.”
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Keshav Pandya, Co-founder, Zeebu believes achieving widespread adoption of blockchain-based payment mechanisms will require collaboration among stakeholders, including businesses, governments, and regulators. “If these challenges can be addressed, blockchain technology has the potential to revolutionize financial systems, making transactions faster, cheaper, and more secure,” assures Pandya.
Our experts believe that technology is no longer the roadblock. The industry has solved, or is on the verge of solving, most of the technical hurdles that were roadblocks in the previous 2017 bull-market cycle, assures Arto Bendiken, CTO, Aurora.
He insists the roadblocks are elsewhere, pointing to the recent hostility by American regulators to blockchain technology and blockchain-friendly banking. According to Bendiken, none of Citi’s trillion-dollar projections will be realized in case the rest of the world follows the recent example of the US in enforcing overreaching regulation that is also impossible to comply with.
Pointing to Citi’s report that mentions how the invention of the automobile hastened the demise of buggy whip companies, Bendiken adds that it was hastened by some legal shenanigans, particularly the Red Flag Act of 1865 which limited the speed of automobiles to 2 MPH and required that men walk in front of vehicles waving red flags.
“That’s how attempts to regulate tokens and smart contracts will be viewed a few decades down the road,” says Bendiken.
Walk the Talk
Of course this isn’t to discount the value and need for the involvement of governments in embracing blockchain-based payment mechanisms.
Gronager points to the UAE as a “shining example” thanks to the recently unveiled Digital Dirham strategy, which he explains aims to facilitate real-value cross-border CBDC transactions for international trade settlement.
The strategy also seeks to establish bilateral CBDC bridges with India, and discusses proof-of-concept work for domestic CBDC issuance to cover wholesale and retail usage. Gronager insists these use cases have the potential to greatly benefit both consumers and businesses.
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“Eventually, such CBDCs and private blockchains will need to be bridged with their public counterparts,” adds Gronager.
Karl Blomsterwall, CEO, Planet IX, agrees. He says that as the sector moves from play-to-earn to play-and-earn there’s an overall growth in creating a more collaborative ecosystem.
“I see developments such as decentralized digital identities, zero-knowledge proofs, Oracles, and secure bridges being key factors which, together with gaming, will lead to mass adoption of blockchain based technologies in the future,” says Blomsterwall.
Gronager envisions a future where all value transacts on blockchains. “Just as the internet made the distribution of information instant and universal, blockchain-based payment mechanisms will do that for value,” forecasts Gronager.
