The second day of the CV SUMMIT 2022 spans the entire spectrum of the blockchain world – from the firmly established field of crypto investment to the sci-fi-like vision of a universal, unified, fair, and secure metaverse as part of Web3. The fireside chat on dynamic NFTs and compliant DeFi is a highlight packed with information. Personally, I find the panel on the African market, leapfrogging legacy tech with disruptive solutions, most inspiring.
Crypto as an investment– a maturing market
The discussions on crypto as an alternative asset class mainly revolved around technical solutions to the current challenges, for example how to improve liquidity, and how institutional investors can be better served. Speakers highlight the fact that the crypto market has turned out to be resilient. I got the impression that insiders perceive the crashes of TerraLuna or Celsius as singular events.
Crypto gets into troubled water if (retail) investors mix up centralized with decentralized models, as it was the case with Celsius. Once again, it comes down to the keyword of the conference: Clarity. Further, regulation and sound risk management for models like Celsius are required. Or, alternatively, the model ought to be decentralized, with the yield “baked” into the protocol.
Institutional adoption is skyrocketing, indicating that the market has reached a level of maturity. This opens a lot of opportunities for highly specialized services providers, in execution, custody, liquidity, and market making. In a nutshell, traditional and decentralized finance is getting closer. They start working together and learn from each other.
Crypto as means of payment and store of value – the dilemma of CBDCs
Today, money comes in different flavours: There are sovereign currencies, i.e. central bank money. commercial bank money, and electronic money like Paypal. And there are non-sovereign currencies, i.e. public cryptocurrencies and stablecoins. The discussion about the role and legitimacy of CBDCs (Central Bank Digital Currency) is heating up. Calling CBDCs a monstrosity from hell – at least if conceived for retail – is a minority opinion, although some speakers came up with substantial arguments related to the fully transparent citizen-consumer, total control by potentially malign governments, and the risks of sudden, arbitrary interventions by authorities that can be executed with immediate effect. Further, CBDCs are expensive and of unclear benefits. CBDCs lack agility, rely on proprietary technology and are not open to everybody. In stark contrast, the potential of CBDCs for wholesale was acknowledged. The finance system is looking for efficiency gains, and digital money will play an important role. Many speakers expect banks to come up with their own solutions, with the risk of fragmented systems and markets.
Obviously, the inherent risks of stablecoins, if not backed-up 1:1, have become evident over the past couple of months. However, the past months have been a stress test for stablecoins and they prevailed. Good regulation and interoperability will be pivotal. Still, there is the risk of a fractioned ecosystem with a proliferation of proprietary solutions offered by private banks. A regulated liability network might be part of the solution (Alexandre Kecht).
A new beast in the Zoo: Dynamic NFTs*
Currently, we are lacking the bridge from real-world identity to the blockchain. One of the challenges is to make (identity) data anonymous but validated. In the context of a seamless KYC solution, identity data must be accessible to authorities at the same time. The panel with the intriguing title “DeFi, the Good the Bad and the Ugly in 2022. How Dynamic NFTs and Compliant DeFi will Redefine the Industry” (Ronald Kogens, Rachid Ajaja, Micha Roon) outlined potential solutions. Dynamic NFTs can aggregate identity information and give access to self-sovereign finance, with anonymity and being legally compliant. The panel asks for accredited agents for KYC (“KYC as a service”). At the end of the day, people validate people. Dynamic NFTs are validated for KYC information once, and then provide automated access, e.g. to an investor pool.
*Dynamic NFTs (Non-Fungible Tokens, also called living NFTs) use SMART contracts to update their metadata from external sources. Example: The hat on a portrait may change depending on the weather data for Zug.
Metaverse – the 12 trillion $ opportunity*
The metaverse is an immersive digital universe for leisure and work. Its boundaries are still not clearly defined. A zoom call can provide this feeling of being immersed in a social context, so Zoom, too, could be part of the metaverse. A narrower definition understands the Metaverse as a 3D digital world with an element of presence – so more the goggles, gloves, and sensors kind of thing. For this reason, some view the Metaverse as a place where digital representations of individuals interact. This, first of all, calls for smart regulation (Thomas Linder): The safety of the vulnerable must be protected. More importantly, interactions in the metaverse must be binding – or be able to be made binding. That’s where the blockchain technology comes in, with its capability of “notarizing” transactions: The metaverse as a part of Web3 – or as the final vision of Web3.
*according to Mckinsey (Daniel Bundi)
Web3 Mass Adoption and Leap Frogging on the African Continent
The panel united impressive entrepreneurs on the stage, being part of a strong movement on the African Continent which is capitalizing on Blockchain Technology. Blockchain technology is key to overcome the challenges of infrastructure, financial services, ownership and venture capital on a continent, where over 60% of the population is below 25 years.
As opposed to “old Europe” or Japan, the implementation of blockchain technology on the African Continent is hands-on, pragmatic and solving urgent, real-world problems. Bringing the land register onto the blockchain is a great step forward in a situation where it is sometimes difficult to verify ownership of real estate. Making land ownership transparent – there is “lost property” equivalent to $ 900M only in Nigeria (Nnamdi Uba) – brings immense benefits for the local society and economy.
The challenges are great: 75 pct of Africa is still offline. Hence, including the whole population with the internet in parallel to building new infrastructure on the blockchain, is primordial.
The panel is optimistic that Africa will meet the challenges. There is already exponential growth. The great talents of developers are the real asset, delivering a lot of products in a cost-efficient way. Together with the deeply committed entrepreneurs, they will boost the success story.
Data as an asset – is Blockchain the solution?
“Data is the oil of the 21st century” – this is neither new nor particularly thrilling any longer. Still, SMEs struggle to monetize their “data treasure”. The value of the data business is 3 trillion USD (Matthijs de Vries), but a standardized, efficient, inherently GDPR-compliant infrastructure for secure, fair, and transparent data trading is missing. Making data available on an open, compliant, and transparent market requires concise, standardized information about the data that is available on the market: Metadata. More precisely, smart Metadata is partially curated by human brains. Blockchain may help to crowdsource this effort in a secure and fair way.