Supply + Demand:What will drive next crypto mass adoption wave?
This is 1st article of a series from ethereumwriterscohort2
From an economic perspective, massive demand outweigh supply needs to happen for a wave of significant crypto mass adoption.
What could be the supply side and demand side for next mass adoption wave? What shall we build toward it?
This article aims to establish a simple supply-demand analysis framework for crypto mass adoption.
Demand: Incremental Fiat liquidity + Organic blockspace demand
Native or not, last cycle, USD on-rails & US based players significantly fueled incremental liquidity in crypto with multi layered infrastructures:
Prime trust for custody, signature and silvergate bank for banking and settlement between USD and crypto, major stablecoins are all USD - denominated, while the regulated ones actually helped on boarding banks for fiat-crypto settlement.
Blockfi and genesis for centralized lending, while jump trading as market maker dominated both market share and mind share, let alone coinbase as one of the first listed regulated crtypto exchange, headquartered in the U.S. (or more specifically, SF.)
All the infrastructures above significantly helped bridging large amounts of USD liquidity on chain.
However, after the cycle, we see majority of the U.S. infra is gone, many of them blown up and found themselves in knee-deep litigations due to people’s own weakness: greedy, and misjudgment and mis management largely due to that.
To make things worse, U.S. regulations are increasingly hostile as well.
That leaves us a question, where will the fresh liquidity come from?
A spot ETF, maybe. User’s organic, healthy need for using crypto as a global permissionless value network infra, maybe, but they will still need on and off rails to get on chain.
USD infra built on the ashes of destroyed ones, together with ones that survived this winter, which is more disciplined and sustainable;
Three possibilities, not mutually exclusive:
USD-denominated infras being built again from the ashes:
EUR increasing its share due to Mica providing a clarified regulatory framework
Regions where cross border payment has a stronger demand & fiat liquidity is already fragmented: SEA/Middle East/South America;
Injecting more fiat into the system is important, but organic demand of blockspace is the core of crypto growth. Wether use cases which could drive user demand of blockspace can be built and adopted, is even more essential to whether this industry can uphold its value proposition, and stay prosper in the long run.
Last cycle, Defi is one of the product-market fit example, making good use of blockchain’s nature as a global permissionless ledger.
After all, the key value proposition of crypto, is a value internet that let value creation, ownership, transaction and settlement permissionless, instant, and globalized.
Any good use case should work around this feature: Web3 social that lets user take ownership of their own datas, Decentralized science platforms that can fund emerging scientific research more distributed, and on chain games where gaming assets can flow more freely.
Supply: off chain assets and native assets
On chain assets come from two categories:
Off chain assets:
Tradfi assets that needs to/wants to be on chain, for many reasons, like faster settlement time. If you’ve used cross boarder wire transfer you got a rough idea of how painful it could be through traditional finance rails: even with everything regulators want you to add, such as kyc and aml modules, i’m still quite confident that a global, automatic, distributed ledger is natively superior to the existing system;
USD-denominated stablecoins are a good example of fiats (or their reflections) on chain. Next cycle, maybe more bonds and equities will be on chain.
Native assets:
People create them on chain because on chain is the only way to enable such assets to be ownable and transferable. Both BTC and ETH are great native assets, and what could make sense for next bull: IPs that can fund emerging scientific research in a more decentralized manner, on chain community membership/pop up city/network state memberships, and on chain gaming assets
Wat do now?
Apart from all the technical jargons, from 1st principle perspective, what we build needs to help with either the supply or demand side to drive the next mass adoption wave. Now is the best time to build!