Any new technology goes through the hype phase after which the real use cases for it emerge. The blockchain ecosystem might be moving in that direction after the recent collapse of crypto assets. Invesco says that other functional uses of blockchain saw growth after the FTX collapse and tokenised assets are being used widely.
The investment management firm lists the various blockchain applications and their benefits for a better snapshot of the development of the ecosystem. It adds that a winter certainly arrived for the blockchain ecosystem in 2022, and while staff cutbacks and failures increased in 2022, quality companies with experienced founders are still receiving capital.
“While investment across the whole technology market declined in 2022, hotspots such as Web3 remain,” as per Invesco.
The asset manager talks about improving blockchain’s environmental, social and governance (ESG) credentials. The major concern with using blockchain is the large amount of electricity consumed to make the network function and Invesco takes the example of an upgrade in the Ethereum ecosystem which reduced the costs associated with transactions.
“While cryptos ‘E’ credentials still have a way to go, the use case for the underlying blockchain technology is much more diverse. Better ESG data is one example,” adds Invesco.
Beyond cryptocurrencies, the blockchain ecosystem offers other use cases such as tokenisation which is a process to represent a real-world asset in a digital format. A token can be an asset itself and is often a digital twin of the asset in the real world. The asset manager says that tokenisation offers efficiency in trading and settlement.
Blockchain technology also forms the base for the metaverse, where the combination of virtual assets and virtual worlds will take place. “The metaverse economy’s potential size raises questions about what kind of monetary system will sustain it. Potential solutions may include cryptoassets, stablecoins, traditional fiat or potentially Central Bank Digital Currency (CBDC),” says Invesco.
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