From the early emergency of Bitcoin to the rise of stablecoins such as Thether, we've seen years of dramatic expansion in digital finance. Statista forecasts that the use of blockchain in finance will explode from $280 million in 2018 to $22.5 billion in 2026. Of course, that prediction came out shortly before FTX unraveled and Bitcoin floundered, throwing continued growth into question.
In late 2022, professionals and academics gathered at Columbia University for the inaugural CryptoEconomics Workshop. Despite the turmoil facing the industry, many in the field still offered strongly positive projections. The overall sentiment was optimism that recent issues would lead to useful re-centering, moving us away from the runaway valuations and the unmanaged risk that led to crashes, fraud, and hacks. Some workshop attendees called the FTX debacle an opportunity to move toward appropriate regulation and rigorous analysis, even suggesting that this is precisely the right time to develop creative applications of technology focused on decentralizing finance.
It’s an exciting vision, looking ahead to improved technology transforming how we execute every type of transaction by replacing intermediaries with distributed ledgers in the form of unbreakable blockchains. The envisioned advances could create the confidence consumers get today from having monies held by trusted intermediaries, a scenario familiar to anyone who has used escrow accounts or online markets such as Airbnb.
If decentralized models replace these middle-men, transactions would leverage tokens and be governed by protocols, going through a digital system that’s automated, secure, and independent. Transfers would clear almost instantaneously with almost no opportunity for fraud. Better yet, the systems could operate without the fees and commissions that are integral to today’s transactions because decentralized data could streamline, reduce, or eliminate the need for costly steps such as reconciliations and audits.
It’s a vision worth striving for. Regulation needs to be ironed out and other concerns still exist, but it’s clear that digital technologies will be shaping the future of finance. Perhaps that growth prediction of $22.5 billion in 2026 may even turn out to be low.