Cryptocurrency: Leading To New Innovation
When people are free to create, innovation is the result. One of the reasons why the cryptocurrency industry carries so much potential is the use cases are near limitless. Operating in the digital world, it is fast, relatively inexpensive to create, and global in nature. This is a very powerful combination.
We also see the extension from the digital into the physical world. This is something that started with the advancement of the Internet yet is now reaching epic proportions. The line is rapidly blurring due to the creativity that people are incorporating.
All of this is going to radically alter society. Everything from personal to business is going to be affected.
The tokenization of everything is underway.
Cryptocurrency Driving Real World Projects
Most are aware of the proposed Bitcoin City in El Salvador. While this is still a dream, it is interesting to note how many different pieces this integrates.
It is safe to presume this was driven by cryptocurrency. Without Bitcoin, none of this would be taking place. It makes sense, hence the name of the city. However, this brings up an important point.
To start, we are looking at a new funding mechanism, or at least a tile on an old one.
The city is going to be funded by Volcano Bonds. These will be sold to the public in an effort to raise the money required for the city. A portion of the money brought in will purchase Bitcoin miners. Over time, the Bitcoin that is mined can be part of the return the bond holders receive. It is an added bonus on top of the anticipated 6% proposed APR.
Another factor in this is renewable energy. The plan is not only for the mining operations to be powered by geo-thermal energy, the city itself will too. President Nayib Bukele confirmed that the country is making an investment in the drilling of more wells.
The company is now adding more wells to increase its power production. According to statements from Bukele, the company is preparing the inclusion of four new wells to the system, that would contribute to production. One of the more advanced wells will supposedly be able to provide more than 95 MW (megawatts) of energy to the national grid. Regarding the nature of the energy provided, Bukele stated:
[It will be] clean, cheap and renewable energy, from a source that will last at least a couple of million years.
In this era, any country increasing energy going to its power grid is a good thing. The world is thirsty for energy. It is something we cannot avoid. El Salvador is making the investment in upgrading parts of its system while adding more overall capacity due to Bitcoin.
In the past, we discussed the idea of the tokenization of everything. This is a concept that is difficult to see, especially in light of the interest in regulators within this industry. It is going to take some time for things to flush out. Ultimately, we are going to require millions of projects tokenized behind the backs of entities such as the SEC to make a difference. We all can see this is where things are going so it is only a matter of time before the infrastructure is in place.
The "Asset-as-a-Service" is nothing new. Digitization allowed for a new model of asset utilization. Instead of buying the product, one opts to rent it only for the required time necessary. This allows for a greater use of the resources while saving the users money. There is no need to purchase something that is going to sit in a warehouse for months on end.
This model found a home with industrial products. Many companies opted to establish this market employing applications to provide a platform to link up users with products. One barrier is the high cost of entry. It is obviously capital intensive to start up since the equipment purchases are not cheap.
Here is where tokenization enters the picture.
Under the existing financing system, companies are able to use data to create a flexible program. The value of the asset is transferred to a Special Purpose Vehicle. This is combined with the data to determine the rate of payment. During high utilization time, the rate goes up. However, when it is low, capital is conserved by generating a low rate.
The drawback is this is slow, expensive, and exclusive.
Tokenization solves this. Like the SPV, the value of the asset is transferred to a token. Under this scenario, the set up and implementation of the project is very simple. Tokens can be sold to generate the revenue to cover the cost of the industrial machine. The utilization will generate the revenues to pay back the token holders.
An advantage of tokenization is that the investment amount can be as small as desired. This removal of minimum investment requirements means that different, and new investor classes, such as private investors, can be addressed. In addition, token investments are not necessarily associated with a long holding period due to their uncomplicated tradability, allowing for more flexibility and improved diversification.
Real estate, whiskey, and now tractors. These are some of the things we saw tokenized over the years.
It is only starting to spread.
Of course, we cannot overlook the fact that vast sums of money are flowing into the digital world. The buzzword appears to be "Metaverse" and people are jumping on board.
While this is something that operates in the digital realm, it is hard to argue that it is going to have physical world implications. The fact people are dropping hundreds of thousands of dollars on virtual plots instead of real homes is very telling.
Obviously, this could have an impact upon physical real estate prices. It does, however, go beyond that. What we are witnessing the is the value many are applying to the Network-State. This is something that could end up rivaling much of our current governance systems.
For now, innovation is lacking since it is something that is just beginning. Nevertheless, over the next few years, we are going to see the rise of expanding governance systems tested and put to use. The outcomes will likely start to spread into the physical world. Decentralized Autonomous Organizations (DAOs) are going to be one of the first areas affected. This will likely become a standard business model for those autonomous systems such as, perhaps, a robotaxi network.
As always, nothing operates in a vacuum, especially when it comes to technology. The most powerful technological breakthrough is always convergence. When multiple technologies are combined, the impact is exponentially greater than if just one was applied. The best example of this is the smartphone.
We are seeing something similar with cryptocurrency. When people start to innovate, we see massive advancement. Even in the early days, we are monitoring many ideas that hold enormous potential. This article covered a few of them.
It is best to keep stepping back to see what is taking place. Many are unaware of the different areas that are already being impacted by this technology. Cryptocurrency is not only here to stay, it is rapidly expanding.
In the process, we are witnessing a lot of new innovation.
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