As per the latest report by Citi Global Perspectives and Solutions, the adoption of blockchain technology could potentially reach a value of almost $4 trillion by 2030, driven by the integration of central bank digital currencies (CBDCs), tokenized assets in gaming, and blockchain-based payments on social media platforms.
However, the question remains whether this is an ambitious target or if blockchain-based payment mechanisms can genuinely revolutionize financial systems before the end of this decade.
Michael Gronager, CEO and Co-Founder of Chainalysis, believe blockchain technology can potentially transform and enhance financial systems significantly. This transformation would make sense not only from a technological standpoint but also from a socio-economic perspective.
Gronager argues that the current financial system is not working for most people globally, with over 1.4 billion remaining unbanked. Cryptocurrencies provide these underserved communities with a convenient and cost-effective alternative to traditional banking, enabling them to transfer funds across borders instantly without bureaucratic hurdles.
Overcoming the Chasm
Despite the growth potential of blockchain-based payment mechanisms, experts suggest that several challenges must be addressed before becoming mainstream.
Ace Desai, Founder of String, identifies issues such as poor user experience, lack of interoperability, and privacy concerns that need to be overcome for blockchain technology to realize its full potential. He adds that achieving a seamless payment experience for both Web2 and Web3 users is a significant obstacle that needs to be tackled to drive mainstream adoption of blockchain technology.
According to Keshav Pandya, Co-founder of Zeebu, collaboration among stakeholders, including businesses, governments, and regulators, must widely adopt blockchain-based payment mechanisms. Pandya is optimistic that blockchain technology has the potential to revolutionize financial systems, making transactions faster, cheaper, and more secure if these challenges can be addressed.
Arto Bendiken, CTO of Aurora, believes that technology is no longer the primary roadblock to blockchain adoption. Most of the technical hurdles have been solved or are close to being solved. However, the roadblocks now lie in regulatory issues, such as the recent hostility by American regulators towards blockchain technology and blockchain-friendly banking.
Bendiken warns that none of Citi’s trillion-dollar projections will come to fruition if the rest of the world follows the US example of enforcing overreaching and impossible-to-comply-with regulations.
Bendiken points to Citi’s report that draws a comparison between the invention of the automobile and the demise of buggy whip companies, where legal shenanigans, such as the Red Flag Act of 1865, limited the speed of cars to 2 MPH and required men to walk in front of vehicles waving red flags. He predicts that attempts to regulate tokens and smart contracts will be viewed similarly.
Action Speaks Louder Than Words
The involvement of governments in embracing blockchain-based payment mechanisms is crucial to driving mainstream adoption of this technology.
The UAE’s recently unveiled Digital Dirham strategy is a prime example of a government that is taking strides in this direction, according to Michael Gronager, CEO and Co-Founder of Chainalysis. The strategy aims to facilitate cross-border CBDC transactions for international trade settlement and establish bilateral CBDC bridges with India.
There are also proof-of-concept works for domestic CBDC issuance to cover wholesale and retail usage. These use cases can benefit consumers and businesses greatly, and CBDCs and private blockchains will eventually need to be bridged with their public counterparts, says Gronager.
Karl Blomsterwall, CEO of Planet IX, believes that creating a more collaborative ecosystem is crucial as the sector moves from play-to-earn to play-and-earn.
Blomsterwall sees developments such as decentralized digital identities, zero-knowledge proofs, Oracles, and secure bridges being key factors that, together with gaming, will lead to the mass adoption of blockchain-based technologies in the future.
Gronager envisions a future where all value transacts on blockchains. Blockchain-based payment mechanisms will make the distribution of value instant and universal, just as the internet did for the distribution of information, according to Gronager. However, it’s important to note that the involvement of governments is not the only factor in driving adoption. Overcoming technical hurdles and addressing user experience, interoperability, and privacy concerns are equally important.