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Crypto innovation enables new business models
Technology investment

Crypto innovation enables new business models

We believe that the next upcycle may see the scope of crypto technology widen beyond just scaling transactions, DeFi, and digital art.
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4 APR, 2023

By Yaro Pan


Behind the scenes of crypto volatility, the unwinding of leverage, and rising regulatory uncertainty, less-talked-about innovations are brewing. While many crypto developments are still early experiments, they offer a view of the ways these technologies can address a wider range of business applications beyond just payments and stores of value.

Expanding the crypto ecosystem

A few years ago, a lot of crypto innovation focused on two areas: scaling blockchain technology and building out the infrastructure for creating and trading digital assets. We saw a rise in decentralized finance (DeFi), which helped fuel the rally across multiple emerging protocols that expanded the size of the ecosystem. Nonfungible tokens (NFTs) expanded crypto’s reach into mainstream awareness and culture.

Now we find ourselves at the tail end of that upcycle, but with many more users, innovators, and unspent venture capital funding working in this space. So, the question is: What drives the next expansion wave? We believe that the next upcycle may see the scope of crypto technology widen beyond just scaling transactions, DeFi, and digital art.

Crypto building blocks

Before exploring emerging business models, we believe it’s important to review some key building blocks that crypto and blockchain technology enable:

Business model innovation in the data economy

Combining the elements above will lead to a reimagining of many business models. The idea of incentive design may be one of the most disruptive elements of crypto innovation. It draws on the existing elements of open-source software, crowdfunding, cooperative ownership, and digital platform economics — how to incentivize collective action to achieve an outcome. One area where we see an impact in the year ahead is in the business of data. Data ownership, use, and rights have been ongoing topics of debate that are only intensifying with the acceleration of AI innovation. 

We see projects that reimagine the business of storing, exchanging, and using data emerging. These types of projects use the consensus database of blockchains to track data assets, their ownership, and their rights. They facilitate the software-based transfer of value connected to data assets and run on automated token incentives that ensure the data is securely stored by a network of decentralized participants. These approaches are already scaling to petabytes of storage deployed, and the innovation continues to progress at a rapid pace.

Decoding the power of disruption

There are three ways in which new crypto-centric business model approaches can be disruptive to the existing technology landscape:

While we’re eager to see the opportunities these disruptions create, it’s important to remember that it will take some time for these ideas to mature. The regulatory landscape will have a significant impact on the direction of innovation because crypto assets don’t easily fit into the existing categories of regulated assets. We are optimistic that over time, regulatory frameworks will emerge and address new disclosure and accountability needs while also accounting for the differences among the tokens — not all crypto assets are the same!

Our focus in crypto asset research is finding sustainable and responsible innovation. We are encouraged by what we observe and see opportunities for alignment between new innovators, investors, regulators, and users. Where that alignment happens, we’ll see highly disruptive business models emerge.

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