Source: Galaxy; Compiled by: Wuzhu, Golden Finance
Preface:
In recent years, businesses and organizations have invested time and resources to adapt their traditional business models to incorporate cryptocurrencies and other disruptive technologies such as artificial intelligence, cloud computing and big data. Cryptocurrencies offer advantages such as speed, resilience, transparency, cost efficiency and accessibility. Although some critics remain skeptical, most understand that cryptocurrencies have utility beyond speculation.
The primary mission of cryptocurrency is to foster a more equitable and inclusive digital economy on a decentralized, trust-minimized blockchain infrastructure. Cryptocurrency unlocks new capabilities and simplifies information sharing with an individual-centric approach. It is a new technological paradigm that changes the way we create and share value.
One criticism, however, is that proponents of the industry often conflate an end state with the current state of adoption by making forward-looking promises about cryptocurrencies’ utility.
Cryptocurrencies face a cold start problem — the underlying technology is still in the early stages of development and their adoption faces significant barriers, including customer education, trust gaps and regulatory uncertainty, as well as user experience challenges in interacting with decentralized applications.
Although the crypto industry still has a long way to go to realize its overall vision, it has already achieved product-market fit (PMF) in multiple use cases across various verticals.
money
Store of Value
Often referred to as "gold with wings," Bitcoin is a digitally scarce asset that offers advantages such as divisibility and transferability on a decentralized, permissionless global network. Bitcoin and other crypto assets can serve as a hedge against uncertainty in monetary systems, the credibility of central banks, authoritarian regimes with strict capital controls, and unstable financial systems due to strong value transfer and property rights. Bitcoin has been adopted by a variety of end markets, including retail, institutional, corporate, government, and nation-state, as an emerging market currency, seizure-resistant asset, and treasury asset.
Stablecoins democratize access to programmable digital cash instruments and other digital representations of value, such as currency buckets or gold. Despite the lack of comprehensive federal regulation of stablecoins in major economies, many individuals from emerging markets hold stablecoins to hedge against fluctuations in their national currencies.
Remittances and wages
Cryptocurrencies can offer significant cost savings to remittance businesses and individuals who rely on international remittances and other cross-border transactions that incur high fees. Traditional methods of sending remittances through established remittance organizations incur significant costs, averaging 6.3% of the remittance amount, according to World Bank estimates. In contrast, cryptocurrencies offer a more accessible alternative with borderless, permissionless, and 24/7 transaction capabilities, often at lower costs and faster settlement times. In addition, the scalability of blockchain technology allows for efficient processing of both large and small transfers, including micropayments that may not be possible through traditional channels.
Cryptocurrencies also facilitate rapid data aggregation, verification, and social coordination, making them an effective tool for allocating income, claims, or social benefits, especially for marginalized groups. By encouraging participation in the financial system, cryptocurrencies help expand financial inclusion, benefiting cross-border workers and those who face challenges in unbanked areas.
Payment (Merchant Acceptance)
Acceptance of cryptocurrencies as a medium of exchange continues to rise as more merchants are now able to accept cryptocurrency payments. This trend is driven by mainstream payment service providers such as PayPal, Shopify, and Square, who have integrated support for cryptocurrencies into their platforms. Major players in the payment industry such as Visa and Mastercard have launched crypto card programs, including crypto debit, prepaid, and credit cards backed by cryptocurrencies, as well as cryptocurrency rewards programs. In addition, Visa and Mastercard have expanded their capabilities to settle selected digital currencies, including central bank digital currencies (CBDCs), directly through their networks.
By leveraging encrypted payment channels, merchants can bypass traditional checkout intermediaries such as banks, card networks, and processors, resulting in significant cost savings. This allows them to offer consumers competitive prices while avoiding bank fees and reducing the risk of fraudulent chargebacks since crypto transactions are irreversible. Crypto payments provide merchants with real-time access to funds and enhanced control over working capital, liquidity, and liability protection.
Financial Services
capital market
Tokenization of real-world assets (RWA) is the process of issuing blockchain-based tokens that represent tangible physical or financial assets such as stocks, bonds, real estate, commodities, and art. RWAs deliver the benefits of an open crypto economy to familiar off-chain assets, improving their liquidity, utility, and efficiency. They provide a wider range of investment opportunities, shorten lock-up periods, and improve price discovery in a 24/7 market.
While tokenization efforts are still in the early stages of development, the issuance of RWAs by trusted traditional financial brands can accelerate the adoption of cryptocurrencies by new users and investors. Despite the multi-trillion dollar market potential, only a small portion of financial assets (approximately $1.5 billion) have been tokenized on public blockchains, indicating a huge growth opportunity in this market. Tokenization is one of the most promising use cases for cryptocurrencies and will continue to shape the trajectory of the industry.
Borrowing and lending
Cryptocurrencies allow individuals to use any financial asset as collateral or lend passive assets to earn interest. Smart contracts can be programmed to automate processes such as loan issuance, repayment, and liquidation based on predefined conditions. This has significant advantages over traditional banks and credit institutions:
Borrowers and lenders connect directly. Depositors on DeFi lending platforms can earn a larger share of the interest paid by borrowers compared to banks.
Automated decisions. No lengthy credit application process. Borrowers have immediate access to liquidity. This means no borrower receives preferential treatment to avoid liquidation or repayment negotiations (e.g. 3AC paid off its Aave loan before paying back its CeFi creditors).
Other benefits: permissionless access/listing, composability, non-custodial, more resilient than CEXs (ideally). Also supports features like flash loans, a type of uncollateralized lending in DeFi where assets are borrowed and returned in the same transaction without upfront collateral.
Risk Management
Cryptocurrencies provide full transparency into counterparty holdings, allowing for easy verification and tracking at any given time. Participants can proactively monitor for mismanagement of client funds. Data authenticity is ensured using decentralized, immutable infrastructure, while programmable smart contracts can automate decisions across a wide range of processes.
These characteristics provide crypto-finance applications with significant risk management advantages compared to traditional finance (“TradFi”). Market participants can gain real-time insights into counterparty performance (rather than having to wait for company reports monthly or even quarterly), manage collateral efficiently, and hedge risk positions across a wide range of customized products/markets. Cryptocurrencies unlock new risk management use cases for real-time monitoring (e.g., “proof of reserves” for custody operations), insurance, and auditing in decentralized markets.
Consumer, Media and Entertainment
Business and Loyalty
Loyalty rewards programs can serve as a strategic marketing investment to boost sales and customer engagement. Many businesses have implemented successful loyalty programs through different types of mechanisms, such as Starbucks reward points and mission-based programs, cash back credit card programs, or airline miles and spending-based programs to achieve elite status. However, many loyalty programs are inefficient - reward points are fragmented in closed systems and customers are faced with a large number of products across brands, resulting in low redemption rates, account inactivity, and increased customer churn.
Blockchain enables brands to address many inefficiencies and provide customers with a wider range of loyalty rewards. Digital wallets and blockchain-based digital collectibles provide loyalty benefits that are earnable, redeemable, and transferable. With participating agents of loyalty rewards programs interacting in one system, customers have greater control over their accumulated points and rewards. For brands, blockchain offers streamlined execution to save costs, expand reach, programmable rewards, and community-driven incentives to scale programs. In addition, leading consumer brands have been looking to satisfy their customers in the metaverse as they adapt the web3 paradigm to drive new forms of digital commerce.
Games and GameFi
Blockchain-based games offer gamers the opportunity to earn and own in-game assets (e.g., avatars, weapons, collectibles, land, currency, etc.), often in the form of NFTs. Specifically, blockchain enables traditional games to add player-owned economies, the ability to spend in-game rewards with other players on the NFT marketplace, and in some cases, the value of these in-game assets may scale across the gaming platform. Blockchain games can offer additional advantages over traditional games, such as the ability to build open economies that connect gamers, providing them with more value and control over their assets.
GameFi (Play to Earn) combines online games with DeFi concepts, which can drive higher engagement through a Play to Earn ("P2E") mechanism. For example, mobile to earn ("M2E") games incentivize users to perform physical activities through cryptocurrency rewards. M2E applications use fitness trackers to track steps or calories burned, encouraging positive human behaviors (such as exercise) through economic incentives to encourage higher engagement.
social media
"DeSoc" is short for decentralized social media, which uses blockchain infrastructure and cryptocurrency incentives to build interactive online communities. Compared to centralized alternatives, DeSoc can enhance censorship resistance, user verifiability, and data sovereignty. Users can control their own data, including how and where they share it, which is very different from the data practices of many existing social media platforms. User data is stored on a distributed ledger, which can reduce risks associated with single points of failure, censorship, and central control. Cryptocurrency also enables users to interact and share content seamlessly across multiple platforms, while providing innovative ways to build communities and monetize data.
A unique feature of DeSoc is the concept of users owning their own data and being able to create “social graphs.” These graphs map users’ interactions and relationships within the platform, providing a digital fingerprint of their social presence. With user permission, these graphs can be shared or integrated across different applications, facilitating a more connected and user-controlled experience.
DeSoc is one of the most powerful use cases for cryptocurrency and has the potential to drive mass adoption of the technology.
Creator Economy and Intellectual Property Management
Content creators, influencers, and independent artists in the creator economy currently rely on centralized platforms and face challenges such as unfavorable revenue sharing agreements and lack of content ownership. Additionally, limited content ownership and portability of community bases create platform dependency. Cryptocurrencies enable creators to have greater ownership of their content and control their social graph, removing reliance on centralized platforms and enabling more direct artist-audience relationships. Creators in the web3 economy can more efficiently monetize, manage, and distribute their content to their super fans, who can now self-identify and financially support their favorite artists.
Creators use blockchain to manage, distribute, and fragment their intellectual property (content) through NFTs and decentralized platforms/marketplaces. Blockchain provides a time-stamped, verifiable record, empowering creators to protect their work and prevent unauthorized distribution. Smart contracts enable automated streaming royalties and licensing agreements, while decentralized marketplaces facilitate transactions between fans to support their favorite artists, ensuring creators can seamlessly monetize their work.
Professional Use Cases
Identity and Authentication
Approximately one in seven of the world’s population lacks access to identity documents, limiting their ability to open a bank account, vote in elections, own property or find a job. Even citizens who have a form of identification do not have full control over their identity and face verification friction across numerous online accounts with various service providers, many of which have sensitive user data that is frequently hacked. Additionally, identity fraud has become a growing problem as insecure verification systems can be spoofed.
By leveraging blockchain and strong cryptography (i.e. zero-knowledge proofs) for decentralized identity (DID), individuals can have greater control over their online profiles without having to rely on specific service providers. DID systems are trust-minimized, immutable systems that facilitate identity verification without revealing sensitive user data. This provides benefits such as tamper-proof documentation, simplified verification, and reduced risk of identity theft/fraud due to data breaches. Verifiable sources of identity may include new web3-based credentials (such as digital signatures or non-transferable tokens) to coordinate and build reputation systems. Other extensions of blockchain-based identity management systems include democratic DAO voting (one person, one vote), fair airdrops, and the ability to efficiently distribute value on a global scale.
DePIN & AI
The Decentralized Physical Infrastructure Network (DePIN) leverages the financial infrastructure and token incentives of cryptocurrencies to build a fair physical infrastructure network and promote ownership distribution. DePIN can provide a more cost-effective solution by subverting the high-profit model of existing players and passing on cost savings to users. DePIN provides a new path to capital formation for traditional capital-intensive industries such as telecommunications and cloud services. Individuals can be compensated by contributing resources to the supply side of the DePIN network, including hardware equipment, energy, data, and computing power.
An emerging category of DePIN projects integrate AI workflows, leveraging tokens to incentivize a variety of use cases such as (1) provisioning hardware for AI workflows, (2) data storage and indexing for model training and inference, and (3) providing feedback for model refinement through reinforcement learning.
Storage and file sharing
Cloud computing provides enterprises and organizations with managed data storage and shared computing storage services, reducing the cost and complexity of operating data centers. Although widely adopted, leading centralized cloud providers (e.g., AWS, Microsoft Azure, Google Cloud) have a rich history of security incidents and privacy risks - they use predatory pricing strategies, make huge profits from user data stored in the cloud, and suffer downtime resulting in productivity losses of up to $2 trillion.
Decentralized storage is critical infrastructure to ensure that storage clouds and node operators adhere to the decentralized principles that underpin Web 3. These protocols aim to solve many of the problems associated with centralized providers by competing on censorship resistance, resiliency (data redundancy; eliminating single points of control/failure), security and privacy, and operational efficiency (e.g., cost and data retrieval).
IPFS (InterPlanetary File System) enables users to store and retrieve cryptographically verified content across centralized or distributed data storage systems.
Filecoin and Arweave are decentralized storage platforms that provide censorship-resistant data storage and access. Filecoin charges clients on a rental model based on the amount and duration of data stored, while Arweave provides permanent data storage.
In addition to improving data resiliency, other use cases for decentralized storage and file sharing include content collaboration (including decentralized science), security of voter data, and as raw data for training artificial intelligence models.
Outlook
While many crypto applications and use cases are still relatively new and have gained traction in the past few years, the underlying public blockchains and related infrastructure have been around for much longer. As the infrastructure layer continues to improve, more applications will be developed and more utility will be unlocked. In the last year alone, the industry has made significant progress in speed, scale, and network resilience. Ongoing areas of technical research focus primarily on privacy (i.e., separating sensitive information from transparent public blockchains), composability, and interoperability - all of which should unlock new application utility and enhance the potential of the crypto economy.
Certain use cases with clearly beneficial value propositions are not included in this presentation due to limited adoption or effectiveness to date. These include applications in governance, supply chain management, healthcare, and ticketing/events, which must address regulatory clarity or social coordination challenges to be valid cryptocurrency use cases. However, many of these barriers to adoption are expected to ease as individuals and businesses become more accepting of crypto for other designated use cases. Additionally, as centralized service providers inevitably face disruption over time, the value of decentralization should become clearer.
As the world undergoes a digital revolution, society places increasing emphasis on empowering individuals, especially among younger generations who feel disenfranchised by the old world. Cryptocurrency is positioned at the intersection of technology and culture to meet their needs by providing a more fair, free, and efficient system.
