Mainstream Adoption: Cryptocurrency Funding Real World Economy
As we enter the last part of 2022, we see the cryptocurrency market mired in a bear. Prices across the board are beat up. This is gathering all the headlines, often reinforcing the idea that cryptocurrency is a scam.
Understanding markets is important. However, when we look at what is going on, we see that cryptocurrency is still operating on its own island. It is still cut off from the rest of the world. Most utility that comes from tokenization applies to a self referential system. In other words, the biggest use case is swapping one coin for another.
Most focus upon the monetary aspect of cryptocurrency. That is what Wall Street is interested in. Yet, their focus is on this as another asset class. To them, it is no different than stocks, bonds, or any other derivative.
Sadly, that is how most are looking at it. The idea of "when moon" is still on the minds of many. This is causing untold headaches for the industry as a whole. It is what gets the attention of regulators along with the politicians. Ultimately, it makes the journey many times more difficult.
That said, the one of the paths to mainstream adoption is to integrate with the real economy.
Funding Productive Investments
It is interesting how the mindset is regarding cryptocurrency. We know that the industry is filled with venture capital money. Here we see firms bring their fiat currency to fund the development of blockchain related projects. It seems natural.
Yet, how often do we see people funding real economy projects using cryptocurrency? How come we do not see the reverse happening? If, after all, cryptocurrency is money, why do we not apply this to productive investments that generate a sustained return?
Here is where we still see a clear line between the two "economies".
Naturally, we would be remiss if we did not mention the fact the market is still rather small. For that reason, there are limits to what can be funded. Nevertheless, some basic projects could start to tap into this realm. It would also help to integrate cryptocurrency in the real economy.
Essentially, cryptocurrency needs to move beyond just financialization. We see this with existing currencies. As the financial sector gets larger, the real economy tends not to see the same benefits. Ultimately, the money gets locked up in the financial realm and being passed around as opposed to entering the real economy. It is one of the reason for the large shift in income and wealth inequality. We are now to the point where the real economy is starved for money, leading to collapsing growth rates.
Hive Is Starting To Change This
Isn't it ironic that one of the most overlooked blockchain ecosystems is starting to change this? We are seeing some reaching out of a small scale. One of the advantages Hive has is the Decentralized Hive Fund (DHF). This is allowing for the funding of different projects that could have real economy impact. We are seeing both direct and indirect opportunities.
A great example of how we see the bridge taking place is with the Hive Borehole Project. They recently started their 4th one, bringing water to another local community. This certainly is changing lives in that country. In fact, the first stage was already completed.
Of course, this is not an investment in the traditional sense. It is not a business or start up which will generate a return over time. However, this is an investment in people, some who might join the world of Hive due to the efforts of those involved.
Obviously Hive is stepping in where the government did not. This is typical in that the private sector often can get things done in a more efficient way, especially if there is corruption involved.
This is a powerful starting point yet it has to be built upon. The ultimate transition is when the monetary reversal takes place: real economy companies being funded through cryptocurrency.
Is Infrastructure The Answer?
There is no doubt we are still early in the game. Many of the issues we presently face are due, in part, to the lack of infrastructure. This is something that is being worked on daily.
If we have more solutions, especially those truly decentralized, this could be a major step forward. One of the challenges with funding real economy projects with cryptocurrency is the government's stance on it being a security. Here is where decentralization provides the answer. If there is a way to fund companies via crypto while operating outside the reach of governments, we could see an entire different scenario emerging.
Of course, even with infrastructure in place, the money has to be available to invest. Here is where the financial aspect does enter. Being so young, along with a major bear, has limited the "purchasing" power of crypto at the moment. We see the total market capitalization now sub $1 trillion.
Thus, using simple math, we can see that, even at a 20% return, this is only generating $200 billion per year. The industry has a lot of growing to do before we will see the resources to fund major initiatives.
Nevertheless, we can truly enhance the process. Consider this idea:
Cryptocurrency is used to fund a start up. The company operates in the real economy, accepting whatever currency is the norm. When the profits are generated, the money, let's say USD, is used to buy cryptocurrency for payout. Here is how we get more fiat currency funneling back into cryptocurrency.
Bridging the gap between crypto and the real economy will go a long way to pushing for mainstream adoption. At that point, people will quickly realize how much is being offered.
It will also reframe the entire conversation around this industry.
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Cryptocurrency is filling the gap and we can see so many countries in Africa are already thriving through crypto. I know there is still a lot of work to be done but with time crypto will change how world economy operate
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It is great that Cryptocurrency is filling in holes in Africa. We need to get this starting spread throughout the world.
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Lots of people have the mindset the whole ecosystem is just a cash grab and no one really looks at the big picture, the fact that cryptocurrencies are actually the future. Well, the world is still evolving and more web2 users will get to the realization of the whole thing.
Loved the writeup, nice job!
Hard to deny what most people think since that is how many approach it. We did turn it into a cash grab sadly.
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Interesting how HIVE could make a difference for people getting credits, at the same time it means new comers, I think.
I have an idea that HIVE could be perfect for students with minimum resources, if they become active in the ecosystem, in some period of time they could be an interesting kind of savings just for stay active. They could share some papers, some reviews they did as part of their bachelors. I remember when I was in University, any little income was great. The challenge is to convince young people (people in general) of the potential of Hive and the patience they need until they see some interesting results.
I don't remember to hear about Decentralised Hive Fund, where we can learn more about it?
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Just google search it I am sure there are a lot of hits that will come up on it. There is an account @hive.fund where you can look at the wallet but no posting from the account.
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Okay, thank you for your answer.
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nice
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this is very grateful, thank you for sharing
I keep spinning two ideas around in my head.
One being a 'Hive Homestead/Farm' where people can visit and share knowledge. Not a school but with a focus on education with speakers (teachers, professionals etcetera) and such that help share knowledge. It would also sell any goods produced whether that be livestock, food, plants, trees or whatever.
The other is a 'Hive Campground/Retreat' where people can visit, relax and do all the fun stuff that happens at such places.
Anyway, where I hit a snag is how to bridge the gap between real estate (land ownership) and crypto. Also all revenue generated would either begin or end as crypto so that makes it even more complicated. As a side note, by 'end in crypto' I mean generated fiat being converted into HIVE and/or HBD.
Meaning... what kind of company, corporation, non-profit or decentralized autonomous organization would be required that could both operate in the traditional financial world and the world of crypto and own a hard asset like land. Plus all the crypto conversions would have to be somehow managed in a way that would keep it 'above board' so to speak.
It is an idea spawned by the Hive Borehole Project but also very different because 'ownership' is involved and of course the holding of the actual land title has to be in something or someone's name.
Anyway, that is as far as my thought experiment ever gets but I think that bridging the divide between traditional markets (in this example the real estate market) and the world of crypto would be a big shift in the right direction.
Note: Edited for clarity.
Very true. You are dealing with a different dynamic. Check some of the laws in Wyoming. They were quick to pass legislation legalizing DAOs. Perhaps that is a starting point.
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That is interesting about Wyoming. Thanks.
It is definitely just a thought experiment though. Not so much something I would want to do myself.
In the homestead/farm example I was picturing a place like Ghana and the land itself operated and managed by locals to the area.
It amazing how cryptocurrency can get integrated into almost anything like the idea you mentioned above. There need to be a bit off less focus on "when moon" so we can all see the potential of what we are dealing with here.
It is baffling some don't see it that way with focus on the next profit taking. Perhaps we should start thing of leaving an impact like Hive is doing providing water for Ghanaian local communities.
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HBD is an ideal coin to be used for funding purposes. We simply need to start creating the business opportunities and build the platform for it.
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I think that Hive has started to impact individuals's life, that is, people have started spend the income from Hove for their daily expenses. I believe it will increase in the future.
It's pretty cool how well that borehole project is doing. Changing quite a few lives through the power of blockchain. I've noticed that the big businesses aren't advertising as much like they used to that they are building things on blockchain. I don't know if that is because they have shifted focus or if it is just because it is more common now and less of a buzz word.
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I think there is going to be a shift. For now, advertising is going to be a vital part of the online world. It could diminish as more is moved to blockchain.
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that is true in many there is still a degree of mistrust and more when you look at Luna but let's hope all those fears disappear to finally observe the power that Cryptocurrencies cannot give
Bridging the gap is tough and as of right now, I don't really see much bridging just yet. Even the games are a long way off from what people find in a game of the year video game. So in a way, it's going to be tough but we are going to need those applications if we want faster adoption of crypto.
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Isn't this because the "lawful scammers" sell this kind of idea that the clueless majority are embracing gullibly?
Glad to see the progress of the Hive Borehole Project. We need more of this type of project.
My head really spins whenever I hear clueless comrades praising the superiority of government service over the private sector. It puzzles me about the kind of world they live in.
Not only does government fail in fulfilling its obligations, but they also prevent private initiatives outside its control to grow the economy. They promise to give but ended up taking 3x times and even more than what they give. I love to see how decentralized entities find that way outside the reach of the parasitical class.
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