While the number of applications across the interdependent spheres of crypto, blockchain, and web3 continue to expand into every field of human endeavour, the current bear market is acting to flush out much of the excess and bad actors in the space – a painful but necessary part of the industry's maturing process. This makes it all the more important to monitor trends in the ecosystem that already are or have the potential for real longevity.
In this second part of our series looking at seven blockchain trends to watch this year and beyond, we look at stablecoins and DeSci. In case you missed it, click here for Part 1.
By now, it’s widely understood that price stability is the principal advantage that stablecoins offer over traditional cryptocurrencies which are still exhibiting levels of volatility consistent with ongoing price discovery corrections. This stability allows investors and/or traders to bridge the gap between fiat currency and cryptocurrency using stablecoins which are able to achieve this valuation stability using different working mechanisms.
Given the ravages of the current bear market, stablecoins have played a critical role for investors to keep their money in the crypto ecosystem across both CeFi and DeFi platforms. Indeed, being a useful proxy for cash, it is estimated that as much as 18% of the crypto market cap is denominated in cash via stablecoins, which is an indication of how much deployable dry powder lies in wait for a trend reversal.
Figure 1: Stablecoins' share of the total crypto market cap is at historic highs
Beyond their use for trading and countering volatility, fiat-collateralised stablecoins (Tether, BUSD, USDC, etc.) also have increasing utility in lending, liquidity pools, savings, remittances and other areas, all of which reflect their very real potential for offering an alternative to traditional banking.
In regions such as Sub-Saharan Africa, even though it accounts for a small proportion of global crypto transactions, markets such as Kenya, Nigeria, and South Africa are highly developed. The volatility of local currencies and other cryptocurrencies as well as the high cost of remittances means that stablecoins are a good fit for these economic realities.
Additionally, alongside governments’ efforts to introduce central bank digital currencies (CBDCs), they are also tapping into non-fiat/crypto collateralised stablecoins for use as payment mechanisms for international trade.
For example, Russia and Iran are working together on a gold-backed stablecoin that could be used to replace the dollar for international trade transactions for the two countries, both of which have been severely hampered by Western sanctions.
It’s clear therefore that as we continue down the path of increasingly unstable fiat currencies and greater state-sanctioned fiscal and monetary repression, stablecoins may well be the central mechanism to shake up the way in which international and domestic banking is done.
DeSci, lies at the intersection of the drive in the scientific community to change how research is funded and knowledge is shared, and the movement to use distributed systems to shift ownership and value away from industry intermediaries.
While it hasn’t yet reached the broad adoption of the category it has modelled its name after, DeSci is quickly emerging as a hotbed of innovation in the digital assets space. By de-siloing data and making it more accessible, DeSci seeks to reduce the reliance on publisher conglomerates and increase collaboration across the field by building public infrastructure for funding, reviewing, crediting, storing, and disseminating scientific information via the Web3 stack.
Indeed, there is no better example of why a greater degree of decentralisation is needed in the scientific community than the emergent scandals of the pandemic. Not only did poor data reporting and transparency keep many people in the dark as to the true threat posed by the virus, but these failures also led to flawed response models the consequences of which are only beginning to be understood. Most egregiously, we saw how centralised power, from governments to large pharmaceutical companies, came to bear on the enterprise of public health more than any time in recent memory.
Figure 2: Blockchain application possibilities within DeSci
Though aligned with the open science initiative, DeSci specifically looks to find solutions to the flawed peer reviewed process, as well as some of the aforementioned problems, by taking a practical approach to blockchain applications in the scientific space (Figure 2).
For example, given how critical the peer review process is to the validation of the scientific method, the inadequacy of the incentive schemes for peer-reviewers is ongoing and gives too much clout to publishers. This in turn impacts the timeliness, quality and fairness of scientific dissemination.
Here, researchers have proposed that smart contracts could be used to disintermediate publishers by connecting scientific authors directly with peer reviewers who are incentivised through token-reward schemes. Such a blockchain-based incentive system (Figure 3) could both provide rewards for scientists peer-reviewing other scientists’ work and build trust, as well as promote ethical behaviour and inclusiveness. The system could also implement a gamified mechanism that allows the whole community to evaluate the peer-reviews and vote for the best ones (for more see Ants-Review: a Protocol for Incentivized Open Peer-Reviews on Ethereum).
Figure 3: Ants-Review allows authors to issue a bounty for open anonymous peer-reviews
Additionally, and as noted above, censorship of opposing scientific viewpoints has emerged as a major issue over the past three years and there is no doubt that political influence has threatened to reduce science to becoming just another political action committee. Here, the Blockchain's 'immutability of records' principle means that data contained on the blocks are virtually impossible to modify or delete and are available from everywhere at any time, which could be a major feature for preventing scientific censorship.
Part 3 coming soon...
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