For an extended period, watchers have pondered whether the titans of conventional finance, such as BlackRock and JPMorgan, would make a significant move into the blockchain space. Perhaps a bit naive, the hope was that these global banking bellwethers would, in a sense, “see the light” and see the technological benefits of web3. However, it was not unfounded: for a while now, conventional investors have been gradually moving toward this goal, whether through their own product offerings for institutional and retail clients, their launch of custody services, their investment in spot cryptocurrency, or their settlement of digital bonds on public ledgers.
It makes sense to argue that in order for blockchain technology and cryptocurrencies to succeed, established giants must embrace them. However, the rise of institutions that are native to the cryptocurrency space is overlooked due to the intense focus on legacy financial institutions. These progressive investors and innovators were raised with decentralized technology at the core of their business and vision, so they don’t need to be persuaded of the benefits of distributed ledgers. And without a doubt, it will be up to them to propel the sector – and possibly finance overall – forward.
We Were Always Here: The Vitality of Crypto-Native Institutions
A new type of institution has evolved as the crypto business has grown. These are organizations that understand and value decentralization on a fundamental level; they are not your typical Wall Street corporations toying with blockchain technology after the fact. They have an innate understanding of technology and the driving forces behind its advancement. Since the beginning of Web3, they have been a crucial component and have developed with the technology. These organizations have played a pivotal role in propelling the industry forward through significant turning points, such as the emergence of DeFi (short for “decentralized finance”), Ethereum’s (CRYPTO: ETH) transition to proof-of-stake, and the most recent approval of multiple spot Bitcoin (CRYPTO: BTC) exchange-traded funds (ETFs).
This latter occurrence, which has been hailed as a turning point in the cryptocurrency space, allowed ordinary investors to participate in price fluctuations of BTC without having to possess the commodity physically. Furthermore, the arduous work of individuals already involved in the cryptocurrency field, who spent many years educating the public and proving the need for these financial products, is largely responsible for the entry of companies like BlackRock and Grayscale into the market.
During the so-called DeFi Summer of 2020, a number of financial services went live and demonstrated the benefits of cutting out middlemen, which is when a large number of these entrepreneurs gained notoriety. Merely $1 billion was secured in such protocols at the onset of that heady summer. Prior to declining back to earth, that amount reached an all-time high of roughly $175 billion. It is understandable that many detractors point out only the retrenchments, neglecting to mention the important fact that DeFi’s overall investment has increased by 6,000% in less than four years to just under $60 billion.
It is a testament to the creativity and zeal of crypto-natives who developed valuable infrastructure and high-utility decentralized apps (dApps), whether they were focused on NFTs, staking, swapping, gaming, stablecoins, governance, or something else entirely, that traditional financial institutions were inspired to look into or even embrace blockchain technology. Together, these protocols—which have been launching at a remarkable rate since 2020—showed established institutions where the future is.
Of course, more than just decentralized organizations were responsible for the positive wave that forced incumbents to take a closer look at web3. The prominent centralized cryptocurrency exchanges also had a role to play, despite well-publicized failures such as FTX. In example, Coinbase attracted attention when it became one of the first firms based entirely on cryptocurrency to go public in 2021.
The VCs, LPs, and angel investors who are committed to bootstrapping promising web3 startups deserve recognition as well. Not to mention the coordinators of the hackathons and events that brought attention to the issues that skilled cryptocurrency developers were resolving.
How Web3 Entities are Setting the Standard
It goes without saying that, in the larger picture, respecting these trailblazers does not diminish the significance of traditional companies like Fidelity and Standard Chartered. These organizations control enormous amounts of capital, which makes their involvement revolutionary for the sector and a multiplier effect for blockchain adoption and liquidity. Many of these organizations also hold powerful positions in our economy.
Furthermore, conventional financial institutions are crucial to the advancement and use of DeFi networks. Indeed, a large portion of the credit for Web3’s growing popularity in the mainstream goes to the incumbents and the crypto-native players for their successful cooperation. Nonetheless, the organizations who have been using blockchain technology for a long time are in charge. They are the ones reshaping the world, driving innovation, and establishing the parameters for how blockchain technology ought to be included into the world economy. Their vision and leadership are essential to making sure the crypto industry grows in a way that is healthy, sustainable, and consistent with the fundamentals of decentralization.
Steering the sector away from mimicking the inefficiencies of traditional finance is one of the key benefits of having institutions with a focus on cryptocurrencies define the direction. Transparency, equity, and accessibility are the cornerstones of crypto-native organizations, and these principles frequently conflict with the way large banks conduct business.
When traditional finance adopts cryptocurrency, it will provide much-needed resiliency, credibility, and liquidity. However, the organizations that are native to the cryptocurrency space and have driven the sector ahead from its inception will define the future of decentralized technology. They are leading the way in the rapidly developing decentralized financial sector as we approach 2024 and beyond.
