ARK Invest Annual Report Highlights: By 2030, Bitcoin will exceed 1 million dollars

Original Title: 《Big Ideas 2023》

Author: ARK Invest

Compiled by: Jinlu, Tencent Technology

Recently, Cathie Wood's ARK Invest released its annual research report titled "Big Ideas 2023," which has garnered significant attention from industry users since its launch in 2017.

This year's report spans 153 pages, providing an overview of the latest trends in global innovative technology integration, covering 13 major innovative fields including AI, digital wallets, electric vehicles, and aerospace.

1. The report predicts that by 2030, the cost of AI training will continue to decrease at an annual rate of 70%. For example, training a large language model to the level of GPT-3 required nearly $4.6 million in 2020, which plummeted to $450,000 in 2022.

2. Regarding digital cryptocurrencies, ARK Invest pointed out in the report that cryptocurrencies and smart contracts could achieve market capitalizations of $20 trillion and $5 trillion, respectively, within the next decade. By 2030, the price of Bitcoin is expected to reach $1 million.

3. In the electric vehicle sector, ARK Invest predicts that prices will decline, and sales will increase by more than seven times, growing at an annual rate of 50%, from approximately 7.8 million units in 2022 to 60 million units in 2027.

ChainCatcher only extracted the report content related to blockchain and the cryptocurrency industry during the reprint. To read the original text, please click the original link at the beginning. Below is the essence of the report:

1. Technological Integration Creates Exponential Growth Potential

According to ARK's research, five major innovative platforms are converging, creating unprecedented growth trajectories. Artificial intelligence is the most important catalyst, cascading (1) into all other technologies. In this business cycle, the market value of disruptive innovation platforms is expected to grow at an annual rate of 40%, increasing from today's $13 trillion to $200 trillion by 2030. By 2030, the market value associated with disruptive innovation could account for a significant portion of the global stock market capitalization.

// Note 1: Cascading is an important concept in associative mapping, referring to whether associated objects perform the same operation synchronously when the active party executes an operation.

1. Public Blockchains

After widespread adoption, all funds and contracts will move to public blockchains, achieving and verifying digital scarcity and proof of ownership. The financial ecosystem may be reconfigured to accommodate the rise of cryptocurrencies and smart contracts. These technologies enhance transparency, reduce the impact of capital and regulatory controls, and lower the costs of contract execution. In such a world, as more assets become currency-like, businesses and consumers will adapt to the new financial infrastructure, and digital wallets will become increasingly important. Current company structures may also be called into question.

2. Artificial Intelligence

Computing systems and software based on the growth of data can be used to solve complex problems, even driving the automation of knowledge work and accelerating the integration of technology with every economic sector.

It should be evident that the adoption of neural networks is more significant than the introduction of the internet, with the potential to create $10 trillion in value.

At scale, these systems will require unprecedented computing resources, with computing hardware focused on AI likely to dominate the next generation of cloud data centers for training and operating AI models, ultimately bringing substantial benefits to end users: numerous AI-driven smart devices will permeate people's lives, changing their consumption, work, and entertainment habits. The application of AI will transform every field, impact every business, and drive the development of every innovation platform.

3. Multi-Omics Sequencing (Omitted)

4. Energy Storage (Omitted)

5. Robotics

Catalyzed by artificial intelligence, adaptive robots should be able to work closely with humans, helping to change the way products are manufactured and sold. 3D printing should aid in the digitization of manufacturing, improving the performance and precision of end-use parts and enhancing supply chain resilience. Meanwhile, the world's fastest robot, "reusable rockets," should continue to lower the costs of launching satellite networks and achieve uninterrupted connectivity. As an emerging innovation platform, robotics can significantly reduce the cost of hypersonic flight distances, the complexity costs of 3D printing, and the production costs of AI robots.

2. Integrated Platforms

Integrated innovation platforms involve 14 investable technologies, whose costs are rapidly declining, impacting multiple industries and serving as a springboard for more innovations.

ARK's integration scoring framework and network diagram:

1) The technology score is a function of its potential for super-exponential growth when catalyzing other technologies.

2) The thickest lines correspond to expectations of exponential growth potential for another technology.

3) These technologies have catalytic directionalities. For example, neural networks should catalyze autonomous mobility, and the data generated by autonomous mobility systems should enhance the capabilities of neural networks.

4) Node size corresponds to the estimated impact of that technology on enterprise value by 2030.

5) Based on this network diagram, innovation platforms can be clearly categorized.

1. Neural Networks are the Most Important Catalyst

2. Autonomous Mobility Systems Fully Embody the Integration of Technologies

3. AI Chatbots will "Drive" Autonomous Taxis

4. Deep Neural Networks Enable More Accurate Long-Read DNA Sequencing (Omitted) 5. Thanks to advancements in AI language models, robots can learn from experience

6. Advances in Batteries are Crucial for Augmented Reality (Omitted)

7. Reusable Rockets Provide Satellite Support for Traditional Smartphones (Omitted)

8. Cryptocurrency Mining Can Support Larger Scale Solar Panel Installations

(Solar-powered) Bitcoin mining machines are a useful energy tool: modular, movable, and flexible, they can integrate well with intermittent energy sources like wind and solar. Incorporating Bitcoin mining into solar storage systems can enhance the scalability and reliability of the grid without increasing the equivalent levelized cost of electricity. According to ARK's research, by increasing battery capacity by 4.6 times and adding Bitcoin mining, solar systems can meet over 99% of end-user demand without sacrificing profitability. 9. Discontinuous Changes in Macroeconomic Growth Have Become the Norm Due to Technological Reasons

10. Disruptive Innovation Complicates the Meaning of Economic Statistics

11. Today's Innovation Platforms Can Enhance Consensus on GDP Growth, Reflecting the GDP Growth Historically Associated with Technology

According to ARK's research, by 2030, breakthroughs in technologies related to energy storage and robotics alone could add 30% to real GDP, with AI's contribution potentially being even higher. The impact of these technologies on GDP is unlikely to be captured by traditional economic production statistics. In particular, while AI's impact on the productivity of knowledge workers will drive substantial improvements in the software, administrative, and management aspects of complex systems, it remains unclear how these improvements will be reflected in traditional macroeconomic growth metrics.

12. By 2030, the Share of Disruptive Innovation Platforms in Global Stock Market Value Will Surge

Artificial intelligence, energy storage, robotics, multi-omics sequencing, and public blockchains could expand 15-fold during this business cycle, with equity value reaching $200 trillion. Even if non-innovative exposures in the market continue to accumulate value, by 2030, the share of disruptive innovation platforms in global stock market value is expected to surge. Including crypto assets, by 2030, disruptive innovation exposures could account for about 68% of the value of risk assets.

3. Electric Vehicles (Omitted)

4. Digital Consumption

1. Immersive Virtual Experiences Will Give Rise to the Next Wave of Gaming

As the gaming industry transitions to an all-encompassing virtual world, video games and social media may merge, as consumers socialize and entertain in virtual spaces in game formats rather than physical environments. According to ARK's research, the integration of gaming and social media should drive gaming revenue growth from a compound annual growth rate of 7% over the past five years to 10% over the next five years.

2. Trading and Creation of Digital Assets Show Divergence in Bear Market

In 2022, NFT trading volume grew by 15% year-on-year, primarily driven by high-profile collectible projects like Bored Ape Yacht Club and Crypto Punks. However, the share of minted NFTs shifted towards utility-based projects, such as on-chain domain names and digital memberships. The shift towards practical value rather than speculation is a healthy development trend.

3. Digital Wallets: Decentralization of Traditional Banking

With billions of consumers and millions of merchants joining, digital wallets can transform the economic activities associated with traditional payment transactions, saving nearly $50 billion in costs.

Digital wallets currently have 3.2 billion users, penetrating 40% of the global population. ARK's research indicates that the number of digital wallet users will grow at an annual rate of 8%, reaching 65% of the global population by 2030.

As consumers and merchants adopt digital wallets, the use of traditional checking accounts, credit cards, debit cards, and merchant accounts should decrease, impacting traditional payment intermediaries—banks.

By eliminating intermediaries, digital wallets can facilitate closed-loop transactions for over 50% of payment volume, with an expected increase of $450 billion on top of the current $1 trillion enterprise value of digital wallet companies by 2030.

4. The Share of Digital Wallets in Online and Offline Transactions is Continuously Increasing

In 2021, 49% of e-commerce transactions were based on digital wallets, up from 18% in 2016. Since 2016, the share of digital wallets has been on the rise, corresponding to a decline in the shares of credit cards, bank transfers, and cash transactions. In 2021, 29% of offline transactions were completed using digital wallets, nearly doubling from 16% in 2018. During the pandemic in 2020, digital wallets surpassed cash to become the primary means of offline transactions, continuing to gain share.

5. Digital Wallets Create Closed-Loop Ecosystems for Consumers and Merchants

After acquiring billions of users, digital wallets are bringing millions of merchants onto their platforms, facilitating direct transactions between consumers and merchants, bypassing traditional financial institutions. 6. By 2030, Closed-Loop Transactions Could Account for Over 50% of Digital Wallet Payments

Closed-loop transactions are common in mainland China, allowing for the bypassing of third-party involvement, saving nearly $50 billion in costs for digital wallet platforms, consumers, and/or merchants outside mainland China. By 2030, the total enterprise value of digital wallet platforms is expected to increase by $450 billion on top of the current $1 trillion.

5. Public Chains: Gaining Momentum in Crisis

In 2022, the contagion from Terra/LUNA, Three Arrows Capital, Celsius, and FTX/Alameda consumed about $1.5 trillion of the cryptocurrency market capital. Despite the severe downturn, public chains continue to facilitate changes in currency, finance, and the internet. The long-term opportunities for Bitcoin, DeFi, and Web3 continue to grow. Cryptocurrencies and smart contracts could achieve market capitalizations of $20 trillion and $5 trillion, respectively, within the next decade.

1. Contagion Consumed About $1.5 Trillion of Cryptocurrency Market Value in 2022

Bear Market Events:

• Crypto companies, including FTX and Crypto.com, dominated Super Bowl ads, a sign of irrational exuberance.
• The Federal Reserve raised interest rates for the first time since 2018.
• The collapse of Luna and UST became one of the most destructive events in the history of the crypto space.
• Lending platform Celsius declared bankruptcy.
• OFAC sanctioned the open-source software Tornado Cash.
• Crypto exchange FTX declared bankruptcy.
• Major brokers Genesis and Gemini paused withdrawals for Earn.
• Lending platform BlockFi declared bankruptcy.

Bull Market Events:

• Ethereum passed the first major test of its transition to proof of stake.
• Coinbase announced a partnership with BlackRock.
• Ethereum successfully transitioned to proof of stake.
• Bitcoin's hash rate reached an all-time high.

2. Despite Severe Downturns, Public Chains Continue to Facilitate Various Transformations: Monetary Finance, Internet Transformation

3. Financial Transformation: Decentralized Finance Driven by Cryptocurrency Crisis

Issues:

• Over 2 billion people lack access to basic banking services, including account management and credit.
• The opacity of traditional financial institutions has led to catastrophic financial collapses.
• Counterparty risks among traditional financial institutions can trigger single points of failure (5). (// Note 5: A single point of failure refers to a situation where a resource in a system architecture (which can be hardware, software, or components) fails, causing the system to malfunction.)

Data:

• DeFi trading volume is approximately $1.2 trillion, growing 12 times from 2020 to 2022.
• After the collapse of FTX, DeFi trading volume increased by 52% relative to total cryptocurrency trading volume.
• $9 trillion in on-chain stablecoin transfers exceeded the combined total of card networks Mastercard, American Express, and Discover in 2022.
• In 2022, approximately $32 billion in withdrawals and nearly $1 billion in liquidations.

Transformations:

• DeFi eliminates reliance on traditional intermediaries. Automated smart contracts ensure execution without the need for trusted fee collectors.
• DeFi is global. Financial services deployed on open protocols allow anyone with internet access to access custodial, trading, and lending facilities.
• DeFi is interoperable. Financial services are open-source and interoperable, allowing for rapid innovation and experimentation.
• DeFi is auditable and transparent. Users manage risks and functionalities, while collateral and asset flows are public and open for inspection.

4. Internet Transformation: Web3 is Reaching a Turning Point Issues:

• The internet relies on technological monopolies that exploit, own, and monetize user data.
• Online identities and reputations are not interoperable.
• Centralized decision-makers control information discovery, subjectively regulating content and communication.

Data:

• 5 million unique IDs have been issued in Ethereum Name Service and Unstoppable Domains.
• The annual trading volume of NFTs is $22 billion, growing 15% in 2022.
• Cumulative NFT creation revenue is $127 million.
• Major brands, including Starbucks, Adidas, Nike, Coca-Cola, and the NBA, are collaborating with Web3 protocols.
• Major social platforms, including Instagram, Twitter, and Reddit, have launched NFT-driven features.

Transformations:

• Web3 is user-owned. Web3 introduces digital property rights for the first time.
• Web3 relies on protocols rather than platforms. Decentralized protocols enable the management of distributed data and open access, limiting platform control.
• Web3 proposes new monetization models. Web3 brings economic concepts into software, allowing users to participate in network development and profit from it.
• Web3 achieves the integration of consumption and investment. As the economy digitizes, consumer behavior is changing, enabling new paradigms for purchasing, owning, and using goods and services.

5. Crypto Assets Can Compete with and Redefine Traditional Asset Classes

According to our research, cryptocurrencies and smart contracts could create $20 trillion and $5 trillion in market value, respectively. 6. Bitcoin: A Durable Network

We believe that the long-term opportunities for Bitcoin continue to grow. Despite a tumultuous year, Bitcoin has not stagnated. Its network fundamentals have strengthened, and its holders have become more focused on the long term.

The contagion caused by centralized trading parties has enhanced Bitcoin's value proposition: decentralization, auditability, and transparency. The price of a single Bitcoin could exceed $1 million in the next decade. 7. The Decline from Bitcoin's All-Time High Reflects the Scale of Market Value Loss and Downward Cycles in Financial History, Ranking Fifth and Second, Respectively

8. Despite Severe Declines, Bitcoin's Long-Term Performance Exceeds All Major Asset Classes.

Bitcoin's volatility obscures its long-term returns. Despite experiencing five declines of over 75% since its inception in 2009, Bitcoin has positive annualized returns over 3, 4, and 5-year time frames. 9. Bitcoin Liquidation Behavior Shows Correlation with Past Price Lows

10. Exchanges Have Increased Transparency to Address the Trust Collapse of Centralized Crypto Entities

In 2022, the net outflow from centralized exchanges reached 560,000 BTC, the largest in history. A "bank run" forced a record number of exchanges to disclose auditable financial conditions and provable solvency, known as "Proof of Reserves" (PoR). 11. Bitcoin Has the Potential to Expand into a Multi-Trillion Dollar Market

ARK's research estimates that by 2030, the price of a single Bitcoin could exceed $1 million.

6. Smart Contract Networks: Facilitating Financial and Internet Transformation

After the catastrophic failures of centralized cryptocurrency intermediaries last year, automated self-executing contracts on decentralized public chains have emerged as alternatives for transparent and non-custodial financial services. It has proven that decentralization is more critical for maintaining the original value proposition of public chain infrastructure. According to ARK's research, as the value of tokenized financial assets on-chain grows, decentralized applications and smart contract networks could generate $450 billion in annual revenue, reaching a market value of $5.3 trillion by 2030.

1. The Utility of Smart Contract Networks is Expanding and Diversifying

Public chains, once dominated by simple asset transfers like Ethereum, have now diversified into decentralized financial services (DeFi) and the creation and ownership of NFT-based digital goods, as well as other applications.

2. Decentralized Finance is a Promising Alternative to Centralized Intermediaries

Abandoning centralized intermediaries in favor of self-custody solutions, traders are increasingly favoring the transparency of decentralized exchanges. Since 2020, the share of decentralized exchanges (DEX) in total cryptocurrency trading volume has been on the rise. This share declined in the summer, perhaps due to the speculative trading around long-tail assets limited to DEXs gradually disappearing after the collapses of Terra/Luna, Celsius, and Three Arrows Capital. However, after FTX's collapse in November, the market share of DEX surged by 52%, rising from 9% of total trading volume to 14%.

3. The Merge Has Brought Ethereum into a New Era

During the Merge in September 2022, Ethereum transitioned from proof of work (PoW) to proof of stake (PoS). No longer needing to pay security fees to energy-intensive miners, Ethereum has strengthened its monetary policy and reduced the issuance of new tokens. Under the new token model, Ethereum's annual net issuance has stabilized and is now below Bitcoin's 1.7% and Ethereum's previous PoW model of 4%. As the network continues to develop, Ethereum's supply will decrease.

4. Ethereum's Layer 2 Networks are Starting to Scale, but Remain in Early Stages

Due to severe congestion challenges, Ethereum has developed a scaling solution—"Layer 2" networks, which are gaining meaningful momentum. The transaction volume of popular "Layer 2" networks, Arbitrum and Optimism, is now comparable to Ethereum's base layer, and in 2022, the number of active addresses on each network grew by 11 times and 19 times, respectively.

5. Concerns Over Censorship Increased After the Merge

Validator Centralization: As stakers prioritize convenience over decentralization, the top three staking services now account for about two-thirds of the total staked Ether.

Transaction Censorship: As financial incentives to maximize rewards begin to outweigh resistance to censorship, the share of services like Flashbots that censor transactions is increasing in new blocks.

6. True Decentralization is More Challenging for New Networks

On first-layer blockchains, the proportion of token supply allocated to insiders—including founding teams, private investors, and privately controlled foundations and ecosystem funds—has been increasing. Since 2017, founders have been continuously attempting to create new chains to compete with existing rivals, while venture capital actively invests in base layer protocols. Additionally, regulatory concerns have hindered initial coin offerings as an open distribution model. Therefore, new networks cannot claim to be fully decentralized based on token holders and may be susceptible to internal pressures.

7. By 2030, Smart Contract Networks Could Generate $450 Billion in Annual Fees

Smart contracts can facilitate the initiation, ownership, and management of tokenized assets at a fraction of the cost of traditional financial services. If financial assets migrate to blockchain infrastructure at a pace similar to early internet adoption, and decentralized financial services charge one-third of the fees of traditional financial services, then by 2030, the smart contract business could generate $450 billion in annual fees, creating a market value of $5.3 trillion.