Why hasn't crypto achieved mass adoption yet?

Author: 0xCousin, IOBC Capital

The large-scale adoption of a new technology takes a long time. In the United States, it took 78 years for cars to achieve a 92% penetration rate, and 48 years for household electricity to reach 100% penetration; the internet took 26 years to reach an 88% penetration rate.

The time required for the large-scale adoption of these technologies is getting shorter, but why have concepts like Bitcoin, Ethereum, and other blockchains and Crypto successfully permeated global public awareness, yet most people have never truly used Crypto services? There may be five main reasons: first, institutional funding channels are blocked; second, ordinary user entry channels are blocked; third, there is a lack of investment targets that meet the tastes of the masses; fourth, most developers find it difficult to enter the industry; fifth, infrastructure cannot support large-scale applications.

However, it is exciting that some signs have emerged in this bear market that are conducive to faster Mass Adoption of Crypto.

1. Bitcoin Spot ETF: Traditional funding channels are about to open, potentially bringing in hundreds of billions in funds

On August 11, the U.S. SEC extended the review period for the Bitcoin spot ETF applications from Ark Investment Management and 21 Shares. However, there is great optimism about the approval prospects for the Bitcoin spot ETF. Galaxy CEO Mike Novogratz mentioned in his earnings call that there are "insider news" from BlackRock and Invesco, believing that the approval of the Bitcoin spot ETF is just a matter of time and may be approved "within four to six months."

Once the Bitcoin spot ETF is listed, investing in Bitcoin will become easier. The U.S. stock market is dominated by institutions, with institutional investors represented by mutual funds accounting for 55%. Currently, the main push for SEC approval of the Bitcoin spot ETF is also from several mutual funds. Therefore, after the Bitcoin spot ETF is listed, it may not only attract potential investors from major stock markets like NASDAQ, NYSE, and CBOE, but more importantly, it will facilitate the entry of large-scale institutional funds.

If the Bitcoin spot ETF is listed, how much funding could it potentially bring? According to NYDIG's statistical analysis, the current Bitcoin-related products (including Grayscale Bitcoin Trust, Bitcoin futures ETFs, and other countries' Bitcoin spot ETFs) manage assets totaling $28.8 billion. This figure only accounts for publicly available products. Based on this, NYDIG believes that the listing of the Bitcoin spot ETF could bring in $30 billion in new demand.

2. PayPal USD Stablecoin: Ordinary user entry channels have opened, potentially bringing in millions of new users

PayPal is one of the most well-known global mobile payment companies, covering 202 countries and regions, supporting 24 currencies, and millions of companies accepting PayPal as a payment method, with over 400 million monthly active users worldwide.

On August 8, PayPal launched the PayPal USD (PYUSD), a stablecoin for transfers and payments on Ethereum. This stablecoin is issued by Paxos Trust Company and is 100% backed by U.S. dollar deposits, short-term U.S. Treasury bills, and similar cash equivalents. PayPal has become the first major fintech company to embrace digital currency for payments and transfers.

Eligible PayPal customers will be able to transfer PYUSD between PayPal and compatible external wallets, use PYUSD for peer-to-peer payments, and choose PYUSD to pay merchants at checkout. Users can also exchange PYUSD with cryptocurrencies supported by PayPal. PayPal Vice President Jose Fernandez da Ponte stated in an interview that currently, PYUSD can only be obtained through the PayPal wallet, but the goal is to enable PYUSD to be adopted on major centralized exchanges.

PayPal's vision is to serve as a bridge between fiat currency and Web3, facilitating mainstream adoption of the stablecoin payment system. In this regard, compared to existing dollar stablecoins in the Crypto industry (such as USDT, USDC, etc.), PayPal USD has a natural advantage in reaching a wider audience, leveraging PayPal's 400 million monthly active users to potentially bring millions of new users to Crypto.

3. RWA Trend: RWA is a lever for traditional institutions to participate in building Crypto

In the past six months, RWA has become a hot topic in the market, with intense community discussions about it.

Supporters believe that RWA will introduce real-world assets and yields, significantly increasing the asset scale of Crypto. In terms of tokenizing off-chain RWA and settlement, while it cannot achieve complete trustlessness like Crypto Native Assets, there are clever settlement mechanisms based on "collateral, staking, arbitrage, and gaming." This indeed creates more connections between Crypto and the real world, especially for DeFi lending protocols, which benefit from the high interest rates of U.S. Treasury bonds during the Federal Reserve's rate hike cycle, finding a business model for "risk-free" continuous income at least in the short term.

Opponents argue that most RWA projects still rely on centralized trust regarding "compliance" and "auditing," and cannot fully achieve trustlessness, which is inconsistent with the spirit of Crypto. Meanwhile, the best development direction for RWA currently is the tokenization of U.S. Treasury bonds based on DeFi lending protocols. The high yield of this underlying asset indicates high inflation expectations, suggesting that one should hold "Crypto digital gold" like Bitcoin, which has "the Chancellor on the brink of a second bailout for banks" written in its genesis block.

We also published an article on RWA at the end of March, at which time we believed RWA could be the next engine for DeFi. Of course, we still feel that there may be some opportunities in the RWA direction. In the bear market, we often hear various opinions in the industry, "there are no new asset targets"…… Since this is the case, and traditional institutions are showing signs of entering the Crypto space, if the next cycle is a bull market driven by large traditional institutions, we cannot completely ignore RWA.

RWA may be the first lever for traditional large institutions to participate in building Crypto. Just like PayPal, which enters Crypto with the dollar stablecoin PYUSD, it is also a form of RWA with "risk-free" U.S. Treasury yields, although currently, it does not distribute yields to PYUSD holders. In the future, "interest-bearing stablecoins" may become mainstream projects.

When we look at some project decks, we often see visions similar to "revolutionizing something." Perhaps this cycle requires giving traditional institutions some time; maybe they see opportunities and have made up their minds to self-revolutionize through blockchain and Crypto.

4. Chains Supporting Multiple Programming Languages: Expected to Attract Millions of Web2 Developers

Currently, there are two concurrent logics regarding Web3 programming languages in the industry.

One is the exploration of new languages that have unique advantages for certain new application scenarios. For example: Cairo, which is more friendly to ZK applications; Move, which is more friendly to formal verification; and DeepSEA, a functional programming language that prioritizes security.

The other is chains like zkSync, Risczero, and VRRB that support multiple programming languages, which is beneficial for attracting millions of Web2 developers to Web3. Currently, Layer 1 and Layer 2 need to offer high hackathon rewards and ecosystem investment funds to attract a very limited number of developers. If blockchains support multiple programming languages, it will have a significant advantage in attracting more Web2 developers, as there are currently only a few hundred thousand Web3 developers, while there are over ten million Web2 developers. This also increases the likelihood of creating a more prosperous ecosystem, thereby capturing more value.

We recognize both of these logics as beneficial for the development of the industry.

5. Infrastructure is About to Be Ready, Expected to Give Birth to Large-Scale Blockchain Applications

At the Shanghai summit in 2017, when asked "why we still do not have truly large-scale blockchain applications," Vitalik attributed it to "the most important factor hindering large-scale blockchain applications is technical barriers." He stated that the urgent task is to improve the scalability of blockchains.

Years later, the Ethereum ecosystem has developed a prosperous Layer 2 scaling matrix targeting scalability. Layer 2 solutions like Optimism, Arbitrum, StarkNet, zkSync, Polygon, Scroll, and Taiko will significantly enhance performance compared to Ethereum Layer 1.

In addition, modular blockchains are also experiencing rapid development. Projects like Celestia, Polygon Avail, and Rooch may provide support for large-scale blockchain applications in their respective fields.

In summary, compared to previous cycles, the development of Crypto infrastructure in this cycle has seen significant improvements, making it possible to support the emergence of large-scale blockchain applications.