Private markets represent one of the best users for blockchain, as this technology has the potential to revolutionize every stage of business. Private asset managers have the ability to strategically implement this technology within their investments to position themselves ahead of the market. We believe there will be vast use of this technology over the next decade. With the rise in popularity of cryptocurrencies the blockchain has created new investment vehicles, opportunities and sectors. Within the private markets we see abundant opportunities for investing in businesses and technologies implementing blockchain or distributed ledger strategies giving private asset managers opportunities to leverage the potential offered. Any opportunity of this magnitude presents a reasonable amount of risk. The largest risk we foresee is how government regulation affects different parts of the blockchain industry. Governments and regulators around the world are beginning to decide how to enforce existing regulations, safeguard investor interest and categorize these new types of assets. With any emerging investment category that has high levels of innovation, financial regulators take considerable time to understand its scope and pass regulation. The blockchain, by its very nature is decentralized and cannot be regulated in a single jurisdiction. Therefore, it presents further challenges to regulators since its activities are not confined to individual institutions, intermediaries, or jurisdictions that can be regulated in silos. Given the potential risk, we see that it is critical to understand how regulation could affect specific asset classes in the blockchain sector. Asset managers and investors must remain ahead of the regulatory curve by following future regulation closely and building a diversified portfolio in the blockchain industry to hedge against regulation.

The global blockchain technology market size was valued at USD 5.92 billion in 2021, up from 3 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 85.9% from 2022 to 2030. The legalization of cryptocurrency in countries, such as Ukraine and El Salvador, is expected to create new opportunities. Market growth posted double-digit increases in 2020, which is expected to continue exponentially in the next decade. By far, the biggest contributor to blockchain spending is the United States followed by Western Europe. In terms of industry, the banking sector had the biggest spend on blockchain technologies.

The legalization of cryptocurrency has encouraged businesses and investors to invest more in blockchain technology. It also encourages the market players to make more efforts to improve their services to gain a competitive edge. These efforts made by companies are expected to make blockchain technology more effective and efficient in the near future. The growing strategic initiatives in the decentralized finance (DeFi) space are expected to drive market growth even further. The acceptance of cryptocurrency as a payment by an increasing number of companies is expected to drive additional market growth. Various restaurants, gaming platforms and e-commerce sites are entering into partnerships with cryptocurrency solution providers to offer cryptocurrency-based payment methods to their customers. Various companies are making efforts to integrate artificial intelligence (AI) capabilities with blockchain technology to enhance their offerings, creating new opportunities for market growth. There are several use cases for blockchain technology that saw exponential growth from 2020 - 2021.

We believe the largest shift in adoption and growth will occur when executives fully comprehend the migration of resources away from centralized companies, which currently control large parts of the internet’s infrastructure and data, to decentralized networks and organizations. The most prominent implementations of these principles are exemplifed through blockchain technology. We foresee the 4 largest opportunities of the decentralized internet and the digital asset space listed below. 

Trustless Infrastructure

Current digital products rely on trusted infrastructure, meaning only permissioned servers can run the application backend and participate in the product ecosystem. In an infrastructure that requires no trust, trust that was previously required of a single, centralized actor (such as a database server) is now distributed so widely amongst all the small database servers (nodes) in the system, that trust in any one single server is no longer required, leading to true freedom. Every server operating within the blockchain ecosystem is incentivized by economic models to act correctly and cooperate with others. With the decentralized internet, people, machines and businesses will be able to trade value, information and work with global counter-parties they don’t know or explicitly trust, without an intermediary. The blockchain enables the minimization of the trust required for coordination on a global scale, removing gatekeepers and middlemen from global commerce.

Diminishing Gatekeepers

Until now our digital products have relied heavily on gatekeepers and permissioned access. Online banks have the control of who is able to have an account with them. Social media platforms have the control over who can participate on their platform. Many tech giants have the control over what they can do with your data. Web3 pushes the notion of permissionless access, allowing anyone within a system’s ruleset to participate in that system. The increasing digitization of assets on which these rules rely makes this possible. For example, in Web3 today anyone can take out a financial loan on a borrowing platform, as long as the collateral requirements are met and programmed into the contract. Since all assets involved in these transactions are digitized (in this case cryptocurrencies), the platforms can enforce all rules programmatically. There is no gatekeeper to review credit history or financial statements, although once identity and creditworthiness are established and digitized these could potentially become part of a contract’s ruleset as well. As more real-world assets are digitized (such as home or car titles), these features could all become part of the Web3 ecosystem.

True Ownership

Decentralized systems eliminate the possibility of large-scale control of users’ data and assets, instead shifting that option of responsibility to users. This raises a concern if users are truly prepared to assume the responsibility of owning and managing their own data. Without a middleman (such as a bank or institution) to mitigate the loss of data, users could face significant consequences if they do not have the tools or resources to efficiently manage their own data. We see a large shift in the coming years in infrastructure provided to consumers that gives them the ability to blend both models; having true ownership and monetization rights of their data, while having solutions that protect their data.

Transparent Autonomy

A handful of large enterprises, which are centralized both politically and architecturally, have been the dominant drivers within the economic structure of the 20th century. Misalignment of interests between shareholders, operators, users and customers – a legacy of the industrial revolution has created an environment of broken promises and mistrust. Web3 introduces new structures, such as Decentralized Autonomous Organizations (DAO), which are smart contract systems containing the business and governance rules for how to operate. These organizations can realign the economic interest of all stakeholders, reducing friction and removing middlemen. Digital products, once owned by centralized corporations, can now be part of DAOs, where ownership and control are decentralized. What lies ahead in Web3 goes far beyond the initial use case of cryptocurrencies. Through the variety of interactions now possible, as well as the global scope of counter-parties available, Web3 will cryptographically connect data from individuals, corporations, and machines. This will lead to the rise of fundamentally new markets and associated business models.

With the rise of visual search, social commerce, and immersive digital experiences, Web3 is showing the early stages of a true virtual universe. This virtual world commonly referred to as the “metaverse” is one of the more complex concepts to grasp that will use blockchain technology. The metaverse is an emerging digital and ever-present world where virtual reality, augmented reality, and reality meet. Blockchain technology is helping develop an immersive digital experience where a person can learn, work, play and socialize all inside one virtual ecosystem. By vastly improving intuitive interactions and increasing our ability to deliver highly contextualized experiences—for businesses and consumers alike—the Web3 era will spark new opportunities to improve efficiency, communication, entertainment, and commerce in ways we are only beginning to imagine today. Looking back at the shift from Web 1.0 to Web 2.0, there were various components tied to Web 2.0 that were built on Web 1.0. Similarly, there will be significant components of Web 3.0 that build upon Web 2.0 infrastructure.

The worldwide Covid-19 lockdown has paved new growth opportunities to empower remote working, learning, shopping, living and playing, showing rapid metaverse adoption.This shift aided in the growth of the global metaverse market, projecting a market size of approximately 828.95 USD billion by 2028 at a CAGR of 43.3% from 2020 to 2028. The increasing developments in making online interaction life-like experiences in the gaming world is fostering remarkable progress in global metaverse market, as the gaming industry leads the way in present metaverse adoption. We foresee the highest growth occurring when full adoption flows into multiple industries such as, banking, training, product design and development, streamlined logistics in the manufacturing sector, medical training and many more every day use cases. When full adoption occurs increasing its use worldwide, a majority of the way we do business and commerce will be completely transformed. Emerging technologies such as 5G will contribute to the speed and power required for these digital worlds to function, which is expected to fuel revenue growth of the market. North America is expected to account for the largest revenue share in the global metaverse market due to large scale adoption of advanced technologies, such as virtual reality (VR), augment reality (AR) and mixed reality (MR) and an increasing number of startups focusing on building metaverse platforms for commercialization purposes. As the line between our digital and physical worlds has already begun to blur, we are very optimistic on what the next era of computing entails, how it could transform businesses and how it can create new value as it unfolds. We see tremendous opportunity for businesses in the private markets to begin adopting Web3 product and service offerings on the path to metaverse maturity.

We have seen rising focus on converging digital and physical worlds using the internet, increasing traction and popularity of MR/AR/VR devices. These early stage devices are expected to be a primary gateway for humans to access the metaverse. F

orm factor may eventually range from AR glasses or digital contact lenses to haptic wearables, next generation TV’s, smartphones, smart functional equipment, sensors, autonomous vehicles and beyond. For the metaverse to become widely adopted, AR interfaces in particular will need to become more advanced for the end user. In recent years, significant investments have occurred in this area. Traditional incumbents, such as Google, are continuing to develop and evolve AR hardware. Facebook (Meta) has recently made a slew of investments focused on AR and the AR Cloud. Apple has been developing its own light-weight AR glasses and has applied for a series of patents that could significantly reduce the size of such AR devices. Zooming out to look at the broader tech industry, we see upward trends in innovation and development of technologies supporting the interaction layer of Web 3. For example, the number of AR-related patents published yearly in the United States grew more than threefold over the last ten years.

On the basis of end-use, the global metaverse market is segmented into a variety of industries already including fashion, media, entertainment, education, aerospace, defence, and others. Media and entertainment segments are expected to account for the largest revenue share in the global metaverse market over the the next decade due to the growing gaming industry globally. Additionally, corporations are constantly focusing on creating virtual meetings, training technologies and use cases to improve business efficiency. Adoption of this concept among an increasing number of corporations is expected to augment revenue growth of this segment. The metaverse provides content creators unparalleled flexibility to explore and communicate virtually with fans and customers. Unlimited possibilities are on the forefront for influencers, content creators, and enterprises who create and distribute content. Virtual platforms are expected to expand at a rapid CAGR over the next decade attributed to an increasing number of application developers, rising smartphone penetration and technological developments in metaverse virtual platforms. Virtual spaces on metaverse platforms are currently used as performance halls, art galleries, event venues, games and meetings. As metaverse development continues the possibilities of virtual experiences will align precisely with real world experiences. This has the potential to transforming every aspect of our lives, from retail and advertising, to work and education, to entertainment and social interaction.

On the technology front, MR is expected to register a significantly large share of revenue contribution to the global market due to increasing use of MR to engage more effectively in the metaverse. When users can engage directly with metaverse environments at a physical location, this is known as mixed reality. Users do not need a VR headset for interacting with the metaverse. Users could simply engage with the metaverse using a keyboard, irrespective of the level of immersion. This is where we see every business having the capability of bridging their current products, services and experiences into Web 3. 

As the landscape of the metaverse has evolved we are able to see risks unfold. Growing concerns regarding personal privacy, increasing cyber-attacks such as ransomeware and data breaches are some factors expected to restrain the metaverse market. Data security still remains a challenge for many IT companies which can create hindrance in consumer interaction with the virtual environment. Security issues about identity of users and challenges of convincing users to utilize payment systems in these environments are some key factors expected to hamper global metaverse market growth. Despite businesses and organizations constantly modernizing existing IT security systems, data security continues to remain a major challenge and deterrent for consumers being more interactive in any digital environment. Further technological advancements are required in terms of security of devices and sites in order to ensure better user safety and higher confidence among users in an ever-expanding environment. This would require development and introduction of new and more robust solutions to safeguard private and personal information. This would secure data confidentiality, with a more stringent focus on ensuring identity safety for individuals in the virtual environment. That said, personal authentication could change to a point wherein users would be required to provide more or additional private data than what is currently required in order to authenticate their identity and ensure that the security system operates effectively. Regulation also presents risks especially in the global market as regulatory crackdowns in countries like China will act as a brake.

One of the most revolutionary uses of metaverse is to purchase digital assets using cryptocurrencies which is gaining steady traction globally. Metaverse platforms with blockchain technology enable users to create, own and trade decentralized digital assets with cryptocurrencies and Non Fungible Tokens (NFTs). Increasing demand and deployment of blockchain technology-driven metaverse platforms for trading digital assets is expected to support market revenue growth to a significant extent going ahead.

Digital assets have exploded in growth, specifically non-fungible tokens. NFT’s are unique, non-splittable tokens that can represent ownership of a digital asset in a decentralized way. Their inherently counterfeit-proof nature and the transparency of the transaction process, makes them a landmark internet innovation. In the past 2 years NFTs have swept the globe with their newfound wave of popularity and utility. Demand for these unique digital assets is skyrocketing as the NFT market cap surpassed 40B in 2021. As the convergence of the digital and physical worlds are taking shape, NFTs allow brands to expand their reach into “digitally-enabled experiential tie-ins”  and create an asset for customers, fans and investors to acquire. The landscape of NFTs is still unfolding but undoubtably show a wide variety of uses and potential for substantial disruption in the coming years.

2021 without a doubt has been the year of digital assets, with NFT sales totaling 26.9 billion an increase of 7,811% from 2020 totaling 340 million. Some investment banks such as Jefferies see the NFT market reaching more than $80B in value by 2025. Many analysts expect double-digit percentage growth for the next five years. For context, 2018 saw only $41 million in NFT sales. The cumulative trading volume of NFTs was $21.5 billion by the end of 2021, compared to $120 million before 2021, a 200x jump in cumulative trading volume. The number of traders has also doubled from less than 1.3 million to 65.4 million by 2021, a 50x increase. Overall, given the explosive growth NFTs have experienced in 2021, we expect the market will continue to grow at exponential rates. There are currently between 15,000 and 50,000 NFT sales a week ranging between an average of $10M-$40M in total traded value.

As NFTs have soared in value, average prices rose tremendously throughout 2021, sparking a wave of interest in these uniquely identifiable digital assets. Early investors have been able to gain remarkable returns on highly sought after projects. However, NFTs remain a relatively new concept and many people are still trying to get their heads around the underlying factors. More than 70% of Americans still don’t know what an NFT is. The latest data shows that most adults in the US still aren’t familiar with NFTs. The figures are even higher in Japan and Germany, where 90% and 82.6% of the adult populations haven't heard of them. Meanwhile, in Hong Kong, only 55.3% of people don’t know what a NFT is. America ranks 18th in terms of adoption globally with only 2.8% of the U.S. population owning NFT’s, although 42% of millennials collect NFTs showing the wide adoption amongst younger generations. The Philippines leads global adoption with 32% of the country’s population owning NFT’s followed by Thailand at 26.6% of the country’s population owning NFTs.

OpenSea is one of the biggest digital marketplaces when it comes to NFTs and cryptocurrency collectibles. In August of 2021, it did more than $3 billion in trading volume and surpassed 14 billion in 2021 annually, a staggering 646X from 2020.

Just how much the NFT sub-sector will grow in 2022 is a matter of speculation, but many analysts predict that its expansion will outstrip what we’ve witnessed so far in 2022.

As NFTs are a new way of proving ownership over digital goods, we are seeing the early stages of innovation with potential utility. In the coming years we will begin to see mainstream corporations leverage NFTs as a way to forge deeper, experiential connections with their consumers. This will create avenues for customer engagement, and revenue intake. Utility is beginning to take shape across the industry, particularly in terms of enriching various experiences, like fan engagements for collectors or exclusive access to events, by virtue of owning these digital assets. We have seen athletes take advantage of creating NFT projects to unlock items like autographed memorabilia, celebrities offer VIP and personal experiences with purchases of specific NFTS, and large brands like Nike, Gucci and Addidas offer one of a kind, limited edition memberships with abundant benefits to purchasers of their own NFT projects. We are also seeing uses of NFTs for authentication by doing physical-digital pairings. This means that many physical assets will be authenticated on the blockchain by having a NFT paired to it. Additionally we are seeing many other use cases such as the Crypto Baristas project connecting NFT’s and the natural world by creating a utility-based project that funds the opening of a coffee shop in NYC. Various foundations are using NFT’s to raise money donating 100% of crypto proceeds to a cause. Companies are also using NFT’s as a fund raising mechanism by creating a NFT and delivering on the utility of their project over the course of time or at a later date. A number of platforms such as NFTfi are disrupting the DeFi space by offering NFT collateralized loans. NFTfi has already supplied nearly $4 billion USD in loans. NFT’s have the potential to disrupt almost every industry over the next decade. We are already seeing trends with virtual real estate NFT sales currently over 500M, to innovation in the healthcare sector by safeguarding the confidentiality of health records and tightening supply-chain tracking of medications. By intertwining physical and digital worlds in this way, NFTs become increasingly relevant to audiences that reside outside of hardcore early adopters. Essentially, by having the token stand for more than just the digital rendering itself and in many cases having true utility, we are all just getting started on what the possible use cases for this technology could be.

One of the unparalleled features of NFTs is their ability to pay royalties to creators even after they have been transferred. All of this is made possible by the blockchain’s immutability and transparency. Since the public ledger protects the integrity and authenticity of the token, the automated protocols will ensure that anytime the requirements specified in the smart contract are met, the relevant action is taken, which in this case is the payment of royalties. Most marketplaces allow creators to choose their royalty percentage. 5-10% is considered a standard royalty. There are no intermediaries needed, nor does this depend upon the wishes of whoever is transacting them. Once the smart contract terms are clearly written into the blockchain, the rest is taken care of automatically. This technology has the potential to push NFTs even further, disrupting industries that have substantial disputes over ownership. With original creators regaining full control over their work and setting their own terms (without the need for a middleman), there is an increasing probability that the rise of NFT royalties will spark a revitalization of many creative industries and businesses by providing substantial revenue. Messari, a blockchain research firm, suggests that total NFT secondary sales have surpassed the $15 billion mark, accounting for more than 85% of the entire volume of USD traded.

Industry figures expect NFT regulation to begin emerging this year, although we might not see concrete enactments and enforcements by the SEC until subsequent years. Regulators are likely to impose KYC and AML checks on NFTs. Consumer protection will remain as a focal point for regulators ensuring investors are not misled by companies and creators selling this new security. Since NFTs do not have a specific definition and can describe a wide variety of assets, regulators are having a hard time writing and passing regulation specifically targeting the NFT industry. It is important for investors and asset managers to reflect on the legal and regulatory NFT risks as they are clearly evident from the technological advancement in NFTs. As NFTs continue to grow and expand into different use cases, the laws and regulations will be adapting. Cyber security will also remain a risk as we bridge into Web 3. Smart contract risk is prevalent in the industry, whereby hackers identify a flaw in the code and are able to steal the funds or NFTs locked into the contract. Although as more adoption and development occurs the risks of security will decrease as platforms deploy more capital towards cyber security measures. Environmental and social governance became a larger topic in 2021 as environmentalists narrowed their stance on the harmful environmental affects crypto mining can cause.

With the explosive growth of the NFT market in 2021, the industry is still very young and is in the early stages of development. 2022 should see further growth and maturation of the market with the proliferation of new unique use cases of NFT technology and increased mainstream and institutional adoption.We see NFTs as a disruptive technology that has the potential to solve real-world problems such as copyright claims and digital asset validation evolving into much more. This technology has the opportunity to give early adopters leverage in the marketplace breaking into new markets and creating more value for customers, employees and shareholders.