The Next 3 Years in Crypto

At the panel titled " The Next 3 Years in Crypto" on 18 September 2023 at TOKEN2049 Singapore, the panel consisting of Haide Rafique, CMO of OKX Chamber who is moderating; Vitalik Buterin, Co-Founder of Ethereum; Star Xu, Founder and CEO of OKX; and Jeremy Allaire, Co-Founder, Chairman, and CEO of Circle; delves into healthy crypto adoption and the prospect of crypto in the following three years.

Crypto Has Come a Long Way

At the inception of Ethereum, Buterin was not affirmative of how far it would have gone.

He saw Bitcoin’s potential as early as 2013 when he attended a conference in San Jose.

That was when he realised this was not just a few internet enthusiasts; real businesses and people were dedicating their lives to it.

When he first published the Ethereum whitepaper, he was waiting for some highly-skilled cryptographers to prove him wrong or point out a fundamental flaw.

But that never happened.

Then by the time he made his first visit to China and met Xu from OKX, Ethereum had been around for over half a year, and it was clear that it had the potential to become something big.

If you look at the original white paper, it talked about stable value cryptocurrencies, which we now know as stablecoins.

It mentioned financial derivatives, and today we have decentralised finance (DeFi).

It even predicted decentralised naming systems, which we now see with ENS.

The one thing the paper did not predict was non-fungible tokens (NFTs).

Buterin joked:

“The thing that it did not predict is NFTs. I'm sorry, but like the whole thing where you're like paying $3,000,000 for a picture of a monkey, that's on you. But, I think a lot of these general categories were definitely just starting to be there, but the sheer scale that it would get to or just how quickly it would get to was definitely something that I think, kept coming as a shock to me for years to come.”

Xu expressed his regret on not listing Ethreum on OKX in 2017 when Buterin enquired.

At the time, he said no—it was just another altcoin, and their exchange was not interested in those.

But he came to regret that decision now.

He lamented:

“So I feel shame about that. Yeah. And I think until today, Ethereum is the most important infrastructure to blockchain ecosystem. That proved that it's a great vision builder, community builder. We, OKX, also have our commitment, to Ethereum ecosystem. We work hard to contribute, to the infrastructures.”

Circle: From Exchanges to Stablecoins

With regard to the transition from exchanges to the stablecoin world, Allaire expounded on his rationale:

“I think the first is when we got started in 2013, we were motivated by a lot of the ideas that were floating around but had not been executed. So the idea of smart contracts, the idea of putting a virtual machine on a blockchain network, the idea of issuing other assets on these networks. And the founding of the company was on this idea that you could build a protocol for dollars on the Internet, that you could do that on and you'd have programmable money. And that was what we originally set out to actually build. And back in 2013, when we started designing this, 2014, really, there was just Bitcoin. And we became very frustrated by the lack of technical progress that was being made in terms of executing on a lot of those earlier ideas.”

By 2017, they had completed the groundwork to legally move money between fiat systems and blockchain networks, securing licenses and regulatory approval to support transactions in dollars, euros, and pounds on the Bitcoin network.

Once they realized they could execute this vision properly, they shifted their full focus to USDC, which by 2019 had achieved solid product-market fit.

They worked closely with Ethereum’s DeFi protocols, and that collaboration was crucial for Circle's success.

It became obvious that the entire future of the company would revolve around this ecosystem.

How Can Ethereum Contribute to the Next 3 Years of Crypto?

According to Buterin, one of the unique and powerful aspects of the crypto space is how inherently international it is.

This was particularly evident during the initial coin offering (ICO) era, which he believes is often underrated today.

At that time, it was common for new projects to engage communities globally—whether in the US, China, Japan, or Europe—fostering collaboration across borders.

These projects brought together people from around the world who might otherwise never have interacted, creating a truly global community around shared ideas and innovation.

In today’s world of increasing physical and economic barriers, as well as growing internet restrictions, crypto remains a steadfastly global and mobile ecosystem.

This is an essential value it offers, especially by providing solutions for people disconnected from traditional financial and social systems.

In this way, the crypto space is not only meeting basic needs but is also evolving as a platform for collective progress.

Self Custody is the Future for OKX

Rafique pointed out that Xu had recently transitioned his business from an exchange model to a Web3 technology company:

“Given your passion for self-custody, could you share your perspective on its importance in the future, particularly amid global economic and political instability?”

In traditional finance system, businesses are often structured into separate entities—exchanges, custodians, etc.

However, crypto is fundamentally a technology-driven industry, and emerging technologies are reshaping these conventional structures.

Self-custody is one of the most transformative innovations in this space.

Throughout human history, people have always sought ways to store and protect their wealth, whether it was gold or silver.

In today’s digital age, we rely on third-party intermediaries to manage our assets.

However, self-custody technology offers individuals the opportunity to reclaim control over their funds, ensuring that if it is your money, it truly is yours.

Xu said:

“I believe it will be a great, beautiful future. A self custody doesn't means no recognition, no compliance. Right? So we believe the onchain ledger is a transparent ledger. The industry can do much better activity monitoring than the trad-fi. So that is our company, OKX, believes self custody is the future. So we make it as one of our most important strategy.”

Stablecoins in the Next 3 Years

Allaire expressed that they are rapidly approaching the realisation of their vision for stablecoins.

The aim is to create a world where the marginal cost of storing and moving value becomes zero, much like what happened with the internet for information and communication.

He stated:

“We're not quite there. We're getting really, really close.”

Once that point is reached, the implications will be significant.

Just as the internet revolutionised the distribution of information, the removal of transactional friction in finance will exponentially increase the velocity of money.

This can unlock incredible economic opportunities globally, as anyone with internet access will be able to participate in this system of value exchange.

He added:

“I think the thing I'm most excited about is we're like in the very early stages of programmable money and programmable money use cases. And while we have huge advancements that have happened with that with DeFi, you know, we're still barely scratching the surface there as well. And, I think so I'm interested mostly in what people are gonna invent in terms of intermediating value, that has never been invented before.”

He believes we are approaching a similar inflection point with programmable money, and is eager to see what innovations will emerge.

He is particularly interested in the launch of credit and credit intermediation on blockchain.

Real economic output is driven by the time value of money transformation, which is essential for economic growth.

Currently, we are not seeing much movement in this space on-chain, but he believes this represents one of the deepest potential transformations for increasing global economic prosperity.

If we can bring unsecured credit and other forms of credit onto these networks, it would be revolutionary.

Currently, many forward-leaning companies like Stripe and certain Neobanks are just beginning to use stablecoins, though the adoption is still relatively small.

Major enterprises, in particular, have yet to fully embrace stablecoins.

A critical factor for this expansion is ensuring that stablecoins are recognised as legal electronic money and treated as cash equivalents on balance sheets.

Once businesses can classify stablecoins as digital cash with proper legal backing, adoption will grow exponentially.

Many large companies today are hesitant because they do not know how to account for stablecoins, even if the technical utility is in place.

Thankfully, stablecoin regulations are either in effect or being enacted in key financial markets globally, which should unlock widespread institutional adoption within the next 12 months.

Rise in Layer 2 Solutions & its Impact on Ethereum

Ethereum's success is closely tied to the rise of Layer 2s.

They have brought immense talent into the ecosystem—like proving systems and zero-knowledge proofs—also in terms of attracting users and expanding the Ethereum ecosystem.

Each Layer 2 essentially forms its own sub-ecosystem, contributing to Ethereum's overall growth while addressing key challenges, like scalability.

However, there are real concerns about fragmentation between Layer 2 solutions, particularly around issues like cross-chain transactions and asset movements.

These are topics we are actively discussing to improve standardisation across Layer 2s and ensure a more unified Ethereum ecosystem.

Buterin said:

“… the fact that the layer 2 ecosystem has done so much on scaling, and has also freed up our developers' time to finally get the merge done, which, you know, was done only, I think about 2 years 3 days ago. So, happy second birthday to proof of stake.”

On both the standardisation and economic alignment fronts, significant progress can be seen.

Web3 Infrastructure with Web2 Front-End

Over the past decade, the crypto industry has developed several successful assets—Bitcoin being a prime example, now one of the top 10 assets globally by market cap.

Bitcoin ETFs, for instance, have made it easier for people to invest in Bitcoin.

However, when we look at crypto applications, while there have been some successes, the growth of crypto applications has been slow.

In Xu's view, the first challenge is the on-chain currency itself, though companies like Circle have made great strides in recent years.

Today, we can code a currency directly into apps, which stablecoins have made possible by addressing this issue.

The second challenge is wallets.

Most crypto wallets, like OKX's Web3 Wallet and MetaMask, still require users to manage complex tasks like backing up their private keys and ensuring they are secure.

Many users struggle with the responsibility of safeguarding their keys.

Moreover, from a regulatory perspective, if a financial institution builds a dApp on the current infrastructure, they face two key questions from regulators: Who is your customer, and how do you manage activity on your platform?

In the next three years, the industry needs to create more user-friendly wallets that also meet regulatory requirements, particularly for TradFi institutions.

Coinbase, among others, is already pursuing similar strategies.

With the development of new technologies like Layer 2 solutions, multisig wallets, abstract wallets, and passkeys, it is now possible to build a user-friendly, Web2-like experience for a Web3 wallet.

Additionally, advancements like zero-knowledge proofs (ZK) and zk-KYC can enable dApps to select and serve specific users or exclude them as needed.

This technology will meet regulatory demands while maintaining user privacy.

Xu noted that: https://www.coinlive.com/news/okx-strengthens-singapore-presence-with-former-mas-official-as-new

“So dApp can choose to for example, I only serve a single customer, or I want to exclude a single customer. This kind of new technology will make these requirements, happen. So I believe, like, 3 years, crypto finance will really become a big revolution. Every company, banks, interest company, you can build your fiat based on the current infrastructure. Also, I believe, stablecoin payment, can be a very success, application in the future…So I think, 3 years later, when we look back, we will find crypto. It's not just trade asset. Crypto will really become infrastructure to everybody's life. Massive retail user can easily use a crypto wallet, which is a KYC that with activity monitoring, which can easily finish your payments and can interact. A lot of banks will develop a dApp. They can use your wallet. Also authorize your funds to the different dApps. So it will be, very exciting, in next 3 years.”

Adoption Levels Vary in Different Regions

It is important to note that nowhere in the world has anyone had access to an electronic form of money that has a near-zero marginal cost to store and move, is fully programmable, and runs on verifiable, auditable code.

This innovation, whether in the US, Europe, or Pakistan, opens up new possibilities for utility and efficiency.

When we look at the demand globally, people everywhere are interested in stable-value currencies that can serve as efficient mediums of exchange.

Dollar-based stablecoins are currently fulfilling this need, with businesses and individuals increasingly opting to transact in this more efficient system while preserving value in dollars.

We have seen accelerated growth in this area over the past few years, particularly in regions where traditional banking systems struggle to provide the same value.

Once the remaining UX issues are addressed and liquidity becomes more seamless globally—an area Circle is working on, alongside others in the industry—stablecoins could become what Allaire refer to as "over-the-top money.”

Just as we have seen over-the-top services disrupt telecommunications and media by allowing anyone to offer those services using open protocols, stablecoins could do the same for money.

He said:

“I guess my long term view is that just in this in in Internet scale, kind of forms of economic activity, which we're seeing kind of borne out here, it is gonna force governments to change fiscal monetary policy. I don't believe that there'll be a need for as many currencies in the world. There'll be different competition, amongst all of that. But I think that the end result will actually end up being, you know, a smaller number of broadly adopted kind of stablecoin and stablecoin networks.”

How to Achieve Healthy Adoption Over the Next Few Years?

Buterin expounded:

“If you think about like people are trading, you know, the $3,000,000 monkeys, or like any of these applications that people tend to criticize. Right? A lot of that stuff, like, it works with 5¢ fees and it still works with $500 fees. Right?”

However, when it comes to empowering people in countries facing political or economic challenges—enabling them to maintain independent savings, engage in economic activity, and transact globally—low fees, like 5¢, make a huge difference.

But if fees soar to $200, people will simply abandon it.

Moreover, we also have to account for the costs related to security issues.

If you add up the losses from transaction fees and those from lost or stolen assets, they are likely comparable—possibly with security losses being even greater.

Fortunately, the technology to minimise both of these issues has improved significantly.

At this point, we can credibly say that blockchain can directly improve the lives of everyday individuals—people dealing with small sums, like $10 or $20, for family transactions.

Now that the technology has reached this level of maturity, it is up to all of us to build out the ecosystem and manage it effectively.

Fostering Better Crypto Adoption in the Coming Years

From an individual perspective, Xu believes that over the next few years, billions of users could adopt Web3 wallets, which will function as user-friendly portals with a Web2-like experience.

However, at their core, these wallets will remain self-custodial, aligning with regulatory requirements.

From a business standpoint, more companies will likely develop decentralised applications (dApps) or transition their models from centralised to decentralised.

This shift will create a transparent business ecosystem where users can engage with various dApps through their crypto wallets, leading to a richer crypto finance landscape.

Allaire expressed his optimism on the health adoption of stablecoins over the more speculative assets:

“I'm very, very, optimistic right now about our ability to make really material progress for people broadly. I feel like the and this is just, like, the hard work of tons and tons of people in the industry and developers who are solving some of the most critical kind of last mile problems in terms of privacy, security, identity, naming, the efficiency, kind of, you know, scale and efficiency. And so I'm more optimistic than ever that, like, these things are gonna get solved, and there's great things that are right in front of us right now on that.”

If we continue working on these advancements while receiving the legal clarifications that are currently unfolding, he believes that in three years, we’ll be in an extraordinary phase of growth—similar to the internet's breakthrough moment in 2004.

He concluded:

“I think we're approaching that point with crypto.”