It is an understatement to say that the crypto space is booming. We’re talking about extraordinary growth levels. And not just that. But Web3, blockchain, and metaverse are going more mainstream by the second. There are a lot of them, and many have found unique use cases across fintech.
Magic Square is here to show you just where to look and answer the burning question of this article. Here are some of the trendiest use-cases of crypto worldwide, some of which are likely to remain the focus of 2022.
1. Decentralized Digital Currency - No Middlemen, Please
Despite an avalanche of new technologies buzzing in all the headlines, the number one use case of crypto is the very reason blockchain came to be—Independent and decentralized digital currency. Blockchain has proven its point and usefulness from complex mining to easy exchange transactions.
The nature of crypto is quite marvelous, along with other benefits of decentralization; minimal transaction costs, security, and privacy. This has allured many entrepreneurs, investors, and tech-enthusiasts, and once the word was out, the market was flooded. Nowadays, thousands of exchanges manage millions of transactions daily. And the growth of that number shows no signs of slowing down.
2. Banking But Make It Crypto
Despite the obvious differences between crypto and traditional banking, there is a meeting point where cryptocurrency and fiat currencies collide. This is what we call crypto banking. The main point of it is that anyone with an Internet connection and a smartphone can trade digital currencies.
Crypto banks are much like financial institutions, except that they hold digital assets and currencies instead of holding stocks and cash. Banking giants are also adapting to the crypto craze by adding crypto interest accounts and savings accounts to their list of services.
3. Give Us Tokens! - Asset Tokenization
Digital currencies have a lot of alluring features, but we can’t say that crypto is a flawless solution. Inconvenient liquidity is one issue crypto traders may encounter. Inconsistent liquidity can cause problems such as constant spikes in cryptocurrency prices or price fluctuations. This is a sign of a volatile market with low liquidity. So how does the market handle the issue?
There is a solution that works in specific cases: “asset tokenization.” Asset tokenization solves the liquidity issue in real-world assets.
How does it work? Asset-backed tokens hold inherent value, as they are directly linked to a physical asset. Real estate is a great example of this. When a piece of real estate is tokenized, it is broken up into small bits, each worth an equal amount. Investors can then buy tokens and own a fraction of the worth of a piece of real estate. This allows the market to expand and include a wider investor pool.
If the ownership of a certain asset is divided into several smaller fractions, each investor sees gains proportional to the value of the asset they own. So, to sum up, asset tokenization increases asset liquidity with traditionally illiquid assets, thus helping with the inconvenient crypto liquidity issues.
4. On-Chain Governance - Power to the Users!
Governing policies with crypto? Yes, it’s possible! Certain entities, like private organizations and clubs, are always seeking new ways to give users more power. By forming a DAO, or a decentralized autonomous organization, you manage to achieve this goal. In turn, members receive voting rights - governance tokens for depositing money into this organization.
A system where control is distributed among stakeholders is also known as, you guessed it, on-chain governance. The aforementioned governance tokens may have the power to give stakeholders either traditional management positions, the ability to alter entity protocol, etc.
5. Smart Contracts - The Best Kind of Contracts
Finally, we’ve come to our favorite kind of contract - smart contracts. To put it simply, it’s a kind of paperless digital code that gives numerous guarantees. This is based on specific, previously agreed-upon terms and conditions. Smart contracts can be used for automating actions or entire networks.
In fact, whichever the use case, automation is the prime benefit of smart contracts. What it means is there will be no interference - no third parties can modify this decision or agreement. The immense security adds to their value. Thanks to encryption, the generated data cannot be altered in any way. Given that all smart contracts are on an immutable network, all data can be truly safe.
It seems that plenty of industries acknowledge the potential of smart contracts, as more and more are incorporating them into their systems and processes—finance, governance, healthcare, privacy, etc. Possibly, there will be even more industries on the list. The future seems bright for smart contracts.
Final Thoughts
To summarize, in this fast-expanding, new, digitalized world, it is of grave importance that we know how to get in on the action and enter the exciting cryptocurrency world. More importantly, we should consider doing so as soon as possible, as all evidence suggests that crypto is the future.
Let Magic Square guide you through your crypto beginnings. Read on about the enticing features of the crypto space, and discover guides, tips, and tricks here.
