Five Fintech Blockchain Trends In 2023
The covid-induced pandemic has significantly influenced cryptocurrencies, leading to the enrichment of investors. Elon Musk, a big fan of cryptocurrencies, said Bitcoin can be used to buy Tesla cars. This had a big effect. Bitcoin, the most prominent cryptocurrency globally, dominated headlines in September 2021.
Cryptocurrencies are gaining popularity, which has made tech-savvy businesses aware of blockchain technology. However, some governments are against using cryptocurrency for payments. The same governments were and are looking forward to implementing blockchain technology as soon as possible in their respective countries, for example, India and China.
Growth of Blockchain Technology
There are many advantages of implementing blockchain technology – trustworthiness, data security, decentralization of networks, and traceability of data users. Not surprisingly, the blockchain market experienced unprecedented growth – from $7 billion in 2022, to potentially grow to $164 billion in 2029!
Statista states global spending on blockchain solutions by tech-savvy and non-tech-savvy industries will reach $19 billion by 2024. With hundreds of billions of dollars expected in investments, the blockchain market will be heading towards an average growth rate of 56% from 2022 to 2029.
Other technology-based companies are also adopting the decentralized ledger (blockchain) to gain the advantage of low-power processing, 5G communication, high-performance computing, and secure quantum communication.
As shown in the chart above, blockchain in finance has the biggest global spending when it comes to blockchain technology in the year 2022. In the year 2023, there are new emerging industries and trends. Let’s discuss some of these trends.
Five blockchain trends in 2023
CBDC (Central Bank Digital Currency)
Central bank digital currency (CBDC) is a digital form of national currency issued and regulated by a country’s central bank. It represents a digitized version of physical cash designed to be used as a medium of exchange, store of value, and unit of account within the digital realm.
Private entities back cryptocurrencies, and those mining the cryptocurrency can hide their identity. The hidden identity controlling a volatile currency can bring chaos to the economy, which governments can’t afford. They often attract speculative investments, where individuals buy them expecting to sell them at a higher price.
If people view cryptocurrencies as investment assets, they may hoard them instead of using them for transactions. Hoarding reduces their circulation in the economy, hindering their effectiveness as a medium of exchange. Governments have to bring up an alternative of volatile currency (cryptos), which is more regulated and does not have the possibility of speculation or hoarding. The best way to come up is CBDC.
According to the Atlanta Council, 144 countries, representing 95% of global GDP, are already looking to pilot their CBDC. Virtual money is less expensive than cash. CBDCs have lower fees. Digital currencies can help include more people in the financial system and track money. This can reduce illegal money and the income gap.
The infrastructure of CBDC depends on Fintech blockchain technology, which uses the concepts of distributed ledger. It helps settle peer-to-peer transactions hassle-free. CBDC can be launched without the use of blockchain technology, but the majority of governments use blockchain.
NFT or Non-Fungible Tokens
They are a type of digital asset that represent ownership or proof of authenticity of a unique item or piece of content using blockchain technology. NFTs can represent various digital or physical items, including artwork, music, videos, virtual real estate, virtual goods in video games, collectables, and more.
Each NFT has a unique identifier and metadata stored on a blockchain, typically Ethereum, which provides a decentralized and transparent record of ownership.
NFTs first grabbed the attention of artists in the year 2021, when the crypto art piece First 5000 Days from Beeple became the most expensive NFT in the world at 69 million U.S. dollars. According to BCC reports, the Compounded Annual Growth Rate of Non-Fungible Tokens is 27.3% during the forecast period of 2022-2027. The global NFTs market is expected to reach $37.6 billion by 2022 and $125.6 billion by 2027.
Artists are most likely to be attracted by NFTs as their artworks are financially appreciated and secured due to unique identification and ownership. Brands like Nike, Adidas, Disney, Starbucks, and MasterCard have already shown their interest in NFTs and mined their token that is valued precisely.
Blockchain as a service (BaaS)
The popularity of blockchain as a service (BaaS) has surged in the business world due to its capacity to offer simplified and effective optimization, transparency, and cost solutions.
The widespread adoption of BaaS has resulted in leading tech giants like IBM, Microsoft, and Oracle establishing dedicated divisions focused on integrating and promoting blockchain as a service. These companies recognize the immense potential and benefits of BaaS and actively advocate for its implementation in various sectors.
As shown below, Blockchain as a service is getting traction in sectors like banking, manufacturing, and retail –
According to Allied Market Research, the CAGR of Blockchain-as-a-Service (BaaS) is as high as 59.3% and is expected to reach a market value of USD 84.6 billion, previously valued at $829 million in 2021.
The term “metaverse” refers to a virtual reality space where users can interact with a computer-generated environment and other participants in real-time. It is often described as a collective virtual shared space encompassing augmented reality, virtual reality, and the internet.
The concept of the metaverse has gained significant attention and discussion due to advancements in technology, such as virtual reality headsets, blockchain, and the growing popularity of online gaming. Some of its unique facets are as follows-
- Virtual Economy: The metaverse could give rise to a virtual economy where users can buy, sell, and trade virtual assets and services using digital currencies. It allows businesses and individuals to create and monetize virtual products, such as virtual real estate, digital artwork, virtual fashion, and more.
- Augmented Experiences: With augmented reality (AR) and virtual reality (VR) technologies, the metaverse can enhance real-world experiences by overlaying digital information onto the physical environment. This has implications for areas like education, entertainment, training, tourism, and even healthcare.
- Privacy and Security Concerns: As the metaverse relies on vast amounts of user data and interactions, there are concerns about privacy, security, and the potential for exploitation. Safeguarding personal information, preventing identity theft, and ensuring secure transactions within the metaverse will be crucial.
As shown below, the growth of the global metaverse market is expected to be as high as 47.2%.
Other Fintech Blockchain Applications
Fintech blockchain refers to the general application of blockchain technology used by firms in financial technology (fintech). Blockchain provides a way to securely store and verify data, eliminating the need for intermediaries such as banks or clearinghouses.
The disruptive potential of blockchain technology on financial institutions is profound. Instead of merely replacing existing systems, it paves the way for an entirely new market and provides a means to extend banking services to those previously excluded.
Blockchain security is revolutionizing finance by introducing scalable, cost-effective, and secure solutions that benefit even the average individual. It eliminates barriers to accessing financial services, ensures robust security measures, eliminates intermediaries, and improves transparency.
Fintech Blockchain Market size was valued at USD 1.1 billion in 2021 and is poised to grow from USD 1.58 billion in 2022 to USD 8.7 billion by 2030, growing at a CAGR of 43.8% in the forecast period (2023-2030), according to SkyQuest.
In conclusion, as we delve into the realm of blockchain technology, it becomes evident that 2023 will witness significant trends poised to disrupt the financial landscape. The continuous advancement and innovation in technology have prompted businesses and governments to harness the potential of blockchain, both to streamline their operations and provide unparalleled services to end-users.
Amidst this era of progress, countries across the globe are allocating substantial resources toward research, development, and innovation in technology and science.
With a noteworthy portion, approximately 20%, of the region’s 750 billion euro ($887 billion) pandemic recovery fund dedicated to this cause, it is evident that blockchain holds immense promise for the future.
Before understanding blockchain trend, let’s understand a bit more about blockchain industry developments and its use cases –