Blockchain and cryptocurrency have been buzzy words over the past few years to say the least. From headlines about the sale of internet meme NFTs to the tune of thousands of dollars to the rise and fall of the cryptocurrency Dogecoin, it can be easy to brush off blockchain technology as another strange internet trend and nothing more.
As fun as it is to laugh at the absurdities that have appeared as a result of blockchain, the technology can go further than many give it credit for. A number of studies have found that implementation of blockchain technology can positively affect a large number of industries, saving money, increasing efficiency and raising performance overall.
Current estimates have found that investment in industrial blockchain will have reached $11.7 billion by 2022. Digital currencies such as Bitcoin and Etherum have played a large role in pushing this technology to the forefront, and there are now more than ten thousand cryptocurrencies and 50 million blockchain wallets in use worldwide.
Although the technology is still relatively new, it is already having a large influence on a wide range of industries, and the market will continue to mature over the course of the next year. According to Mark Hauser, a private equity investor and fund manager with over three decades of experience, there is ample room for growth in the blockchain industry in 2022. The technology promises to bring about profound changes in practically every sector, but its influence on banking, money transfers and decentralized markets will be some of the most intriguing.
Increasing cryptocurrency sustainability
One of the biggest obstacles to cryptocurrency is that mining it is highly energy-intensive. Bitcoin – currently the largest cryptocurrency – uses proof-of-work to confirm transactions and add new blocks to the blockchain. However, the competitive validation method requires large amounts of energy to perform the associated computations; a single bitcoin block may consume the amount of energy equivalent to that of an average American household over 72.2 days.
Detractors have pointed to environmental impact as a major flaw in blockchain technology, and 2022 will likely see further attempts to remedy this. One option is the cryptocurrency consensus mechanism proof-of-stake, which relies on owners using their own tokens as collateral to validate transactions, removing the extra energy needed to prove trustworthiness and reducing the overall energy consumption substantially as a result.
Proof-of-stake isn’t the be-all, end-all solution to the sustainability issues with cryptocurrencies, it is a step in the right direction, and while Bitcoin has yet to make the switch one of its biggest competitors Ethereum has. Ethereum 2.0, also known as Serenity, is an upgrade to the company’s blockchain that is amongst other focuses such as increasing transaction capacity and reducing fees aimed at making the network more sustainable.
With Ethereum making these moves that Bitcoin has yet to address, there is a possibility that the latter will lose at least a portion of its market dominance. In order for the industry as a whole to move forward, 2022 will have to see further advancements in increasing sustainability for all cryptocurrency players.
Regulating decentralized finance (CeDeFi)
The next year will see the cryptocurrency market mature further as a genuine asset class as regulations create clarification and encourage participation rather than restricting it. Known as centralized decentralized finance (CeDeFi), it has the potential to address the growing concerns surrounding regulation and compliance in relation to cryptocurrencies.
The concept of decentralized finance is for many the appeal of digital currencies, but centralized decentralized finance provides the best of both worlds, allowing corporations to explore this innovative technology while still meeting conventional financial regulatory standards. Global payments can be revolutionized as never before through these protocols which are more rapid, affordable and accessible.
Binance, currently the largest cryptocurrency exchange in the world, announced in 2021 the integration of decentralized finance with its centralized platform known as Binance Smart Chain. This move was seen by many as signaling the beginning of mass adoption of decentralized finance and crypto.
Centralized decentralized finance is not a competitor with other blockchain projects in the financial landscape. Rather, it is a way for other industries that may have been otherwise hindered by regulations to take advantage of blockchain’s innovative technology.
GameFi and the metaverse
While decentralized finance may be the leading blockchain technology in terms of total value, blockchain gaming growth is on a much faster pace. An easier concept for many to wrap their head around than DeFi, GameFi is a subset of the metaverse in which game developers are using blockchain to become more linked to the virtual world.
GameFi involves tokens granted as rewards for performing game-related tasks such as winning battles, mining precious resources or growing digital crops. While this may sound like many games that have already existed in the past, the difference lies in the fact that GameFi tokens are designed to work as full-fledged cryptocurrencies, meaning that players have the ability to convert tokens won in-game to cash. This also means that like other cryptocurrencies these tokens can vary in value, with the popularity of a game directly affecting its token’s value.
The number of blockchain games doubled over the course of 2021, and in the first week of January alone the top 10 of those games handled more than $841 million in transaction volume. Early investments in a metaverse token in 2022 may be the equivalent of Bitcoin investments in its early days.
About Hauser Private Equity
Currently partnered with over 50 private equity funds, Hauser Private Equity is a hybrid private equity fund manager that focuses on direct co-investments in the lower-middle and middle market. Headquartered in Cincinnati, Hauser Private Equity also has operating offices in Chicago and Los Angeles, partnering with control buyout funds and discerningly with managers of growth equity and special situation funds. It focuses on companies in the healthcare, financial & business services, industrials and consumer goods verticals and to date has invested over $300 million in capital in innovative privately-owned businesses. The firm was founded by co-managing partner Mark Hauser as a continuation of the success he had achieved with Hauser Capital Partners.
About Mark Hauser
Mark Hauser is founder and co-managing partner of Hauser Private Equity, a private equity fund manager and co-investor. With over 35 years of investment and operating company experience, Mr. Hauser has built a trusted operation where he focuses on capital formation and investment selection.
Mr. Hauser has had a prolific career in business and investment banking. After earning a Bachelor of Science degree in business administration with a major in finance from Miami University, he soon earned the position of vice president at Reynolds Dewitt Securities. At the investment services firm, Mr. Hauser played a significant role in the public offerings of many companies including Future Healthcare, Health Images and Mid-American Waste Systems.
He has served on the board of directors for a number of companies related to consumer goods and food & beverage brands, and has also held board positions for government-contracted security & defense, digital advertising and textile manufacturing businesses.
Additionally, for over 25 years Mark Hauser has led HAUSER Inc., a national risk advisory and insurance brokerage firm. Formerly known as The Hauser Insurance Group, Mr. Hauser was instrumental in transforming the company from a local insurance agency into a national full-service brokerage firm.