Ark 2022 Research Report Compilation | About Public Chains, DeFi, Web3, and Bitcoin Breaking $1 Million

ARK Invest, led by the renowned "Queen of the Bull Market" Cathie Wood, released their annual research report yesterday – BIG IDEAS 2022, covering various aspects such as AI, battery technology, blockchain, robotics, genetic editing, and more. This is a summary focusing on the blockchain industry from the report.

About Public Chains

1. Public Chains Minimize the Need for Trust in Centralized Institutions

The emergence of public chains has altered the distribution of trust, with decentralized open-source software replacing reliance on central authorities. While central institutions are necessary to coordinate the functions of the financial system, Bitcoin operates like a single, decentralized institution that continues to function without depending on accountants, regulatory bodies, or governments, but rather relies on global network miners to collectively enforce rules.

2. Blockchain Will Alter Traditional Asset Classes

Just as the internet has significantly changed people's lifestyles and the nature of assets, the emergence of public chains will also have an impact. While the internet turns information into data packets transmitted online, public chains may bring all asset transaction activities onto the chain.

3. Public Chains Are Revolutionizing Various Fields

From Ark's perspective, Bitcoin itself is the most profound application in the infrastructure of public chains. In addition to the currency revolution, public chains have also catalyzed the financial DeFi and web Web3 revolutions.

About Bitcoin

1. Bitcoin's Price Expected to Exceed $1 Million by 2030

Ark analyzes 8 use cases for Bitcoin, including remittances, emerging market currencies, economic settlements, treasury assets, anti-seizure assets, institutional investments, corporate treasuries, and digital gold, and calculates their market values individually. Among them, digital gold is expected to bring the most value to Bitcoin, with a projected value of $1.36 million per Bitcoin in 2030.

2. Bitcoin Market Participants Growing More Mature and Mostly Long-Term Holders

In 2021, Bitcoin's market capitalization grew by 96%, while the realized capitalization increased by 168%. Furthermore, the proportion of long-term holders holding coins for over 155 days continues to rise, with over 500,000 addresses holding a total value exceeding $13.5 million.

Note: Realized capitalization calculates the value of each cryptocurrency based on its most recent transaction price, considering the final price of all on-chain transactions. It can be seen as a more "real" long-term measure that reflects market capitalization more accurately.

3. Bitcoin Continues to Occupy Market Share in Global Payment Networks

Bitcoin's cumulative transfer volume increased by 463% compared to the previous year, surpassing Visa's payment transaction volume in annual settlement volume.

4. Bitcoin Continues to Attract Institutional Investors

With the introduction of more regulated products and the emergence of use cases where corporations and countries adopt Bitcoin, the proportion of institutional Bitcoin holdings is gradually increasing. Exchange-traded products, nations, publicly listed companies, and private companies collectively hold around 8% of the circulating supply of Bitcoin.

About Ethereum and DeFi

1. Smart Contracts Introduce Various Traditional Financial Functions to Ethereum

DeFi platforms' functionalities are often extensions of traditional financial concepts; for example, UniSwap can be likened to the New York Stock Exchange, MetaMask to Robinhood, and DYDX to the Chicago Mercantile Exchange. The transparent nature of smart contracts allows them to operate without relying on traditional financial intermediaries, thereby reducing counterparty risk in transactions.

2. Financial Activities Driven by Cryptocurrencies Are More Efficient Than Traditional Finance

Financial transactions based on smart contracts can settle almost in real-time almost anywhere worldwide. Ark believes that the efficiency of DeFi compared to traditional finance can be illustrated by using each employee's income.

3. Stablecoins Drive Cryptocurrency Trading, Lending, and Payments

The supply of stablecoins has grown nearly fivefold in 2021. The largest centralized exchange, Binance, accounts for over 70% of total trading volume in pairs denominated in stablecoins. Additionally, stablecoins are widely used in DeFi, with stablecoins accounting for 95% of the total outstanding debt in lending protocols like Compound and 22% of the total liquidity in decentralized exchanges like Uniswap.

4. Ethereum's Market Value Could Exceed $20 Trillion in the Next 10 Years

Ethereum is gradually replacing traditional financial services, and its native currency, Ether, is poised to become a global competitive currency. As the preferred collateral for DeFi and the unit of account for NFTs, Ether has the potential to exceed $20 trillion in market value in the future, approximately 56 times its current value, and become part of the global M2 money supply.

Note: M1 refers to Narrow money, consisting of the 4 most liquid items in the market: currency, traveler's checks issued by non-bank institutions, demand deposits minus cash in transit and undeposited checks, and other checkable deposits. M2 is Broad money, which includes M1 plus 3 quasi-monies: savings deposits, small time deposits minus retirement account funds, and money market mutual funds minus retirement account funds.

About Web3

1. Public Chains Introduce the Concept of NFTs, Granting Ownership of Digital Assets

NFTs minted through smart contracts can verify ownership of digital assets on public chains, replacing the ability of centralized platforms to own, control, and verify assets. In 2021, NFT sales reached $21 billion, with independent buyers growing eightfold to 700,000.

2. Demand for NFTs Gradually Shifts from Static Collectibles to Dynamic Digital Assets

So far, collectibles and digital art account for 75% of Ethereum NFT transactions, with game or virtual world assets like land in The Sandbox or pets in Axie Infinity making up less than 25%. However, as the gaming market evolves, the demand for NFTs in gaming or virtual worlds may surpass these categories, especially as these digital art or collectibles begin to have more utility or display in games.

3. NFTs Blur the Line Between Consumerism and Investment

NFTs provide a fluid market where consumers can invest in various digital assets and engage in peer-to-peer transactions. In the past, when disposing of used goods, people often had limited options with low investment returns such as resale, donation, or abandonment. However, as digital assets reliant on decentralized platforms and applications, NFTs purchased by consumers can have more utility and generate returns through lending, staking, collateralizing, or fractionalizing.

4. Thanks to Web3, Annual Online Expenditure in the Next Ten Years Could Reach $12.5 Trillion

According to Ark's research, offline consumption is expected to peak at $4.9 trillion annually in 5 years but may decline in proportion with the emergence of Web3. Without Web3, annual online spending could grow at a rate of 16% per year, but with Web3, it could grow at a rate of 28% per year, reaching $12.5 trillion.

The above summarizes key points from Ark's report, which covers a wide range of research and analysis. Interested readers can access the full report through this link.