2018–08–30 | Nick Gorman | The Gulf Blockchain Foundation
At the end of Q1 2018, Binance, a cryptocurrency exchange only 8 months old at the time and with just 200 employees declared a Q1 profit of $200M. For the same quarter, the Nasdaq (the world’s 2nd largest stock exchange by Market Cap) posted a profit of $209M. The Nasdaq has been operating for 47 years and employs more than 4,500 people.
There are various reasons for Binance’s success, including less-onerous regulatory requirements than established exchanges, the 2017 Crypto bull run and unverified allegations of wash trading. But the fact remains that by the end of 2018 Binance will have added over $1Bn of value to the GDP(s) of its host countries. The majority of that increase flooding in from offshore investors.
Digital asset exchanges
Binance isn’t the only cryptocurrency exchange propping up the global economy. The 20 biggest exchanges combined bring in around $20m in fee revenues per day. And because cryptocurrency exchanges operate 24 / 365 this equates to over $7.3bn in net revenue annually for these exchanges globally. The graphic below is reproduced from this Bloomberg article published in March 2018:
In Hong Kong, Bitmex (a crytpocurrency futures trading platform) is king, boasting a daily trading volume of $1.7bn and the most expensive commercial rental in the city. Recently, Bitmex’s CTO, Ben Delo was reported as the youngest self-made British billionaire.
But exchanges are not the only lucrative Blockchain projects.
Tokens, protocols and SmartContracts
In 2017 ICOs raised over $5bn globally. Projects vary and include utility tokens, stablecoins, security tokens, cross-border remittance protocols, identity protection blockchains, smartcontract platforms and a myriad of other use cases. Regardless of the project goals, these projects reflect real investment unlocked and released into real projects creating real jobs. 2018 smashed that figure in the first 3 months of the year. Even the failed projects that received money still paid salaries, rented offices and kept jobs afloat as long as they existed. Those that succeeded have gone on to generate even more value and in the case of Telegram ($1bn ICO — based in Dubai) or EOS ($4bn ICO — based in the Cayman Islands) are looking to build an entirely new, decentralized internet.
Savings from SmartContract Automation
The value added to economies by unlocking liquidity through blockchain projects and cryptocurrency exchanges is clear and measurable. More challenging to determine are the savings that automated transactions through SmartContracts can deliver. Estimates vary wildly but in this Forbes piece Dubai is expecting over $1.5bn in savings per year, mostly through automating public and private sector transactions such as property ownership, asset transfer and private vehicle maintenance history using blockchain technology.
A very trivial example showing the net effect on a Gulf nation (or any nation for that matter) implementing just one of each of the above examples looks something like this:
- Profit from a single locally-established, globally-accessible exchange (based on Binance, assuming 50% remains in-country): $0.5bn
- Unlocked foreign and local investment into blockchain projects locally (20% of global total as an estimate): $1bn
- Savings from automation of Public and Private transactions (based on Dubai estimate): $1.5bn
Realizable benefit: $3bn
Soft benefits include improved global perception of a country’s innovation appetite, increased job creation leading to a more buoyant domestic economy, greater disposable income in-country and most importantly, the move from a fossil fuel economy towards a skills-based economy.
In a world moving from carbon to electric, the question is no longer whether innovation investment is a priority, but rather how fast it can be done. The answer isn’t always blockchain, but this time, it is.