Token Economy Growth and How to HODL Safely
By Clarence on ALTCOIN MAGAZINE
Global Digital Landscape:
Today we have a global population of 7.4 billion people, of which 4.3 billion are active internet users (57% penetration rate). At the end of 2018, there are about 35 million verified crypto users. That is a staggering low adoption rate at 0.5% of the total population and 0.7% of active internet users. Although the adoption rate is low, on the contrary, we have seen a high growth rate in terms of crypto users. More than a 50% increase from 2017–2018, this shows that there is good potential & continuation for the market.
The Adoption Process:
Looking at the time series of internet users, 35 million crypto users are as though we are back in 1996, with 36 million internet users, and it took us 22 years to get to 4.3 billion users. We believe the Improvement in utilization and ease of use, drove up the number of internet users, and the adoption of cryptocurrency will happen in a similar style.
From blockchain architecture, we are seeing developments in:
• Crypto assets with smart contracts;
• Layer two implementation and DApps;
• More sophisticated financial instrument;
• To support various business use cases that will eventually drive up the adoption rate
We observed that there are various key impediments to mass adoption of digital assets.
Such factors include security, volatility, usability, interoperability, scalability, and regulations.
Various research reports have converged on the same, as sharepost’s latest bi-annual survey of about 3000 respondents showed that Security remains a top concern with over 37% voting for it.
With the rise in adoption and Increasing value of digital assets, it is attracting more thefts and heists. Since 2011, over USD 1.5 billion worth of digital assets has been reported lost to attacks on exchanges and investors, the amount is without accounting for unreported losses. Exchanges and Investors are susceptible to hacks and heists, without the necessary controls and protection in place, they are vulnerable to malicious intends. Below is a timeline of hacks and heists since 2011.
An industry overview of the types of safekeeping and custody available in the space, with custodians and crypto banks emerging as a more feasible option to protect your digital assets.
A known fact is that custody of digital assets by exchanges is highly efficient for purposes of trading and settlement, but it doesn’t do as well in other categories such as risk management and transparency. Some exchanges publicly advertise that they move their customer’s assets to cold storage while leaving a mere 2–10% on their hot wallet to facilitate spot liquidity but an industry recommendation is that if you’re not actively trading, its better that you move those assets to cold storage. This is where the option of self-custody using hardware devices, software wallets, which can be more transparency and cost-effective comes into play.
But inevitably due to investors departing or losing access to their private keys, there is said that 20% of Bitcoin’s supply may be lost forever. According to Delphi Digital, the Bitcoin’s Unspent Transaction Output (UXTO), a statistic indicator to attempt the determine pivot point when sellers begin to fade and accumulation begins. Which might indicate if and when Bitcoin’s bottom is in. The lost Bitcoins also contribute to the final UXTO value. A part of the analysis contains a 5+ year UXTO, which represents either the longest-term holders, or the portion of Bitcoin’s supply that has been lost forever.
A Bitcoin UTXO age distribution chart above shows the price action and the statistic of Bitcoins that remain dormant, not transacted as the price increasing. A staggering 21.54% of Bitcoin’s supply has not transacted for over 5 years as of Aug 2019. With the appreciation of Bitcoin’s value, investors had turned into “HODLERS”.
A noticeable trend in the space is that in the last 2 years, custodians have been popping up as a new option, and they perform much better in risk management, transparency, neutrality, among others. In hindsight, investors could have stored their digital assets with a third-party custodian or crypto bank. These arrangements allow users to safely store their digital assets and appoint ultimate beneficial owner(s) in the event of their departure. Such arrangement ensures that the digital assets are kept in a controlled environment, in the safe hands of a trusted third-party custodian or crypto bank hence those digital assets will never be ‘forever lost’.
Clarence,
Onchain Custodian
Source: Onchain Custodian
