How Big Can Digital Assets Truly Get?
We are conditioned to view numbers that we can understand. This is something that is no secret.
To the average person, a trillion dollars is something that is really outside our grasp. Actually, for the majority of us, even imaging a billion dollars is too difficult. We can try to conceptualize it but we really do not have a frame of reference.
Nevertheless, understanding what is taking place if vital. We are embarking upon a completely new Internet. Which brings up the question, what is the present one worth? That is a guess at this point but it seems likely that around $50T could be an accurate guess. With all that takes place online, we are seeing more of our global economy shift to this medium.
Nevertheless, as they say, "you ain't seen nothing yet".
The new Internet is going to be, as Raoul Pal likes to call it, the "Internet of Value".
You see, something interesting happened along the way. Through the tokenization process, we are able to monetize the activity that takes place. Not only that, we are seeing collateral generated by the day. This collateral is ideal in a sense in that it has a transparent, ongoing value (mark-to-market) that is traded on open markets. This make for a more fluid economic system.
We are going to see projects worth hundreds of billions of dollars. Of course, over time, that will drift into the trillions. The growth rate of the digital world is too big a multiplier.
Decades ago, having companies that were worth tens of billions was a big deal. Most operated in a local capacity, restricting their reach. Over time, that scope expanded, with more companies becoming "international". These entities were able to leverage their size to become even bigger.
Yet, that was a drop in the bucket compared to what we see today. The largest companies in the world, Microsoft, Amazon, Google, and Facebook, all operate in the digital arena. They are able to grow at a much faster rate while entering markets very rapidly. For most of them, the distribution of their product is not done physically. This reduces the cost, sending profits soaring.
They also have potential customer bases that reach the billions. This equates to a lot of money.
Here is a chart of the top companies looking at 5 year intervals.
Notice the shift that took place. Traditional industries like energy, banking, and retail were in there 20 years ago. Now, it is all technology companies.
Also, this ends 5 years ago. We know that Microsoft and Apple have $2 trillion market caps. Amazon and Google are over $1T.
It is no secret this is where the power resides. Banking, often thought to be an extremely influential in its own right. In 2006, Citi was worth $273B; today it is at $154B.
This is just an example of how FinTech did a number on the banks.
With tokenization, we see another seismic shift starting to take place. Just like the introduction of evolution of the Internet provided a 10x, we will see something much larger this time.
Our progress is still stifled by the centralization of innovation, power, and resources. This could be turning.
We already see a market cap of more then $1.75 trillion on Coingecko for tokens it lists. This, of course, is just portion of what is taking place out there.
The recent NFT craze saw some serious numbers being tossed around. Couple this with all the smaller priced activity, and what do you get? While a factor not yet truly accounted for, we are likely already into the tens of billions (if not hundreds).
Make no mistake; there will be failures. What looks strong today might end up as MySpace. That is the nature of emerging industries and technologies.
However, the potential that exists is greater than anything humanity ever saw. The impact of the Internet is about to be 100X through the next phase of its evolution. All components are getting larger, faster, less expensive, and automated.
This creates a tremendous amount of economic potential.
To illustrate this point, let us look at Leofinance and its recent development.
The present market cap of that project is $7.16M. This takes a total supply of 6.57M found in this post and multiplied it by the present $1.09 price.
We saw the introduction of CubFinance this week. It grew very quickly, in a multi-million dollar value. Here we see the latest stats on the project.
Between the two projects, we are now sitting at $10 million. Here is the key point: did the addition of CubFinance take away from any other project? Outside perhaps the removal of some money from the banking industry, we see little impact elsewhere. Sure, this project is not very big yet the growth DeFi in general means newer entrants can excel.
The thing to remember is this process is going to be repeated thousands upon thousands of times. Some projects will reach tens of millions; a few, hundreds of billions.
We will see the totality of it all truly explode.
Therefore, we best start to embrace another level of numerical advancement: quadrillions. This is the level where this is all going.
The global real estate market is estimated to be about $225 trillion. What do you think the virtual real estate market will be worth? As they say, they can't make more land. In the virtual world, this is not the case.
We see how the Network Effect has a financial impact. The picture of the world's richest companies all depend upon that. They grew at an exponential rate as users signed on to the platforms. Over time, they achieved previously unseen growth rates. That is until now.
Looking at this another way, if we take a linear view, there are roughly 100 million people involved at this point. With a planet of more than 8 billion people, all of whom will be connected to the Internet in the next 5-7 years, we can see a growth rate, from a user perspective of 80x.
Just looking at the market cap of the tokens listed on Coingecko, we come up with $140 trillion. This include NFTs, businesses tied to this industry, or anything that site does not provide a value for. Yet, we know there is already billions more in value out there.
The other thing is we know that Network Effects do not have linear impacts on value. Instead, that growth rate is exponential. How much so is up to debate but we know it exists. Thus, the $140 trillion is not accurate since it does not factor in the Network Effect.
Thus, when this industry matures, we are going to see the numbers in the quadrillions. This is a vital point to drive home. When looking at a project, understand that 100x or 1000x is very possible. This is because our limited thinking about numbers stands in the way.
Each day more tokens are being created and distributed. This means bags are filling up, many of which will get more valuable over time.
And that is the epitome of exponential growth in value.
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