Since the cryptocurrencies arrived to the financial sector, the investors have been looking for different ways of investing in them. The easiest way to do it is directly through the exchange platforms, but it is not the only way. In fact, it is possible to benefit from them performance using the classical investment approach. Therefore, we can think about equities and the new business models which multiple companies are developing. Consequently, we will talk in this post about the six sectors most affected by the cryptocurrencies and their new business models.
This is, without any doubt, one of the industries which has been able to develop new business opportunities thanks to the cryptocurrencies. Every years we see several frauds and attacks whose price is paid in cryptocurrencies. This is because these assets are anonymous, which allows the hackers to run away from the authorities and still maintain the stolen money. In fact, the lack of reliable intermediaries brings the responsibility to the exchange platforms, which are not regulated and, therefore, not so trustworthy.
There are other type of frauds which also quite common, as false investment entities or even manipulated software to steal private data. The 100% digital conception of the cryptocurrencies makes easier to suffer frauds, and not all the users are ready to avoid these situations. For this reason, a lot of companies are investing huge amounts of money to protect themselves from these threats.
This means a great opportunity for the companies in the cybersecurity industry. Through training or by developing the correspondent software, these companies have the opportunity to sell protection to companies and users from several frauds related with the use of cryptocurrencies.
Mining of cryptocurrencies
This is a sector whose conception comes directly with the appearance of cryptocurrencies. It consist on making available to the network the computational resources to generate new tokens of cryptocurrencies. For the first years, the mining activity was mainly focused on individual users. However, due to the increase of the costs and the entry barriers, the number of big companies in the market is getting higher over time. Mining as a business case makes quite good sense if we take into account all the factors. The cost of the servers and the price of energy can become an entry barrier for individuals, but they are easier to overcome if you are a company with higher resources.
Additionally, the benefits are directly related with the current valuation of cryptocurrencies. This can be risky for individuals, but it is not the same when we talk about a company. Any business can manage different levels of risk and have access to hedge, which is a great advantage in a volatile market. Therefore, the benefits for the company will usually be higher than for the individuals given a certain price. This is due to the synergies of the companies and their economic strength. One company is able to divide all their servers to mine several cryptocurrencies simultaneously, which is something difficult to accomplish for an individual.
It occurs also that the companies have more availability to relocate in case of adverse regulation. In China, for example, the individuals cannot continue with the mining activities, while the companies move to other countries. All these elements are the reason why the mining is a so profitable activity. This activity is only feasible under the Proof of Work algorithm. Of course, there are also benefits with Staking, but the difference over the individuals is not so significant.
Decentralized Applications (DApps)
The Decentralized Applications appeared long time earlier than Bitcoin, although they were not so popular until then. These applications do not depend on a unique central server, but on the whole network that forms them. This allows a better tolerance to failures, and a more democratic way of functioning. Moreover, since blockchain appeared, this type of applications are usually built on an open source protocol. Therefore, they count with a huge network of developers for the security and efficiency of the applications.
This is the reason why the blockchain technology has brought new structures for the companies and their traditional processes. Some companies have created new business models with this idea, in very different sectors. By optimizing their traditional processes, they have succeed in saving costs and time resources. Additionally, the blockchain technology allows them to created new applications based on Smart Contracts. There are some use cases such as the digital firm or back-office and post-trading processes where these applications make real sense.
These applications have most of their most successful use cases in the entertainment industry. Applications such as Decentraland or Cryptokitties are the most important representatives of the DApps, but not the only one. In fact, thanks to some innovations as the metaverse, it is very likely that the potential of these applications will grow in the future.
Training and research
With new technologies and innovations there is always a need for training for the potential users. This need is even bigger when the innovation implies technical challenges as cryptocurrencies do. Currently there are not so many professionals in this industry, and this is something that requires several years to solve. Training and research are key elements in this aspect.
In fact, the amount of documents and training material for cryptocurrencies have been growing over time. It is not a casualty the growing appearance of courses and masters related with cryptocurrencies, blockchain, etc., and we expect this to continue in the following years. Regulators all over the world are working in this aspect, but the private companies are always ahead in innovation. Consequently, the number of new applications and services related with the cryptocurrencies is much higher now than five years ago.
From the point of view of the individual investors, this is really important to understand the scope of the technological change. Moreover, a better preparation of the users will allow them to adapt faster and better to the changes, which at the end will imply a higher growth in the overall industry.
Legal / Tax
The investments by individuals and the lack of physical barriers of the cryptocurrencies cause a real need for a good legal framework. The regulation is key for its development and a proper understanding by the potential users. Obviously, from the point of view of the governments, the activities related with cryptocurrencies should be equally treated in terms of taxes. However, most of the countries still show ambiguity in this aspect.
Because of this, several private and public institutions are currently working to define a common legal framework for these assets. The most important goals are the transparency and the protection of the investors, as well as the integration with other financial assets. This framework should also serve to reduce the fraud with these products, which is one of the main concerns.
At the end, any legal framework should bring protection for all the participants, which is beneficial in the long term. With clear and uniform rules, the interoperability among countries is much easier. Moreover, the approval for certain services will allow the entry of several companies which until now remain pending of authorization.
Last but not least we have the financial industry. This is, without any doubt, the sector with a most direct impact from the cryptocurrencies. Since their appearance as financial assets, the cryptocurrencies have been in all kind of discussions among investors. Both individuals and institutions have seen in these products a great potential, and several companies have integrated them in their processes.
From the creation of exchange platforms to their authorization as payment methods, a lot of companies have evolved their business models around cryptocurrencies. In fact, the capital markets have listed several products based on them, such as ETFs, futures, etc. The cryptocurrencies are not important just as investments but also because of the lack of control by financial institutions. Additionally, their anonymous and 100% digital character match perfectly in a society which starts to avoid the cash money.
It is also important that the technology of cryptocurrencies is a threat to the fiat money of the Central Banks. In fact, many of them are currently working on their own projects of CBDCs to remain up to date. Now more than ever there is a real discussion between public and private money. All this has a great impact in the family and institutional finance. The importance of stores of value in contexts of inflation has also contributed to the popularity of cryptocurrencies. In fact, there has been a debate between Bitcoin and the gold to be the real safe investment.
From social networks (Facebook) to car manufacturers, payment platforms (Paypal) or even fast food restaurants (Burguer King), there are a lot of companies which have integrated in some way the cryptocurrencies in their business models. Some of them have also integrated the blockchain technology in their processes to save money and time.
Additionally, most of the governments are working to regulate them in one way or another. The investors protection and the appearance of new financial assets have created the need for this regulation. In fact, many of them are using their technology to change the way we see and use the money for.
All of the above are the reasons why the cryptocurrencies and their technology have come to stay. Their direct impact in many of the traditional industries is very significant and it is expected to grow in the future. This impact will be higher once the regulation and the crypto community solve all the existing doubts around these assets.