Blockchain: Adoption Gains Momentum in 2024
As of September 30, 2024, BLOK’s NAV returns were up 6.25% for the 1 month, 5.79% for the Q3, and is up 25.53% YTD (see standardized performance). More importantly, the driver of these returns is evidence that real change is on the horizon. In September, at the Singapore 2049 Conference, Sergey Nazarov, the Co-founder of Chainlink, delivered an eye-opening keynote address that explained his idea of why adoption is at an intersection between TradFi and DeFi, which will ultimately lead to hundreds of trillions of value, measured by dollars and code. Note that many readers of this report likely have not heard of Sergey Nazarov or Chainlink, but in a changing world, innovation does not usually come from your next door neighbor. Chainlink, which he co-founded, is an industry platform standard that is powering and integrating the decentralized computing ecosystem referenced as DeFi. “Chainlink since 2022 has enabled over $15 trillion in cumulative transaction value by providing financial institutions, startups, and developers worldwide with access to real-world data, and offchain computations. It provides a base level of security and cross-chain interoperability across any blockchain.” Check out his full Token Singapore 2049 keynote speech1 as well as all of our footnotes links below.2
Further to the point, we see supporting evidence of adoption from major leading public companies like Visa, Blackrock, and Alphabet. In addition, during September we saw trillion-dollar financial institutions like Bank of New York3 and DTCC4 making announcements about their positioning and product offerings in the coming infrastructure buildout. We note that all these trillion-dollar companies may not be in the portfolio, but anyone who is not paying attention to their strategic efforts towards tokenization and blockchain is living in the 1981 world of MS-DOS.
Bottomline, adoption is accelerating because of the efficiencies that blockchain may offer, and scaled business operators know that the technology attributes offered by DeFi that help lower cost, increase efficiency, and improve reliability with transparency may threaten their businesses if they don’t get on board. To this point, we share some exciting new KPI bullets:
- In 5 minute, you can get a Home Equity Line of Credit (HELOC) on the blockchain through Figure Technologies. Cumulatively, Figure has wrapped $12 billion in HELOCs. In 2024, the total outstanding HELOC debt in the US was $380 billion, so this opportunity is quite large. Traditional HELOC through Tradfi usually take 5 weeks.
- It has only been about 120 days, but as of the latest report, $190 million of life insurance was hosted on Blockchain through Infineo. The Life insurance market worldwide is projected to reach a market size (gross written premium) of US$3.56tn in 2024.5
- Total Value of Tokenized Private Credit on Chain is $14.93 billion6, but according to McKinsey, the total addressable market is expected to expand from $2 trillion to $30 trillion through nonbank resources and technology pools on digital assets.7
- According to Nic Carter of Castle Island Ventures, Stablecoins have generated about $4.96 trillion in volume this past year and expanded from $127 billion to $171 billion. They are also supportive of US dollars and backed by US Treasuries, which is why most people buy them. The number of addresses has also increased to 23 million, up from 16 million, and 45% of people hold Stablecoins because they are backed by US Dollars.8
- Visa reports that $1.5 trillion in Stablecoin transactions took place in the past 30 days9 which compares to about $3.9 trillion of volume for Visa.10
We admit the size and scale of these KPIs are challenging to truly appreciate it. However, as we move into 2025, we think it’s important that investors think beyond just Bitcoin. The world is a rapidly changing and regardless of whether an investor allocates to BLOK, we believe these KPIs provide solid evidence that the disruption cannot be ignored.
Transactions and Repositing:
Pursuant to process, in September we trimmed Core Scientific because its success continues to make it an overweighted top position. Similarly, we trimmed Galaxy Digital. We sold Accenture because its head of blockchain left the firm. Offsetting purchases included Terawulf and some additional ownership in the Bitcoin spot basket of ETFs.
1youtube.com/watch?v=JDIiZdSKD8M
2blog.chain.link/wp-content/uploads/2024/09/2024.09-TOKEN2049-Sergey-Nazarov.pdf
3 www.bloomberg.com/news/articles/2024-09-24/bny-plans-to-custody-crypto-for-etfs-after-sec-review?embedded-checkout=true
4 prnewswire.com/news-releases/dtcc-and-digital-asset-complete-successful-pilot-to-test-collateral-and-margin-optimization-through-tokenization-302255589.html
5statista.com/outlook/fmo/insurances/life-insurance/worldwide
6app.rwa.xyz/private_credit
7 mckinsey.com/industries/private-capital/our-insights/the-next-era-of-private-credit#/
8 niccarter.info/wp-content/uploads/token2049_2024_ncarter_revised.pdf | youtube.com/watch?v=v9S6TjXasJw | castleisland.vc/writing/stablecoins-the-emerging-market-story/
9 visaonchainanalytics.com/transactions
10 ycharts.com/indicators/visa_inc_v_payments_transaction_volume_quarterly