Digital Assets on the Brink of a Bull Market: Similar to the Early 2000s Internet Transition

[Block Media Reporter Lee Jeong-hwa] "I believe the digital asset market is in a very similar situation to when the world was about to change with high-speed internet."

Spencer Bogart and Alex Larson from Blockchain Capital claimed that the digital asset market is on the verge of another bull market. They made these remarks during a podcast hosted by David Hoffman, stating that digital assets are positioned on the S-curve. The podcast was released on YouTube on the 5th.

Digital Asset Market Resembles Early Internet

Alex, a General Partner at Blockchain Capital, analyzed that the current market is experiencing unprecedented positive catalysts with regulatory clarity and the full entry of institutional financial entities. He noted that practical use cases, such as prediction markets and stablecoins, have continued to grow independently even during downturns, despite the public's lack of technical background.

Alex compared the development stage of digital asset technology to the history of the internet. He explained that it took a long time for the internet to become mainstream after its public release in 1989, going through a transition to broadband networks between 2000 and 2005. He diagnosed that the digital asset market is currently in a flat section of the S-curve, similar to the broadband internet adoption period of 2003-2004, and is on the brink of explosive growth.

In particular, based on the launch of Ethereum in 2015, he assessed that the market is now entering its 10-11 year phase, with a technical foundation established to build popular applications as block space becomes cheaper and more abundant. He mentioned that there are currently about 700 million digital asset holders worldwide, with approximately 10% active on-chain users.

Evolution of Token Economics: From 'Buy and Burn' to Generating Real Cash Flow

In-depth discussions were also held regarding the traditional token model of 'Buy and Burn.' This model, pioneered by Maker (MKR), has operated as the most logical model providing certainty to investors in a situation where the rights of token holders are not legally clear.

Spencer, a partner at Blockchain Capital, explained that while it may be inefficient for startups to use capital for stock buybacks from the beginning, it was an unavoidable choice to prove the project's authenticity in a low-trust market environment. However, both Spencer and Alex predicted that through future regulatory improvements and the restoration of investor confidence, projects will evolve into ecosystems that can reinvest capital more efficiently and promote growth, suggesting that in five years, Buy and Burn may no longer be the dominant model.

Shift in Value Chain: Moving from Infrastructure to Application Layer

The digital asset industry has repeatedly gone through cycles where excessive capital is concentrated on infrastructure building. In 2021, over 70% of the fees paid by users were attributed to the infrastructure layer, but after efforts to improve scalability, a structural shift is expected in 2025 when application layer fees will surpass infrastructure fees for the first time.

Spencer analyzed that as transaction costs such as gas fees decrease, value is shifting towards applications. He evaluated this as strong evidence that the market is maturing into a healthy ecosystem where infrastructure does not charge excessive rents and higher financial services capture more value.

Explosive Growth of Stablecoins and Activation of On-Chain Economy

Based on his experience investing in the three major stablecoin issuers—Tether, Circle, and Paxos—since about ten years ago, Spencer predicted with over 90% confidence that the current stablecoin market, valued at approximately $300 billion, will grow to $2 trillion by 2030.

In particular, according to Blockchain Capital's analysis, every time a new stablecoin worth $1 billion is issued, approximately $122 billion in economic activity occurs. A significant portion of this liquidity is injected into the on-chain economy, such as lending protocols or exchanges, resulting in an estimated annual revenue of about $19 million from downstream protocol fees. This revenue is said to flow directly into traditional on-chain blue-chip protocols like Aave and Uniswap.

Challenges and Prospects of Real-World Assets (RWA) and Stock Tokenization

Following the success of stablecoins, which are tokenized dollars, the tokenization of real-world equities has emerged as the next financial innovation. Spencer emphasized that stock tokenization will dramatically lower accessibility for global investors outside the U.S. and provide programmability to maximize asset efficiency by allowing loans against on-chain stock portfolios.

However, to overcome the limitations of the current offshore special purpose vehicle (SPV) model, which takes the form of debt instruments rather than actual stock ownership, securing legal ownership and compliance through coordination with regulatory authorities is essential to attract trillions of dollars in funding.

Blockchain Capital successfully issued 'BCAP,' the first security token that tokenized its fund on Ethereum in March 2017. The process of issuing tokens while complying with regulations in a situation where there was no existing infrastructure was challenging, but it achieved participation from investors in over 80 countries. This fund, which started as an experimental project with a scale of $10 million, has now grown to approximately $1 billion in assets.

David, the host, evaluated the current signal that institutional funds are independently flowing into the market despite the decline in market prices as very encouraging. In response, Spencer and Alex expressed that temporary market downturns or asset price declines are merely noise, and there is ample reason to maintain long-term optimism as fundamental upgrades to the financial system are actually taking place.