Are Cryptocurrencies Ready to Break Out of Their Niche?

Ten years after the mysterious figure or group of people known as Satoshi Nakamoto introduced the world to bitcoin, cryptocurrencies are still largely seen as an exotic invention that most regular folks view with skepticism. While the bitcoin’s underlying ledger technology, the blockchain, is enjoying greater experimentation and adoption by companies and countries, cryptos are still tough for most people to fathom. It doesn’t help that the biggest headlines tend to be about theft of these assets.

“Cryptocurrency — no one owns any and no one uses it. That’s kind of where we are today,” said Ari Paul, chief investment officer of BlockTower Capital, a crypto-asset investment firm, during a keynote speech at the second annual Penn Blockchain Conference held at Wharton. By no one, he meant relatively few people. He estimates that around 35 million people globally own cryptos — less than 1% of the world’s population. Among these crypto owners, Paul believes that fewer than 2 million actually are active users. Most hold it for speculation. “This is an incredibly tiny niche industry with very little usage and adoption.”

But developments are afoot. There are people who are working to solve the problems that have hindered wider acceptance of cryptos, especially by institutional investors. “They are quietly building infrastructure,” Paul said. They are also seeking solutions to problems ranging from the straightforward — such as lack of institutional-quality trading software — to much deeper concerns like security of assets. Issues of governance are being hammered out, as is dealing with differing regulations among nations.

Paul recalled that just six months ago, his firm had to build its own crypto trading software because there were no institutional-quality ones on the market. BlockTower Capital also had to “self-custody” or act as a disinterested protector of assets because there weren’t any viable options, he said. In such a…

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