ARK Invest, a Florida-based global asset management company, made some bold predictions about the near future of disruptive technologies, including blockchain and smart contracts. In the latest edition of its annual Big Ideas reports, published since 2017, the firm claims that decentralized applications (Dapps) and underlying smart contracts may generate as much as $450 billion in annual revenue, reaching $5.3 trillion in market value by 2030.
One of the key factors driving growth for Dapps is the ongoing shift from the classic custodial model, undermined by recent failures, to decentralized, fully transparent blockchain solutions based on automated smart contracts. According to the researchers, "Decentralization is proving more critical to maintaining the original value proposition of public blockchain infrastructure."
Key trends in crypto: diversification and decentralization
The report's observations are consistent with the trend of smart contract diversification. Ethereum network has expanded from mere asset transfers to accommodate several other transaction and service types, including DeFi, asset tokenization, NFT-based ownership, and stablecoin issuance.
There's also an uptick in decentralized exchange (DEX) activity influenced by several factors, including crypto scandals or anti-crypto policies. After a sharp rise in the summer last year, DEX trading volumes fell to 2021's levels but remained significantly higher than in 2021. In November, after the FTX crash, the DEX market share rose from 9% to 14%.
Ethereum is by far less congested but more prone to censorship
The report also touches on the sensitive question of Ethereum censorship risk. Concerns intensified after the Merge. The transition from Proof-of-Work to Proof-of-Stake put an end to energy-intensive mining and solved the congestion problem, but it also augmented the position of major players.
As shown in the graphic below, the top three staking services account for about two-thirds of total Ether staked. The proportions may further change in favor of the leaders, as censorship resistance is outweighed by financial incentives to maximize rewards.
Smart contracts may generate $450 billion per year
Concerns aside, ARK Invest experts predict a colossal rise in fees generated by smart contracts: from $11 billion in 2022 to a staggering $450 billion in 2030, at a 59% compound annual growth rate (CAGR). The prognosis is based on two assumptions.
First, financial assets will migrate to blockchain at a rate similar to that of the early internet adoption. Second, decentralized financial services will charge a third of traditional financial services take rates (fees on transactions collected by service providers or third parties).
One thing is sure: smart contracts have a way to go. Currently, tokenized assets' value is infinitesimally small compared to all global financial assets, and at the predicted progress rate, its market share will reach only 5% in 2030.
Crypto industry to reach $25 trillion by 2030
In absolute number terms, the prognosis looks much brighter. $5.3 trillion sounds good, but $25 trillion sounds even better. That's the predicted combined value crypto assets and smart contracts may reach by 2030, according to the report.
In the section dedicated to public blockchains, the authors compare the forecast market value of crypto assets with the future value of traditional asset classes. Global real estate holds firm as the leading market, but crypto "inventory" is projected to overtake gold in the years to come.
In ARK Invest's report, the future of crypto looks bright. The web3 revolution is underway, with megabrands, such as Coca-Cola, Nike, NBA, or Starbucks, partnering with web3 protocols and major social platforms, including Instagram or Twitter, launching NFT-powered features.
However, neither the pace nor the scope of this process is determined, with a lot depending on government policies, investment trends, and consumer behavior.