Crypto's Future: Infrastructure Over New Assets

Annabelle Huang argues that the future of cryptocurrency lies in enhancing market infrastructure rather than simply creating new assets.

Opinion The Evolution of Crypto: From Asset Creation to Market Infrastructure

Shifting Focus in the Crypto Industry

According to Annabelle Huang, co-founder and CEO of Altius, the future of cryptocurrency may hinge less on inventing new assets and more on developing the necessary infrastructure to accurately price a widening array of existing ones.

In the early days of cryptocurrency, the industry concentrated on generating entirely new asset types. Bitcoin and its derivatives were first, followed by Ether and its rivals, then various governance tokens, NFTs, and meme coins. The prevailing strategy was to establish a new digital asset class and cultivate a market around it.

However, as the sector has matured, the emphasis has shifted toward creating new markets rather than just new assets. Notable examples include prediction markets, perpetual contracts for oil and gold on Hyperliquid, and pre-IPO perpetuals. These innovations have established real-time, continuously tradable markets around existing entities—such as news, commodities, and private firms—that previously lacked such structures.

Blockchain technology proves to be particularly adept at broadening the spectrum of what can be priced, which may ultimately hold greater significance for the financial landscape than merely generating new digital assets.

Annabelle Huang is the co-founder and CEO of Altius Labs, a company focused on creating high-performance blockchain technologies.

From New Assets to New Markets

Global events, such as elections, inflation reports, commodity valuations, and key corporate milestones, attract considerable interest. The crypto sector is now exploring the concept that attention itself carries economic value. If a development garners public interest, there likely exists a demand for a market that encapsulates collective expectations surrounding it.

This transformation allows for the shift from mere observation to active participation in market assessments from anywhere globally. Instead of passively witnessing events unfold, individuals can engage in market-based evaluations of their significance or likelihood.

Consequently, there is an expanded definition of what can be quantified through markets. Aspects of human activity that were once qualitatively discussed can now be represented with continuously updated pricing.

Simultaneously, blockchain technology is reshaping the very essence of price discovery. Whereas traditional finance often considers price discovery a byproduct of trading, the crypto landscape increasingly views it as the primary outcome of market activities.

The popularity of pre-IPO perpetual futures exemplifies this trend. Traders may not acquire shares in private companies, yet they value having real-time market signals regarding those companies' perceived worth. Here, the market acts as an information engine, where the price is not just a result of trading activity but the main product itself.

Characteristics of New Markets

Conventional financial markets are often fragmented. Even with publicly traded companies, price discovery is limited to business hours, while private firms are only reassessed during funding rounds or valuation updates. This delay means that significant information may surface at any time, yet traditional markets are ill-equipped to react promptly.

In contrast, blockchain-based markets operate continuously, 24/7, allowing them to incorporate information as it arises, rather than waiting for the next session or valuation event. This results in a more agile and organic method for assessing value.

Moreover, blockchain markets are significantly more accessible than their traditional counterparts. Engaging in private equity typically requires accreditation, special connections, and considerable capital, limiting participation to a select few. The crypto industry, however, is adopting a more inclusive approach, enabling anyone with Internet access to express their market opinions. If markets are seen as systems for aggregating information, increasing participation enhances the quality of that information.

Another crucial aspect to note is that these products offer exposure rather than ownership. Holding a perpetual contract linked to a private tech company does not equate to owning equity in that firm. There are no shareholder rights or direct claims to future cash flows.

However, many participants increasingly view such exposure as adequate, reflecting a broader trend that has fueled the global expansion of derivatives markets over recent decades. Investors often prioritize expressing their market perspectives over actual ownership. Blockchain technology serves as the optimal medium for this.

Future Requirements for Crypto

We can envision a future where blockchain’s long-term value proposition is more informational than purely financial, serving as a global infrastructure to answer the pressing question: “What is this worth right now?”

This vision imposes significant demands on the underlying technology, as establishing continuous global markets is not simply about launching a token. Informational markets necessitate efficient trading capabilities. Factors like throughput, latency, liquidity depth, and reliability become paramount.

Many blockchain networks still encounter substantial limitations in these areas. Infrastructure bottlenecks can compromise the quality of price signals and restrict market participation. For crypto to emerge as the leading engine of price discovery worldwide, it must enhance its capacity to facilitate high-frequency trading environments, advanced risk management systems, and substantial capital pools.

In conclusion, the future trajectory of cryptocurrency may rely less on the creation of new assets and more on the development of the infrastructure needed to price a burgeoning variety of existing assets.

Note: The opinions expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc. or its owners and affiliates.

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