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1、Citi is one of the worlds largest financial institutions,operating in all major established and emerging markets.Across these world markets,our employees conduct an ongoing multi-disciplinary conversation accessing information,analyzing data,developing insights,and formulating advice.As our premier

2、thought leadership product,Citi GPS is designed to help our readers navigate the global economys most demanding challenges and to anticipate future themes and trends in a fast-changing and interconnected world.Citi GPS accesses the best elements of our global conversation and harvests the thought le

3、adership of a wide range of senior professionals across our firm.This is not a research report and does not constitute advice on investments or a solicitations to buy or sell any financial instruments.For more information on Citi GPS,please visit our website at GPS:Global Perspectives&Solutions Marc

4、h 2023MONEY,TOKENS,AND GAMESBlockchains Next Billion Users and Trillions in Value Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 Ronit Ghose,CFA Head of Future of FinanceCiti Global Insights+44-20-7986-4028| Sophia Bantanidis Future of Finance Analyst Citi Global Insights +44-20-7500-965

5、5| Nisha Surendran ICG Lead for Tokenization ICG Digital Assets,Citi +44 20-7986-7766| Kaiwan Master Future of Finance Analyst Citi Global Insights +44-20-7986-0247| Ronak S Shah Future of Finance Team Citi Global Insights +44-20-7986-3960| Yirou Yu FinTech&Blockchain Citi Business Advisory Services

6、 +1-212-723-4131| Loubna Regragui Digital Securities Lead Citi Global Markets +44 20-7986-0490| Henri Arslanian Co-Founder&Managing Partner Nine Blocks Capital Mgmt Bob Blower CEO C Nanne Dekking Founder&CEO Artory Inc.Samuel Falic Co-Founder&President BlockBar Inc.Stani Kulechov Founder&CEO Aave Co

7、mpanies Morgan McKenney CEO Provenance Blockchain Foundation Silvio Micali Professor MIT Aaron Powers Co-Founder&CEO Hunit Jessica Renier Head of Digital Finance Institute of International Finance Sunil Senapati Chief Operating Officer XinFin Ruth Wandhfer Partner Gauss Ventures Zooko Wilcox Founder

8、&CEO Electric Coin Co.John Wu President Ava Labs Ryan Wyatt President Polygon Labs With thanks to:Steven Biekens,Shearin Cao,Julien Donnet,Chelsea Lo,Martin Masser,Ciarn McGonagle,Adnan Memon,Ioana Niculcea,Opeyemi Olomo,Puneet Singhvi,Ajit Tripathi,Stephanie Wake,Jack White,and Vasant Viswanathan.M

9、arch 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 3 MONEY,TOKENS,AND GAMES Blockchains Next Billion Users and Trillions in Value Can you always spot disruptive innovation?When we hear the story of how the invention of the automobile hastened the demise of buggy whip companies,

10、we often question why the disruptive potential of gas-powered cars wasnt noticed.In the modern era,most people buying digital cameras in the 1990s would have scoffed at the idea that in a few years time,we would all be carrying around cameras in our mobile phones.The potential for tokenization via b

11、lockchain has been talked about as being transformative for the past few years but we are not quite at the point of mass adoption.Unlike automobiles or more recent innovations like ChatGPT or the Metaverse,blockchain is a back-end infrastructure technology without a prominent consumer interface,maki

12、ng it harder to visibly see how it could be innovative.But we believe we are approaching an inflection point,where the promised potential of blockchain will be realized and be measured in billions of users and trillions of dollars in value.Successful adoption will be when blockchain has a billion-pl

13、us users who do not even realize they are using the technology.This is likely to be driven by the adoption of central bank digital currencies(CBDCs)by large central banks as well as tokenized assets in gaming and blockchain-based payments on social media.By 2030,up to$5 trillion of CBDCs could be ci

14、rculating in major economies in the world,half or which could be linked to distributed ledger technology.Tokenization of financial and real-world assets could be the killer use case driving blockchains breakthrough,with tokenization expected to grow by a factor of 80 x in private markets and reach u

15、p to almost$4 trillion in value by 2030.We first wrote about tokenization in the 2021 Citi GPS report Future of Money:CBDCs,Crypto,and 21st Century Cash.At the time,China was starting to pilot test its CBDC and other central banks were warming up to the idea of their own digital currencies.In recent

16、 months,central banks in multiple large countries have announced plans for CBDCs this decade,giving almost 2 billion people the opportunity to experiment with digital currency.To be successfully adopted into the mainstream,blockchain needs the help of technology enablers,including(1)decentralized di

17、gital identities,(2)zero-knowledge proofs,(3)Oracles,and(4)secure bridges.The legal plumbing also needs to be altered to enable smart legal contracts that will provide a whole new set of rails for global commerce and finance to run on.Regulatory considerations are also necessary to allow adoption an

18、d scalability without hindering innovation.Although we think mass adoption could still be six to eight years away,momentum on adoption has positively shifted as governments,large institutions,and corporations have moved from investigating the benefits of tokenization to trials and proofs of concept.

19、Kathleen Boyle,CFA Managing Editor,Citi GPS Blockchain:The Opportunity and the Addressable Need 2023 CitigroupOpportunityBILLIONS OF USERSBlockchain user numbers will be boosted by daily activity.The success of blockchain adoption will be measured by when it is being used by a billion plus end users

20、 who do not even realize they are using the technology.Blockchain-based products can make a significant impact in terms of wide consumer adoption in digital currency,especially central bank digital currency(CBDCs),gaming,and social.TRILLIONS OF VALUEAlmost anything of value can be tokenized and toke

21、nization of financial and real-world assets could be the“killer use-case”blockchain needs to drive a breakthrough.We forecast$4 trillion to$5 trillion of tokenized digital securities and$1 trillion of distributed ledger technology(DLT)-based trade finance volumes by 2030.Tokenization Total Addressab

22、le Market(US$Trillions)Source:SIFMA,Preqin,Savills,Finadium,and Valuates$42 trillion2030E securities financing and collateral2030 Estimate$0.5-$1.0 trillion Tokenized$12 trillion2030E trade finance2030 Estimate$1.0 trillion TokenizedCBDCs could be used by 2-4 billionusers globally by 2030,50%of whic

23、h could be DLT-linkedWith over 3 billiongamers currently,we expect 50mn-100mn could be Web3 users by 2025,with estimates rising as Web2 hits include tokensArt and collectibles,NFTs,and digital collectibles could create new paths for content creators and unlock new monetization opportunities$20 trill

24、ion2030E real estate funds2030 Estimate$1.5 trillion Tokenized$7 trillion2030E private equity/venture capital2030 Estimate$0.7 trillion Tokenized$187 trillion2030E non-financial corporate and quasi sovereign debt2030 Estimate$1.9 trillion TokenizedLEGAL ENABLERSContract creation and execution can be

25、 a painful process,making it ripe for disruption.Technology-enabled smart legal contracts,are legally binding agreements with obligations performed automatically by a computer.They are dynamic,connect to outside data sources,and allow for human involvement where necessary.TECHNOLOGY ENABLERSBlockcha

26、in promises something that is in parts a replacement of a current functioning system and in parts new capabilities and operating models.From a technology specification perspective,blockchain needs to have transaction scale and throughput,strong guarantees of security,on-chain identity,privacy,Oracle

27、s,bridges,and good user experience.Technology DriversDescriptionHow It Helps Blockchain AdoptionDecentralized IdentityLeverages blockchain while enabling data privacy and protection for individualsDrives adoption by providing individuals the ability to access and navigate the digital ecosystem lever

28、aging self-sovereignty and sharing details on a need-to-know basisZero Knowledge ProofsSeparate knowledge from verificationAllows for scaling by moving computations off-chain in a verifiable way and privacy by keeping data,transactions,and computations hidden but publicly verifiableOraclesServe as a

29、 bridge between the blockchain ecosystem and external data sourcesAllows blockchain applications to access data stored outside the blockchainSecure BridgesEnable users to move assets from one blockchain to anotherDrives adopooin by enabling interoperability between different networks and avoiding si

30、loed ecosystemsUsing distributed ledger technology(DLT)in smart legal contracts can:Increase longivity and independence Enhance trust and eliminate silos Create a tamper proof record Increase security Create a single source of truth Real Estate/PropTech Escrow Payments Insurance Supply Chains Managi

31、ng Breaches in Service Level Agreements Derivative AgreementsUses Cases for Smart Legal Contracts Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 6 Introduction 8 How Big Is the Market for Emerging Technologies?.9 Four Key Takeaways From This Report.10 Defining Blockchain,D

32、LT,and Web3.13 Defining Tokenization?.14 Challenges Bringing Real World Assets On-Chain.16 A Conversation With Henri Arslanian on the ChatGPT Moment for Blockchain.18 Billions of Users 20 Central Bank Digital Currencies(CBDCs).22 Key Takeaways on CBDCs.22 Why CBDCs?.23 What Are CBDCs?.24 To DLT or N

33、ot to DLT?That Is the CBDC Question.26 Risks and Implications of a CBDC.27 Case Studies.28 A Conversation With Jessica Renier on CBDCs.33 Gaming.35 Five Key Takeaways on Gaming and Web3.35 Increasing Demand for Digital Experiences.37 A Conversation With Ryan Wyatt on Gaming and Web3.38 Social.40 A C

34、onversation With Stani Kulechov on Decentralized Social as a Driver for Blockchain Adoption.42 Art,NFTs,and The Metaverse.46 Traditional Art on the Blockchain.46 Five Key Takeaways on Blockchain and Traditional Art.46 A Conversation With Nanne Dekking on the Art of Tokenization.48 New Forms of Digit

35、al Art(NFTs).52 How Do NFTs Work?.52 Bringing Collectibles On-Chain.53 Adoption of Web3 by Consumer Brands.53 A Conversation With Samuel Falic on Authenticating Rare Wines and Spirits With NFTs.56 Trillions in Value 58 Tokenization of Digital Securities.58 Benefits of Tokenization.63 Beyond Tech:Wha

36、t Is Needed to Scale Securities Tokenization?.69 A Conversation With John Wu on Tokenization.71 A Conversation With Morgan McKenney on the Future of Finance and Blockchain.73 Trade Finance 76 Trade Finance and the Opportunity.76 Inefficiencies in Trade Finance:The Old and The New.77 Blockchain for T

37、rade Finance.79 Digital Money 2.0 for Trade Settlement.80 A Conversation With Bob Blower on the History and Future of Trade Finance.82 A Conversation With Sunil Senapati on Blockchain Use in Trade Finance 84 C.Technology Enablers 86 Decentralized Identity.89 Contents March 2023 Citi GPS:Citi GPS:Glo

38、bal Perspectives&Solutions 2023 Citigroup 7 Need for Decentralized Identity.90 Identity in the Web3 World.92 How Does Decentralized Identity Work?.94 Risks of Digital Identity.97 A Conversation With Dr.Ruth Wandhfer on Why Digital Identity Matters to Web3.99 Zero-Knowledge Proofs.103 What Is a zk-SN

39、ARK?.104 Specific Zero-Knowledge Proof Use Cases.106 Trusted Setups in Zk-SNARKS.109 A Conversation With Prof.Silvio Micali on Zero-Knowledge Proofs and Scalability.111 A Conversation With Zooko Wilcox on Application of zk-SNARKS.114 Blockchain Oracles.115 Oracles:A Prerequisite for Blockchain Use C

40、ases.115 How Does a Blockchain Oracle Work?.116 Types of Blockchain Oracles.116 Importance of Oracles in Blockchain and Web3 Applications.117 Potential Risks and Challenges.119 Secure Bridges.120 How Do Bridges Work?.121 Bridge Exploits.122 Moving Beyond Asset Bridges.123 Different Types of Interope

41、rability Protocols.123 Looking Ahead.126 D.Legal Enablers 127 Smart Legal Contracts.127 Smart Contracts vs.Smart Legal Contracts.129 Anatomy of a Smart Legal Contract.131 Do Smart Legal Contracts Need DLT?.134 Use Cases of Smart Legal Contracts.136 Regulatory Considerations.141 SLCs and the Future.1

42、43 A Conversation With Aaron Powers on How Smart Contracts Can Transform Finance.146 Appendix 1:How Real-World Assets Are Tokenized 151 Appendix 2:Digital FMIs Scaling Infrastructure 153 Appendix 3:DAOs as a Foundation for Web3 156 Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citi

43、group 8 Introduction Disruptive technologies change the state of doing things:how we live,work,spend,invest,interact,and more.Blockchain and the associated Web3 concept are disruptive technologies.They attract controversy and debate,as well as inspire dreams and disillusionment.In this report,we exp

44、lore some of the key drivers that will take blockchain technology to the next billion users,and potentially trillions of dollars of economic activity.As classically defined by Clayton Christensen in The Innovators Dilemma:“Disruptive technologies bring to a market a very different value proposition

45、than has been available previously.Generally,disruptive technologies underperform established products in mainstream markets.But they have other features that a few fringe(and generally new)customers value.Products based on disruptive technologies are typically cheaper,simpler,smaller and,frequently

46、,more convenient to use.”1 Blockchain fits many of the characteristics set out by Christensen tokenized,programmable assets with atomic settlement(instant and simultaneous)are a different value proposition than existing fiat money or financial assets.The adoption of public blockchains(e.g.,cryptocur

47、rencies),has happened initially in niche communities,such as the technologically savvy,as well as among those living in countries that are peripheral to core financial markets,including Argentina,Nigeria,and Ukraine.However,blockchain as a disruptive technology is different from many others.As it in

48、volves the transfer of financial value,it enters the realm of money a highly regulated domain in most countries.Hence,while the blockchain revolution began on the periphery,to be powered to mass adoption it needs the support of sovereign institutions,regulated financial institutions,and large compan

49、ies as well as the“degens”and the rebels,who are core to innovation,change,and progress.Those who have been promised the benefits of blockchain for many years might roll their eyes.But this time may well be different.To be sure,blockchain is not about to have a ChatGPT moment.Blockchain is a back-en

50、d infrastructure technology,more akin to cloud computing than artificial intelligence(AI)or the Metaverse,which have a more prominent consumer interface.So,why do we believe the growth of blockchain by 2030 will be measured in:(1)billions of users,and(2)trillions of dollars?Billions of Users:Blockch

51、ain user numbers will be boosted by daily activity spanning money,games,social,and more.Successful blockchain adoption will be when it has a billion-plus end users who do not even realize they are using the technology.Money:Countries with populations totaling approximately 2 billion are likely to ex

52、periment with distributed ledger technology-linked(DLT-linked)central bank digital currencies(CBDCs).Games:The next generation of gaming will include tokenized assets,initially driven by Asian games and appealing to power users.1 Clayton M.Christensen,The Innovators Dilemma:When New Technologies Cau

53、se Great Firms to Fail(Harvard Business Review Press,1997,updated 2016).By 2030,the growth of blockchain will be measured in billions of users and trillions of dollars March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 9 Social:Micropayments,including in Metaverse games,will l

54、ikely be blockchain-based.Large consumer brands will also help power Web3 adoption.Trillions of Dollars:We estimate up to$5 trillion could move to newer digital money formats such as CBDCs and stablecoins by 2030,of which roughly half could be DLT-or blockchain-linked.Legal reforms and greater inter

55、operability could drive up to$1 trillion of tokenization in global trade finance by 2030.Securities and funds are the big private-sector,tokenization prize.We estimate up to$5 trillion of non-financial corporate and quasi-sovereign debt;repo,securities financing,and collateral market;and alternative

56、 assets,such as real estate,private equity(PE),and venture capital(VC),could be tokenized by 2030.Industry estimates for total tokenization volumes are even higher.Technology and Legal:Bringing billions of users and trillions of dollars of investments into the blockchain ecosystem requires a change

57、in the technological and legal plumbing that is needed to support,maintain,and operate the system.These changes could include blockchain-based identity solutions,privacy solutions enabled by zero-knowledge proofs,Oracles to connect/feed real-world data on-chain,and of course,a strong regulatory and

58、legal framework that would allow individuals and institutions to embrace this new technology.How Big Is the Market for Emerging Technologies?Blockchain and Web3 today are relatively small markets(see Figure 1).When assessing total addressable market(TAM)size and time to impact(i.e.,the number of yea

59、rs to reach early majority adoption),we look at several sources.The largest of the emerging technologies today is AI,a general-purpose technology with use cases across nearly every aspect of society and the economy,impacting both consumer-facing and infrastructure layers.Mass adoption for AI could b

60、e as early as 2-4 years driven by the rapid recent increase in data availability and computing power,improved algorithms,and models that have led to products such as ChatGPT,which have caught mass public attention.Blockchain,on the other hand,could take longer for mass adoption(6-8 years perhaps)due

61、 to the need for collaboration among participants,standardization of platforms,as well as interoperability,and compatibility with existing systems and software.However,while challenges exist,including the current,poor consumer user experience and high cost of integration with existing institutional

62、structures,consensus forecasts for TAM growth are the highest for blockchain among emerging technologies.Why?Because large institutions,governments,and corporations are now beginning to adopt it,albeit initially in trials and proofs of concept.As we discuss in the report that follows,we may be at th

63、e tipping point for change in this domain.Notably,in this report we focus on the real-world and tangible use cases of blockchain technology not the speculative,trading side of the business,which often attracts much media attention due to its color and volatility.Out of all emerging technologies,bloc

64、kchain has the highest total addressable market growth forecast Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 10 Figure 1.Estimating the Impact of Emerging Technologies:Revenue TAM and Time to Impact Note:Size of bubble represents estimated 2027 Total Addressable Market(T

65、AM)in billions of U.S.dollars.Source:Citi GPS Four Key Takeaways From This Report Billions of Users:A key area where blockchain/DLT will make a significant impact is in digital money.The world of money is being turned on its head with CBDCs of major currencies coming our way towards the second half

66、of this decade,with many CBDC projects being partially DLT-linked.Get ready for CBDC versions of the euro(EUR),British pound(GBP),and Indian rupee(INR).Together,these four jurisdictions constitute more than 25%of the global population and 22%of global bank deposits.Hence,we think CBDCs could have at

67、 least 2 billion users and$5 trillion-plus in circulation,and half could be using partly DLT-linked models.There are big figures for gaming,with over 3 billion gamers in 2022 an enormous slice of the population.This means only a relatively small proportion of gamers need to participate in blockchain

68、-based games for them to be a success.Gaming will lead the way in“making blockchain big”from a bottom-up perspective.A small number of the most active gamers from Asia will likely adopt the next generation of Web3 games in the next 1-2 years,triggering an inclusion of tokenization aspects by leading

69、 Western and global games studios.The typical gamer does not care about the underlying technology,blockchain,cloud,or otherwise.Web2 or mass market consumer brands will be the key driver of adoption so Web3 will not replace Web2 but will nestle inside it,Russian doll-like.Art and collectibles are al

70、so moving onto the blockchain because these industries resonate with one of blockchains key features,namely trust and provenance,as well as the ability for a broader range of owners to invest via fractionalization.Blockchain will have a significant impact on digital money,followed by gaming as well

71、as art and collectibles March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 11 Similar to the arts,entertainment industries such as music,will use blockchain technology in the form of non-fungible tokens(NFTs).This provides a new path for content creators(be they artists,singer

72、s,dancers,or fashion brands)to connect directly with their fans or audiences,affording these creators and brands new revenue streams.Brands from Nike to Uniglo are already embracing NFTs and in-game assets in an attempt to capture younger generations and keep their businesses relevant.In fact,Amazon

73、 is planning to launch an NFT marketplace for its 167 million Prime users in the U.S.in 2023.It will be interesting to see how those figures increase if this development goes global.Trillions in Value:Tokenization of financial and real-world assets is en route.Moreover,almost anything of value can b

74、e tokenized from wine to financial assets to everything in between.Tokenization of financial and real-world assets could be the killer use case blockchain needs for breakthrough,especially for private market assets.Despite currently having a marginal market share(less than 0.1%in annual issuance as

75、of now),we project tokenization to grow by a factor of over 80 x in private markets and reach up to around$4 trillion in value by 2030.The significant benefits of tokenization,especially for private funds and securities,will likely drive demand-side uptake,leaving behind expensive reconciliations an

76、d settlement failures while embracing operational efficiencies,fractionalization,and accessibility to a wider range of market participants.Beyond private market tokenization,we expect$1 trillion of the repo,securities financing and collateral market could be tokenized by 2030.Later in the report,we

77、take a dive deep into tokenization for certain types of financial assets,including digital securities.We examine the main ingredients beyond the blockchain tech need to scale securities tokenization,namely an entirely digitized workflow,support from traditional finance(TradFi)layers,tech-neutral law

78、s,standardized taxonomy,interoperable platforms,and standards,to name just a few.As a standalone,tokenization may offer positives,but the benefits need to offset the integration costs of adding the new disruptive technology to the existing legacy stack and this is as much a coordination and culture

79、question as a tech one.In the world of financial services,trade finance and blockchain have had an uncomfortable relationship in recent times,with many projects ending up in the graveyard.But change may be underway:Encouraging regulatory developments designed to pave the way for trade documentation

80、to be digitized are solid first steps for blockchain deployment.The big inflection point for the digitization of trade finance is the upcoming UK legal reform that will make the acceptance of digital documents legal under common law a huge step for the global trade finance industry,as around 80%of g

81、lobal volumes are governed by English law.Technology Enablers:There is a long shopping list of technological specifications that blockchain must have ranging from transaction scale to strong user experience(UX)and user interface(UI)to reach billions of users,combined with four key technology drivers

82、 that will drive mainstream blockchain adoption:Decentralized Digital Identities:Give users power and control over their personal data,including how and by whom it is used.Digital identities form the backbone of any digital ecosystem and are the core building block to deliver the decentralization pr

83、omise enshrined in Web3.We estimate tokenization of financial and real-world assets can reach up to$5 trillion by 2030 The big inflection point for the digitization of trade finance is an upcoming UK legal reform,which will make the acceptance of digital documents acceptable under common law a solid

84、 first step for blockchain deployment Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 12 Zero-Knowledge Proofs:Preserve privacy while still being able to use the underlying data,which has been one of the major stumbling blocks for public blockchain adoption faced by large c

85、orporations.Zero-knowledge proofs provide an elegant solution that capitalize on the promise of blockchain without compromising on the confidentiality and privacy of information.Oracles:Bridge the world of blockchain to real-world data off-chain.They are the mega connector between these two worlds.B

86、lockchain will go nowhere without them.Secure Bridges:Offers a solution enabling users to move assets from one blockchain to another.As different blockchains are being built for different use cases on different chains,there is a need for these to interoperate and not be working in silos,to avoid fra

87、gmentation and limited adoption.Legal Enablers:The next wave of contracts(“Contracts 2.0)is underway with the development of smart legal contracts(SLCs).A smart legal contract is defined by the UK Law Commission as“a legally binding contract in which some or all of the contractual obligations are de

88、fined in and/or performed automatically by a computer program.”2 DLT brings unique benefits to the table compared to conventional web platforms,e.g.,longevity of decentralized ledgers that fit well with the nature of legal agreements;enhanced levels of security through the use of cryptography and ha

89、shing techniques;and the provision of a single source of truth through their consensus mechanism and tamper-proof nature.As such,DLTs would be the most favorable technology to underpin SLCs.Regulatory analysis spearheaded by the Law Commission in the UK and emerging regulatory development,which will

90、 recognize the digitization of trade documentation,have lowered the barriers to adoption.According to Aaron Powers,co-founder and CEO of Hunit,these contracts will provide a whole new set of rails for global commerce and finance to run on.There are multiple use cases ranging from property to service

91、 level agreements.However,we believe that given the nature of these contracts they are based on conditional logic,meaning that if X happens then Y follows they will be suited for more basic agreements.2 UK Law Commission,Smart Legal Contracts:Summary,November 25,2021.March 2023 Citi GPS:Citi GPS:Glo

92、bal Perspectives&Solutions 2023 Citigroup 13 Defining Blockchain,DLT,and Web3 Blockchains are a peer-to-peer network based on cryptography that creates a decentralized,immutable ledger that records information and transactions free from any central authority.Blockchains can be either public or priva

93、te.Distributed Ledger Technology(DLT)refers to a digital database held and updated by distributed network participants independently,without any central authority.Notably,while all blockchains are distributed ledgers,not all distributed ledgers are blockchains.Below,we summarize key differences betw

94、een blockchains and DLT:Figure 2.Distributed Ledger Technology vs.Blockchain Source:Blockchain Council,101 Blockchains,Citi GPS Web3,as it is often called,refers to the third iteration of the internet and is based on ownership and decentralization,which is facilitated via blockchain.Web3 decentraliz

95、ation could result in a more transparent environment and help address issues of ownership and control from the Web2 world.As we explain in this report,a key driver of Web3 and blockchain adoption will be Web2 consumer companies and established traditional financial institutions.We believe Web3 will

96、run in parallel with Web2 and in some cases will be nested inside it think of the Russian Matryoshka nesting dolls!Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 14 Figure 3.A Framework for the Evolution of the Internet:Web1 vs.Web2 vs.Web3 Source:ResearchGate,Wordpress,Ci

97、ti GPS Defining Tokenization?Tokenization refers to the creation of tokens,which are pieces of code on a blockchain,to record information about underlying assets and liabilities including their attributes or characteristics,status,transaction history,and ownership.Tokens enable the trade and transfe

98、r of ownership and titles of value directly via a digital ledger.At a high level,tokenized assets can be separated into two categories:Real-World Assets:These represent highly illiquid,bespoke assets such as real estate,art and collectibles,agriculture,climate assets,and intangible assets like carbo

99、n credits and intellectual property.Real-world assets could also include financial assets that are not traded frequently or easily,such as trade invoices,private loans,or mortgages,and are not usually categorized as“securities.”Financial Assets:These refer to the creation of tokens that represent ex

100、isting financial value such as money,stocks,bonds,commodities,and funds.(See The“Trillions in Value”section for a deep-dive analysis of this important topic.)In theory,almost anything with monetary value can be tokenized.3 In this report,we argue that among the best use cases of tokenization will be

101、 money(CBDCs)and private financial assets,especially illiquid ones,and over time,in-game assets.Sizing the Tokenization Opportunity According to a BCG and ADDX study,tokenization of global illiquid assets is estimated to be a$16 trillion business opportunity,or nearly 10%of global GDP by 2030.4 This

102、 includes$3 trillion in home equity,$4 trillion in listed/unlisted and other equity,$1 trillion in bonds and investment funds,$3 trillion in other financial assets,and$5 trillion in other tokenizable assets.3 Ravi Chamria,“Comprehensive Guide on Tokenized Real-World Assets,”Government Blockchain Ass

103、ociation,December 1,2022.4 Sumit Kumar et al.,“Relevance of On-Chain Asset Tokenization in Crypto Winter,”BCG x ADDX,August 2022.Tokenization refers to the creation of tokens,which are pieces of code on a blockchain,to record information about underlying assets,including their attributes or characte

104、ristics,status,transaction history,and ownership Tokenization of real-world assets unlocks a new way to monetize illiquid assets March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 15 The total addressable market for tokenization could,at least theoretically,be as high as the t

105、otal value of global assets,running into the hundreds of trillions of dollars.But do we really need everything to be on the blockchain?JOHN WU,PRESIDENT OF AVA LABS5 We believe the private/unlisted market is more suitable for blockchain adoption due to the resulting liquidity,transparency,and fracti

106、onalization.For public securities across sectors,tokenization will also provide other benefits in areas such as efficiency,collateral use,golden sources of data,and ESG tracking.We are very early in the process of these products growing but,based on conversations with internal and expert domain expe

107、rts,we forecast$4 trillion to$5 trillion of tokenized digital securities by 2030,assuming 1%of corporate and quasi-sovereign bonds,7.5%of real estate funds,and 10%of PE/VC funds and 2%of repo,securities financing and collateral markets are tokenized.Accompanying securities in tokenization will be th

108、e trade finance market,which could see up to$1 trillion of DLT-based volumes,or around 8%-10%of global trade finance volumes,by 2030.We will need the support of large financial institutions,which are increasingly focused on tokenization and the support of the law,where notable changes are taking pla

109、ce in areas such as English law,which governs most international trade finance.Why Tokenize Real-World Assets?Tokenization of real-world assets unlocks a new way to monetize illiquid assets.For example,a numismatist or philatelist can tokenize their rare collection of coins or stamps by fractionaliz

110、ing and sharing ownership of assets with buyers across the world and delivering custody of underlying assets to a museum for display and safekeeping.This could help them retain partial ownership and also unlock liquidity.Artists can also create videos on social media and sell NFTs representing right

111、s to use their videos for marketing and commercial activities,thereby generating yield on their intellectual property(IP)without giving a share to centralized platforms.Tokenization also unlocks new ways of financing infrastructural assets roads,heavy machinery,and public goods and opens new financi

112、ng avenues for small companies and small and medium enterprises(SMEs)through direct-to-retail decentralized finance(DeFi)channels.Tokenization offers possibilities for blockchain technology to solve traditional problems,such as lack of transparency,liquidity,and democratized access.Tokenization also

113、 helps improve the efficiency of holding real-world assets on investor balance sheets,by potentially reducing liquidity capital asks and easing the collateralization process.5 Citi Global Insights,“Bridging Banks and Blockchain:Avalanche Deep Dive,”webinar,October 19,2022.Citi GPS:Citi GPS:Global Pe

114、rspectives&Solutions March 2023 2023 Citigroup 16 Real Estate:Traditional real estate often struggles with poor transparency,illiquidity,and multiple intermediaries.Blockchain could be a good fit as a single,shared source of truth in a market with multiple players,all working with overlapping data a

115、nd the need for constant reconciliation.Tokenization could also help reduce minimum investment amounts and open up asset discovery.Art and Collectibles(e.g.,wine,cars,Pokemon cards,etc.):Tokenization of art and collectibles can help increase transparency,act as a proof of provenance,increase liquidi

116、ty,and offer decentralized ownership,including the ability to fractionalize the asset to a group of investors.We discuss this more in detail in the Art and Collectibles section.Unconventional Commodities:Commodities ranging from gold to agricultural products are increasingly being brought on-chain.A

117、griculture:Platforms like Agrotoken use Oracles and real-world proof of grain reserves to create stablecoins backed by commodities such as soy,corn,and wheat,offering new funding solutions.Climate-Focused Projects:Blockchains can help record and transfer carbon credits reliably between suppliers and

118、 those with demand while also reducing the entry threshold for carbon trading.Challenges Bringing Real World Assets On-Chain Common scalability hurdles for digital assets include a fragmented legal and regulatory landscape across different jurisdictions and a disunified taxonomy or classification st

119、andard at global scale.The tokenization of real-world assets may also encounter additional challenges,which we elaborate on below:Interoperability Issues:Having multiple blockchains can lead to interoperability problems while interacting with centralized backend systems outside blockchain ecosystems

120、,as well as across new architectures built on different chains.Lack of Experienced Custodians:There is a limited number of third parties with expertise in safe-keeping tokens and underlying real-world assets.Duplication and Unauthorized Tokenization:While information on public blockchain is publicly

121、 visible,there is a lack of surveillance and standard practice to slash duplicated or unauthorized tokens linked to underlying assets.Real-World Liquidity Risks:On-chain liquidity tends to be deeper than that in the real world,likely due to fractionalization and democratized market access.Elevated C

122、yber Risk:More technological development is needed to enable transparency on blockchain without revealing the actual information of borrowers and asset owners.The most widely used present solution for privacy are zero-knowledge proofs(ZKPs).Tokenization also creates additional risk related to theft

123、and loss of tokens due to cyberattacks on blockchains and digital wallets.Difficulty of Full Disintermediation:Internet-of-Things(IoT)technology and Oracle networks used for asset appraisal and status reporting of underlying real-world assets are still at a nascent stage and may take time to reach l

124、arge-scale commercialization.Until then,many crucial steps such as evaluation,accounting,and reporting may still rely on human expertise and manual labor just like traditional finance.A fragmented regulatory landscape and a lack of a unified taxonomy are major scalability hurdles for digital assets

125、March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 17 As the infrastructure supporting tokenization continues to develop and mature,we expect to see more blockchain-native assets,with their entire life cycle being managed and completed on-chain.Citi GPS:Citi GPS:Global Perspec

126、tives&Solutions March 2023 2023 Citigroup 18 A Conversation With Henri Arslanian on the ChatGPT Moment for Blockchain Q:Blockchain has been talked about for several years.What is holding it back?What is the ChatGPT moment for blockchain/Web3 adoption?Henri:We have seen a lot of discussions around bl

127、ockchain and distributed ledger technology since 2015.However,blockchains need to be seamlessly integrated into our daily activities for mass adoption.The technology needs to be easy to use for the common person,such that they do not even know when they are using it.For example,when we connect to Wi

128、Fi on our smartphones,we access the internet,without understanding the protocols and infrastructure operating behind the scenes.A similar integration is needed for blockchain and Web3 tools.We are not there yet.More recently,we are seeing interesting developments.For example,Coinbase launched an Eth

129、ereum layer 2 solution,called Base,which is designed to offer a developer-friendly platform for people to build decentralized applications(dApps)by accessing the front-end of the Coinbase interface,without actually knowing if they are dealing with DeFi,NFTs,or other layer 2 solutions.In my view,bloc

130、kchain offers tremendous benefits,with potential use cases spanning digital identity,digital proof of address,digital birth certificates,digital academic degrees,and digital land title deeds.Development of blockchain for any of the above use cases could lead to a significant boost in mainstream adop

131、tion.In the near term,I am most excited for the gaming sector.The gaming industry has over 3 billion users already.Today,several games operate in the Metaverse or a Metaverse-like ecosystem,where blockchain can be adopted for in-game purchases of new skins for avatars,weapons,real estate,or other ac

132、cessories.I see a lot of scope for synergies between the gaming and digital asset industries.Q:Which industries are likely to be most and least impacted by blockchain in the next 5-10 years?Henri:In my view,every industry is likely to be impacted by emerging trends in blockchain and digital assets.I

133、ndustries unable to quickly adapt to change,or ones with several intermediaries,are likely to be most impacted.Humans,by nature,adopt a protectionist approach when faced with radical change.A relatable example could be the early response from traditional taxi operators across major cities following

134、the introduction of Uber services.Today,we see a similar situation with law societies and legal bodies taking action against LawTech and RegTech startups.In my opinion,traditional legal services are often cumbersome,with large volumes of complicated documents requiring time and money.Startups are ex

135、ploring the use of AI,machine learning,and blockchain to make these services more accessible and easier to use for the general public.Embracing blockchain could help remove process inefficiencies.However,industry bodies are often looking to protect their members(e.g.,lawyers and notaries)against mak

136、ing access to justice more accessible.This is similar to how the taxi unions tried to ban and take action against Uber in its early days.Henri Arslanian is the co-founder and managing partner of Nine Blocks Capital Management,an institutional-grade hedge fund manager focused exclusively on digital a

137、ssets.Henri was previously a partner and global crypto leader at PwC.Henri is also the author of numerous best-selling crypto and fintech books,including The Book of Crypto(Palgrave,2022),which became a global top 10 bestseller in financial services,and The Future of Finance(Palgrave,2019),which bec

138、ame not only a global top 10 best-seller in financial services but was also recognized as one of the“Best FinTech Books of All Time”by BookAuthority.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 19 Looking at other industries,traditional auditing processes rely on a sampl

139、ing of transactions,as it is very difficult to review all transactions,especially in large companies.Accounting firms and standard setters can explore the use of blockchain,enabling continuous audits by putting transactions on-chain.Over the next 5-10 years,I see great potential for an autonomous fu

140、ture.We could have self-driving cars transport us from location A to B.The car I own could then self-drive other passengers when I am not using it and thus bring me a return on my investment.This example can be extended to other verticals as well.The car could be connected to the financial ecosystem

141、,where it periodically checks the best refinancing rates in the market.It could also help find the cheapest and most sustainable source of energy for charging.The list goes on.Most of these examples are of automation or AI,but for transactions to work,the backend systems need to be linked to some fo

142、rm of blockchain or DLT.Blockchain combined with AI can have tremendous synergetic benefits.Q:Can central bank-issued digital currencies(CBDCs)play a significant role in driving blockchain adoption in the years ahead?Henri:In my view,we are likely to see mainstream adoption and usage of CBDCs in the

143、 next few years,both for retail and wholesale use cases.The unfortunate events around the crypto collapses in 2022 and the ensuing concern and fears in the digital asset market are only likely to accelerate CBDC development.According to Bank of International Settlement(BIS)data,over 90%of the global

144、 central banks are exploring or running pilots and experiments for CBDC use.Countries such as the Bahamas and Nigeria have already launched their CBDCs,known as Sand Dollar and eNaira,respectively.Several other countries,like India,are running pilots.The e-CNY pilot in China has already scaled to se

145、veral hundred million users.CBDCs are likely to remain a political and societal debate in the foreseeable future.Proponents of CBDCs cite advantages such as reduction of corruption,which ordinarily occurs in paper-based money that is not easily traceable.Tax evasion prevention could be another benef

146、it,as CBDCs help eliminate the shadow economy.On the flip side,critics cite concerns over user privacy and the potential for excessive government controls.However,CBDCs are a key area to monitor,especially the progress in emerging and developing markets like India,China,and Africa.Q:How can we prote

147、ct ourselves in a digital world with deepfakes and skepticism?Can blockchain help build trust?Henri:Looking ahead,I see deepfakes and frauds continuing to grow in quantity and quality.The use of blockchain can help mitigate some concerns by establishing authenticity and provenance.Blockchain is also

148、 important for the content creator economy.Today,Web2 platforms own user-created content.This poses risks should the platform operator unilaterally decide to restrict or delete it.Web3 can help transfer ownership back to the users.Web3 can also help create a content-vetting mechanism,using the indep

149、endent users from its community model,to help detect fakes and frauds.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 20 Billions of Users Some of the key areas where blockchain-based products can make a significant impact on consumers will be in money,gaming,and social.In

150、this chapter,we discuss how blockchain is revolutionizing this space,why is it happening now,and how it could reach billions of users.First,let us look at digital programmable money(i.e.,central bank digital currencies CBDCs).There will likely be tokenized versions of major currencies such as the eu

151、ro(EUR),British pound(GBP),and Indian rupee(INR)in use during the 2020s,in addition to the Chinese renminbi(RMB),which has already been trialed for a couple of years.Together,these four jurisdictions constitute more than 50%of the global population and 35%of global bank deposits.We discussed CBDCs i

152、n detail in a previous Citi GPS report,titled Future of Money:Crypto,CBDCs,and 21st Century Cash.Since then,interest in CBDCs has only increased among policy makers.In recent months,we have had large country central banks announcing CBDC plans,including India and the EU.The technology choices are st

153、ill being ironed out,but distributed ledger technology(DLT)and blockchain options are being considered.About 20%of deposits are forecast to move to tokenized money formats.6 Hence,we think CBDCs overall could have 2 billion users and over$5 trillion of value in circulation of which about half could

154、be on a DLT-linked model.Gaming could potentially be one of the biggest segments for bottom-up Web3 consumer adoption.In 2022,over 1 million unique active wallets connected to game dApps daily in 2022.7 With the advent of improved Web3 games,especially from Asian studios in the next 1-2 years,we cou

155、ld see the most active gamers(nearly 100 million“whales”)move over to blockchain-based games.This could trigger a rush by mainstream gaming studios to incorporate blockchain and tokenization elements in their games.The emergence of Web3 and the growth of the creator economy empowers users to own the

156、ir content.And Web2 companies are getting in on the action with one social media forum onboarding millions of users into Web3 through their“collectible avatars”(NFTs).We believe new technologies like blockchain and NFTs can allow creators to build deeper relationships with their fans NEAL MOHAN,CEO

157、OF YOUTUBE8 6 Bank of England,“New Forms of Digital Money:Discussion Paper,”June 2021.7 Sara Gherghelas,“DappRadar x BGA Games Report 2022 Overview,”DappRadar,January 26,2023.8 Andre Beganski,“New YouTube CEO Is Bullish on Web3 Tech Like NFTs and the Metaverse,”Decrypt,February 20,2023.Nearly 2 bill

158、ion individuals from India,Europe,and the UK could use CBDCs,which may be partly DLT-linked by 2030 In the next 1-2 years,we could see 100 million gamers move to blockchain-based games March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 21 Consumer brands and fashion labels lik

159、e Adidas,Nike,Burberry,and Gucci are embracing NFTs and in-game assets in an attempt to be part of the next big cultural and marketing trend.In April 2023,Amazon plans to launch a NFT marketplace for its 167 million Prime users in the U.S.,and this initiative could go global thereafter.9 9 Michael B

160、odley,“Amazon NFTs Will Be Tied to Real-World Assets,Token Possible,”Blockworks,March 6,2023.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 22 Central Bank Digital Currencies(CBDCs)Key Takeaways on CBDCs 1.More Big Countries Catching Up:Initially,only a few smaller island

161、nations and Nigeria launched CBDCs and China was in advanced stages of researching and piloting a CBDC.Now,major countries in terms of economy,currency,and population size are warming up to the idea of CBDCs.For example,the central banks of India,the UK,and Europe have been making plans to launch CB

162、DCs(potentially DLT-linked)before the end of the decade.2.Billions of Users:Taking into account only Europe,India,and the UK,there are about 2 billion individuals and businesses that could be using some form of CBDC.Businesses in countries with multi-CBDC bridge arrangements would also use DLT-linke

163、d CBDCs,although their domestic CBDCs would be non-DLT-linked.3.Technology:Until now,only the smaller CBDC projects have been based on DLT.However,we can envision some major banks issuing DLT-based(or partially DLT-based)CBDCs and Indias retail CBDC could have some sort of DLT.Chinas participation i

164、n the mCBDC Bridge is based on a DLT.4.Money Mobilized:Central banks estimate up to 20%of deposits could transition to newer digital money formats.10 We could have$5 trillion of CBDCs circulating in major economies in the world in this decade,half of which could potentially be DLT-linked.CBDCs are i

165、ncreasingly relevant as a financial policy and plumbing question.Collectively,the EUR,GBP,and INR constitute around 15%of the worlds monetary base(i.e.,M0,which is currency in circulation and money being held by banks in reserves),or$15 trillion,and 22%of the global narrow money(i.e.,banknotes and c

166、oins,plus overnight deposits),at$71 trillion.Central banks estimate up to 20%of the deposits could transition to newer digital money formats.11 We could have$5 trillion of CBDCs circulating in major economies in the world in this decade,of which half could be DLT-linked.Besides individuals,millions

167、of businesses and importers/exporters will use bilateral or multi-CBDC(mCBDC)arrangements developed between different countries.For example,the mCBDC Bridge between China,Hong Kong,Thailand,and the UAE uses DLT and is piloting different use cases,starting with cross-border foreign exchange(FX)trade

168、settlement(discussed in detail in the“Trade Finance”section).Interest in CBDCs continues to increase among policymakers.Central banks accelerating interest has been driven by the announcement of a private sector stablecoin,Libra,led by Meta(then Facebook);China being in advanced stages of work on an

169、 e-RMB(or e-CNY);the growth of digital finance in general,and the acceleration of this mega-trend during the COVID-19 pandemic.10 Bank of England,“New Forms of Digital Money:Discussion Paper,”June 2021.11 Ibid.Until now,only smaller CBDC projects have been based on DLT;however,in the coming years,we

170、 could see some major central bank CBDC(or parts of it)based on DLT India,the UK,and Europe are all planning to launch CBDCs potentially DLT-linked during the 2020s March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 23 Figure 4.Positive and Negative Stance of Central Banks on

171、CBDCs(Number of Speeches)Note:Search on“CBDC,”“digital currency,”and“digital money.”Classification based on authors judgement.Score takes value of-1 if speech stance clearly negative or if explicitly said there was no specific plan at present to issue digital currencies.Value of+1 if speech stance c

172、learly positive or project/pilot launched/in pipeline.Other speeches(not displayed)have been classified as neutral.The material is available on the BIS website free of charge:www.bis.org.Source:Citi GPS,BIS Working Paper Rise of the Central Bank Digital Currencies:Drives,Approaches,and Technologies

173、Growth of CBDCs during the 2020s will have implications for:Domestic Payment Systems:CBDCs could be competition for existing payment rails.Digital Wallets:State-backed digital tokens could spur growth of digital wallets.Bank Balance Sheets:Partial replacement of deposits,reserve requirements.Cross-B

174、order Flows in CBDCs:CBDCs could partially replace correspondent banking.Sovereign Competition:Will currencies with a tokenized version be used more?Technology:Many of the CBDC projects are partially DLT-linked.We discuss these points in greater detail in the rest of this chapter.Why CBDCs?A survey

175、on CBDCs by the Bank for International Settlements(BIS)suggests emerging markets and developing economies(EMDEs)report a higher motivation for issuing CBDCs versus advanced economies.Financial inclusion and domestic payment efficiency remain top motivators for CBDC development amongst EMDEs.12 12 An

176、neke Kosse and Ilaria Mattei,BIS Papers No 125:Gaining Momentum Results of the 2021 BIS Survey on Central Bank Digital Currencies,Bank for International Settlements,May 2022.CBDCs are increasingly important in financial and monetary policy questions and could also work as an efficient tool to mobili

177、ze bank reserves Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 24 Private forms of digital money often create closed loops wherein users are not able to transact with other users or merchants outside of the system.Moreover,convertibility to different forms of money is als

178、o restricted.A CBDC accepted nationwide would act as an interoperable payment instrument.Another use case,not much discussed,is to act as a tool for bank reserves and balance sheet management.UK banks hold around 947 billion($1.2 trillion)worth of reserves with the Bank of England,while the minimum

179、quantity of reserves needed by UK banks may be around 325 billion to 480 billion.13 CBDCs could work as a replacement of these reserves.Bank reserves held at the central bank are not transferable,and hence not fungible.However,central bank-issued money,including a CBDC,is fungible.If CBDCs are treat

180、ed as high quality liquid assets,banks can use them as collateral to borrow(repo).CBDCs could be seen as a balance sheet and liquidity management tool for central banks and commercial banks.Work around researching and launching CBDCs has partly accelerated in response to the launch of a private stab

181、lecoin.However,ironically,the successful launch and adoption of CBDCs would lead to more stablecoin projects becoming mainstream.This is because the stablecoin protocol is now able to hold reserves in CBDCs,which are more stable and liquid than money market instruments.What Are CBDCs?A CBDC is centr

182、al bank-issued digital money denominated in the national unit of account,and represents a liability of the central bank.14 It is the liability of a central bank that is the key distinguishing feature between other forms of digital payment instruments(e.g.,card payment,e-money,credit transfer)which a

183、re liabilities of private institutions.The money flower(Figure 5)was first published by BIS in 2017,which makes it quite old,but still classic and relevant as it captures examples of money from the past,present,and future.15 BIS distinguishes between two possible forms of CBDCs:(1)a widely available

184、,consumer-facing payment instrument targeted at retail transactions and(2)a restricted-access,digital settlement token for wholesale payment applications.13 Bank of England,“What Do We Know About the Demand for Bank of England Reserves?,”February 2023.14 Anneke Kosse and Ilaria Mattei,BIS Papers No

185、125:Gaining Momentum Results of the 2021 BIS Survey on Central Bank Digital Currencies,Bank for International Settlements,May 2022.15 Morten Bech and Rodney Garratt,Central Bank Cryptocurrencies,BIS Quarterly Review,September 2017.CBDCs are central bank-issued digital money denominated in the nation

186、al unit of account and representing a liability of the central bank March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 25 Figure 5.Money Flower:A Taxonomy of Money Source:BIS Quarterly Review Central Bank Cryptocurrencies.Material available freely at www.bis.org In terms of ve

187、rification of payment,both token-based CBDCs and account-based CBDCs are possible.In payment economics,the way of verification distinguishes two kinds of payment systems:tokenized and account-based.Token-based CBDC:Coin,notes,and electronic stored value are examples of the tokenized system.In a toke

188、n-based CBDC,claims are honored based on demonstrated knowledge,e.g.,digital signature.However,KYC-ed wallets,i.e.,wallets verified for“know your customer”rules,can also be used.Token-based CBDC are also called value-based CBDC.Account-based CBDC:An intermediary verifies the account holders identity

189、 for transactions,e.g.,banking account and cards.In an account-based CBDC,ownership is tied to an identity and transactions are authorized via identification.Figure 6.Account-Based Access vs.Token-Based Access Source:BIS speech titled Digital Currencies and the Future of the Monetary System.Material

190、 available freely at www.bis.org.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 26 To DLT or Not to DLT?That Is the CBDC Question Many of the smaller-currency CBDCs are DLT-linked(see Figure 7).We expect some major CBDCs,in full or in part,could also be blockchain-based al

191、though the major sovereigns appear to want to primarily rely on a centralized ledger due to policy preferences(e.g.,China).The domestic implementation of many of the major CBDCs is expected to be on a centralized ledger,mainly due to policy preferences and efficiency gains at scale.We expect cross-b

192、order CBDCs could be primarily DLT-or blockchain-based,for the sake of ease and because it could bring down the cost and time of foreign exchange transfers,thereby creating operational efficiencies.It could also disintermediate layers of correspondent banking and lead the race of superior currency t

193、echnology.For example,Project Icebreaker is a collaboration between the Bank of Israel,Norges Bank,Sveriges Riksbank,and the BIS Innovation Hub that is testing the technical feasibility of conducting cross-border and cross-currency transactions between different DLT-linked CBDC proofs of concept.The

194、 aim is to gain a deeper understanding of the technologies used,as well as to identify the key technical and policy choices and trade-offs that central banks would need to consider in designing CBDC implementations that facilitate cross-border payments.China is currently well ahead of major peers in

195、 developing a CBDC(referred to as e-RMB,e-CNY,or Digital Currency Electronic Payment or DCEP)and is already at the point of extensive pilot testing.Given the countrys sprint to becoming a cashless society,we expect fast adoption of DCEP over the next five years relative to other CBDCs.The e-RMB does

196、 not have a fixed path on its technical route.The central bank has initiated a“horse racing”model where several designated operators have adopted different technical routes for developing DCEP.We believe the core ledger will remain a centralized one with DLT options possible at the distribution laye

197、r.We expect some major CBDCs to be blockchain-based,either in full or in part March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 27 Figure 7.Select Central Banks CBDC Projects Country/Region Announcement Year Status Retail/Wholesale Technology DLT/Non-DLT Australia 2022 Resear

198、ch Wholesale Ethereum DLT Australia 2021 Research Retail Ethereum DLT Bahamas 2022 Launched Retail NZIA Cortex DLT DLT Bhutan 2021 Research Retail,Wholesale XRP Ledger DLT*Brazil 2022 Proof of concept Retail DLT Canada 2016 Pilot Wholesale R3 Corda DLT Canada 2017 Research Wholesale Non-DLT*China 20

199、22 Pilot Retail Non-DLT Eswatini 2022 Research Retail Filia Non-DLT Euro Area 2020 Research Retail,Wholesale Non-DLT*France 2022 Pilot Wholesale DL3S DLT France 2022 Pilot Wholesale DL3S DLT Hong Kong 2021 Research Retail DLT*mBridge 2022 Research Retail DLT India 2022 Pilot Retail DLT India 2022 Pi

200、lot Wholesale Non-DLT*Jamaica 2022 Launched Retail DSC Non-DLT Japan 2021 Proof of concept Retail Non-DLT*Japan 2016 Research Other DLT Nigeria 2022 Pilot Retail Hyperledger Fabric DLT Norway 2022 Proof of concept Retail Ethereum,Hyperledger Besu DLT Saudi Arabia 2022 Research CBDC DLT*Singapore 202

201、2 Pilot Wholesale DLT*South Africa 2022 Research Wholesale Quorum DLT South Korea 2022 Proof of concept Retail Non-DLT*Sweden 2017 Proof of concept Retail DLT United Arab Emirates 2022 Research Retail DLT*United Kingdom 2022 Research Retail Non-DLT*U.S.Fed CBDC 2022 Research Wholesale Non-DLT*Denote

202、s Citi estimates.Source:Citi GPS,CBDC Tracker Risks and Implications of a CBDC Out of the 100+central banks involved in CBDC research,development,and piloting,only three central banks have officially launched CBDCs:Nigeria,the Bahamas,and Jamaica.Others are in pilot stage,most significantly China,In

203、dia,Japan,and the UAE.China was the first large economy to pilot a CBDC in April 2020.However,the results from these live CBDC projects and the pilots are quite unimpressive.The risks and implications of CBDCs include:Central Banks Competing with Private Players:CBDCs could potentially increase comp

204、etition in a countrys payments sector either directly by competing with existing forms of payments,or indirectly by competing with private payment and digital wallet players if the CBDC is designed as a platform open to private payment providers.Citi GPS:Citi GPS:Global Perspectives&Solutions March

205、2023 2023 Citigroup 28 Loss of Privacy:Risk of excess surveillance and loss of privacy of private citizens transactions are often cited as a risk and a hindrance for uptake of a central bank digital currency.CBDC transactions will not be anonymous,unlike traditional cash transactions.16 For example,

206、Nigerias digital currency faced criticism citing potential surveillance and curbs on freedom.17 Ways to address such fear could include making data visible only to the financial intermediaries,such as banks and third-party payment companies,and not automatically to the central banks.Loss of Bank Dep

207、osits:The Bank of England(BoE)estimated 20%of household and corporate bank deposits may flee from banks to new forms of money.18 As a result,banks may replace the lost deposit money with wholesale funding that is costlier than customer deposits.The higher cost will have to be passed on to the borrow

208、ers through increased lending rates.Disintermediation of banks could also affect efficient monetary policy transmission.Notably,the European Central Bank(ECB)is considering a cap of 3,000 for holding digital euros,and the Bank of England is considering a cap of 10,000-20,000 for digital pounds.19 Li

209、mited Uptake:In the Bahamas,the per capita value of CBDCs is just 86 cents compared with the per capita cash value of$1,365.Less than 0.5%of Nigerians are using the eNaira.Outstanding e-RMB is at only$2 billion or 0.13%of outstanding monetary base,or M0 and 0.005%of M2,as of December 2022.Reasons fo

210、r the slow update range from inertia and complexity to a lack of digital literacy.Case Studies Case Study 1:Digital Euro The ECB is working with euro area national banks on the subject of introducing a digital euro.The investigation phase started in October 2021 and is expected to take nearly two ye

211、ars.The ECB is exploring how a digital euro can be designed and distributed,as well as its impact on the market.After the third quarter of 2023,it will take another three years of building to go live,so the earliest launch of the digital euro will be 2026 or beyond.Why is the ECB looking into launch

212、ing a digital euro?According to the ECB,it is considering launching a CBDC in Europe to respond to the increasing demand for safe and trusted electronic payments.Having digital money issued by the central bank would provide an anchor of stability for the payment and monetary systems.A digital euro w

213、ould also strengthen the monetary sovereignty of the euro area and foster competition and efficiency in the European payment sector.16 Bank of England and HM Treasury,The Digital Pound:A New Form of Money for Households and Businesses,February 7,2023.17 Abubakur Nur Khali,“Nigerian Election and Nair

214、a Crisis is Fueling Bitcoin Adoption,”Forbes,March 1,2023.18 Bank of England,“New Forms of Digital Money:Discussion Paper,”June 2021.19 Lorenzo Burlon et al.,Working Paper Series:The Optimal Quantity of CBDC in a Bank-Based Economy,No.2689,European Central Bank(ECB),July 2022;Bank of England and HM

215、Treasury,The Digital Pound:A New Form of Money for Households and Businesses,February 7,2023.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 29 A progress report,released in December 2022,outlined a set of design and distribution options and the role of the Eurosystem and i

216、ntermediaries.20 The ECB is still in the investigative stages regarding what technology it will use for issuing and settling a digital euro.Funding and defunding functionalities would enable the end user to top up or withdraw digital euro holdings by transferring money in or out of private money or

217、cash.Furthermore,waterfall and reverse waterfall functionality will be an added feature that can be activated at user discretion this means pushing funds from the digital euro wallet in excess of the threshold limit to a linked private account at the time of receiving a payment,and vice versa.Subseq

218、uent progress reports will assess further functionalities such as programmable payments,cross-currency payments,and additional distribution models.Case Study 2:Digital Pound The Bank of England and HM Treasury published a digital pound consultation paper in February 2023 arguing it is likely that a

219、retail,general purpose digital central bank currency i.e.,a digital pound will be needed in the UK.This would be a new,digital form of money,issued by the BoE for use by households and businesses for everyday payment.21 The central banks motivation and drivers for a CBDC include geopolitical concern

220、s,a decline in cash usage,developments in the digitization of money from non-bank players,and improving cross-border payments.The BoE is in the initial exploration stage,and the work over the next 2-3 years will inform its decision and reduce the lead time to launch should the decision at the end of

221、 this stage be to implement the digital pound.The digital currency could then be introduced in the second half of the decade.22 Over the past decade and half,cash transactions in the UK have fallen from 62%in 2006 to 15%in 2021.23 The cost of accepting card payments for the smallest merchants is fou

222、r times higher than for the largest merchants.Innovation in public money,toward a a digital format of cash,can likely reduce payment costs and improve efficiency in payments.The technological functionalities emerging in money and payments,such as decentralized finance,blockchain,and smart contracts,

223、are outside the traditional financial sector and could be applicable in the design of a digital pound.A digital pound risks disintermediation of the banking sector and will have an influence on financial intermediaries balance sheets,income statements,business models,and services.While holding limit

224、s can act as a mitigant,there may be additional risks should the limits be higher than anticipated.During the introductory period,an individual limit of 10,000-20,000 may be imposed.20 ECB,Progress on the Investigation Phase of a Digital Euro:Second Report,December 21,2022.21 Bank of England and HM

225、Treasury,The Digital Pound:A New Form of Money for Households and Businesses,February 7,2023.22 Ibid.23 UK Finance,UK Payments Markets Summary 2022,August 2022.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 30 The proposed digital pound is based on a platform model where t

226、he central bank would issue the digital pounds recorded on the core ledger.The platform model would be technology-agnostic meaning the central bank could issue a digital pound on a centralized database or through distributed ledger technology.24 UK policymakers say a digital pound could complement a

227、nd support new forms of private digital money and payment services if designed appropriately,e.g.,by acting as the“bridging asset”between different platforms enabling convertibility.The ledger will allow private sector players to connect to the core ledger via Application Programming Interfaces(APIs

228、).The private sector would provide a wallet interface where users can interact.While the consultation paper is focused primarily on a retail CBDC,for the BoE this is not a question of simply retail or wholesale.They are working extensively on both areas,including through the renewal of Real Time Gro

229、ss Settlement(RTGS),but they are also investigating other models.This rhetoric shows a shift from the notion that the BoE is not looking at wholesale CBDCs.Case Study 3:Digital Rupee The Reserve Bank of India(RBI)has launched CBDC pilots in both wholesale and retail segments.The pilot in the wholesa

230、le segment was launched in November 2022,with use cases limited to the settlement of secondary market transactions in government securities.Potentially,some layers of the CBDC tech stack could be on a centralized system with others remaining on distributed networks.The pilot in the retail segment wa

231、s launched in December 2022 within a closed user group(CUG)comprised of participating customers and merchants.This pilot has components based on blockchain technology.Given the success of the United Payments Interface(UPI),Indias highly regarded digital payments scheme,why is a CBDC needed?Backing:A

232、 CBDC is backed by Indias central bank the RBI while UPI is backed by several commercial banks.Moreover,UPI settlements are accomplished through central bank money.Better Settlement and Finality:Unlike UPI or other digital payments,CBDC will move from the payers wallet to the receivers wallet withou

233、t any intermediation of banks.This reduces settlement risk in the financial system and enables finality.As of January 2023,some major banks had technical decline rates(transaction failures)of around 2%.25 Anonymity and Privacy:Digital currency will not leave a digital footprint,and no third party ca

234、n find transaction details(buyer and sender names,transaction values,etc.)as the information is not available from any bank or intermediary.24 Government of India Press Information Bureau,“Central Bank Digital Currency(CBDC)Pilot Launched by RBI in Retail Segment Has Components Based on Blockchain T

235、echnology,”December 2022.25 NPCI,“UPI Ecosystem Statistics:January 2023,”accessed March 21,2023.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 31 Cost Considerations:Reserve banks and commercial banks incur costs of INR 210 billion($2.5 billion)annually in handling physica

236、l currency and INR 126 billion for settling UPI transactions(assuming 0.1%blended merchant discount rate,or MDR).26 Extend Use to Cross-Border Payments:The initial focus of the digital rupee is on domestic payments,but once scaled it can be used for cross-border payments.This can help with remittanc

237、es and provide strategic sovereign flexibility.Case Study 4:Digital Dollar There are three U.S.CBDC or tokenized dollar projects:(1)the Digital Dollar Project(DDP),(2)Project Hamilton by the Federal Reserve Bank of Boston and MITs Digital Currency Initiative,and(3)CBDC-related exploration at the Fed

238、eral Reserve Board(FRB).27 The DDP is a non-profit,non-governmental organization devoted to catalyzing the research,exploration,and real-world experimentation of a potential digital dollar.Its initial May 2020 whitepaper proposed a model of a potential digital dollar for public consideration to test

239、 and evaluate through a series of pilots and other research initiatives.28 In November 2022,the DDP completed its first private sector-initiated,simulated,U.S.CBDC pilot in partnership with the Depository Trust and Clearing Corporation(DTCC)and with technical support from Accenture.29 The core tenet

240、s of DDPs model are:(1)tokenized architecture,(2)being complementary to cash and digital money,(3)distribution via commercial banks,(4)user privacy,(5)monetary policy neutrality,and(6)promotion of private sector participation and innovation.The two-phased Project Hamilton involved researching the te

241、chnical aspects of a U.S.dollar CBDC and creating a design for a modular,extensible transaction processing system.In February 2022,the project released some open-source research software,one of which was blockchain-based and the other of which was non-blockchain-based.The project concluded in Decemb

242、er 2022.The FRB has made no decisions on whether to pursue or implement a CBDC.Instead,it is just the exploring potential benefits and risks of CBDCs through technological research and experimentation.30 In parallel with the above mentioned CBDC projects,the Regulated Liability Network(RLN)was launc

243、hed in November 2022 as a 12-week proof of concept with members of the U.S banking and payments community,and the New York Innovation Center,which is part of the Federal Reserve Bank of New York.26 Tufts University Fletcher School Institute for Business in the Global Context,The Cost of Cash in Indi

244、a,June 2020;Reserve Bank of India Department of Payment and Settlement Systems,Discussion Paper on Charges in Payment Systems,October 3,2022.The source cites a 0.25%cost for P2M UPI transaction.We assume blended 0.1%for all transactions.27 Digital Dollar Project,White Paper 2.0:Revisiting the Digita

245、l Dollar Projects Exploration of a U.S.Central Bank Digital Currency,January 2023.28 Digital Dollar Project,Exploring a US CBDC,May 2020.29 DTCC,Digital Dollar Project and DTCC:Security Settlement Pilot,November 2022.30 Board of Governors of the Federal Reserve System,Money and Payments:The U.S.Doll

246、ar in the Age of Digital Transformation,January 2022.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 32 The pilot explores the feasibility of an interoperable network of digital central bank liabilities and commercial bank digital money using distributed ledger technology.T

247、he RLN is an important step in the development of an always-on,programmable,multi-asset financial system.As of March 2023,the pilot is being conducted in a test environment using simulated data,and a report summarizing the fIndings will be released in 2023.In February 2023,Congressman Tom Emmer prop

248、osed a bill aimed at limiting the Feds ability to issue a CBDC.This could slow the progress on a digital dollar.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 33 A Conversation With Jessica Renier on CBDCs Q:Why are central banks more in action with CBDCs now compared to f

249、ive years ago?Jessica:Many central banks around the world are doing research with the primary goal of buying themselves optionality.This is optionality to launch a CBDC retail or wholesale should they determine it advantageous to do so,which they have not yet determined.China,which is,and has been a

250、head here for some years in CBDC development,is quite certain.However,it is more recent activity by a major western economy,specifically Europe,that is motivating greater interest in having the optionality to launch if enough use cases are met,enough risks can be managed,and enough jurisdictions mov

251、e forward with them.There are geopolitical implications under consideration,not just economic.The rise of interest and activity in cryptoassets and stablecoins over the last five years has put more pressure on central banks to innovate and on governments to evaluate national security implications of

252、 technological advances in payments technology.In last few years,work on CBDCs has gone from internal conversations and desk research to consultative reports to gather public and private inputs on potential risks and benefits,to examining design features and digital wallet thresholds,to central bank

253、s building and testing proofs of concept.We are still far from real due diligence,however,on any of the risks or potential designs in practice.Agustn Carstens,General Manager of the Bank for International Settlements(BIS)in his speech on February 22,2023 at the Monetary Authority of Singapore(MAS)st

254、ated that CBDCs and tokenized deposits replicate existing forms of money in a technologically superior way,while preserving what he has previously referred to as the“the soul of money.”The speech goes on to highlight BIS forward thinking on wholesale as well as retail CBDCs,again,putting this in the

255、 context of tokenized deposits being a critical component of the future of a technologically superior financial system.Q:Given that some smaller CBDC projects have been blockchain/DLT-linked,what will be the tech stack for major currencies like GBP,EUR,USD,and INR be?Jessica:Several economies are pu

256、rsuing sovereign digital currencies,all referred to as CBDCs,and yet they look very different from each other from a technology standpoint.If central banks do proceed,I do not see consensus yet on the best way to build one and I am not certain a consensus will be reached on the technical level.Diffe

257、rent countries have different reasons for pursuing a CBDC,whether they be related to the status of their existing infrastructure,types of payments and volume of funds that flow through their currency,differences in privacy policies,or differences in the ability of a given country to support the main

258、tenance and security of such a system.There has been and continues to be much excitement and belief that blockchain technology could solve a range of problems or bring efficiencies to processes that would benefit from being made technologically superior.I have no doubt that it will.That said,we are

259、seeing the normal arc of innovation here,too.Investors get excited about a new or emerging technology,they test many hypotheses for its use,and then determine which realize value and which do not.Jessica Renier is Managing Director and Head of Digital Finance at the Institute of International Financ

260、e.Jessica has an extensive background in financial services and digital finance,with broad exposure to international policy,including positions at the U.S.Department of the Treasury,Deloitte Consulting,Federal Reserve Banks of New York and Dallas,J.P.Morgan Securities and the Hoover Institution.Most

261、 recently,Jessica served as Program Associate Director for the Housing,Treasury,and Commerce Departments,as well as the Small Business Administration,within the White Houses Office of Management and Budget.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 34 There are many us

262、e cases where blockchain will not be a good fit,and that is to be expected.It is very possible that countries find during their CBDC research that the objectives that their jurisdiction may be looking to achieve are not actually served by a blockchain or particular DLT-linked solution.Q:Is the Unite

263、d States being left behind in the race to CBDCs?What are the implications of wholesale CBDCs on the U.S.dollar?Jessica:I do not think the U.S.is being left behind on the CBDC front.In the arc of innovation,some people always want to be out of the gate first and others take a bit more time to evaluat

264、e the use cases and technology to assess the fit while observing early lessons learned by those who are first out of the gate.There are still others who will take their time,watch it for a little longer,think more about it,evaluate the pros and cons more extensively,and then scale more quickly if an

265、d when they decide to proceed.Not everyone is positioned to do this.Some do not have the same capabilities or market dynamics to contend with as others,which typically drive this type of decision.We often hear the mantra in entrepreneurial circles“innovate fast and fail fast.”By doing this,you avoid

266、 dragging out or exacerbating the downside of the failure and get busy implementing important lessons that were learned that may allow you to succeed the next time.However,CBDCs are sovereign currencies.A sovereign currency cannot afford to fail.It is not one of many digital assets or cryptocurrenci

267、es whose value can be wiped out without severe systemic impacts.The U.S.dollar is the worlds reserve currency and clearly does not have the option to fail,but it does have the ability to scale quickly.Being first is less important for some than for others.I do not think the U.S.is behind by accident

268、.The U.S.is exactly where it intends to be.That said,it is understandable that other countries may want to develop CBDCs on a faster timeline.There are potentially significant geopolitical implications in the case of new wholesale CBDC systems that may reduce some dependence on the U.S.dollar in the

269、 execution of world trade where most invoices are denominated in dollars.Irrespective of whether the U.S.ultimately launches a CBDC,U.S.entities such as the Digital Dollar Project and MITs Digital Currency Initiative,among others,are advancing leading research,conducting pilots,and catalyzing public

270、 discussion around appropriate principles for CBDCs principles that are already and will,no doubt,continue to influence the thinking of both U.S.authorities and other countries pursuing CBDCs.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 35 Gaming Five Key Takeaways on Ga

271、ming and Web3 We spoke with Ryan Wyatt,President of Polygon Labs,on the future of gaming in the Web3 world.We feature our full conversation further into the report;below are five key takeaways from our discussion.1.Gamers Do Not Care About Technology and Innovation:Gamers do not typically care about

272、 the underlying technology powering their favorite games.For example,how often have you sought to understand the benefits of cloud computing and what it means for gaming?Do you determine which particular multi-player game to play based on whether it is hosted on Amazon Web Services or Google Cloud?T

273、he moment gamers have a Web3 equivalent of their existing game(s),they will likely switch as Web3 games can enable earning while playing their(new)favorite game.2.Challenges with Play-to-Earn Games:Ryan expresses his view that the economics in play-to-earn games are often complex,while the gameplay

274、tends to be rudimentary and not much fun.Furthermore,content was missing in the first generation of Web3 games,so gamers did not cling onto a game and make it a big hit.However,a few interesting concepts emerged from the play-to-earn model,such as the idea to reward users for participating in games,

275、which can offer several interesting use cases.3.Power of Web3 and Blockchain in Gaming:Games like Minecraft and Roblox already offer elements of ownership via mini-games,mods,and cosmetic items.However,one can imagine the power of putting these elements on-chain,improving visibility and portability,

276、and allowing gamers to sell items or trade them with friends inside or outside the game.4.East vs.West in Game Development:New gaming models(e.g.,mobile or free-to-play)often originate from countries in the Eastern hemisphere.Countries such as South Korea,followed by Japan,are among the hotbeds of g

277、aming innovation.By contrast,gaming studios in the Western hemisphere tend to be late adopters but help drive mass adoption.5.Inflection Point:With over 3 billion gamers worldwide today,we are likely to see nearly 50 million to 100 million adopt games with some element of Web3 or blockchain by 2025.

278、Gamers in Asia are likely to be the early adopters.However,it is useful to focus on the revenues and not the user numbers a small fraction of global gamers account for the lions share of money spent on games.We are likely to see a significant shift in transaction spends from off-chain to on-chain in

279、 the coming years.The disproportionate shift by heavy spenders to blockchain-based games is likely to be the inflection point for the entire ecosystem to incorporate token-and blockchain-based games.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 36 Gaming is the largest ca

280、tegory in the entertainment industry,with revenues exceeding those of the film and music industries.31 The gaming market is sizeable,with nearly 3.2 billion gamers as of 2022,based on data from Newzoo(see Figure 9).32 Even if blockchain-based games are adopted by only a fraction of the total gaming

281、community,this could translate to significant adoption numbers in the blockchain and Web3 ecosystem.In our view,the gaming industry is intrinsically suited for blockchain.Gamers are tech-savvy,with most already having a good understanding of digital ownership and virtual assets.The emergence of Web3

282、 and the rise of new economic models,such as play-to-earn,aim to empower gamers with ownership of their in-game assets.These digital assets can range from cryptocurrencies to in-game resources that are tokenized on the blockchain.But this has not really worked well so far.Up to now,blockchain-based

283、games are often developed by crypto-native folks with a greater focus on in-game tokens and monetization,versus the need to make games fun and exciting.Hardcore gamers often criticize the shallower and simpler gameplay in blockchain-based games.Some gamers also worry NFTs and in-game tokens could be

284、 yet another tool to extract more money from gamers.Out of the huge number of people who play games online,only a relatively small number need to participate in blockchain-based games for them to be a success.RYAN WYATT,PRESIDENT,POLYGON LABS33 The next generation of game developers is already worki

285、ng to incorporate digital asset components into fun games.This should help address the gaming community concerns and drive adoption rates.For example,the recently concluded Dookey Dash competition by Yuga Labs delivered a fun gaming experience for the Bored Ape Yacht Club community,attracting partic

286、ipation from all over the world and demonstrating the growing importance of NFTs in gaming.We believe the next iteration of blockchain-based games will include digital asset elements with other models beyond play-to-earn games.Regular pay-to-play or free-to-play games will include blockchain element

287、s,possibly even without the gamers explicit awareness.31 Ryan Parreno,“Gaming Is Five Times Bigger Than Movies Now,”Gameranx,December 13,2022.32 Newzoo,Global Games Market Report 2022,July 2022.33 Richard Waters et al.,“Will the Crypto Crash Derail the Next Web Revolution?,”Financial Times,July 6,20

288、22.The gaming industry is intrinsically well-suited for blockchain,with gamers broadly having a good understanding of digital ownership and virtual assets March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 37 Figure 8.Different Economic Models for Gaming Source:Citi GPS Increa

289、sing Demand for Digital Experiences The number of gamers worldwide grew from 2.7 billion in 2019 to 3.2 billion in 2022(Figure 9).Two years of pandemic-and lockdown-fueled growth have likely helped 2020 and 2021 see a noticeable jump in number of gamers,including new and lapsed players.34 Figure 9.G

290、lobal Number of Gamers Source:Newzoo()According to data from Newzoo,the global games market was forecast to generate$184 billion in 2022.By region,Asia accounts for nearly half of the global revenue pie;followed by North America,with 26%;and Europe,18%.35 The buzz around the metaverse,especially in

291、late 2021 and early 2022,has amplified the transition to the virtual world.The gaming industry has played a fundamental role in shaping the Metaverse,with games like Roblox and Fortnite boasting hundreds of millions of users and offering users goals and objectives to achieve in a virtual gaming envi

292、ronment.34 Newzoo,Global Games Market Report,July 2022.35 Ibid.There were over 3.2 billion gamers worldwide as of 2022 Gaming has played a crucial role in shaping the Metaverse and Web3 ecosystem,with games like Roblox and Fortnite boasting millions of users Citi GPS:Citi GPS:Global Perspectives&Sol

293、utions March 2023 2023 Citigroup 38 A Conversation With Ryan Wyatt on Gaming and Web3 Q:Why do we need blockchain-based games?How early are we likely to see new releases?Ryan:An increasing number of gamers who buy in-game assets and merchandise want the ability to sell or trade it,much like they can

294、 with physical items in the real world.But end-gamers do not care about the underlying technology;they only want to play an exciting game,not understand the benefits of cloud computing for gaming or inquire if the game is hosted on Amazon Web Services or Google Cloud.In my view,having a public distr

295、ibuted ledger that is visible for the entire ecosystem is enough to justify the product-market fit of building an in-game marketplace.While blockchain-based games are a distinct category today,I expect all games to leverage blockchain as the underlying infrastructure in the coming years.Game develop

296、ment often follows a four-to five-year cycle,and we could see new games leveraging on-chain elements using Unreal Engine as early as the second half of 2023 or the beginning of 2024.Q:Why have early blockchain-based games and the play-to-earn model not been very successful?Ryan:I have never been ver

297、y interested in the play-to-earn gaming model,as the model does not fundamentally work from a tokenomics perspective.The economics of play-to-earn games are often structured in a complex manner.Most games also tend to be very rudimentary and not much fun to play.This has led to pushback from the gam

298、ing community.However,a few interesting concepts emerge from the play-to-earn model.For example,the idea of rewarding users for participating in games can offer several interesting use cases.Q:Several games today already include elements of ownership.Why do we still need blockchain for ownership?Rya

299、n:Games such as Minecraft or Roblox already offer elements of ownership,whereby gamers can spend money to buy different components such as mini-games,mods,and cosmetic items.Gamers are responding positively to this but wait until you give them more power and ownership over their in-game assets.They

300、are likely to be even more engaged.Imagine if you put in-game assets on-chain today;gamers could now start to sell these assets or trade them with friends.Innovation in game development is seldom driven by customers telling developers what the latter should build.Consumers did not ask developers for

301、 cloud gaming,multi-player games,mobile games,or play-to-earn games,and they certainly are not going to ask for blockchain-based games.In-game assets on-chain is likely to be net positive for everyone in the ecosystem and help create a free-flowing economy.Gamers can have visibility of different in-

302、game assets,who owns them,and how they can be purchased.Developers can also enforce creator royalties,allowing the content creator to receive royalties every time the digital item is resold.This could materially change the business model of game developers.Ryan Wyatt is the President of Polygon Labs

303、,leading the business team working to help advance the Polygon ecosystems across various products.Before serving as President,Ryan was the Chief Executive Officer of the Polygon Studios division,which was the gaming,NFT,and Metaverse vertical.Before Polygon,Ryan spent almost eight years at Google,wh

304、ere he created YouTubes gaming vertical and built it into the video platforms second-biggest business,generating billions in revenue.March 2023 Citi GPS:Citi GPS:Global Perspectives&Solutions 2023 Citigroup 39 Q:Who is likely to lead new blockchain-based game development in the next one to two years

305、?Ryan:I see a lot of momentum for blockchain-based games from developers in the Asia-Pacific region.New gaming models,such as mobile games and free-to-play,often originate from countries in the Eastern hemisphere,while studios in the Western hemisphere tend to be late adopters.Gaming studios in the

306、East can be seen as lead indicators for innovation,while studios in the West help drive adoption.Over the next one to two years,large reputable game developers in Asia are likely to launch blockchain-based games.This is likely to include non-Web3-native and Web3-native cohorts of gaming studios,as w

307、ell as other developers who have left large established studios to develop their own blockchain-based games.In my opinion,we could see the release of a big breakout game from the native Web3 developer group initially,which is then likely to be replicated by other developers.I would closely watch gam

308、e developments in South Korea,followed by Japan.In the long term,game development by studios in the Western countries is likely to drive mass adoption.Q:We currently have over 3 billion gamers worldwide.Of this,how many are likely to play games with some element of Web3/blockchain by 2025?Ryan:I sho

309、uld first point out that the statistic of over 3 billion gamers worldwide is a very broad number.It includes the casual gamers who started playing Candy Crush two months back while waiting at the LAX airport lounge,as well as the hardcore gamer doing this for several years.In terms of the number of

310、gamers,I would estimate nearly 50-100 million are likely to adopt games with some element of Web3/blockchain by 2025.However,I am more fascinated by the potential revenue pie for in-game Web3 and/or blockchain-based assets.In my opinion,this is likely to be the big driving force for blockchain-based

311、 games.Even today,a small fraction of global gamers account for the lions share of money being spent on games(let us refer to them as“whales”).Over time,we are likely to see a significant shift in transaction spends in games from off-chain to on-chain.One hundred million gamers shifting to blockchai

312、n-based games,from a total of over 3 billion gamers worldwide,may not seem like much.However,the disproportionate shift in value of wallet(i.e.,the shifting of whales to Web3)is likely to be the inflection point for the gaming ecosystem.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023

313、 Citigroup 40 Social Imagining Social Media on a New Path Web3 proponents cite the need to build a new system that is decentralized.Blockchain-based social media could help authenticate identities,verify accounts,and infuse transparency in the process.Blockchains ability to create a shared,immutable

314、 digital record of transactions could also help users see where particular information originated in order to judge its credibility.This could help build trust.Companies such as Aave are building decentralized social media platforms like Lens Protocol,where users have ownership of their cryptographi

315、c profiles as opposed to being locked to a specific Web2 platform.Users can mint a profile,follow others,and create and collect publications,completely on-chain.Ownership of content and control over the distribution channels remains with users.I believe that creating more access to blockchain-based

316、technology requires non-financial applications.People will come into the blockchain space not only by the financial play,but from using decentralized social media and playing games.I believe games and social media might be the way that most of the people get their awareness about the blockchain as a

317、 technology.STANI KULECHOV,FOUNDER AND CEO OF AAVE COMPANIES36 Sizing the Creator Economy In the Citi GPS report The Creator Economy:Getting Creative and Growing,we estimate the market for the creator economy is currently about$60 billion per year and will grow nearly 9%through 2024,when it should a

318、pproach$75 billion.Many segments of this economy are growing in double-digit percentages.Figure 10.Sizing the Creator Economy Market($billion)Source:Citi GPS 36 Citi GPS,Metaverse and Money:Decrypting the Future,March 2022.CAGRCAGR2002020212022E2023E2024E17-2121-24E Ad-based video7.49.812

319、.816.725.625.927.130.437%6%+eCommerce3.33.95.010.313.513.313.615.743%5%+eSports1.31.52.24.25.35.86.36.943%9%+Fee-based video0.30.30.42.43.33.94.34.785%12%+Education0.71.21.62.02.73.34.15.042%22%+Podcasts0.20.41.11.62.13.03.74.280%26%+Metaverse0.10.30.50.91.92.32.83.3109%20%+Donations0.30.40.81.01.31

320、.61.82.048%15%+Mobile game creation0.10.20.30.40.50.91.11.553%39%+Publishing0.00.00.00.00.10.20.20.3211%50%=Total13.518.024.639.556.560.165.274.043%9%memo:growth33%36%61%43%7%8%13%Web3 social media can help authenticate identities,verify accounts,and build trust March 2023 Citi GPS:Citi GPS:Global P

321、erspectives&Solutions 2023 Citigroup 41 Blockchain-based social media platforms aim to take social media on-chain,offering the benefits of enhanced privacy,ownership of personal data,and greater control of user-generated content.Most platforms also offer digitally native tokens for monetization of c

322、reator content.However,decentralized social media networks are still nascent,and the user experience is not as rich as in their traditional counterparts.Citi GPS:Citi GPS:Global Perspectives&Solutions March 2023 2023 Citigroup 42 A Conversation With Stani Kulechov on Decentralized Social as a Driver

323、 for Blockchain Adoption Q:What is Aave and your journey to setting up Aave?Stani:“Aave”means ghost in Finnish.The reason for naming the network Aave is because we build technology that is decentralized.After building the software,we give ownership to the user community,essentially becoming a ghost

324、at this point.The software and protocols operate via smart contracts on the blockchain with community governance.I started building blockchain-based applications in 2016,while a law student.The first version of the Aave Protocol back in those days was called ETHLend(short for Ethereum lending).It wa

325、s a proof of concept of how cryptographic assets could be traded on an ongoing basis on the blockchain,as well as used as collateral to borrow liquidity and earn yield.In 2017,we introduced the Aave Protocol a peer-to-protocol that allows users to supply and borrow cryptographic assets and earn yiel

326、d.The protocol is now fully decentralized and operated by the Aave Decentralized Autonomous Organization(DAO).Over the years,with support from the Aave DAO,we have contributed new updates to the Protocol,with the focus on creating a more capital-efficient and risk-averse protocol.The latest version,

327、currently V3,secures about$5 billion in total value locked(TVL)across multiple networks.The Aave Protocol has been deployed on the Ethereum main network,Polygon,Avalanche,and on layer 2 networks,such as Optimism and Arbitrum.At Aave Co.,our vision is a people-powered internet that benefits all.At th

328、e heart of this is broadening access to finance and other markets.The Aave Protocol helps create globally-accessible markets,offering a liquidity pool where all participants have equal rights to the same yield,irrespective of their location.Bitcoin and Ethereum gave us the idea of owning our assets

329、without third-party intermediaries such as banks and brokerages.We are also enabling users to own their social profile and not be beholden to a particular social media platform.Creating this kind of social capital ownership is important,as unlike financial capital,which many people dont have and if

330、they do,it cant be spent,social capital is owned by everyone and can be held for a lifetime.At Aave,we focus on creating technology that increases access and is open,secure,transparent,and governed by users.Q:What is Lens Protocol?Why do we need decentralized social media?Stani:Lens Protocol is the

331、blockchain social layer that aims to enable users to own their social capital.It is another use case on the blockchain,such as finance was.On Lens,users create a universal profile.They own their social profile,data,content,and followers.We call this social capital,and it is valuable,as we see large

332、social media companies have garnered huge wealth from owning users,user-generated content,and followers.Stani Kulechov is the Founder and CEO of the Aave Companies,a software development company that builds open-source,blockchain-based software.Aave Companies are best known for creating the Aave Pro

333、tocol,a decentralized,open source,and non-custodial liquidity protocol which allows users to supply crypto-assets(i.e.,earn interest on them)and borrow crypto-assets.He is a seasoned entrepreneur with extensive experience developing technology in the crypto,blockchain,FinTech,and most recently social media spaces.In 2017,Stani released ETHLend,one of the first DeFi dApps and soon after,the Aave Pr