Scary year 2024 solidified the cybercrime economy’s GDP as the 3rd largest worldwide! 2024 was also a year of videos, which look so real (with real looking people), but are in fact AI generated and almost indistinguishable from the reality. A year of crypto dominance but based on a different outlook. The year ended with elections and mystery drones in the sky.
Dangers are looming large, and there is a sense the world is teetering on the verge of a global conflict while moving forward ever so slightly.
Tether’s USDT delisting on regulated exchanges in EU effective as of 30th December 2024 marked an important change. After years of debates and much denial by supporters of an unregulated path this looks like a battle won against crypto and in favor of regulated blockchain when it comes to financial products and services.
Regulation is the only way – a view maintained by X8 since the beginning. Quite soon, there will be only a small specter of businesses that will be able to continue without some level of regulation going forward. Unregulated part of business in the overall economy could dramatically shrink; however, this could be only a relative view. The opportunity from regulated business activities is still increasing and will probably surpass the current economy in terms of size sooner than expected! In our view the USDT’s example is showing this gradual path continuing in the future.
Many remember the dotcom bubble time. It was about internet and e-commerce becoming a thing for the first time. Despite the hype, internet based – e-commerce economy took a long time to become mainstream. The investment market was sluggish after the dotcom bubble for many years, yet the economy that was born out of this period has become much more active than the best pre-internet economy of the 1990’s could ever be. There cannot be any comparison to how much further the current internet-based economy has taken us. Even in a scenario of a recession its output is far larger. A similar development could take shape for regulated blockchain based commerce in the coming years.
A shout out to a few regulated projects that have chosen the regulation path – a lengthier but more prudent option compared to the faster unregulated approach!
Contrary to what one would expect, the stress from extraordinarily fast pace of seemingly dangerous worldwide developments has not translated into negative market price trends in 2024.
Markets seemed positive throughout 2024. Equity markets rose to a new record high. Bitcoin market price reached a new record. These were safe havens in relative terms simply because they proved to be the least complex investment options, so most of money was migrating into these two areas not because the appetite for risk was great, but because these markets offered a simpler path for investors. Equities and crypto provided a better answer for looking into the future and for how to potentially move forward from these investments into something else going forward and under various possible future scenarios. Due to very high uncertainty this factor influenced investor’s behavior the most in our opinion.
In contrast to this, X8 continues investing in the business design and in the product design, both of which we find to be of key importance on the medium to long term – adhering to regulation and its updates.
2024 was more about just surviving, maintaining an achieved base and not scaling up. Investments in stablecoin framework require long-term commitments that were relatively harder to secure in 2024. Despite this, X8 has specified necessary expenditures for all elements of the system remaining to be implemented – through detailed assessments for each necessary activity over the next 2 or 3 years. By having a clear and detailed plan for the path forward, future costs and necessary investments, X8 worked on reducing the risks and increasing attractiveness for institutional capital.
In 2024 we made most significant progress in the further upgrades of next-gen-ID design targeted at solving challenges and adjusting to the changing demands dictated by AI-cyber-crime coupling. Already prior to this, KYC/AML has been a strong point of X8’s fully regulated approach. With upgrades in the architecture design, we aim to provide better protection against AI-deep-fakes going forward. AI-deep-fakes are disturbing a large part of the financial industry – especially when it comes to payment verifications. We believe that no stablecoin system can really work in the future without a payment verification concept that can be resilient against AI-deep-fakes.
Recently, with the help of AI and its ability to mass produce fake identities cybercrime has gained the potential to become the top economy by GDP in the world by 2040 or even before! It is already one of top economies in the world today. Standard Digital IDs cannot fully answer this issue. In 2024 X8 has been working intensely on providing an alternative solution to this problem.
Second issue is more relatable to an average reader than a technically demanding AI-cyber-crime issue. This second point is the current issue of trust in general. Trust currently represents a major societal pain point worldwide. It is having a profound impact on everything from consumer behavior to dynamics between people at workplace, among friends and throughout the society.
The pain point has been emphasized by growing scope of modern-day duties and obligations to follow – predominately in business environments. Computers have added to the clarity and to the length of the list of rules where everything is specified. Although there are exceptions, they (the rules) make sense. Especially businesses have become very rigid and constrained due to this, however, it is affecting almost everyone in nearly any situation.
People and businesses have developed a dichotomy between wanting to be approachable, open and positively oriented towards the environment, yet at the same time we should be able to follow all the societal rules, corporate rules and regulations down to the point. Consequently, participants in the economy have started to feel torn and unable to reconcile the two key social drivers.
In simple terms, if a business is behaving openly, it is in today’s day in age running a risk of connecting with non-authentic entities. Alternatively, when a business tries to implement all the rules, it appears very demanding toward all new and unverified contacts to the point where the process is not user friendly and potentially without clarity if this gap can be resolved.
If during early stages of contact the solution is not instant, it can quickly cool down any interest due to very high hurdles of verification – making the opportunities for mutual business development look unattractive, cold and even almost foreign. Both sides that meet can get to experience the same thing. The choice between the more open and the more rigid approach does not really exist, and the solution hasn’t been available for the digital world. The progress of AI with its dramatically increasing deep fakes capabilities has made this problem further magnified compared to prior years.
Work done by X8 during 2024 has been about how these obstacles can be overcome and how a functional and commercially viable solution can be provided as an answer.
The big idea which we seem to all go by is linked to the future economy in which we will be able to interact with strangers and that we’ll find a way somehow for the online world to work for us better. A big part of the growth story for the future depends on this premise. As consumers, we are all supposed to not have to worry about really knowing anyone when we purchase goods and services. We are living with a promise that we will always in the future be able to obtain a product or a service from anywhere in the world in a fast and efficient way – no matter from where or whom. In the past we have learned that by adopting this way we could further specialize and become even more efficient.
Nevertheless, interacting with this stranger is a thing with which society has not become comfortable yet with when speaking about how things in the real-world function nowadays when the global economy has become digitalized. We have instant coffee, but we don’t have instant trust – not yet at least.
X8 has put in extended efforts to go beyond the standard KYC/AML model and beyond standard payment instrument design to analyze the described situation in depth. When approaching this issue from the point of an average reader observing recent trends the question is, how will the future look like in the years to come?
While nobody knows, X8 believes that robots will gradually be introduced into the society – present in our environment participating in daily routines. Robots will be driven by the ever-advancing AI. At some point robots will also in a way start forming an ecosystem, meaning robots will soon be becoming more interconnected among themselves and through an AI. It is unrealistic to expect this trend stopping or slowing down anytime soon – a view now shared among various world leaders. Avatars that demonstrate human-like behavior are already here and showing us how this could look like, and this is just one of the steps before robots. This prediction makes finding answers to the mentioned issues most critical even if only a part of the possible scenario becomes a reality.
It is possible that the internet will need to undergo a rebirth during the next several years. There is simply too much noise on it. We predict that the use of social media will undergo a drastic change. Use of unverified content will eventually decline. Postings of spontaneous and unverified content would mean AI will have open access to such information – prompting more and more users in the future to switch to blockchain based social media usage when trying to find and connect to authentic future friends or business partners.
The driver of changes in the use of social media might simply come from not knowing for sure if an entity is an AI generated avatar or a real person. The prediction is that a large part of interactions in society will start to rely on blockchain technology even more to avoid confusion and open-ended search for trust – like already currently present when finding and making new contacts online.
Key takeaway for the average reader is that soon the societal interaction will be severely impacted across the board!
Interaction won’t be anymore only about the individual-to-individual connection. Those times have long passed already anyway. In recent epoch we were learning and got used more and more to interactions between individuals and corporates and between a corporate and another corporate. These 3 modes of interaction have been dominant in shaping business activity up to now.
However, we have yet to approach an almost certain fact that robots might very well add 3 more combinations to the existing combinations mentioned above. This implies there will soon be 6 possible combinations of interactions instead of 3, increasing the complexity of interactions in the economy by 100%.
Humans will soon start interacting with avatars and with robots as a part of their daily routine. It is possible that such introduction of artificially intelligent helpers into the society will add to the scope of how private individuals and business entities interact with the external world as well, especially if robots achieve the so-called general AI level and when robots will be seen by corporates as external persons. Finally, a robot-to-robot interaction could drastically change how we perceive group dynamics – necessitating a change when contemplating collaborations, affecting individuals and corporates respectively.
Discussions about Digital ID and verified content will intensify, plus this may be accompanied by a topic whether robots should also operate under same or similar ID rules.
X8 sees some of these developments as long-term probabilities. The described scenario is quite probably in store for the next generation already. Most certainly, the number of use cases for a user-friendly Digital ID solution keeps rising. On the short and medium term these points are also relevant due to commercialization of products which needs to be compatible to how younger audiences perceive this trend and how they will choose to co-exist with it.
X8 is focusing on the development of the first Swiss fully regulated smart stablecoin – our existing core business. We believe this is an essential component for how the future economy can then self-organize. We do not believe in a barter economy taking over, meaning that currencies (tokenized or not) will continue to be used for payments. Even though the hype around stablecoins has cooled down compared to previous years, these products remain a common denominator for the fully tokenized economy the world is heading toward.
In addition, X8 has expanded the focus onto how next-gen-IDs can help solve practical problems for all participants, and overcome the gap still experienced under currently understood Digital ID concepts. As indicated in our message, standard Digitals ID in current form don’t satisfy real world participants when looking to establish trust for the first time. X8 aims to contribute to the field by developing and commercializing a new more friendly version that can also be educational for younger users – useful but also fun.
Finally, tokenization of real-world assets is the area where many years of steady progress could result in the new largest market, therefore it requires preparations due to its long-term importance. These three areas are instrumental for web3 technologies to be widely adopted. Web3 seems to be an area of large business growth potential spanning across well over one or two decades into the future.
In 2025 we look forward to focus on a few added functionalities of stablecoins with which we could demonstrate the use of elements required by regulations and providing answers to some deficiencies of various stablecoins like the USDT, also when it comes to solutions for cross-border compliance when transacting stablecoins. The scope will depend on how much we can accelerate the development with funding appropriated for demonstration of different use cases possible.
Work will have to continue into the direction of providing an AI-deep-fake proof payment verification mechanism that will be resistant to AI-deep-fakes, which today represents a large challenge and to which the industry has not adjusted yet. Payment services will need to protect all real and fully verified users so that nobody else but only them can verify a payment transaction and order an execution of money transfers.
Tokenization of Real-World-Assets (RWAs) could become the new largest market – surpassing current traditional, cryptocurrency and stablecoin markets by a wide margin. We understand however, that this market will be functioning properly only after regulated stablecoins and regulated next-gen-ID’s will become available in the right form to allow a friendly, orderly and regulated use of many tokenized RWA products supported by blockchain in the future.
Despite many challenges, the future also holds many positive things in our view. Preparing for these eventualities might mean that we can together achieve more fulfilling scenarios.
Let 2025 be a year of positive transition, supporting awareness that large changes take time. During this time, we learn, grow and foremost we look forward to the development of meaningful and purposeful solutions that can help future generations build an economy with fewer fakes. Finally, may this year offer many moments to enjoy with family and friends and create new collaborations with people that help improve the world.
X8 team wishes you a Happy New Year 2025!
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The difficult part of central bank digital currencies is adoption, said Ashok Venkateswaran, Mastercard’s blockchain and digital assets lead for Asia-Pacific.
A Binance executive said the cryptocurrency exchange plans to delist stablecoins in the European market by June 2024 in order to comply with standards laid out by MiCA.
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