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Watch these 6 crypto tokens with the potential to disrupt legacy industries dominated by players like JP Morgan and Google, investment bank Oppenheimer & Co says

A photo illustration of the digital Cryptocurrency, Ethereum

  • Oppenheimer & Co released a blockchain whitepaper listing 10 key themes to watch this year.
  • The rise of crypto tokens is one of those themes. The analysts believe these assets can disrupt traditional industries.
  • We list the 6 tokens the firm’s analysts say could potentially act as disruptors.
  • See more stories on Insider’s business page.

Investment banking firm Oppenheimer & Co expects blockchain technology to eventually upend many legacy industries including banking, law, healthcare and supply chains.

In the firm’s most recent blockchain white paper, analysts said blockchain and crypto adoption currently have parallels to the widespread adoption of the internet in 1998.

“We are barely in the first inning of blockchain innovation, we think, similar to the Internet in the late 1990s, when an explosion of innovation (and speculation) took place,” the analysts said.

Oppenheimer & Co blockchain hype cycle graph from March 26 research note
Oppenheimer & Co blockchain hype cycle graph from March 26 research note



Within the March 26 report, the analysts outline 10 key crypto and blockchain themes to watch for 2021.

One key theme is the rise of cryptocurrency tokens. The analysts believe the tokens have the potential to disrupt legacy organizations and industries.

“Right now, we are seeing a surge in the number of new token-based community business models that disrupt rent-seeking middlemen,” the analysts said,

The total value of the cryptocurrency market is around $1.5 trillion. For, tokens it’s about $40 billion, but this is five times more than what was listed in the firm’s last white paper in November.

What are crypto tokens?

Cryptocurrencies are digital currencies that facilitate transactions. Bitcoin (BTC) and ether (ETH) are two of the most widely traded examples.

Crypto tokens are a type of cryptocurrency that can represent a specific asset,or use case on the blockchain.

Tokens are usually created, distributed, and sold through an initial coin offering (ICO). An ICO is a crowdfunding exercise that typically enables funding of the project development.

There are two types of crypto tokens: fungible and non-fungible.

Fungible are tokens that are all the same and have no special value. They can be used as currency, credit or an exchange of value. For example, fiat currencies are fungible, so is bitcoin. The uses of fungible tokens tend to fall into three main buckets: payments, utility and securitization.

Non-fungible tokens (NFTs) are unique. Therefore, there is no standard value attached to a token and they can not be exchanged for one and other equally.

For example, a non-fungible token can represent unique ownership of a real asset, such as art, music or real estate or represent a digital identity.

“Tokens have created new community-based applications with strong network effects that cut out the middleman,” the analysts said. “These token-based business models enable communities to work together using smart contracts that automate trust.”

The analysts expect tokens to be a game-changer for blockchain and the economy. Tokens and digital assets can be embedded with new features that make them more robust than legacy fiat currencies and, in turn, this drives usage and engagement of new platforms, the analysts said.

Why now?

Crypto tokens and ICOs have been around for some time. In fact, investors were cautioned about ICOs in 2017 by the Securities and Exchange Commission.

However, Oppenheimer analysts now see a range of practical use cases being developed in the crypto space from gaining interest on crypto deposits, to art ownership and cross-border payments.

The analysts expect financial services, asset management and legal industries to become areas that are ripe for blockchain disruption.

Toward the end of 2020, the analysts saw a “step-function increase” in both interest and activity surrounding blockchain and crypto. They believe this is down to two reasons:

1) Supportive macro environment

The weakening of the US dollar, rising interest rates and monetary supply expansion have supported bitcoin’s rise.

“The macro environment we have outlined above is typically an attractive environment for gold, but BTC, aka ‘digital gold,’ has massively outperformed in 2020 and early 2021,” the analysts said.

2) Unlocking new investors

“Greater institutional adoption on concerns around fiat currency has been a catalyst for digital asset performance,” the analysts said. “Tokens are creating innovative new platform-based business models, including DeFi, and non-fungible tokens (NFTs).”

DeFi

Crypto tokens underpin a concept called decentralized finance, which is gaining momentum in the crypto space.

Decentralized finance (DeFi) seeks to replace a range of centralized and regulated banking institutions with decentralized systems and products, which are typically built on top of the Ethereum blockchain.

Oppenheimer & Co graph of the top 10 DeFi projects from March 26 research note
Oppenheimer & Co graph of the top 10 DeFi projects from March 26 research note

DeFi removes the middleman and leverages blockchain technology to enable complex financial use cases directly between parties.

“Finance and particularly decentralized finance is going to have the largest near term impact on public markets,” the analysts said. “According to Coinspeaker, a number of IPOs of DeFi companies are coming, including Coinbase next month and BlockFi within a few quarters. These valuations will be in the tens to hundred billion dollars, we think.”

With decentralized finance booming, we list the 6 crypto tokens, the analysts think have the potential to disrupt legacy industries and the companies those tokens could impact.

Oppenheimer & Co said the whitepaper was, in no way, a recommendation to investors to buy any cryptocurrencies, ICOs, utility tokens, or security tokens.

Disruptive tokens:

1. Basic Attention Token (Brave)

Token: BAT

Token description: “The Basic Attention Token uses blockchain to make it easier to compensate publishers and for advertising services through the Brave search browser.”

Disrupted industries: Digital advertising/search engines

Companies impacted: Google, Bing, Facebook

Token market capitalization: $1.7 billion

Source: Oppenheimer & Co

2. Filecoin

Token: FIL

Token description: “Filecoin is a decentralized storage network where users pay to store files on storage miners.”

Disrupted industries: Compute storage 

Companies impacted: Amazon (AWS), Microsoft

Token market capitalization: $5.4 billion

Source: Oppenheimer & Co

3. Helium

Token: HNT

Token description: “Mining HNT provides miles of wireless network coverage for devices.”

Disrupted industries: Wireless

Companies impacted: Verizon, AT&T, T-mobile 

Token market capitalization: $637 million

Source: Oppenheimer & Co

4. Nexus Mutual

Token: NXM

Token description: “Tokens can be used to purchase insurance coverage as well as participate in claims assessment, risk assessment and governance.”

Disrupted industries: Insurance

Companies impacted: Geico, Progressive, State Farm

Token market capitalization: $458 million

Source: Oppenheimer & Co

5. Aave

Token: AAVE

Token description: “Aave’s token is used for people to earn interest on deposits and borrowing.”

Disrupted industries: Banking

Companies impacted: Bank of America, Wells Fargo, JP Morgan

Token market capitalization: $4.3 billion

Source: Oppenheimer & Co

6. Uniswap

Token: UNI

Token description: “Uniswap is a decentralized exchange, which are noncustodial and eliminates centralized power and control. Uniswap is the largest decentralized exchange in terms of market cap today.”

Disrupted industries: Exchanges

Companies impacted: New York Stock Exchange, NASDAQ

Token market capitalization: $16.4 billion

Source: Oppenheimer & Co

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