Digital Assets and the Dematerialization of... Everything: Past, Present and Post-Pandemic Future

In his interview over at DomainSherpa, Michael Saylor (in light of being a major science-fiction fan) referred to dematerialization as one of his favorite superpowers, with superheroes essentially being able to shift from their regular flesh and blood state to a dematerialized one that allows them to for example walk through walls, thereby breaking the laws of physics. Needless to say, the discussion shifted toward a form of dematerialization relevant to our interests, more specifically dematerialization trends which involve a secular migration from the bring & mortar world to the digital landscape.

As many readers have undoubtedly noticed, these trends have manifested themselves very aggressively for certain industries in light of the pandemic. For example, it is difficult to think of another scenario where humanity has been forced to experiment with the dematerialization of education (even if we are dealing with a temporary situation in this case) due to schools having to be closed and teachers resorting to online alternatives. The same way, business meetings for example become Zoom meetings and regular handshakes turned into virtual handshakes, with this specific trend having a high likelihood of persisting compared to the previously mentioned one. The grocery shopping experience was also dematerialized for many people, who chose to simply order online through various delivery services rather than visit offline stores.

Past: Yes, There Was a Pre-Pandemic World

When tackling the issue of dematerialization from the perspective of digital assets, it is important to understand the role of the pandemic in the entire equation but at the same time, it would be a huge mistake to consider it the sole game-changer in this department and assume that in the absence of 2020's developments, the brick & mortar status quo would have continued uninterrupted for everyone.

While it is true that for example not much would have changed when it comes to the school system without a pandemic, the same principle is most definitely not valid when it comes to other industries (industries for which significant dematerialization occurred well before COVID-19 was even called that and well before the pandemic dominated headlines each and every day), such as for example:

  1. Have you heard anyone talk about the dematerialization of newspapers due to the pandemic? Of course not because this dematerialization (the transition of the newspaper reading experience from offline to online) occurred a long time ago. Think of it as one of the world's most natural/obvious progressions rather than a trend brought about by an exogenous shock such as a pandemic.
  2. What about online shopping? Yes, it is true that a lot of individuals ended up shopping online more so than during 2019 or doing so when it comes to items they usually bought offline (groceries for example) but it would be downright ignorant to place too significant of an important to the pandemic in terms of the online shopping mega-trend which has been developing for a long, long time.
  3. Dematerialization as far as employment is concerned, or in other words working remotely rather than going to the proverbial office. Once again, as true as it is that many businesses which wouldn't have embraced remote working solutions this year have been forced to do so by the public health situation, this trend has also become more and more popular well before the pandemic for various reasons, from studies which show that individuals can be more productive when working from home to the idea of cutting various costs for businesses (rent, utilities, coffee machines and other amenities, etc.)

Present: Giving to Caesar What Belongs to Caesar

Through the pre-pandemic section, it has hopefully been made clear that yes, there were dematerialization-related mega-trends in motion well before the pandemic and as such, using terms in the sphere of causation to describe the role played by COVID-19 would be less than accurate. However, it does make sense to give to Caesar what belongs to Caesar and not downplay the importance of what is happening in 2020.

A decent enough compromise would revolve around replacing "causation" with "exacerbation" and admitting that while dematerialization mega-trends already existed in many instances, the pandemic took them to the next level and essentially added fuel to an already-potent fire. For example, a fair number of businesses most likely had the intention of eventually at least experimenting with remote work-related options and the pandemic basically forced them to kick things into gear.

Post-Pandemic Future?

While some of the entities that have experimented with dematerialization will most likely revert to the status quo because they are not ready for a permanent transition, others such as Microsoft (that will allow 150,000 employees to work from home permanently as of this year) will embrace the remote work paradigm. As such, for a more than reasonable number of businesses, the pandemic will generate permanent changes.

Therefore, as irrational as it may be to blame the pandemic for everything, it would be equally sub-optimal to underestimate the long-term impact of it when it comes to a wide range of market participants. Yes, the medical dimension will only stay dominant for so long and one way or another, we will move on in medical terms but make no mistake, quite a few of the pandemic-facilitated changes are here to stay. Not because market participants will have no choice but to embrace them, as happened this year, but rather as a result of the fact that the changes in question represent win-win situations, from business owners who are happy about cutting costs and increasing productivity to employees who are looking forward to a commute-free work day.

Implications for Digital Assets

When selling to customers online, you need... of course, an online storefront. Without a domain name, it is impossible to have one and without a good domain, it tends to be quite difficult to stand out, especially in a world where online competition is skyrocketing. Therefore, businesses are likely to become more interested in domain acquisition than in the past, not because they want to or because they all of a sudden became passionate about domain names but because they have no choice. As more and more industries become dramatically competitive, standing out no longer ends up representing a goal related to self-esteem or even prestige but rather a necessity for survival.

The same way, the dematerialization of money is also likely to persist, since making online payments represents the status quo option when conducting business online or shopping online. While for the time being, the bulk of online shopping is likely to continue being done through status quo online options such as PayPal or credit cards, decentralized digital assets (cryptocurrencies) should not be discounted. As true as it may be that cryptocurrencies have a long way to go in terms of commercial adoption (including either blockchain tweaks which facilitate a more shopping-friendly experience or strong second-layer solutions), it is difficult to believe that the crypto world will not end up representing a significant part of this mega-trend.

What About Threats?

This article might have compelled some to believe that dematerialization will inevitably continue and that nothing in this world could stop this mega-trend from becoming more and more dominant. Unfortunately, that is not exactly true and especially in our increasingly divided world, it makes sense to understand that nothing is irreversible.

A textbook example to that effect is represented by threats pertaining to a potential fragmentation of the internet if isolationist tendencies not only continue but are actually exacerbated. Right now, we take the global Web for granted but it would be naive to assume that pretty much all geopolitical actors do not have clear plans pertaining to a more or less forced transition to a fragmented internet. Or, if you will, a transition from the World Wide Web to US Web, CN Web and so on. Fortunately for those who hope this does not materialize (see what I did there?), there is a lot in the way of financial incentives to make it clear that a transition to a fragmented internet would be painful for all parties involved and risks leading not only to economic horror stories but also downright civil unrest.

The Conclusion?

While threats such as the previously mentioned one undoubtedly exist and should not be ignored, the path of least resistance is represented by continuation when it comes to the dematerialization mega-trend. As such, digital assets cater to the needs of individuals and businesses alike in this dematerialization paradigm are not only here to stay but will most likely thrive.

Does this mean it is time to back up the truck and go all-in on various digital assets right away? Of course not, it simply means that one of the most important long-term goals portfolio owners should have needs to revolve around adequate allocation in the direction of digital assets. Most readers probably not only understand this but already acted on it and make no mistake: The Average Joe will eventually follow suit, which means it is quite difficult to envision an investing landscape which does not involve digital assets outperforming status quo ones, most likely by a wide margin.

If you are already exposed to digital assets, it makes sense to maintain course and if your financial situation permits (because it is important not to be a one trick pony for reasons that revolve around financial stability), it might not be the worst idea in the world to make a battle plan which involves further acquisitions. But remember, you are riding a long-term wave, so reason rather than a misguided sense of urgency needs to prevail.