Four Quadrants – Dividing and Conquering the Crypto Universe

State Street's former blockchain lead breaks down how he views developments in the blockchain market – and why there are four opportunities.

AccessTimeIconAug 6, 2017 at 5:10 p.m. UTC
Updated Sep 13, 2021 at 6:48 a.m. UTC

Hu Liang is the former head of emerging technology at State Street, and the founder of a new blockchain stealth startup 'Project Omni.'

In this opinion piece, Liang attempts to segment the blockchain technology market, breaking down the different use cases and opportunities he believes will eventually develop, and charting a course forward for its likely development.

I've been fortunate to have spent the past two-plus years looking at bitcoin, blockchain, crypto and everything related.

The market has definitely changed and shifted during this period. However, what I still find lacking is a clear and concise way of looking at all the opportunities in this crypto space. I still find myself explaining the difference between bitcoin and blockchain, and proof-of-work and consensus.

And many still have the impression that institutions can function under the same trust premise as consumers and retailers.

Here is a model I came up with to explain how I see the various opportunities and their differences. I hope you find this model informative and useful.

Of course, this is but one model from one person, so feel free to agree, object and generally comment. I look forward to hearing your perspective.

Two axes

I look at the entire crypto space from two axes.

On one axis, we have the major innovations, crypto assets on one end (bitcoin, ethereum and other tokens) juxtaposed with blockchain (the underlying technology that makes crypto assets possible). The other axis is focused on the audience, consumer and retail versus the institutional space.

Together, we end up with four quadrants that explain where the opportunities lie. Each quadrant, therefore, represents the opportunities the innovation brings to that particular audience.

The model… let's follow the numbers…


This is where it all began with bitcoin, and it now represents all the coins or tokens available to the consumer and retail market. Opportunities here are many, and they will develop at varying speeds based on use.

Broadly speaking, I’m putting them into three sub buckets:

  1. A medium of exchange or new form of payment rail – a cryptocurrency – like bitcoin, zcash or Ripple's XRP.
  2. A digital store of value – a crypto-commodity – like a digital gold.
  3. A new ownership model – crypto-equity – through the "usage token paradigm" created by initial coin offerings (ICOs).

This genesis quadrant, through the growth and development of all three buckets in succession, through arguably ICOs as the main future driver, have really sparked the tremendous growth we've seen in the last six month.

Of course, there are many other factors like Japan's national regulation of the industry and explosion in crypto exchanges. But no doubt this quadrant with consumer driven demand and innovation is what’s powering the growth of our new crypto world.

2. Decentralized infrastructure

This quadrant, I think, in the long run could be the most disruptive.

This is truly building decentralized infrastructures and services out of platforms like ethereum, new competing platforms like Tezos and others being created. This quadrant represent the technologies the tokens actually fuel.

Possibilities here are endless, but it could be difficult for the institutional space to adopt given the unstructured nature, lack of governance and difficulty to regulate. This is the "fat protocol" concept so well explained by Joel Monegro while at USV.

Quadrants one and two are clearly related, not only because they both focus on the consumer and retail segment, but because the new infrastructures being created by quadrant two are driving opportunities of quadrant one… or vise versa depending on your perspective and argument, I suppose.

If this quadrant really matures and takes off, many of the companies we know so well today like Amazon AWS, Google, Box and Facebook might dramatically change or even disappear. It's difficult to imagine given all the unknowns.

Therefore, this is possibly the most interesting long-term disruptive opportunities of all four quadrants.

3. A new technology stack

Ah… blockchain, the word used so much to describe disruption in the last two to three years in the institutional financial world, the one that spawned the creation of the Linux-led Hyperledger project, R3, the Enterprise Ethereum Alliance and countless blockchain-related startups.

While development in this space will undoubtedly continue, I think the institutional segment is generally realizing blockchain will be a new technology stack as opposed to a business model transforming force.

Just look at the similarities of the technical architecture diagrams compared to the J2EE stack of late 1990s.

Banks in general will use blockchain to replace aging infrastructure that's been accumulating for decades. While industry wide efforts exist, initial use cases will be narrow in scope focusing on specific inefficient and costly processes.

Only after wider adoption by the industry, I believe interoperability will emerge and broader connectivity via blockchain across use cases and sectors will materialize. Industry-wide scale and broad interoperability will be on the scale of 5–10 years.

4. A new asset class

The fourth quadrant is perhaps the most interesting from a capital markets perspective in the near term. This segment really didn't exist two to three years ago.

Financial institutions didn't really look at bitcoin back then, eschewing the anarchist, world-currency concept for the more grounded innovation of blockchain.

But the dual effect of realizing the third quadrant will take longer to mature (and that the burgeoning first quadrant represents more than just bitcoin) led the institutional financial market to determine that the crypto space is developing into its own asset class.

This latest quadrant development can really drive the overall adoption of crypto in the broader market by creating a healthy investment and trading market.

If the requisite infrastructure existed today to allow institutional players, market makers, OTC brokers, quant funds and even traditional asset managers to easily transact and store crypto assets, the movement can dramatically spur further growth and development in all three other quadrants.

Two paths

I see this market moving forward on two paths – both started on the same initial trajectory but are currently growing for different reasons.

The initial starting trajectory is from quadrant 1 to quadrant 3. This was evident when banks in 2014 and 2015 started in earnest to focus on blockchain and consciously downplayed the value of bitcoin.

Three years into this effort, the market is realizing that blockchain technology will eventually save costs in the institutional financial world and save us from decades of technology debt in the form of mainframe, legacy databases, custom implementations and other programatic contraptions.

But, it's clear that blockchain tech in the institutional space will not come in the near term.

So, all the investments from VCs and institutions that were going after blockchain in the institutional space are looking for new avenues to deploy. These new paths will soon lead us to see tremendous developments and growths in quadrants two and four.

As I stated above, I think quadrant two is the most disruptive in the long run because it has the potential to change the way computational value is distributed in the world. Changes of this magnitude takes time, even with internet speed.

Recall the "Bitcoin Maximalist" concept of a few years ago, where many thought bitcoin would be the chain to rule them all. Two years later we have hundreds of coins competing for our money and attention.

(So much so that VC and hedge funds are creating investment vehicles specially because we don’t know which will be the winner.)

But the concept will win. The internet ushered in the free exchange of information, and blockchain, with the right tokenization structure and application, can indeed usher in the free exchange of value, it will just take time.

The safe bet

Time, however, is a valuable asset and many people prefer not to wait so long, particularly capital markets. That leads me to the second path of development, institutions moving from blockchain to the crypto asset class, quadrant four.

The question of "What is blockchain?" and "How is it useful?" are changing to "What is this cryptocurrency?" or "How can I trade and custody crypto?"

There is a shift in the institutional world to own and trade this asset class. Articles and books have been written about why crypto is a new asset class.

Indeed, if you believe my portrayal of crypto values in the genesis quadrant, then you can see crypto has characteristics of many asset classes and therefore deserves to be classified as its own. There is a lot of demand in this space, unfortunately liquidity is fragmented and the infrastructure is designed mostly for retail users.

We will see faster developments in this quadrant as use-cases and value of crypto-asset increase. The requisite infrastructure can be accomplished without the need of blockchain, so we can likely see adoption on more near-term timeframe.

Again, this is but the view of one person. Even my own views are developing and changing as I learn from experimentations and conversations, but I'm about to go head first into quadrant four.

Colorful ties image via Shutterstock 


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.