Investing in MENA’s crypto future: Opportunities and challenges | Opinion

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As a researcher with over two decades of experience in the financial industry and a keen interest in blockchain technology, I have had the privilege of witnessing the remarkable growth and transformation of the digital asset landscape, particularly in the Middle East. The region’s rapid ascension as a thriving hub for web3 innovation has been nothing short of astonishing, and attending events like Satoshi Roundtable and Token 2049 in Dubai was an exhilarating experience that reinforced my conviction in this space.

In the Middle East, there’s been impressive progress with technology-literate citizens, forward-thinking regulations, and bold government projects fostering the growth of blockchain and cryptocurrency innovation. This year, I got to attend both the Satoshi Roundtable and Token 2049 in Dubai, two notable events on the international web3 calendar. These conferences displayed the most recent achievements and advancements within the web3 sector, while also highlighting the region’s rapid emergence as a bustling hotspot for web3 activity. The excitement in the atmosphere was tangible.

Over the past few years, the MENA region has gained a notable reputation for organizing top-tier events, drawing in the most innovative minds within the web3 sector. Since its establishment seven years ago, Lemniscap has been proactive in spotting and supporting emerging trends and promising web3 solutions, from both an infrastructure and consumer standpoint.

In simpler terms, the countries in the Middle East and North Africa (MENA) region offer excellent opportunities for investment in emerging fields, and as blockchain technology advances, it’s expected that there will be a surge of innovation and disruption in web3 projects within this region.

Phygital: The intersection of blockchain and physical assets

In my mind, one of the most intriguing investment plays in the Middle East is the ‘Phygital’ space, representing the confluence of blockchain technology with physical assets. This convergence has the potential to revolutionize industries such as real estate, art, and luxury goods—three sectors that are already booming across MENA. Blockchain’s immutable ledger and smart contract functionality provide a powerful framework for creating transparent and secure systems for managing and trading physical assets. For instance, tokenizing real estate on blockchain platforms allows for fractional ownership, making it easier for investors to buy and sell shares in high-value properties.

In a region where real estate investment is a major driver of wealth, particularly in countries like the UAE and Saudi Arabia, this is opening up a world of opportunities for smaller investors who may not have had access to such high-value assets previously. We’ve seen how the UAE’s real estate sector is benefiting from deployments of blockchain technology, with properties being bought and sold using Bitcoin (BTC), which provides international investors with a more seamless and transparent way to invest in MENA property markets. Additionally, by tokenizing art and collectibles, owners can secure proof of authenticity, trace provenance, and even trade portions of high-value pieces—not only democratizing access to valuable assets but also reducing fraud, a key concern in these markets.

The potential benefits of the Phygital realm are significant, yet the development of a cohesive system that smoothly combines digital and tangible possessions is ongoing. Establishing secure and authentic links between blockchain-based digital tokens and their associated physical items can prove difficult, necessitating robust tracking systems like IoT devices or RFID technology. Additionally, legal uncertainties and the absence of standard regulations for tokenized physical assets may temporarily limit expansion. However, as these matters are addressed, the future growth pathway for Phygital is projected to be broad.

Web3 gaming

As a crypto investor, I’m excited about the proactive approach governments across the MENA region are taking to nurture innovation within the gaming sector. They seem to grasp the importance of being ‘first movers’ in accommodating web3 gaming platforms, which are rapidly gaining traction. These innovative platforms offer players a unique advantage: real ownership over in-game assets through Non-Fungible Tokens (NFTs) and play-to-earn models, allowing us to potentially earn while we play!

In essence, Dubai has firmly positioned itself as a premier location for advancements in web3 gaming, propelled by the unveiling of The Dubai Program for Gaming 2033, aiming to generate around 30,000 jobs in this expanding field. Gaming, particularly when it comes to cryptocurrency adoption, shows immense potential among consumers, yet it poses one of the most intricate challenges to master. Web3 gaming integration with blockchain technology, marred by slow transactions, exorbitant gas fees, and cumbersome onboarding processes for non-crypto users, still impede the overall user experience. These obstacles make it tough for traditional gamers to immerse themselves in web3 games, thereby restricting its widespread adoption.

For example, high Ethereum transaction fees often deter in-game purchases or NFT trades, while complex wallet setups discourage casual users. However, with advancements such as Layer-2 scaling solutions and gasless transaction models, these issues can be resolved. Simplified onboarding through user-friendly wallets and seamless integration with blockchain infrastructure can significantly improve user experiences. Once these obstacles are overcome, web3 gaming can attract millions of players, unlocking massive opportunities for growth and player-owned economies. Looking ahead, we are excited to pursue exemplary investment opportunities that expand the realm of onchain gaming.

DePINs

As a crypto investor, I find myself drawn to the untapped potential of decentralized physical infrastructure networks in the web3 landscape across the Middle East. This region, rich in energy resources, presents an intriguing canvas for DePIN (Decentralized Physical Infrastructure Networks) deployments. By leveraging blockchain technology, we can create decentralized networks that not only support our existing physical infrastructure but also open up a world of unique opportunities.

As an analyst, I find myself in a strategic position given the significant investments Middle Eastern nations like Saudi Arabia and the UAE are making in renewable energy, aiming to reduce their reliance on oil. This shift opens up a prime opportunity for Venture Capitalists (VCs) to support projects that could revolutionize energy management and distribution within this region.

As a researcher, I am excited about the potential of DePIN, yet I recognize that its success in the MENA region hinges on our capacity to construct and sustain resilient infrastructure networks capable of hosting decentralized applications. This endeavor necessitates substantial investment in physical assets and technology. The financial burden of building such infrastructure will be considerable, and the maturation process may span years. However, I firmly believe that the pathway to success is clear if we are willing to make these investments and persevere through the challenges.

Viewed from a venture capital standpoint, the Middle East presents a continuous stream of extremely appealing investment prospects within the realm of blockchain technology. The emulation of strategies like the UAE’s Digital Government Strategy 2025 throughout the MENA region could significantly boost digital and blockchain adoption across key government agencies. This widespread integration would likely create a positive impact, cascading through the broader tech industry and investment landscape.

Roderik van der Graaf

Roderik van der Graaf established Lemniscap in the last quarter of 2017. Since 2014, he has been offering strategic counsel to fledgling blockchain companies. Lemniscap is an investment firm designed for institutional investors and focused on the emerging blockchain sector. Over a career spanning more than two decades, Roderik has built up a substantial portfolio of work in various areas of finance, having served at some of the world’s leading financial institutions.

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2024-08-30 14:18