Produced by: OKG Research Authors: Wang Lele, Bi Lianghuan, Jiang Zhaosheng

In the past year, the physical world has experienced a “death” "Globalization" is in constant dispute. In the digital world, a new globalization model is gradually emerging.

In 2024, general elections will be held in and regions with more than half of the world’s population. The Russo-Ukrainian war has entered its third year, and the war between Kazakhstan and Israel continues to spread. In his new book Nexus, Israeli historian Harari attributes the secret of human civilization to the ability to tell stories. Globalization, as the dominant narrative, has experienced its peak period from the end of the 20th century to the beginning of the 21st century. However, they themselves took the lead in opposing the win-win narrative of globalization led by developed countries: the dividends brought by globalization are not universally beneficial, and in the economy The slowdown in growth has highlighted problems such as the widening income gap and asset price bubbles, and further divided the rich and the poor.

At the same time, a quietly rising digital wave is taking a completely different direction. According to statistics from the Ouke Cloud Chain Research Institute, as of now, crypto assets have been legalized in more than half of the countries and regions (119 and 4 British territories). Since El Salvador became the first country in the world to use Bitcoin as legal tender in 2021, many third world countries such as Cuba and the Central African Republic have followed suit. At the beginning of 2024, the United States approved 11 Bitcoin spot ETFs, and Bitcoin entered the mainstream financial market. In addition, Trump made ten major commitments to crypto-assets during the election year, including establishing a strategic reserve of Bitcoin, setting off a new wave of sovereign adoption of crypto-assets and further promoting the globalization of crypto-assets.

Developed countries' "self-opposition"

Globalization was once regarded by developed countries as shaping the global economy Tools of order, however, they who were the first to advocate globalization have now become the first voices to question this system. The cross-border flow of capital and industry has promoted the improvement of global production efficiency and helped developed countries complete the transformation from manufacturing to high value-added technology and financial services. At the same time, lower-cost goods have promoted consumption upgrades.

However, this process also laid deep structural contradictions, causing the original beneficiaries to begin to reflect on the costs of globalization. The most obvious of these is the uneven distribution of wealth. Taking the United States as an example, its Gini coefficient increased from 34.7% in 1980 to 41.3% in 2019, and income inequality increased by 19%. Although it fell back in 2020, it has since risen back to highs, the income distribution problem remains severe, sounding the alarm for the globalization model.

Graphic Gini coefficient of the United States (1980 to 2022)

In addition, developed production dominance declines: BRIC China's global GDP share jumped from 7.7% in 2000 to 37.4% in 2023, the US share dropped from 30.5% in 2000 to 24.2% in 2023, and the EU dropped from 26.6% to 17.5%. Looking at the manufacturing industry alone, developed countries' share of global manufacturing dropped from 70%+ in 2000 to about 45% in 2023, while the share of manufacturing added value in East Asia and the Pacific climbed from 31.9% in 2007 to 2021 46.5% of the year. This imbalance has intensified global competition and uneven distribution, and has become a microcosm of the deep-seated contradictions in the globalization model.

At the same time, public debt problems in developed countries are increasingly intensifying, and high public debt has further exacerbated the hidden worries of globalization. The U.S. debt-to-GDP ratio has risen from 58% in 2000 to 98% in 2023. Japan has maintained above 200% for a long time, and will be close to 260% in 2023. Debt pressures undermine flexibility as fiscal deficits and interest payments surge. These economic structural problems highlight the imbalance in benefit distribution and risk transfer brought about by globalization, which is forcing developed countries to re-examine their dominant globalization system and its sustainability.

Figure 2024 Global Public Debt/GDP

As the deep-seated contradictions of globalization become more apparent, the uneven distribution of capital and wealth has deepened social rifts. Historically, war has often been an extreme means to resolve economic conflicts and disputes, especially when the international system is out of balance or the economic structure encounters a major crisis. The Marshall Plan after World War I promoted the reconstruction of Europe and became the starting point of postwar economic globalization; during the Cold War period after World War II, the arms race and technological innovation between the East and the West accelerated the revolutionary transformation of science and technology and industry. Although war brings great destruction, it often leads to new orders and the restructuring of global systems.

Today, we stand in the wave of digital change and see technological innovation gradually replacing the previous armed confrontation and becoming one of the new driving forces for economic and social development. one. In this new context, the approach to globalization is also undergoing profound changes: it is no longer simplyexpansion, but a process of continuous self-correction and evolution. Innovation is opening up an unprecedented "new continent" for the global economy.

The "New World" of globalization

At the end of the 15th century, Columbus originally wanted to search for gold and spices. The Asian continent unexpectedly discovered a new American continent full of opportunities.

Bitcoin was born 16 years ago. This is defined in the white paper as "a peer-to-peer electronic cash system" to solve the problems caused by relying on traditional financial credit intermediaries. fragility and other systemic issues. However, this initially seemingly "subversive tradition" concept has already changed. Bitcoin is no longer just "electronic cash", but is regarded as "digital gold", and has even been discussed as a strategic reserve. The crypto market represented by Bitcoin is gradually penetrating the global financial landscape: from a niche testing ground for geek punks, it has gradually evolved into the "New American World" of the financial world.

This "New World" is different from traditional globalization. It not only breaks through the limitations of geographical boundaries, but also breaks through the inherent model dominated by one power center. It does not rely on a single economy or power, but establishes a new trust system through global consensus mechanisms and technical means, which is the foundation of a new type of globalization.

In the context of the intensifying "de-globalization" trend of the real economy and the escalation of geopolitical tensions, the global economy is under pressure, and the encryption market is gradually becoming a new " Decompression valve". Take Bitcoin as an example. In the performance ranking of major asset classes in 2024, Bitcoin ranks first with an annual return of 128%. From a market value perspective, as of November 12, 2024, Bitcoin's asset market value has surpassed silver, becoming the eighth largest asset in the world. This not only highlights the new status of crypto assets in the traditional financial system, but also reflects its potential for risk aversion and value-added in a complex economic environment.

Figure 2024 ranking of asset class return rates

This is not only the result of capital pursuit, but also a manifestation of the borderless nature of crypto assets that promotes the formation of a new global market. In the context of geopolitical conflicts and restricted capital flows, cryptocurrency has demonstrated its unique economic function of “decentralization”. Traditional economic systems are often deeply influenced by geography. For example, the SWIFT system (a communication protocol between global banks) is often used as a gaming tool between banks during the sanctions process. Suffering SWIF in RussiaAfter sanctions, some economic activity shifted to crypto assets. It demonstrates the flexibility and decentralization characteristics of crypto assets in responding to international conflicts. Russian President Vladimir Putin immediately signed a law that recognized crypto-assets as "property" and established a tax framework for their trading and mining, giving them legal status. For another example, in 2022, Ukraine raised more than $150 million in donations through crypto assets, proving its rapid response and transnational capital flow capabilities in crises.

Looking deeper, cryptoassets are driving a new economic model that does not rely on power centers. This system based on technological trust replaces traditional institutional trust. Unlike the fragility of the traditional financial system - where financial crises, bank failures, currency devaluation and other issues often expose the shortcomings of power centers - crypto-assets fundamentally reduce these risks through technical means. In this world of trust dominated by algorithms, real power no longer comes from a single authority, but from the joint participation and guarantee of countless nodes around the world. Just like the Bitcoin network has about 15,000 nodes, which changes with the activity of the network and user participation, this decentralization greatly reduces the risk of "single point of failure".

This trust mechanism also provides a new foundation for global collaboration. The 24-hour uninterrupted trading and borderless attributes of encrypted assets break through the restrictions of days, holidays and national borders. Crypto-assets are providing the possibility to bridge the rifts and reconstruct order in a world divided by deglobalization.

As the saying goes, everyone who wants to make the last copper plate will never get what they want. The "globalization" of the physical world is like a thing of the past, and attempts to squeeze out the last profit will often eventually lead to imbalance and rupture of the system. Today's encryption market seems to have given a brand new answer.