At the end of last year, I wrote an article about three unfocused product trends in 2020. Before forecasting 2021, let’s take a look at whether the previous forecast has been realized.
1. Smart contract insurance
The forecast is accurate.
In 2020, the effective insurance amount of Nexus Mutual increased from 1.1 million US dollars to 56.4 million US dollars, an increase of 50 times in one year!
(Change in Nexus Mutual insured amount)
In 2020, the DeFi protocol lost more than $93 million due to a large number of hacking attacks-bZx, dForce, Opyn, Harvest Finance, Value DeFi, Origin Protocol, Akropolis, Pickle Finance, etc.-and Nexus successfully paid for it in the bZx hacker The first claim. At present, the funds locked in the smart contract have been 14 billion US dollars. The DeFi project is a huge reward for hackers, and more risk-averse individuals and funds want their deposits to be protected.
Another major revelation brought by these hacks is that compared with before, smart contract audits can no longer explain much. Auditors have heavy tasks and miss vulnerabilities under the pressure of deadlines, and they have not audited other types of vulnerabilities, such as lightning loan attacks. Looking to the future, I hope to see the project allocate some funds to pay for expensive audits to incentivize users of the insurance pool to purchase insurance for their projects.
2. Joint curve
The forecast is accurate.
Compared with order book DEX (decentralized exchange) and Dutch auction DEX, AMM-based DEX clearly wins. Especially Uniswap, which occupies more than half of the DEX market. AMM-based DEX is taking the lunch of CEX (Centralized Exchange), and CEX feels the threat brought by the joint curve.
We have also seen the rise of custom AMM joint curves, which are designed to solve specific trading use cases. Curve is focused on the application of stablecoins to stablecoins and Bitcoin swaps on Ethereum. It uses a mixed constant product joint curve to minimize the slippage of trading pairs. The company provides fixed-term loans with fixed interest rates and uses a logarithmic curve to minimize interest rate slippage in zero-coupon bond transactions.
3. Wallet user experience
The prediction failed.
More specifically, I predict that contract-based accounts will have a major user experience improvement over externally held accounts, and we will see explosive growth of smart contract wallets in 2020. However, the gas price at that time was only a few gwei. Then in summer, the gas price soared to more than 100 gwei. This makes the cost of deploying a smart contract wallet for each new user up to $20, and Argent will spend $584,000 monthly to subsidize users’ transaction fees.
Given that gas prices will not drop in the short term, Metamask’s dominance will remain. The use of DeFi will also continue to be driven by giant whale users who are satisfied with the behavior of encrypted native wallets.
Three major product trends that have not been watched in 2021.
1. Encryption art
DeFi supremacists currently believe that NFT is still a toy, reminiscent of how BTC supremacists rejected dApps in 2018. But under this appearance, there is a very enthusiastic community of early artists and collectors-how did I know this first-hand information? Because my Twitter bot that monitors NFT receives nearly 100 notifications every day. In addition, the encryption art industry has been quietly growing at an annual growth rate of more than 50% until December this year.
Beeple is a 3D artist with more than 1.7 million followers on Instagram. He recently learned about NFT and tokenized some of his daily art works. One of the works set a record for the most expensive encrypted artwork at a price of US$777,777.77. Beeple is currently the top encrypted artist with a total value of nearly US$6.5 million.
There have been many articles discussing the opportunities of crypto art in depth, but I will briefly summarize why I think crypto art will be popular. First, the blockchain makes it easy to verify the authenticity of the original artwork, while traditional artworks such as Picasso’s paintings are difficult to forge and difficult to verify. Secondly, NFT opens a new business model for digital artists, because they can now sell individual works without relying on commissions from commercial customers. Third, crypto art is in a good position to capture the shift in the taste of art from baby boomers to millennials. Finally, crypto art is a potential way for mainstream adoption of blockchain and cryptocurrency.
At present, there are 3 artists whose artworks are worth more than US$1 million and 43 artists whose art is worth more than US$100,000; I predict that by the end of 2021, this number will far exceed the present.
2. Predict the market
One big news about 2020 that the mainstream media did not report is that the polling agency believes that Biden has an 85-90% chance of winning the election, while the probability of predicting the market is about 60-65%. In hindsight, the election was much fiercer than expected, and the polls were completely wrong. To make matters worse, polling is a multi-billion-dollar industry, and hundreds of millions of dollars in campaign funds are wasted because of inaccurate polling data.
In a society that does not trust mainstream media, as a source of information, we have been optimistic about the prediction market for a long time. But in the previous period, the timing seemed too early because there was very little trading volume on the market; now, the prediction market has reached an inflection point, with trading volume reaching tens of millions of dollars. Not only do I expect to see more markets reaching tens of millions or hundreds of millions in the next year, but I also hope to see more media use prediction markets as information sources to report on issues such as Eth2 Phase 0.
3.DeFi derivatives
From 2018 to 2020, we have seen the foundation of DeFi gradually consolidated. This includes borrowing/borrowing agreements (such as Compound, Aave), exchanges (such as Uniswap, Curve, Balancer) and asset issuance (such as USDC, DAI, WBTC). While these fundamental levels continue to grow, the significant liquidity at these levels enables the establishment of a whole new level of derivative financial instruments, including structured products, index ETFs, options, futures, swaps, and so on.
In traditional finance, the derivatives market is many times larger than the spot market. The market value of Blackrock is US$100 billion, and the total market value of structured products is estimated to be 5-10 times higher (US$500 billion to US$1 trillion). For DeFi, this means that major opportunities for derivatives and projects such as DeFi Pulse Index, Hegic and Barnbridge are just the tip of the iceberg.
