Original Title: “2021 Encryption Industry Forecast”
Written by: Paul Veradittakit
Translation: Lu Jiangfei
This issue of VeradiVerdict will be the last issue of 2020, and this year is finally over! 2020 is an ill-fated year. The COVID-19 pandemic has changed our way of life, changed the way people conduct business, changed the way of transactions, and changed the way of interacting with others. Of course, in the past year, the adoption of cryptocurrencies by institutional investors and retail investors has also accelerated. In addition to the themes of asset diversification/value storage and enhanced platform accessibility, we have also seen tremendous progress in blockchain scalability and encryption applications, especially the rapid development of decentralized finance.
Inspired by the annual forecast of Fred Wilson of Union Square Ventures, I reflected on my industry forecast for 2020, and now I decided to make another forecast for next year. This way, I can dig into the past. Whether the idea has been developed, on the other hand, it can also dig deeper into some areas of future interest. I previously published a prediction analysis of the crypto industry on Coindesk, but now I want to renew some updates-especially at this special moment, the price of Bitcoin has reached a new all-time high: $28,200!
Again, I wish you all a happy holiday and a happy new year. I believe that 2021 will be an unprecedented year in the blockchain/encryption industry!
For the cryptocurrency industry, 2020 is an exciting year. In particular, the value of Bitcoin and decentralized finance (DeFi) has increased significantly, and the central bank digital currency (CBDC) has also taken an important step to build a decentralized The technology of dapps is also much more advanced than in the past. In the cryptocurrency industry, I think there will be seven areas that will be further developed in 2021:
1. Bitcoin : Bitcoin has soared from approximately US$7,000 in January 2020 to nearly US$30,000 at the end of the year. You will see daily users and institutional investors becoming more and more interested in Bitcoin, so Bitcoin in 2021 Prices will continue to soar.
2. Central bank digital currency : We have seen important progress in central bank digital currency research in 2020. For example, China has launched many important pilot tests, and many European banks and the Federal Reserve have also begun to conduct in-depth research on central bank digital currencies. I hope to see more central bank digital currency pilot projects in 2021, and even hope that China or Japan can fully launch central bank digital currencies.
3. Decentralized finance : There is no doubt that 2020 is a year of decentralized finance. It seems that dozens of DeFi protocols can make hundreds of millions of dollars in profits overnight. People are getting huge returns from liquid mining and DeFi. We are likely to see more large-scale decentralized financial projects emerge in 2021. .
4. Cryptocurrency adoption : From a financial point of view, cryptocurrency is becoming more and more profitable, which will also “stimulate” more and more people to use cryptocurrency in retail applications. On the other hand, large projects such as the central bank’s digital currency and Facebook’s Diem stablecoin (formerly known as Libra) have also begun to attract public attention. Taking these factors into consideration, 2021 is likely to be a critical year for mainstream cryptocurrency adoption.
5. Regulatory regulations : As the function of cryptocurrency gradually expands to more retail and daily use cases, I hope to see more regulatory measures introduced by regulators, which can also guide the outline of cryptocurrency as a store of daily value. In 2020, the U.S. Internal Revenue Service asked taxpayers for the first time their financial records using virtual currencies. With the introduction of central bank digital currencies and more stable currencies, governments will pay more attention to the use and supervision of cryptocurrencies in 2021.
6. Acquisitions and mergers : According to research data released by Pantera, the average transaction size of mergers and acquisitions in the cryptocurrency industry in 2020 has increased from US$19.2 million in 2019 to US$45.9 million in 2020. More and more cryptocurrency companies will join the “unicorn club”, Coinbase will conduct an initial public offering (IPO) in 2021, and it is expected that more companies will begin to explore overseas backdoor (SPAC) as a way to go public . As more and more crypto projects emerge, corporate development and mergers and acquisitions will become a major trend in the cryptocurrency industry in 2021.
7. Digitalization of private assets : As financial institutions become increasingly interested in cryptocurrencies, they will begin to pay attention to how to use blockchain technology and cryptocurrencies to better support the existing economy. For example, the inefficiency and security of traditional securities registration are incredible. Supported by cryptographic signatures and automation, these problems will be effectively alleviated. In 2021, I look forward to seeing more institutions begin to explore the potential of asset digitization.
To say the least, a lot has happened in 2020. In terms of blockchain and cryptocurrency, we have also seen several key developments: Bitcoin block reward halving, the rise of liquid mining, and the explosive growth of some decentralized finance (DeFi) applications. Chain interoperability tools have also become more powerful, and so on.
With the advent of 2021, it is expected that tensions between countries will gradually ease, the new crown virus epidemic will also be eased, and the impact of related market fluctuations will gradually decrease. I look forward to seeing further innovation and widespread use of blockchain technology. Influence is expected to become more diverse. On the one hand, the blockchain and cryptocurrency industries are becoming more and more complex, but on the other hand they are more accessible. In terms of building a decentralized, user-oriented financial system, the vision of the crypto community will be greatly broadened.
2020 forecast results
Next, I will review the crypto industry predictions I made at the end of 2019. In addition to the summary of the development of the relevant industry or trend in 2020, I will first give a summary of the accuracy of the forecast, so that everyone can understand whether my forecast last year is reliable. Specifically, in the encryption industry forecasts I made at the end of 2019: one is the least accurate and five is the most accurate.
Diem (formerly Libra) / Novi (formerly Calibra) : Considering the series of major events (in a regulatory sense) that Diem has experienced in 2019, I previously expected that 2020 will be a major challenge for Facebook’s digital currency project. An exciting year, including building reputation, dealing with regulatory issues, and beginning to attract people to adopt. But the actual situation is not the case. In 2020, the release of Diem was postponed, and has been under public attention during the past year. In April 2020, the Libra Association announced that it will make major changes to its structure to resolve some major regulatory issues. In addition, the Libra Association also decided to rename the project from Libra to Diem, and rename the wallet from Calibra to Novi. Recently, key figures in the plan claimed that the Diem digital currency platform could be launched as early as January 2021. Even if Diem did not attract public attention in 2020, they must have done some key development work behind the scenes. In addition, with the launch of groundbreaking federal antitrust lawsuits against Facebook, Instagram and WhatsApp, the Diem Digital Project is likely to attract more attention in the coming months.
Accuracy: 3
Bitcoin block reward halving : In May 2020, the Bitcoin block reward was halved from 12.5 BTC to 6.25 BTC. This event has undoubtedly attracted widespread attention, but the exact impact of the block reward halving event on the price of Bitcoin It still seems unclear. The market’s response to the block reward halving event also seems to be relatively flat, and just a few days after the block reward halving, the Bitcoin price even dropped a bit. Some experts have analyzed that it may be because the price has been “credited” in advance before the Bitcoin block reward is halved. In other words, since investors expect the price of Bitcoin to rise before the block halving, they “invest” this expectation before the block reward halving event occurs, causing the price of Bitcoin to appreciate before the halving. So that after the event, there is no obvious price change. But even so, the block reward halving will undoubtedly have a major impact on Bitcoin’s long-term prospects and macro narrative. In fact, traditional investors have been questioning Bitcoin’s potential for a long time.
Accuracy: 4
Blockchain games : Unfortunately, throughout 2020, we have not seen too many innovative developments in the field of blockchain games, and of course there are not too many blockchain games released to the public. At present, because blockchain games are still relatively complex and the running time is usually very slow, many game developers still need to face a lot of technical friction in building on-chain games. However, the market’s interest in the concept of blockchain games has not faded. Many game creators are exploring how to use non-fungible tokens (NFT) as valuable digital assets in games. Many game studios including Pixelmatic, Ubisoft, and Atari have claimed that blockchain technology may play an important role in their games in the future, and they have begun to actively explore this concept. So far, the most promising and well-known blockchain game should be considered “The Sandbox”. This game is similar to Minecraft. Users can monetize digital assets through the blockchain. It is reported that The Sandbox has announced a partnership with Atari and Square. Major game developers such as Enix establish partnerships.
Accuracy: 2
DeFi growth : If 2020 is the year of DeFi, not many people will object. There is no doubt that one of the biggest trends in the cryptocurrency industry in 2020 is liquidity mining. Simply put, liquidity mining essentially allows users to provide their own assets as protocol liquidity in exchange for protocol governance tokens. Over time, as people become more and more interested in the protocol, the value of related governance tokens will continue to increase, which will usually bring rich returns to users who provide liquidity and encourage them to continue to support the DeFi protocol. In 2020, the issuance value of Compound, Balancer, Yearn.Finance, and more DeFi protocol governance tokens have all increased significantly. In addition, the annualized return on investment of governance tokens provided by these platforms for liquidity providers can even reach 100-200%. In January 2020, only about 1 billion US dollars of funds were locked on the DeFi platform, but by August, this number had soared to 15 billion US dollars. Interestingly, MakerDAO is still the decentralized financial platform with the largest lock-up value. Although Compound and other DeFi platforms have won the first place many times in 2020, MakerDAO has the most long. Users are beginning to benefit from the financial system owned by the decentralized community, and it is expected that this excitement and rapid growth will continue until 2021.
Accuracy: 5
Central bank digital currency : The new crown virus epidemic has already had a huge impact on the economic development of the world’s largest economies, and this impact may continue. Therefore, people have begun to raise some questions about the government’s economic policy capabilities and intentions. They feel that there may be some problems and difficulties in the performance of the existing economic system in terms of efficiency. Although 2020 has not seen the official issuance of central bank digital currencies in the true sense, as more and more governments, banks and research institutions explore how cryptocurrencies can improve our financial system, this field will definitely cause more attention. The People’s Bank of China is conducting a pilot digital currency for the central bank and has completed more than 4 million transactions and a transaction volume of 2 billion yuan. In October 2020, a number of financial institutions, including the Bank of Canada, the Bank of England, the European Central Bank, and the Federal Reserve Bank of the United States, jointly issued a report that outlined some key features necessary for central bank digital currency issuance. Has been actively working on the development of the digital dollar.
Accuracy: 4
Infrastructure and Web 3.0 : In 2020, we have witnessed the launch and release of several key infrastructure projects in the blockchain field. These projects will support a large number of decentralized applications in the future. One of the largest activities should be That is, the Alchemy application program interface is online, and the Alchemy application positions itself as the “blockchain version of AWS”. The infrastructure they build can be easily deployed and managed on Ethereum nodes. Currently, it can promote $7.5 billion in on-chain transactions each year. Other Web 3.0 infrastructure tools include:
- Keep Protocol, which mainly provides developers with DAPP off-chain storage services;
- API3 is an oracle that builds a native blockchain together with the API ecosystem, and aims to bring DeFi and DAPP information returns to API providers;
- Oasis Protocol, which builds tools to support blockchain to help developers safely analyze data and ensure user privacy.
In general, given the growing interest in decentralized applications in the cryptocurrency market, I hope to see more developers use these technologies to reduce the complexity of building DAPPs, while expanding to explore more use cases.
Accuracy: 4
Regulatory Obstacles : In general, our attention and discussions on regulating cryptocurrencies have decreased throughout 2020. This may be due to the impact of the new crown virus epidemic. Government financial institutions may focus on other areas (the actual situation is also true) . However, some government agencies still took more stringent crypto regulatory actions in 2020, indicating that they are considering cryptocurrencies and the role that cryptocurrencies may play in the modern American economy more seriously. In 2020, the U.S. Securities and Exchange Commission imposed a fine of approximately $40 million on cryptocurrency companies, while the U.S. Commodity Futures Trading Commission “only” imposed a fine of approximately $9 million on cryptocurrency companies (although the CFTC’s fine The amount is not as much as the US Securities and Exchange Commission, but the highest fine in the history of the institution). It is worth noting that most of the sanctions and penalties against cryptocurrency companies are for initial coin offerings (ICOs) and some gray areas. These gray areas are actually judging whether certain tokens should be considered securities or commodities. For example, the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission jointly imposed a fine on the cryptocurrency portfolio application Abra because Abra allows users to obtain synthetic exposure to the traditional market. In addition, the U.S. Commodity Futures Trading Commission also sued BitMEX, claiming that The exchange provides users with illegal encryption services. However, there are also some improvements in 2020 regulators, such as the US Securities and Exchange Commission proposed to provide a “safe harbor” for cryptocurrency entrepreneurs.
Accuracy: 3
Look to the future
Throughout 2021, I expect to see many promising innovations and growth in the following seven areas.
1. As the number one cryptocurrency, Bitcoin will continue to grow tremendously in terms of value and popularity . Bitcoin hovered in the $7,000 price range at the beginning of 2020, and then climbed to a record high above $28,000. Payment giants like PayPal and Square are making it easier for ordinary users to buy Bitcoin, and institutional investors are also showing unprecedented interest in Bitcoin. In 2019, the price of Bitcoin rose by 90%, and in 2020, the price of Bitcoin soared by 170%. Now we are ushering in 2021. I look forward to seeing the value of Bitcoin gain more growth and become more widely used.
2. Governments of various countries will explore central bank digital currencies (CBDC) more seriously. We may see the emergence of central bank digital currencies in 2021 . As mentioned above, some governments and cross-government agencies have begun to take digital currencies seriously, and they have begun to conduct in-depth case studies and launch pilot projects to explore how central bank digital currencies can provide better support for financial services and help local economic development. Not only that, as Facebook’s digital currency Diem is coming soon, and other digital currency projects such as Celo launch more products and features, stablecoins will serve as a viable remittance tool to stimulate the interest of more government agencies and Gain greater appeal in the market. China’s digital renminbi (DC/EP) pilot project is progressing very smoothly. In 2021, the scale and availability of digital renminbi may be further expanded, and may even be faster than we expected. In Japan, 30 local banks have begun to study digital currencies, and the country may even achieve full digital currency issuance in 2021. In the United Kingdom, the Bank of England is studying and evaluating how to provide retail central bank digital currencies, and may start trial operation in 2021.
3. The value of DeFi will continue to show explosive growth . In 2020, we see that the total lock-up volume of DeFi has increased by 15 times, which is incredible! In fact, a large part of the reason for this growth is driven by the trend of liquid mining. This trend was first initiated by key players in the DeFi market such as Compound and Balancer, who used the DeFi protocol to govern token incentives. Users provide liquidity in exchange for governance tokens that rapidly appreciate over time. In addition, the crypto community also sees another trend, that is, developers will fork existing protocols and platforms to build other custom use cases] or create protocols and platforms with stronger decentralization and privacy, such as :
- Cream Finance is forked from Compound;
- Swerve Finance forks from Curve.
Setting up a DeFi protocol is easier and more profitable than ever before, so I look forward to seeing more projects in this field, and hope that the total lock-up volume on the DeFi platform can increase again. Existing DeFi platforms have seen amazing capitalization trends, which can also enable them to support more unique functions, such as providing larger loans, developing differentiated loan products, and so on.
4. Cryptocurrency will be widely adopted . Even the most demanding critics of cryptocurrencies and digital currencies are now beginning to see that these technologies can generate immense value, and the explosive growth of the DeFi protocol has surprised many people. In the Latin American and Southeast Asian markets, more and more people use cryptocurrency for daily financial transaction settlement. In addition, as the crypto community proposes more primitives and tools for building DAPP, developers will be able to provide more attractive services for daily consumption. Considering the integration of all these factors, 2021 may be a crucial year to promote the adoption of mainstream cryptocurrencies. With the widespread adoption of cryptocurrencies by the mainstream, we will also begin to see more and more transparent regulatory regulations introduced-especially in cryptocurrency retail use cases. Not only that, when cryptocurrencies are widely adopted, regulators will begin to pay attention to this area. So far, the vast majority of cryptocurrency regulations have focused on two aspects:
- Distinguish the security and commodity attributes of cryptocurrencies;
- Follow the appropriate guidelines of the US Securities and Exchange Commission and the US Commodity Futures Trading Commission.
Cryptocurrency has not been used for daily value storage. There is not much work done in this area. In addition, how to use stablecoins and other digital currencies for retail, subsidies and other services is also worthy of in-depth study.
5. Governments will be increasingly interested in how cryptocurrency transactions will affect taxation . In terms of cryptocurrency taxation, the U.S. Internal Revenue Service (IRS) has begun investigations into related trading activities. Of course, this is also due to the fact that more and more people like to use cryptocurrency. You will find that cryptocurrency is no longer limited to trading, lending or investment, but has begun to penetrate into the cash Hull Credit in daily financial activities. business. Therefore, 2021 may see tax authorities carry out more supervision work.
6. In 2021, there will be several cryptocurrency acquisitions, several “unicorns”, IPOs and more backdoor listings . Coinbase is expected to be listed in 2021. Together with Coinbase, the market capitalization of some other well-known cryptocurrency companies will also reach the “unicorn” level, such as Circle, Binance and Ripple. In addition, crypto companies with a value of at least several hundred million U.S. dollars may explore listing through “backdoor” methods. The average transaction size of mergers and acquisitions in the cryptocurrency industry in 2020 has increased from US$19.2 million in 2019 to US$45.9 million in 2020. This trend will continue to rise in 2021. As more and more people become interested in the field of cryptocurrency, we will see the rise of more cryptocurrency projects. Naturally, through more acquisitions, many crypto projects can enter the “unicorn club”, the cryptocurrency business The development volume will also increase sharply in 2021. Not only that, the world’s leading financial institutions will become more and more curious about cryptocurrencies, which will “stimulate” a large inflow of institutional capital. Therefore, mergers and acquisitions and business development will become the main axis of the cryptocurrency industry in 2021.
7. Private assets will gradually begin to be digitized . Decentralization and cryptocurrency can bring purer financial value, so large financial institutions also hope to explore the huge potential of basic blockchain technology to better support the existing financial system. In addition to the pure financial value generated, large financial institutions are also beginning to see the huge potential of basic blockchain technology and some of the key ways to support the existing financial system. The efficiency of traditional securities ownership registration is extremely low, some compliance supervision even requires manual operation, and the transaction process is long and slow. Using blockchain and encryption technology to digitally process traditional securities ownership registration can make the cost lower and the operation safer. , Because the key that can be encrypted and verified can provide a more reliable record of ownership, and digitization can also bring a faster workflow and a higher degree of automation. Of course, this change may be slow, because innovation always brings challenges to the traditional financial paradigm, but it should be noted that innovation will also bring considerable value to the traditional financial industry, which is why banks are also beginning to pay attention to related technologies. one of the reasons.
Final thoughts
In 2020, we may have seen the darkest “black swan”, but even so, the cryptocurrency industry has still achieved incredible development, innovation and growth. 2021 is coming, and I hope that the world will return to a “normal” state as soon as possible. The next few months are crucial, because the following market changes will have a huge impact on blockchain developers and ordinary users. Although the challenge is inevitable, I am still very excited about 2021.
More and more ordinary users will be exposed to digital currencies. Some countries have begun to explore central bank digital currencies. Blockchain technology will become faster and better. There is no doubt that we are ushering in an important turning point in the cryptocurrency industry. Expect to see a brighter, more accessible, and even more decentralized financial future in a few years.
Source link:
