If you are an investor in the crypto space or just interested in keeping tabs on how this industry is evolving, one major interest would be how blockchain technology is being adopted across all industry segments across the globe. Billions of dollars are being invested annually in what skeptics have called “nothing more than a glorified spreadsheet”, but the level of interest far surpasses this uninformed critique. And what is more, every acknowledgement of blockchain is just a bit more awareness for Bitcoin and its altcoin brethren, and with awareness, more appreciation of their value, as well.
Forbes recently put together their Top Ten predictions for blockchain developments over the coming year, which follows a year of demonstrable success. Governments are now looking favorably on having domestic digital currencies. China is far along in this process, but their leader, President Xi, recently sang the praises of blockchian technology for all his countrymen to hear. Report after report have also detailed progress on several fronts by major industry leaders to incorporate blockchain platforms to enhance existing operating systems in nearly every sector of commerce.
In 2020, according to analysts at Forbes, these could be the headline stories about blockchain technology that suggest companies worthy of a nod for future investment:
China is like a “supertanker” in Crypto-Land. When it decided to move in a certain direction, it creates a crypto tsunami of sorts. As just one example, after President Xi endorsed blockchain, investment and research started immediately on new ideas. The Bank of China almost overnight approved $2.8 billion in bonds to support small business development. China is not new to all things crypto. Yes, they have wanted to stamp out fraud and what are called “air tokens” and any exchange that promoted them, but China remains a mining powerhouse and has been active in blockchain developing efforts for several years. Their Digital Currency/Electronic Payment (DC/EP) initiative looks to combine the power of blockchain with other local functionality to revolutionize the payments industry in the Middle Kingdom. Expect it to start in 2020.
Mark Zuckerberg and Facebook’s Libra project caused a big splash, when specific details were announced in 2019, but it was also met with a major backlash from U.S. and EU officials, who questioned the true intentions behind the initiative. Libra has had to slacken its pace, but expect it to do a limited launch in one jurisdiction, as a proof of concept, so to speak. Facebook’s prior transgressions in protecting privacy and the use of third parties have steeled the opposition in its resolve to slow the social media titan down, but Zuckerberg has never been one to back away from a challenge.
There have been more than a dozen applications submitted to the Securities and Exchange Commission (SEC) for a Bitcoin Exchange-Traded Fund (ETF), but each time, the SEC has cited several misgivings. Its chairman has noted progress from time to time in public interviews, but also claims there is more work to be done. Industry observers have concluded that nothing with change until Jay Clayton, the presiding chairman, departs the scene. As for 2020, observers have also noted that a new appointment of Brad Sherman to the post of chair of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, does not bode well for a Bitcoin ETF. Forbes notes that: “He is no friend to bitcoin and cryptocurrencies in general.”
National digital currencies will become the preferred exchange device on exchange platforms. Tether (USDT) has been the stablecoin of choice up until now, but the advent of Central Bank Digital Currencies will offer investors more choices going forward. Forbes concludes that: “We will see increased adoption of stablecoins, mostly fiat-backed, and driven from trading on exchanges. Projects like Fnality and J.P. Morgan’s stablecoin will become live. Even now the dollar-backed Tether $USDT is the most volatile cryptocurrency asset.”
Per one Internet source: “DeFi is the movement that leverages decentralized networks to transform old financial products into truthless and transparent protocols that run without intermediaries.” These efforts take advantage of the “smart contracts” on the Ethereum platform. Currently 193 are on the Ethereum service of the 210 projects listed. These types of systems allow parties to deal with each other directly without a middleman. This so-called “Open Finance” system has nearly $300 million devoted to it, and venture capital firms have already focused on the basic notion behind these decentralized applications.
The big buzz in the crypto-verse has been about a new and enhanced Ethereum platform or “2.0”, as it has been termed. Developers have been tightlipped to date, but the supposition is that it will replace its “Proof-of-Work” (PoW) infrastructure with what is called “Proof-of-Stake” (PoS). It has also been called “Serenity”, but it has suffered from delays. Developers even noted on a recent blog post that the 2020 release may have to be delayed for “potentially many years”. The thinking now is that some of the more challenging aspects may take more time, but the developers are content with releasing updates, as they are completed. For this reason, we may see version “1.X” and so on, until the final package is completed.
The implementation of the Lightening Network was a time for celebration for Bitcoin advocates, as it was designed to improve scalability of volume through-put, perceived as limiting factor before its introduction. There were a number of features and functionalities that were added to the Bitcoin platform, but it was done in a way that actually created another “layer” on the system network. In order to use the new enhancements, existing and new players must adopt the Layer 2.0 environment. Per Forbes: “. In 2020, we will see an increased number of applications, nodes and channels created on this layer 2 network. Overall we will see a growing trend in the bitcoin development ecosystem due to companies and tools like RSK and Exonum which use the bitcoin network as a base.”
Expect more firms to develop privacy tools that enable corporate adoption of the blockchain, but operate on a separate layer of the Ethereum platform. Ernst and Young developers, some 200 in number, announced their “Nightfall” network that will enable clients to use the platform for supply chains, tracing, branch transactions, and public finance. It utilizes what are called “zero-knowledge proofs” to allow private transactions to enter the ledger system. Per Forbes: “In 2020, we will see more zero-knowledge (ZK) and multi-party computations (MPC) projects maturing and entering the blockchain space. If VC funding of startups is considered a metric, then MPC should be the number-one hot area.”
One challenge in the crypto-verse, which was not allowed when the Internet was in its early development stages, is that it has devolved into a series of differentiated protocols. As noted by Forbes: “The differences between the major blockchain protocols like Quorum, Besu, Fabric and Corda remain still significant, but there is an open dialog for collaboration and research into how assets on different chains can co-exist.” Observers are seeing significant progress in finding a workable solution that will allow these various systems to communicate with one another, which may appear as “cross-blockchains pilots” in 2020.
There has been an ongoing “arms race”, so to speak, by governmental jurisdictions across the globe to attract major players in the crypto ecosphere to relocate and set up shop. Zug, Switzerland is one example, where a “Crypto Valley” has been built for blockchian development entities to flourish. Earlier this year, Wyoming threw its hat into this crypto ring and adopted accommodating legislation that many view as a template that should be replicated. The rules divide tokens into separate categories for digital currencies and securities, while labeling each as an intangible asset. The word on the street is that Colorado, New Mexico, and Arizona are fast tracking similar legislation, regardless of federal implications.
2019 has already been a year to remember by crypto advocates. Valuations are up. Awareness is up. Institutional involvement has progressed, as well, as have a multitude of blockchain applications and developments in major corporations across the globe. For all intents and purposes, 2020 is surely shaping up as an even larger display of what is possible with this new disruptive technology from all sectors, both public and private.