It’s that time again. Time to dust off the crystal ball, throw out the last of the turkey and peer into the near future to see what the biggest stories of 2020 we’ll all be talking about this year.
With bitcoin now comfortably over a decade old, the ecosystem is bearing all the hallmarks of maturing. But there are a number of other areas that our panel of pundits and the wider crypto sphere think will make headlines in 2020.
Nation-states will unveil their own digital currencies.
There were rumblings across 2019 of several countries mulling building their own digital currencies–so much so we wrote an article exploring who was in this particular race.
This year it looks like things are going to step-up a gear. The likes of the UAE, Japan, Sweden, Russia, Estonia and France have all announced plans for their own regulated state-issued digital currencies. In France’s case, they’re looking to start laying the foundations by the end of the first quarter of 2020. But it looks like China might beat them to the punch.
Why the sudden urge from states to get into crypto? Pradeep Goel, CEO of blockchain-based health care platform Solve.Care, believes there is a range of efficiency gains from implementing crypto inside the state’s apparatus.
“Although governments around the world remain centralized, there is still an opportunity to incorporate decentralization into certain aspects,” he said. “In 2020, we will certainly see further government integration of blockchain technology in order to process large quantities of data between agencies, services and administrative bodies.”
However, Florian Glatz, co-founder of tokenized real estate firm Fundament Securities, pointed to Facebook’s Libra as the catalyst that’s stirred countries into action. “Hype and contention around Libra will not abate, [but it will] help to strong-arm governments into developing an alternative,” he said.
While the US remains cautious about crypto, Andy Broomberg, co-founder of CoinList, a matchmaking platform for investors and digital asset companies believes there are positive signs. "It’s encouraging to government officials embracing crypto--including SEC Commissioner Hester Peirce, who supports a safe harbor for crypto projects, so tokens meeting specified criteria can be traded more freely."
2. Corporations will get in on the act, too.
Never ones to be left behind, corporations are beavering away at their own iterations of blockchains and decentralized ledgers. As we reported late last year, big tech firms are finally getting excited about the technology again, with talk of blockchain on quarterly earning calls up 25 percent in late 2019.
Big business beasts like J.P. Morgan Chase, Walmart, AirAsia, Mitsubishi, and Tencent are all in the process of exploring digital assets. Some are way out in front. French finance giant Société Générale has been busy building a security token for its bond business and has its fingers in a whole range of pies. Most notable among them is komgo SA, a consortium of companies including ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, ING, Rabobank and Shell that are building a blockchain-based on Ethereum.
“We are highly likely to see huge expansion as blockchain technology moves to enterprise production. We will start to see measurements of the value derived from blockchain being in production environments,” said Greg Forst, Director of Marketing at the Factom Protocol.
Expect to see other blue chips join the fray.
3. The Bitcoin Halvening
Around every four years, as ordained by the eternally elusive Satoshi Nakamoto, the bitcoin network’s mining rewards half in value. The next ‘halvening’ is due in May of this year, when bitcoin block 630,001 is finally reached.
That means the mining reward will drop from 12.5BTC (roughly $90,000) to 6.25BTC (roughly $45,000). Why is this important? There are several reasons. The first and most obvious is that fewer bitcoin will be produced, lowering the overall rate of inflation across the network. The inflation rate will drop from four percent to two percent, putting it on parity with some of the world’s most prominent fiat currencies. While many bitcoin watchers don’t imagine it’s going to do much to the price, it does mean miners’ influence over the network will wane as the incentive to mine is slashed in half.
What does have people excited—and what’s likely to generate the most bylines—is the hope that the event will light the touch paper for a bitcoin bull run. Why? In the last two halvenings of bitcoin mining rewards (in 2012 and 2016) the price went up (although not necessarily straight away). Following bitcoin’s wobbly performance in 2019, many are hoping 2020 will be different.
4. Ethereum 2.0
While Bitcoin gets cut in half, Ethereum is moving to phase two of its mega roadmap. The next iteration of Ethereum has two broad aims: introduce a proof-of-stake consensus mechanism, ending the network’s use of energy-intensive proof-of-work, and bring in the long-awaited sharding to help combat the network’s speed and throughput.
But as we’ve seen with previous Ethereum upgrades, the rollout will be a cautious one.
ETH 2.0 will be deployed and tested in seven distinct phases over the course of several years. While many are still in the early stages, Phase 0, also called Beacon Chain, is due for release in the first quarter of this year. The purpose of this initial phase is to release a proof-of-stake chain (called Beacon) that will run in parallel with the network’s main proof-of-work chain. The idea is that it’ll give developers a chance to prod and stress test the network, without messing up the increasingly complex array of functions and features currently living on the mainnet.
“The launch of Ethereum 2.0 in 2020 will hopefully benefit from the lessons of version 1, in which we learned that developing strong technical foundations are essential to the success of a chain,” said Nicolas Cantu, co-host of Paris Blockchain Week Summit and co-founder of Chain Accelerator, a startup incubator based in France.
If all goes well, that opens the door to Phase 1, which would deploy a primitive version of sharding. Slow and steady wins the race, eh?
5. DeFi comes of age
Decentralized finance, or DeFi had a stellar 2019. In November, the amount of Ethereum locked up in decentralized finance applications surpassed $400 million, the amount of DeFi registered addresses over the year grew by more than 1,600%, and startups like Compound pulled in big rounds of funding from the likes of Andreesen Horowitz. Many are billing 2020 as another big year for financial software built on blockchain.
One of the key areas of growth for DeFi is expected to be around the variety and sophistication of financial tools. A report by Nasdaq predicts that collateralized debt positions (CDPs)–financial instruments that allow virtual assets to be used as collateral to obtain loans– will be big business.
At present, crypto investors have few options beyond holding assets and hoping for long-term returns, but thanks to the success of companies like MakerDAO and Compound, paired with an increasing appetite for DeFi from big exchanges like Coinbase, CDPs present a way for them to grow their holdings while still being able to use a portion of it for purchases and payments.
Ethereum’s slow but steady march towards a staked-based network could also help accelerate DeFi’s growth this year. But it might not be all plain sailing for DeFi. “The shift towards decentralized finance (DeFi) projects will likely encounter their first roadblock in the need to show evidence of both resilience and scalability, while such networks provide significant potential to open access to financing, the practicalities require considerable development,” explained Nicolas Cantu.
But DeFi still has its work cut out, according to Alex Mashinsky, CEO of Celsius Network. "DeFi projects must build on-ramps -- including better user interfaces, accessible products and services, and stablecoins -- that make it easier for people who don’t know much about cryptocurrency to easily buy digital assets and participate in decentralized financial services.”
6. Blockchain will compete at the Olympic Games
As Tokyo limbers up to host the next summer Olympics, so is blockchain. Mitsubishi Estate, which manages nearly a third of all the buildings in Tokyo's business district, has teamed up with electronics giant Fujitsu to offer blockchain-secure data sharing between restaurants, hotels and other companies during the month-long sporting extravaganza.
The premise is that with the deluge of millions of people in a city with a population of 37 million, the city’s ability to go about its business will grind to a crawl. Being able to seamlessly check people’s reservations at restaurants, hotels and tourist experiences however, could help reduce waiting times and improve efficiency. Mitsubishi Estate is also working with multinational conglomerate SoftBank to help process the data on the blockchain.
Future hosts Paris have also been talking up their blockchain implementations, ahead of their hosting the Games in 2024. In a report by Jean Pierre Landau, France’s cryptocurrency task force chief, he said there was potential to use tokens at the Olympics to help combat ticket fraud, adjust ticket prices in real time to increase demand and even help prevent the mis-allocation of medications to athletes.
7. Regulators will get their act together
The biggest story of 2020, according to a report by blockchain VC firm Outlier Ventures, is ‘The Reckoning’—the moment regulators put the breaks on runaway crypto projects that have had an easy ride so far.
“As exchanges are forced to increasingly professionalize, ‘zombie tokens’ will be more aggressively delisted and investors will gradually flock to quality. The idea of projects worth $100 million without product-market fit will go away. Valuations can no longer be sustained by just a vision and an idea, 2020 will all be about traction and usage,” it concludes.
Regulation, it seems, is coming—no more so than in the US. In a speech delivered to the Annual International Conference on Counterterrorism late last year, Under Secretary Sigal Mandelker suggested that unless appropriate legislation is implemented to regulate cryptocurrency exchanges and trading ventures, terrorists could ultimately fund their activities through digital means and go completely unnoticed.
As a result, the United States Financial Crimes Enforcement Network (FinCEN) has said that all money services businesses, including those in crypto, must submit customer information for transactions up to $3,000 or higher. The rule is due to go into effect in June of this year.
While privacy advocates see that as an ominous sign, others feel this clarity could lead to an influx of investor cash and innovation.
Nick Cowan, CEO of the Gibraltar Stock Exchange, said that: “Regulation has been a major focal point for many governments seeking to create some clarity, with the UK jurisdiction task force most recently concluding that Cryptoassets, including but not restricted to, virtual currencies, can be treated in principle as property.”
With countries like France and China racing to produce their own digital currencies, expect the legal industry to not be far behind.