Eagle view on 2020 & HNY 2021
This year has been quite a ride in all aspects of life. From sad stories to various human contributions and advancements, let us move on together as one, more determined and stronger than ever.
In the context of this article I will jump straight to a brief state of affairs in crypto 2020.
Bitcoin has reached the next level and there is no more denying it. While mass retail mostly gave up their ride after 2018 reality check, it turns out that institutions finally put their feet in. No need to dig very much for a proof, one might start checking the Grayscale growth.
Since the Bitcoin narrative appears to shape up and strengthens globally around its SoV properties, public companies and billionaires are progressively converting a small percentage of their cash reserve into Bitcoin. Will this trend continue in 2021?
In a context where the dollar weakens, the workforce and needs digitalize, Bitcoin appears as a true hope made by the people for the people. That sentiment has never been stronger than it is today and here is the main take away of crypto 2020.
Read usage explosion. An entire book would not suffice to describe or grasp all the developments that are going on within the Ethereum ecosystem. For that reason, I will only express a few very compressed thoughts here.
There is something really exciting about structuring your own financial dynamic. You have full control, your finances become flexible, and you can design the multiple flows of any investment strategy as desired. While learning along the way, the daily process of managing your DeFi is addictive: enter Decentralized Finance.
While not born in 2020, DeFi was finally put to real life use this year, at least for a good part of the early crypto adopters. This segment largely operating on Ethereum has been the main reason behind most of the network metrics records (number of transactions, number of new wallets, fees, etc…).
What does it do? While many would say you can simply do anything a bank does but on your own, namely lending/borrowing/saving/investing/trading, I am more fascinated by what a bank could not even do for you. That is leveraging a position in one application to another, and another, and another. That’s what we call money lego, or composition. Since all financial applications live on the same underlying blockchain, it is very easy to combine one another. Think of it as multi-compounding finances.
Results of the composable decentralized applications (or dApps) shaped under various innovative forms such as free weekly lottery, flash loans (borrow and repay in the same transaction), auto-balancing pools, synthetic derivatives, auto-earning farming vaults and much more.
Ethereum king of liquidity
Why Ethereum? Liquidity is king. Liquidity attracts liquidity, and more importantly, unlock the multiple possibilities of what a dApp can offer. Without liquidity, there is no possibility of margin trading. Without liquidity, there is no need of a governance token, another big trend this year.
Governance tokens, perfect compromise?
Governance token was an interesting development as it was found to be the perfect compromise between utility and revenue rights (shares). We are just getting started on that end, but instead of saying directly you have shares and therefore rights in the revenues of xyz dApp, a governance token says that you have a right to govern and make decision on anything related to xyz. Decisions must be first proposed and approved by the community. So in theory, instead of a being a passive investor, one becomes an active member. That alone should make a big difference in the eyes of regulation, similar to how an investment club (active members) can simply be formed as an LLC while a fund (passive investors) has to be registered with the SEC or must be legally exempted. A community organization governed by its token holders is commonly referred as DAO (Decentralized Autonomous Organization).
Projects that made crypto 2020 FUN
As the scope of innovations is too wide to cover and give it justice at the same time, I will simply list below some of the projects I found the most interesting in 2020. Some of them are called ‘blue chips’ as they have been battle tested and proven to be reliable over time.
Wallets embracing DeFi in 2020
Here are some wallets that are both secure and inclusive of DeFi.
Users become builders and governors
I hope I will find more time in 2021 to write and cover more grounds, but exploiting the full potential of those dApps require a lot of time as a user first. On that note, I would like to point out that users could easily be replaced by builders here(sort of a level 2) as governors/operators of the emerging ecosystems. They are effectively the ones providing the initial feedback loop required for the dApps to build on and take off. In most cases, they are the ones providing liquidity, voting on proposals, and possibly operating a node. Developers and users become one and form together the community builders.
CeFi an easier gateway to enter our world
However DeFi in general is not yet ready for complete beginners. For them, I usually recommend to start by holding Bitcoin, Ethereum, and experimenting with stable coins via CeFi, which I wrote about very recently.
Ethereum 2020 summarized in a few words
DeFi, Uniswap, Liquidity providers, Governance tokens, DAOs, Farming pools, Degens, Scams, Rugs, NFTs, Eth 2.0, Wrapped Bitcoin, Oracles.
Other Blockchains (Layer 1)
Each of these projects is very promising, backed by brilliant teams and solid technology. While having merits for their own technical prowess, their most likely challenge will be to catch up on network effect and community building. Nevertheless, one shall keep a close look on them over the coming years. And of course, they went live on their own mainnet in 2020!
2021I’m looking forward to all the above continuation as well as segments that made progress in 2020 but didn’t get it quite right yet, such as scaling solutions, privacy tech, interoperability, prediction markets, fully on-chain operable investment funds, insurance coverage, multi and meta DAO governance. I remain fully committed and can’t wait to discover the always upcoming and various innovations of our dear crazy crypto space. Happy new year!