Hot Topics in Crypto 2020
As we are starting a new year, this post will list a selection of hot topics in crypto for 2020.
The Winklevoss twins already named the 2020s, in one of their blog posts, “the decade of crypto”, I fully agree with them. As adoption increases day by day, regulators start updating the law and answering open questions and state players/corporates enter the market with stable coins this will be a very exciting decade for crypto and blockchain in general.
Since making predictions for the whole decade would be too vague and not foreseeable (especially in crypto) I decided to focus on this year, which is only 3 weeks old. What are the hot topics in crypto this year? What should we be excited about?
1. China’s Central Bank Digital Coin (CBDC)
China has been developing its own national coin since 2014, the chance are very high that after President’s Xi Jinping blockchain advocacy in 2019 the coin will be launched in 2020. According to the People’s Bank of China (PBoC), the coin has completed “top-level design”. China will use the coin in connection to their “New Silk Road” initiative officially called “Belt and Road Initiative” as a payment method. If successful, the digital Yuan will challenge the US Dollar dominance as a global payment medium and increase mass adoption of crypto as a form of payment rather than speculation.
2. Facebook Libra Launch
Although going through several setbacks such as the leaving of several members of the Libra Association in 2019 and critics by the US Senate, Facebook is still planning to launch Libra. Officially, Libra is planned to launch in 2020 but some experts believe it will be later. Especially in connection with Chinas digital Yuan, one could expect the US government to ease its resistance against Libra as an alternative to the Chinese coin. If Libra would be successful, 2 billion people could use cryptocurrencies and mass adoption would start.
3. Ethereum 2.0 Update
According to several news sources and the engagement on GitHub, the Ethereum developer teams are working hard on Ethereum 2.0 which suggests that we will have a full or more probably a partial update in 2020. This is extremely relevant since in my opinion, Ethereum is the most promising blockchain protocol that allows smart contracts, decentralized apps, and decentral autonomous organizations to be programmed on the Ethereum Virtual Machine (EVM). One of the major planned updates in Ethereum 2.0 will be the change of the consensus mechanism from PoW to PoS (see next point).
4. Move from PoW to PoS
Besides Ethereum, other cryptocurrencies plan to switch from Proof of Work (PoW) to Proof of Stake (PoS) as a consensus algorithm. The switch would mean that blockchains would not need high-energy consummation for transaction validation, which is one of the main critic points of PoW. PoS is a lot more environmentally friendly since it is not about having the most computing power as in PoW. It is expected that major cryptocurrencies will switch and new ones will use PoS or other forms such as Delegated Proof of Stake for their consensus mechanism. This will create new questions regarding governance in blockchain since there are also critics to PoS (see next point).
5. Staking as an Alternative to Interest
While banks nowadays have zero or even negative interest rates, crypto offers a very interesting alternative: staking. When a blockchain protocol runs on a PoS consensus mechanism the participants who stake can validate the transactions. This is done by locking up a certain amount of the protocols native currency as a kind of security so that the staker acts in favour of the protocol. Otherwise, his locked up coins will decrease in value. This is criticized by some in the crypto community since this means the more you stake the more you can validate and get rewarded, which will make the “rich richer”. Nevertheless, rewards on staking can be between 5–15% for example for Dash, one of the biggest coins that offer staking. There are already several providers on the market who offer staking as a service, which can be very attractive for investors & Hodlers.
6. Tokenization of Assets
One of the most interesting fields in crypto/blockchain is tokenization. The digital representation of physical/digital objects such as real estate, art, collectibles, rights or services on the blockchain. Tokenization opens new investing opportunities for asset classes that previously have only been accessible to high net worth individuals. Due to the digital representation on the blockchain and the option of dividing an object like a real estate into thousands if not millions of tokens, minimum capital requirements have been eliminated. Just last week a building in Zurich has been sold partly by tokens for $134 million. This is only the beginning. Especially security tokens have enormous potential and there are many companies active in this sector. Which is seen by the increase of STO/TGE and companies applying for licenses with the regulators.
7. Geneva as a new Crypto Hub
Many experts believe that in blockchain technology Silicon Valley will play a secondary role. Especially China & Switzerland will probably lead innovation in this field. Switzerland has gained some recognition with its Crypto Valley covering the area of Zug & Zurich since 2013/14 which gives it a head start compared to other hubs. The Kanton of Geneva is also positioning itself as a new blockchain hub for 2020 with the headquarter of the Libra Association and Don Tapscotts’ new research institute (his first in Europe) being there. Due to the historical presence of large international companies and NGOs such as the United Nations, Geneva has perfect conditions to become a new hub in the blockchain world.
8. Bitcoin Halving in May
Lastly, one of the biggest events in crypto will be the Bitcoin halving estimated in May. The halving means that the rewards for miners will be halved from 12.5 to 6.25 Bitcoins. The halving will probably result in an increase in the price of Bitcoin as past halvings did, which happens every 210,000 blocks. Compared to the end of 2019 crypto prices are already up and it is expected that they increase even more until May. This will result in more attention in mainstream media. Which also bears the risk that after the halving prices will decrease as investors are realising their profits and mass media denouncing crypto as a speculating only asset as in 2017.
To summarize stable coins whether from private companies such as Facebook or states such as China, PoS as an alternative to PoW and the Bitcoin halving will be some of the major topics in 2020.
To make it clear this list is not finite. There are many other big topics coming up in 2020, which I will probably feature in another post. This list reflects the topics I am most excited about. Generally speaking, we are continuing the path of every new technology that enters the market: first excitement & fraud, then development followed by making it user-friendly and lastly adoption & usage. I am very sure we will never be able to even guess how the crypto/blockchain space will look in 5 years let alone in 10.
However, we can all be a part of it.
