Understanding and analyzing the emerging trends in our industry is an important way we can prepare collectively for the opportunities that have manifested through our continued perseverance and hard-work.
Each year we try to spot these trends ahead of time; some we write about, others we keep close to our chest. In 2018, we spoke about the “Top 5 Things in Cryptoeconomics” you should look out for; in 2019 it was “The Year of the DAO Comeback”, and that was almost an understatement; and this year is no different — there’s a clear slew of narratives that are worth unpacking.
Let’s breeze through them, quickly, with a bit of commentary to set the mood for the year.
1) Iterative Interoperability
Tiny improvements overtime lead to huge gains later for potential interoperability. For example with ETH 2.0, they’re working to include support for outside hashing functions, like Blake2b/SHA256, which would enable cheaper interopt between ZCash, Handshake, Ethereum and Bitcoin.
Overtime these minor considerations and efforts in cross chain interaction will lead to assets working together more fluidly, like flywheels, sending state updates and leveraging each-other more efficiently — for a true internet of money. This will ultimately improve the flexibility of the whole ecosystem, and enable new types of applications and services.
Improvement of Crosschain UX
The sad reality of cross-asset support.
In 2019, we saw new stablecoins come into play, with assets like Tether copy/pasting itself onto new assets to retain relevance (as with Ethereum and Tron). Slowly, these various stable assets will find either interoperable mediums that will satisfy their uses (such as chain-agnostic scaling efforts like Connext), or a large portion of the community will opt to focus on stablecoins built on a particular platform (i.e. Ethereum-based ones such as USDC/DAI if Tron fails to gain traction).
Bridges will further enhance and add extendability to these platforms, growing larger in importance, especially among assets like Ethereum and Ethereum Classic, who currently share a similar codebase (for now).
These blockchain-based channels (blockchannels?) will further blur the line between various major assets, enabling user experiences that don’t leave people scratching their heads, as we all become a little more self-aware on eachothers’ various strengths and weaknesses.
2) The U.S. as a Major Mining Power
With the growth of new major mining interests (Urkel Labs, Layer 1, Blockstream), vertically integrating into the ecosystem will grow of larger importance to sustain the United State’s position in leveraging blockchain-based technologies.
As bitcoin and other major PoW assets become major economic tools of political leverage, procuring them at the cheapest cost-basis becomes increasingly pivotal to obtain and retain market dominance.
Focusing on alternative green energy, natural gas, cheap energy, and software, firms and entrepreneurs will find various ways to vertically integrate themselves into the ecosystem (making the ecosystem more resilient, too).
Mining in the U.S. is becoming a major matter of national security if we are to prevent market collusion, or eventual sophisticated economic warfare. I cover this heavily in my crypto governance manifesto (See section titled: Risks of Oligopolistic Mining Cartel Collusion and Its Long-Term Effects on the Political State).
A little patriotic miner commentary 🇺🇸
Politicalization of Crypto
With that said, you can expect to see crypto used as a political tool for massive self-leverage. Expect more of this from notable figures who’ve championed crypto to policymakers and regulators over the years (not to mention the promised crypto party at the White House if Andrew Yang wins):
3) Block Reward Reductions, Decentralized Liquidity
Asset scarcity is the key part of many narratives in crypto. With the bitcoin halvening (halfining?) approaching, we’re also lucky to be enjoying a few other block reward reductions across a stream of assets, with ZCash, Ethereum Classic, and others pending programmatic reductions this year.
With demand only increasing, and supply across major assets in preparation to drop across the board, we’re curious to see how markets react (if at all, but we suspect they will, and in a major way).
This coupled with the maturing DeFi narrative and the ever-growing access to decentralized liquidity (check out our Coindesk post on liquidity to get up-to-speed: here) will generate newfound interest and opportunities for retail speculators.
4) Commons Funding, Developer On-Boarding
Although many assets with halve this year (or have some formal on-chain reduction in block subsidies), the need for increasing the developer mindshare will accelerate proportionally if the marketcap of crypto rises suddenly once again.
Look for continued advances in developer funding, such as Gitcoin CLR funding, interest earning DAI (rDAI, Chai, cDAI and other variations/derivatives) and asset tokenization (Set protocol has some interesting tools potentially worth experimenting with), as we grow more adept/creative at on-boarding new talent.
We’ll also see more major corporations lend developer talent into our ecosystem. Square Crypto’s recently announced Lightning Development Kit (LDK, written in Rust) will be utilizing Matt Corallo’s previous work on rust-lightning, but with the added help of a major corporate budget).
This now in direct competition with the brilliant on-going efforts of Lightning Lab’s LND (GoLang), by Lightning’s Chief Scientist (and Amentum advisor), Olaoluwa Osuntokun.
Bitcoin’s layer 2 saw a lot of love and maturation in 2019. But, with more competition as projects fight for thin amounts of developer mindshare, expect some potential hiccups down the road that will test if bitcoin’s social governance has matured as much as its price since 2016.
5) “Decentralized” Social Media
This narrative started to come to life in late 2018-2019. But, in 2020 it reaches a major inflection point, with scalability and off-chain best practices becoming mainstream amongst developers.
Some will opt to blend the best aspects of web3 and payments: injecting them comfortably into Web2 like interfaces to garner an initial network effect (i.e. projects such as Cent have garnered >50,000 users, with hundreds by the day).
It won’t look like what you expect, at first. But once one of these platforms captures new audiences outside of crypto (it’s looking like digital artists focused on NFTs may be that first major group), their friends and social graphs will follow quickly behind them.
Social media will continue to evolve like an organism: determined to stay alive in a changing world that is slowly opting out; devices remaining on Do Not Disturb regularly, individuals quitting Facebook/Instagram and traditional social media in droves, and it will only hasten from here.
They’ll return, with an incentive, and some improvements around micropayments merged with some clever mechanism design. As the first decentralized hybrid networks take a foothold, decentralized reputation and moderation will begin to take center stage as we reach the year’s end. It’s at that point we’ll be able to recognize the early-winners in the social-crypto narrative.