On January 3rd I reviewed the past decade of cryptocurrency. Today, let’s look to the future and what I think will happen in the 1920s. Of course, no one can predict the future very accurately, but a more accurate way to predict the future is to create the future!
In short, I think in the next decade, we will see a blockchain with more scalability and privacy functions, which will reach about 1 billion users at the end of the decade (about 50 million at the beginning of the decade). Adoption will take place in the most vulnerable emerging markets of the financial system, as well as in a number of new encryption startups that produce the products people want. At the end of this decade, most technology startups will have encryption components, just as most technology startups use the Internet and machine learning today. Governments and institutions will also enter the field of cryptocurrency on a large scale.
In the 1920s, I believe we will see the emergence of layer 2 solutions or new blockchains, which will increase transaction throughput by several orders of magnitude. Just as the replacement of 56K modem by broadband leads to many new applications on the Internet (youtube, Uber, etc.), I believe that scalability is a prerequisite for the real beginning of the utility stage of the encryption industry. Once we see blockchain scalability increase by several orders of magnitude, we will start developing new applications faster (see article 5 “the rise of encryption startups”).
In addition to scalability, I think we will see privacy integrated into a dominant blockchain in the 1920s. Just as the Internet was started with hypertext transfer protocol (HTTP) and HTTPS was not introduced as the default setting in many websites until later, I believe we will eventually see a “privacy coin” or a blockchain with built-in privacy function adopted by the mainstream in the 1920s. In most cases, it makes no sense to broadcast every payment you make on a transparent ledger.
At present, many high-quality teams are studying next-generation protocols (dfinity, cosmos, Polkadot, Ethereum 2, algorand, etc.), and many excellent teams are studying layer 2 extension solutions for existing blockchains. My prediction is that in the next decade, we will see the integration of blockchain (in terms of developer’s thought share, user base and market value). Blockchains that make the most progress in scalability, privacy, development tools and other functions will get the most benefits. We can even see M & A in these teams. If you like, it can be a reverse bifurcation, in which one chain is abandoned, and each token can be exchanged to the acquirer’s token at a fixed exchange rate. How many companies / open source projects / Dao / charities in the world will have many tokens (so there will be millions), but only a few blockchains will power the infrastructure of these tokens. Like any other industry, winning blockchains are likely to follow a power-law distribution in results.
4. From transaction to utility
The decade of the 21st century was mainly about speculation and investment in cryptocurrencies, and transactions drove most activities and the best business model. This trend will continue in the 1920s (see article 9 market structure and Article 7 institutions), but I believe that the best new companies created in the field of encryption in the 1920s will be committed to promoting the utility stage (people use cryptocurrency for non trading purposes). We have begun to see the beginning of this trend, with more and more customers engaging in non trading activities (stacking, lending / margin, debit card, earning income, business, etc.).
5. The rise of encryption startups
This decade, we will see a new type of start-up become commonplace: encryption start-ups. Just as the Internet boom started the idea of Internet start-ups (in a decade, almost every technology start-up will use the Internet in some way), I believe that by the end of the 1920s, almost every technology start-up will have some cryptocurrency component. So what is the definition of encryption startups? Three things. First, it will use cryptocurrency to raise funds (separating the funding proposals of the venture capital industry from the larger global capital pool). Secondly, it will realize the market matching of products by issuing tokens to early adopters of products (turning them into preachers), which is similar to early employees acquiring equity of the company. Third, they will bring together global communities and markets at a speed we have never seen in traditional startups (traditional startups have to painfully expand country by country, integrating payment methods and regulation one country at a time). This has brought numerous regulatory problems, but its advantages are so great that I think the market will find a way. These encryption startups will face the challenge that all startups face: making what people want. The next 100 million people who come into contact with cryptocurrency are not because they care about cryptocurrency, but because they try to play games, use decentralized social networks or make a living, and using cryptocurrency is the only way to use a specific application.
6. Emerging markets
In addition to encryption startups (which will be the first world-class phenomenon), another area of adoption will be emerging markets, where the existing financial system is a greater pain point. Especially in countries with high inflation and large remittance markets. In 2019, givecrypto.org paid cryptocurrency to 5000 people in Venezuela, of which more than 90% were able to make at least one transaction with local stores or local cash withdrawal partners that accepted cryptocurrency. This shows that these tools have begun to cross the availability threshold in emerging markets (where unreliable Internet, old smartphones and lack of education may be challenges). In the 1920s, I think we will see the scale of cryptocurrency adoption in emerging markets expand to hundreds of millions of users, and at least one country will “dominate”, so that most transactions in their economy are carried out in cryptocurrency.
We have begun to see small institutions enter the field of cryptocurrency. In the past 18 months, hundreds of institutions have joined coinbase custody. I expect that this rapid growth will continue in 2020, and more and more large institutions will join in. Finally, almost every financial institution will carry out some cryptocurrency business, and most funds will hold some assets in the form of cryptocurrency, in part because their returns are not relevant. About 90% of the world’s funds are locked in institutions, so this may drive a large demand for encrypted assets.
8. Central bank digital currency (CBDC)
Although Libra aroused the anger of almost everyone in Washington, D.C., China took the initiative to digitize the RMB and made blockchain one of its core technology investments. The United States is now catching up, and the discussion on how to digitize the dollar is actively going on. The centre alliance and its USD coin (usdc) may be the solution for the United States to turn to, or the Federal Reserve may try to use the blockchain to realize its own digital dollars. I think we will see a package of digital currencies issued either by an alliance such as Libra or centre or by the International Monetary Fund (IMF).
9. Gradually mature market structure
Over the past decade, many of the companies we think of as cryptocurrency exchanges have actually been bundled together as brokers, exchanges, custodians and clearing houses. In the 1920s, I think we will see the evolution of cryptocurrency market structure more similar to the traditional financial world. From the perspective of law and regulation, these functions will be separated. This has happened to some extent. For example, coinbase custody is an independent company with its own board of directors and is regulated as a New York trust company. Coinbase Pro will also be divided into brokerage firms and exchanges. Just like in the field of traditional financial services, customers of one product will become competitors of another product, and there will be many cross influences. With these independent components, I expect the SEC and other institutions will make it easier to create a cryptocurrency Index Fund for retail investors.
10. Decentralization will expand
Although Fiat / cryptocurrency transactions will largely follow the traditional financial service model, an independent world will develop in the field of purely decentralized currency transactions. In other words, once you turn your fiat currency into cryptocurrency, you can enter a magical place of innovation, which is pure currency trading.
In this world, unmanaged wallets, DEX, defi and DAPP will continue to improve in terms of availability and security. We will see the emergence of many new applications, from games to online communities to a virtual world with its own economy. Because customers’ funds are never stored, many applications and unmanaged wallets in the world will be regulated like software companies rather than financial services companies. This will greatly accelerate the pace of innovation.
There will also be more privacy in the world, and privacy coins and unmanaged wallets will be more adopted. We will also see the rise of decentralized identity and related reputation scores. With the development of crypto economy, more and more people will make a living by cryptocurrency, find opportunities in this new global network economy and promote global economic freedom.
11. Billionaire flipping
Finally, as a welfare, my friend Olaf Carlson wee, founder of polychain capital, and Balaji Srinivasan, former CTO of coinbase, estimated that at the price of $200000 per bitcoin, more than half of the world’s Billionaires will come from cryptocurrency (the world). Whether you think this is a good thing or a bad thing, it means that more professional and technical personnel will get a lot of capital in the 1920s. It is speculated that this will increase investment in science and technology, and I think we will see more cryptographers turn to philanthropy (we have seen this through the efforts of the pineapple foundation, givecrypto.org and givingpledge).
How many of these predictions will prove true remains to be seen: by shifting cryptocurrency from focusing primarily on trading and speculation to focusing on the utility of the real world, the number of people holding and using cryptocurrency will increase significantly in the 1920s and begin to really promote global economic freedom.
Responsible editor; zl