No matter where you stand — from crypto non-believer to Bitcoin maximalist — 2019 was a fantastic year for the blockchain space. Sure, ICOs didn’t raise nearly as much as in 2018, and crypto prices left something to be desired for traders, but these metrics hardly reflect true developments in the space.
From the birth of new investment products to new alliances and even increased involvement from organizations like the World Bank and major enterprises, we saw greater maturity in the space than in 2017 and 2018.
Without further ado, let’s take a look at some expected events in 2021.
Tokenized funds emerged in 2017 with CRYPTO20, the world’s first tokenized crypto index fund. CRYPTO20 is an autonomous “token-as-a-fund,” which enables investors to purchase a single token, C20, to access a fund that reflects the top 20 cryptoassets.
Since then, a myriad of other funds have come out, from impact-driven solar funds to tokenized VC funds. However, in just a short span of 2 years, we can’t expect tokenized funds to reach anywhere near the level of traditional players like Vanguard or BlackRock.
Nonetheless, players in the space like Invictus Capital have made impressive strides in a short period of time, amassing over 15,000 global investors. In 2020, we’ll be sure to see greater adoption by investors, both retail and institutional.
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Security tokens are a relatively nascent construct, really emerging around 2018. While utility tokens serve to access features in a decentralized application, security tokens are meant to give financial rights to holders, such as a share of equity, debt, or real assets. Because of the relative simplicity of utility tokens, they can use trivial protocols like Ethereum’s ERC-20, which have just a few functions, while security tokens must use much more complex protocols like ERC-1400.
This means that security tokens also have much more stringent regulatory requirements, falling in the same legal basket as traditional securities. The combination of technical and legal complexity meant that security tokens and Security Token Offerings (STOs) haven’t really taken off yet, but they’re geared to succeed in 2020.
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Facebook’s (in)famous payment network plan was met with tremendous pushback by both European and US regulators, but developments continued to march ahead. One need look no further than Libra’s GitHub repo, which is highly active.
While Libra won’t make good on its original promises in 2021, it will be a sign of solid progress to make at least a limited launch.
By now, it’s well-known that Proof-of-Work is an incredibly inefficient consensus mechanism. In fact, a single POW-powered Bitcoin transaction requires almost as much energy as a million VISA transactions. So much for “mass adoption.”
One superior alternative is Proof-of-Stake, which Ethereum has been planning to transition to for a long time. While Proof-of-Work involves generating random (wasted) computations until consensus is reached, Proof-of-Stake auto-selects a block miner based on their “stake,” or simply how much of the coin they hold.
Ethereum 2.0, or a transition to Proof-of-Stake Ethereum, is tentatively planned for the first quarter of 2021. Regardless of whether delays pop up, we’re likely to see the release at least sometime in 2021, which may be a huge upward price driver, as Ethereum may finally meet long-promised expectations of greater scalability.
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