As a Managing Partner at Digital Asset Risk Management Advisors (DARMA Capital), and former Head of Global Business Development at blockchain software powerhouse ConsenSys, I’ve had an inside look at the rapid development of blockchain technology, the extreme volatility of crypto markets, and the emerging ecosystem and culture of decentralization. And let me tell you: Blockchain is entering a pivotal year in 2020, a period that will decide not just the future of cryptocurrency, but blockchain and the very idea of decentralization.
Buckle up, because it’s going to be quite the ride. Here are 20 predictions for blockchain in 2020.
1. Ethereum right now is like dial-up internet in 1996—14.4kbps. Soon it will be the equivalent of broadband.
Remember the days of dial-up internet? Let me take you back to 1996: although AOL was quickly becoming a household name, getting online for most required swapping tangled wired connections and clogging up phone lines to access a limited range of products at a snail’s pace. With a 14.4kpbs connection, intrepid retail consumers could browse the world wide web while transferring data at 1.8kbs per second. To download a megabyte of data took over 9 minutes. All of the content was text-based and bare bones, but it worked! Casual observers could see that this technology would be useful, but few predicted the wholesale societal and economic transformation the internet would bring to the world within a matter of years.
Sound familiar? It’s directly analogous to where we’re currently at with blockchain. 2020 in blockchain years is the equivalent of 1996 in the internet era. Much like the internet, blockchain progress will kick into overdrive with Moore’s Law, and Ethereum 2.0 will be the big red button that launches us off of dial up and into broadband. (Disclosure: I’ve owned Ethereum for several years.) The signs are all there. Almost every sector and leading enterprise is looking into blockchain implementation, governments are terrified of being left behind and are scrambling to catch up, while the infrastructural elements are now in place for developers to build, deploy, and scale products. In 2020 we will begin to see what a decentralized future actually looks like.
2. Bitcoin and blockchain will finally break up
Bitcoin should be revered as the patriarch of digital assets. Bitcoin confluenced cryptography, peer-to-peer networking, a virtual machine, and a consensus formation algorithm to solve “the double spend” and “the Byzantine general’s problem” elegantly. That said, time moves on. The Bitcoin maximalists that believe Bitcoin is where this decentralizing technology might be are in for a rude awakening.
As blockchain reaches a scaling watershed, there’s one key differentiation that the world will come to acknowledge, one that enthusiasts are likely already very familiar with—the difference between Bitcoin, Ethereum and other decentralizing technologies. Bitcoin’s ascension to digital gold has been astounding, and has signaled the beginning of a whole new techno-economic era. But digital gold is just that—a beginning.
The current market capitalization of gold is $8 trillion dollars. That’s an eye-popping number, sure, but it represents a potential ceiling market opportunity for Bitcoin’s “digital gold.” Smart contract-enabled blockchains like Ethereum will digitize the global economy and unlock value in the whole spectrum of assets and processes. In turn, decentralized networks will reach into the farthest corners of every industry on the planet (and beyond). We will be able to digitally represent fiat, gold, software licenses, equity, debt, derivatives, loyalty points, reputation ratings, and much much more that we can’t even conceive of yet. That’s a market opportunity estimated at well over $80 trillion dollars. Bitcoin is a singular use case. Comparatively, Ethereum has infinite use cases.
3. The potential for global economic recession looms, fiat currencies be warned!
Economic uncertainty has been looming over the globe for years. It’s not so much a matter of if, but when the house of cards tumbles with major worldwide implications. Europe will likely be the first to hit recession. One look at the five biggest economies in the region and it’s clear. Germany’s Deutschebank is on life support. The United Kingdom has been eating itself with Brexit for years. France is in a state of constant protest. The Spanish and Italian economies are drowning. The European Union is by now only nominally a union, and growing divisions will leave many nations especially vulnerable.
With respect to the USA, let me paint two realities for you: In 2020, China and the U.S. finally reach a real trade deal. The economy gets a tailwind into 2021 and Donald Trump is re-elected. There’s another leg to this stock market blow-off phase. The house of cards lives another day. If there is no trade deal or no re-election and the global economy is further challenged, the bottom could fall out of Quantitative Easing Mania, and the value of many national currencies around the world will be challenged like never before. The value of fiat currencies could endure a precipitous drop in value via extreme inflation.
Digital assets have exiguous properties similar to gold and oil in that they are provenly scarce. If and when this crisis lands, the digital asset class will be the hedge to traditional central banking systems that resort to printing—and thus depreciating—currencies in times of crisis.
4. The U.S. will have to play catch-up after China’s big play in crypto and blockchain
In January 2020, a new suite of regulation will come into effect that represents a sharp about turn by the Chinese government towards a pro-blockchain and cryptocurrency stance. With new legislation towards mining, state news channels praising Bitcoin, and Chinese President Xi Jinping announced governmental support for blockchain technology in October, it’s clear that China is making its move. China’s central bank will soon test its own digital currency in the cities of Shenzhen and Suzhou with four state-owned commercial banks. Countries like the United States that may have been sluggish to take a leading role in supporting blockchain development will be left with little choice but to play catch-up, and the result will be a huge net positive for the industry.
5. We march onwards to Ethereum 2.0
The long-awaited Istanbul hard fork—the final hard fork of Ethereum 1.0—has successfully deployed. The Muir Glacier difficulty bomb delay update was the cherry on top. Vitalik Buterin has already released a block explorer for the Proof of Stake Beacon Chain, and the march towards Ethereum 2.0 is proceeding at a rapid clip. Proof of Stake Ethereum exists. It’s alive! The roadmap to Serenity is in full effect. 2020 will see Ethereum move stridently beyond Phase 0 of Ethereum 2.0, onto Phase 1 and the launch of shard chains. Then, it’s game on.
Ethereum developers have already proven their ability to work wonders, and that this decentralized team is now in the stride of hitting ambitious roadmap targets is the best indicator in all of blockchain for future success. To daily observers, this upgrading process may seem long and winding, but the extra time it takes to develop the network properly will benefit the entirety of humanity. While Web2 was defined by philosophies like ‘Move Fast, Break Things,’ Web3 should be guided by mantras like ‘Do it the Right Way This Time.’
6. Layer two scaling solutions will turbocharge Ethereum
Ogres, like onions—and like blockchain networks—are all about layers. With the rollout of the Istanbul hard fork, Ethereum is on its way towards 2.0 levels of scalability at layer one. Joe Lubin stated last year at SXSW that Ethereum will process millions of transactions a second. How it achieves this is a combination of steady upgrades to the layer one network and integration of layer two scaling implementations.
Poon and Buterik’s solution of Plasma’s “blockchains on blockchains” was not just brilliant and prescient, it was the inception of a whole sector of Layer Two development. Sharded chains may occupy much of the debate at the moment, but state channels being developed by Celer, Connext, and Counterfactual will be the massive mycelial data network underground that unleashes the main chain to operate unencumbered by state weight. Sidechains will transact the bulk of lower-risk transactions rapidly. Payment channels like Raiden will enable instantaneous token transfers, while ZK-Snarks will keep all of your data private amidst all the transactional action. The stack is all there, and 2020 will see 2.0 come to life.
In the meantime, innovations like Plasma’s Optimistic Virtual Rollup means that projects don’t have to wait for the transactional throughput they need to flourish. That’s huge. There was a time when blockchain scaling was driven by theory and hope. No longer! The incredible, global, decentralized dev teams working on Ethereum will change the world with this technology, and we are all eternally grateful.
7. Layers of the Web3.0 stack go live
A decentralized environment is about more than just shards and nodes, and we’ll see that manifest in in 2020. Web3.0 will be defined by mesh networks connecting smart contracts, file storage, messaging, payment channels, side chains, oracles—the list goes on. 2020 will see many essential infrastructural elements of Web3.0 go live.
What is Web3.0? Here’s a quick breakdown:
The digitization of all assets: Stocks, bonds, fiat currencies, electrons, loyalty points, software licenses, Beyonce concert tickets, insurance policies, derivatives and other assets previously inconceivable, will become natively digital.
The automation of agreements: Microsoft Word legal documents will turn into digitalIf > Then > Else lines of computer code that will move the aforementioned digital assets trustlessly, creating completely new business models like an employment agreement that gets paid by the minute, a piece of art that can pay a royalty to an artist every time it is sold from one owner to the next, a piece of real estate that can pay its investors automatically every time rent comes in, the ability to divide income amongst band members every time a song is played, or routing an electron efficiently to various parts of a micro-grid.
Self-Sovereign Identity: Instead of logging into Airbnb, Facebook, Uber, et al, you will log into your own self-sovereign browser, and will have the same ability to rent a hotel room, use social media or hail a car, but instead of the legacy application providers the same service will occur peer-to-peer, rather than through a thin layer of rent-seeking intermediation. You’ll get paid $1 dollar a day to look at advertising when on social media instead of Zuckerberg and your ride and home shares will be 2/3rd of the current cost.
Some examples: The Interplanetary File System has already showed the nature of data file storage on the decentralized web. Protocol Labs’ Filecoin builds on IPFS to rent users’ hard drive space for crypto. The platform is on schedule to launch in March, with the testnet just launched very recently.
Helium is a mesh network where stakeholders purchase nodes under $500 to provide low bandwidth for Internet of Things devices. Tom Shaughnessy of Delphi Digital recently noted, “Since going live on August 1, 2019, over 2,130 nodes are live on the network covering 90% of U.S. states across 425+ cities. At Verizon’s IoT costs (600KB/year for $12), Helium is underpricing Verizon by 99.9988% ($0.00001 for 24 bytes or 0.024 KB). This type of price consolidation we should expect from the next generation of cell phone service providers, data storers, and truly any intermediary via a decentralized world wide web.
Kyle Samani, and the team at Multicoin Capital have done a great job of mapping a potential Web3.0 software stack with examples of companies attempting to provide solutions. Although it remains the very early days and we’ll see tremendous competition for a hegemonic position for all layers of the Web3.0 stack, the Web3.0 stack will likely look a little something like this:
8. Expect a radically altered blockchain landscape by 2021
By the turn of 2021, we will have a much clearer picture of whether newfangled layer one blockchain networks like Near, Polkadot, Dfinity, and Nervos will be able to contribute substantially to the blockchain ecosystem. Competition is good and I remind everyone that the goal is global disintermediation, decentralization, and the commoditization of trust, rather than a brand of protocol winning. That said, this sprint to layer one supremacy has only spurred on the development of Ethereum 2.0, and the many competing elements are experimenting with new ways to develop the best blockchain product. The answer to who will succeed lies with developers and users.
Ethereum still retains the most robust developer engagement by far. Some view this race as a winner-takes-all, but with so much to be gained from developing this new technology, coopetition will raise the tide for all. There could also be fit-for-purpose blockchains, that satisfy particular niches. New competitors to the layer 1 space will have to deal with Matteo Leibovitz’s “distribution quadrilemma,” which states criteria that new networks must simultaneously satisfy at launch to engender monetary premium. They are:
- wide/equitable distribution
- revenue generation
- potential for upside
- regulatorily compliant
The biggest challenge is requirement #4. If a VC or multiple whales own a large amount of a network’s tokens—a ubiquitous occurrence with layer one “Ethereum Killers” — it will be incredibly difficult to sway the SEC that the token isn’t a security, which means all those big investments and will disrupt nothing but VC piggy banks.
9. The tribulations of Libra will continue…
Facebook’s Libra will not go live in 2020 in any form of scale. The “decentralized wolf in sheep’s clothing” has already done much to bring blockchain to the forefront of global discourse—for better, and at times, for worse. But the company is learning fast that consensus and deployment do not always adhere to the best laid plans of even billionaires. When it does go live, Libra will undoubtedly be a force of education and adoption for billions of people. Farmville with crypto? I can’t wait! Before it gets to that point, however, expect Chinese organizations like WeChat, Alipay, and Alibaba to aggressively pursue first mover status in the space given the recently relaxed regime in the country. Trust in Facebook stagnates still as we enter another election year in the US. If social media has proven so earth-shakingly problematic, we can only guess what ills Facebook’s version of ‘social banking’ may hold within.
10. Trillion dollar companies signal the climax and end of the 3rd industrial revolution
Apple. Microsoft. PetroChina. Saudi Aramco. When the next behemoth rises over a trillion dollar valuation—it will stay there. That same company probably won’t pay a single dollar in U.S. taxes. This is a prime example of vast inequality in the value capture of our economic systems, and it’s only getting worse. Legacy Web2.0 companies are making billions for the shareholder capital class by using the individual as the product. They’re spilling personal data into the clutches of nefarious actors with alarming regularity. As more and more companies pass the trillion dollar mark, it will signal the blow-off phase of late capitalism. After the inevitable crash, we’ll be faced with a once-in-an-epoch opportunity for more equitable, democratized, and sustainable business models to proliferate. Will you be ready?
11. Self Sovereignty on the web will become a human right
With hacks and breaches in both Web2.0 and Web3.0 environments a daily occurrence, it’s clear that change is a necessity. Projects like the Decentralized Identity Foundation have taken major strides in establishing open source standards that will furnish the whole blockchain ecosystem with digital identity components that are trustworthy and decentralized. Blockchain IDs and zero-trust datastores like those created by uPort and 3box will rapidly replace the creaky walled databases we rely on now. Establishing this web of trust may be amongst the most important pieces of the blockchain puzzle in 2020.
Web2.0 stalwarts like IBM and Microsoft are well aware of the urgency of the issue, and they’ve allocated substantial resources to iterating digital identity in their own image. But self-sovereignty must be just that—owned by our selves—before the internet can be truly democratized. Ownership and privacy of data will soon be seen as a human right, and self sovereignty is the solution to attaining it.
12. Say it with me…CME Ether futures
After Bitcoin futures options in January, I have a feeling that it’ll be Ethereum’s turn. CME Ether Futures will be announced in 2020 and will go live in 2020. The CME has an almost 125 year history of innovation in financial instruments, birthing both new asset classes and digitizing the process of exchange along the way. With Bitcoin and Ethereum, the CME will continue this tradition of innovation, in turn catalyzing legitimacy for digital assets and opening access doors for mainstream investors and institutions to kickstart the next round of market growth for digital assets. Futures & options create forward demand curves that are a necessary precursor to a regulated ETF market. Our once child-like asset class is growing up.
13. A billion dollar DeFi ecosystem is a matter of months away
Decentralized Finance will continue to lead the industry in the first quarter of 2020. Over $600 million dollars are currently locked up in decentralized finance platforms. That number will cross one billion before summer. Organizations like a16z have bet big on platforms MKR and Compound, while projects like Synthetix, Uniswap, dYdX, and InstaDapp are furnishing a feverishly active sector of the blockchain ecosystem, one that isn’t immediately contingent upon scaling timelines. That said, DeFi organizations will probably have to spend some big legal dollars in compliance and lobbying. Just one example: in all 50 states, a company needs a specific license to lend to retail clients. When DeFi inevitably gets too big to ignore, regulators will roll out the red tape carpet.
14. The sleeping giant of blockchain awakens — supply chain
Counterfeit goods represent a market of over $1.8 billion dollars annually, with some estimates seeing that number rising over 10% as production and online distribution methods improve. Household names like Louis Vuitton and Levi’s have been quietly perfecting proof of concept trials with leading blockchain companies to ensure provenance and protect consumers on a global scale. Treum has already shown the value of blockchain-ensured supply chain processes on items ranging from salsa to tuna to skincare products. Now, major box retailers like Walmart and international food corporations Nestle and Dole are diving in head first. A recent report stated that companies in Western Europe alone are set to save $450 billion dollars in the next fifteen years with blockchain based supply chain solutions, with operating costs reduced almost 1% across the board. That’s a whole lotta tuna!
15. Art and music will take a lead in consumer-interfacing blockchain applications
Blockchain’s impact on art, music, and the creative space will be profound. In a 2014 report, The Fine Arts Expert Institute (FAEI) in Geneva stated that over 50% of artworks it had examined were either forged or not attributed to the correct artist. Blockchain can fix this now, and I’ve experienced it myself. This year, I purchased a work of art titled “The Human Way” by Vladimir Kush. The payment, certificate of authenticity, and ownership history were irrevocably recorded on the Ethereum blockchain with Treum. By this time next year, this process will be far more commonplace. And it’s not just provenance that makes the arts a prime field for blockchain implementation. Tokenized ownership and the establishment of equitable business models not beholden to gatekeepers have the attention of the art world already. Watch this space.
16. Proof of Work is dying while killing Earth. Long live Proof of Stake.
Retro gaming may be in vogue, but by the end of 2020, Proof of Work will be considered the Atari while we’re all getting used to the controls on the Proof of Stake Playstation. Vitalik Buterin and Ethereum were early adopters of the concept of Proof of Stake, and now there’s a whole industry of projects utilizing stake-based validators to uphold blockchain networks. The reason why is clear: Not only does it unlock the scalability trilemma in terms of speed and security, it is far less taxing on the Earth—y’know, the thing we’re trying to change with this whole decentralization movement anyway. Proof of Work is inherently wasteful, and what’s the point of revolutionizing economic systems if it means contributing to the destruction of the environment? It’s time to move forward.
17. Regulators gonna regulate
While the expectations of the blockchain and larger tech world may move fast, regulators and governments were built to move slowly. Digital assets have now moved out of a phase of distrust by legislative and regulatory institutions, and policy at both the agency and legislative level is aligning to unshackle the technology and streamline regulation. The most recent guidance from the IRS in October suggests that the US government acknowledges that virtual currencies will play a big part in the economy to come. Further, it is well known that the CFTC does not see Ether as a security. Wyoming’s leadership in this regard—with a total of 13 pro-blockchain laws—is behooving other states to catch up. And if there’s one thing that will provide an impetus for the federal government to move forward on the issue, it’s not being left behind by China. 2020 will see positive guidance on blockchain introduced at the state, national, and international level.
18. The unbanked remain unbanked — For now
Decentralized Finance is a remarkable phenomenon with major implications for both blockchain and global economies, but for the time being it will continue to fall short of the oft-repeated mantra and goal of ‘banking the unbanked’ via providing access to financial services to billions of people around the world who need it most. Why? As it stands, the lending community is insular, and issues around ‘reputation’ mean that those who need it most can’t access it. These will surely be ironed out over time, but for the duration of 2020, Decentralized Finance will continue to steadily grow in an enlarging, but closed circle. And that’s not a bad thing. Look at it this way: The sector is already approaching the billion dollar mark, and we’re still effectively in beta mode.
19. User Experience Will Have To Be Better Than Web2.0
Apple’s iPhone is the best selling phone ever because it’s simple and it works. That’s all the consumer needs to know. While many of us tech nerds get our jollies tinkering around the various layers of the Web3.0 stack, everything will need to be abstracted away for the typical Web3.0 user experience to appeal to the general populous. That’s why masterfully artistic UI/UX designers are as important to this industry right now as low layer distributed systems computer scientists.
But UX/UI isn’t just about clean lines and minimal design. From standards to libraries, toolkits, scaling solutions, onboarding, custody and wallet integration, there’s so much that has to be optimized beneath the screen to present that level of functional simplicity. Rimble is an example of an open-source library for creating improved user experiences for Web3.0 decentralized applications. Expect this to be a prime sector for development in 2020. While the first wave of decentralized consumer apps put blockchain front and center, the next will be led by projects that are more subtle and nuanced in the method of blockchain integration.
20. “If you’re going through hell… keep going” – Winston Churchill
The bubble and burst of cryptocurrency in 2017 was like an excessive frat house rager that led to a helluva hangover in 2018 and 2019. There are two types of bubbles, though. Some — like the housing crash of 2008 — leave behind debt encumbrances and waste, while others — like the dot.com bubble — establish foundational infrastructure and crystallize key organizations which go on to become a backbone of the industry. The crypto bubble is akin to the latter, and will lead to the real blockchain boom, one driven by utility, not speculation.
In the wake of crypto markets’ irrational exuberance in 2017 and equally irrational despondency in 2018, the core blockchain community of developers and technologists got to work, heads down, and focused on building infrastructure. Their labor is now bearing fruit. We’re at the crossroads of the next industrial revolution, and it begins in 2020. This progress towards global decentralization and automation will lead to the most prosperous society we’ve ever had.
Here’s to the roaring 20’s!
Andrew Keys is a managing partner of Digital Asset Risk Management Advisors (DARMA Capital), a digital asset investment fund. Previously, Andrew was head of global business development of ConsenSys, the largest software engineering firm in the world solely focused on creating blockchain solutions to build the future of the Internet. Jemayel Khawaja, Editorial Director at ConsenSys, aided in the research and writing of these predictions. This article is not intended as investment advice or solicitation. These are Andrew’s personal views and not that of DARMA Capital or ConsenSys.
Read more of MONEY’s investing coverage for 2020, including what investing pros pick for the stock market.