A look back at 2019 shows that there were already numerous blockchain trends this year. Overall, it was a remarkable year in blockchain and crypto space. Trading cryptocurrencies like Bitcoin and Ethereum survived the bear market. Numerous new strategic alliances have seen the light of day and initiated new projects. More and more companies are testing the potential of blockchain technology in the course of initial pilot tests – and more and more blockchain protocols are maturing into finished solutions.
Central banks are also showing an interest in decentralized solutions and are in favor of developing their own digital currencies. China in particular is securing a leading role in the field of blockchain and is investing billions in technology research. The development in the coming decade will be correspondingly exciting. The year 2020 already harbors numerous new blockchain trends. Below we present the ten most important developments for the coming year.
- China publishes the first CBDC
China is undergoing an extreme economic change. The country is moving away from imitation and focusing on the development of new technologies. Among other things, blockchain technology is the focus of the People’s Republic. Some of the largest crypto exchanges already come from China and most mining providers are of Chinese origin.
However, the incumbent President of China, Xi Jinping, makes it clear that blockchain is inevitably part of China’s future. Investments in technology research are correspondingly high. Above all, the recently completed issue of Bank of China financial bonds to finance small businesses in the amount of USD 2.8 billion illustrates the relevance of blockchain for the country.
One of the most important developments within China concerns the digital yen, which is expected to appear in the coming year. The government wants to use the new currency to reduce its economic dependence on the US dollar.
- Bitcoin ETFs receive approval
Bitcoin was one of the most important topics in the crypto sector in 2019. Investors are still waiting for the first Bitcoin ETF to be issued. So far, the SEC has always been cautious and has blocked all Bitcoin ETF filings.
In particular, financial monitoring and manipulation was considered inadequate. As a direct reaction, companies like Chainalysis, CipherTrace or Elliptic developed important tools. With the appropriate tools, better monitoring should be possible.
Brad Sherman could also play an important role in the approval of the first Bitcoin ETF. Sherman was recently elected to chair the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. In his role, he oversees the SEC and its self-regulatory agencies such as FINRA. Sherman is publicly seen as an opponent of Bitcoin. Nonetheless, another breakthrough in the leading cryptocurrency could spur market interest and accelerate the release of a Bitcoin ETF in 2020. Until then, investors can continue to buy Bitcoin physically or in the form of a CFD – more in our Bitcoin buying guide.
- Facebook publishes Libra with limited functionality
Mark Zuckerberg announced Libra in May 2019. Since then, the currency has attracted public interest. Regulators in particular were concerned about the range of functions and feared a risk to international financial stability. Accordingly, numerous countries have spoken out in favor of regulating the digital currency.
Despite the media interest, the Libra Association pushed the development. The GitHub repository in particular has received regular development commits and shows the progress in the development work.
According to Zuckerberg, the currency should start next year. Despite the ongoing regulation, a market launch of the currency with a very limited range of functions cannot be ruled out. As a result, not all promised functionalities appear, but the introduction with some approved features is not excluded.
- Stablecoins are gaining popularity
While 2018 was cryptocurrency, 2019 showed increasing market interest in stablecoins. Accordingly, more and more issuers are using classic fiat currencies to hedge their own digital currencies.
This trend could continue in the coming year and, as one of the most important blockchain trends, completely reorganize the market. Basically, stablecoins offer disruptive potential. Numerous illiquid assets can be liquidated and traded using digital currencies. Projects like Fnality or J.P. Morgan’s stablecoin goes live.
- DeFi is becoming more relevant
The financial world is still characterized by a high degree of centralization. However, we have identified financial decentralization (DeFi) as one of the upcoming blockchain trends for 2020.
Today, more than $ 290 million is already committed to various applications in the DeFi ecosystem. Much of this growth results from the growth of Maker DAO and Dai Stablecoin. Nonetheless, decentralized exchanges and lending applications are also gaining in relevance. Venture capital in particular shows that DeFi will continue to gain relevance in the coming year and will remain one of the major blockchain trends.
- Adaptation of Lightning Network is increasing
Bitcoin is considered the cryptographic gold. However, the Bitcoin blockchain shows that the currency is not designed for high-traffic trading. The Lightning Network is already a solution for this technological bottleneck, because as a Layer 2 implementation, the Lightning Network enables instant Bitcoin transactions.
Instead of processing all data within the actual Bitcoin network, this layer 2 implementation relies on external data usage. As a result, the transaction speed increases rapidly – the fees, however, remain at a low level.
New applications, nodes and channels will be created on this Layer 2 network in the coming year. In addition, companies continue to rely on the Bitcoin network with their tools, including RSK from Exonum, thereby promoting the further development of the Bitcoin development ecosystem.
- New tools like privacy, oracles are gaining popularity
One of the great advantages of blockchain technology is transparency, because transactions can be tracked at any time. However, transparency must always respect data protection requirements, so that privacy should become more relevant in the coming year.
Companies like Ernst & Young in particular are investing in the development of new data protection tools for the public Ethereum blockchain. With Nightfall, interested parties already get a first idea about the potential use of the public mainnet to process transactions that are secure under data protection law.
As a result, it is likely that new zero-knowledge and multi-party computation projects will also come onto the market in 2020. MPC is the bigger trend. In addition, oracles that ensure the secure import of sensitive data into blockchain networks are becoming increasingly relevant.
- Blockchain protocols offer interoperability
From today’s perspective, different blockchain protocols provide solutions to a wide variety of challenges. Interoperability between the individual protocols is simply not the focus of the individual market participants.
However, Hyperledger Besu’s move to the Linux Foundation’s Hyperledger initiative has shown that the different blockchains will continue to converge in the future. The differences between the most important blockchain protocols such as Besu, Fabric, Corda or Quorum are still significant. Nevertheless, the open dialog makes it clear that the assets of the individual blockchains can exist in parallel.
Blockchain was made available in various cloud platforms in 2019. Accordingly, it is also possible that the first cross-blockchain pilots will appear in the coming year.
- Ethereum 2.0 advances
In addition to Bitcoin, Ethereum is the second largest public blockchain. The public interest in the native cryptocurrency ether is correspondingly large – in our guide you will learn more about investing in ether.
However, Ethereum isn’t considered the perfect blockchain either, so several teams are developing clients and components for Ethereum 2.0. These teams shared updates and progress back in 2019. Accordingly, market participants are confident that the new and improved Ethereum blockchain still exists.
All publicly known advances are enormous and fuel the optimism of market participants. The roadmap provides for partial delivery of the innovation in 2020.
- Investors discover crypto lending
Investors can expect the low interest rate phase to continue in the coming year. Accordingly, more and more banks are putting investors under an obligation and charging negative interest rates. Investors with a certain risk can still achieve above-average returns.
Crypto-lending is one of these guarantees of return. As mining becomes less attractive, investors are discovering the potential of crypto-based lending. Similar to well-known P2P platforms, investors give small loans to other investors and use cryptocurrencies. Internationally, the lending market based on fiat currencies continues to grow in volume – however, growth in the crypto sector is already greater.
For us, this area is already one of the most important blockchain trends of the coming year. After all, investors can earn returns of up to 18 percent here. Providers such as Blockfi or Crypto.com are considered market leaders and can probably expand their position.
Conclusion: 2020 also offers interesting blockchain trends
Our analyzed blockchain trends show that the coming year can also look forward to numerous promising blockchain developments. These blockchain trends not only focus on a specific sector, but have the potential to revolutionize entire economic sectors.
However, various forecasts also show that the coming year is not the end of blockchain growth. Rather, 2020 heralds the new decade with numerous innovations.
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