Four Blockchain Predictions for 2021. From Crypto to Art
2021 is off to an incredible start for cryptocurrencies and blockchain. So far, the total cryptocurrency cap-market hit a historic high, surpassing $1 trillion for the first time ever. New interest and hype around blockchain tech and digital currencies from industry and government leaders have also helped the rise.
As we know, the challenges that arose in 2020 continue, including the global pandemic. COVID-19 took hold of the tech worlds agenda, with the need for digital solutions and real-time multi-party access to consistent information highlighted across multiple sectors.
Let’s go over some sectors where blockchain will be fundamental in a post-pandemic reality.
Focus has shifted towards digital identity for COVID-related needs, but long-term strategies and implications remain to be seen.
The COVID-19 crisis has increased demand for identity solutions that do not compromise privacy and individual freedoms, specially taking into account regulations like GDPR. Of course, views on what constitutes the correct level of privacy preservation vary widely around the globe, with China and the United States taking profoundly different routes. As the travel industry and governments around the world continue to explore ideas such as “immunity passports,” which would maintain vaccination and testing records, creating a global standard around digital accreditation seems necessary and elusive.
What does it mean to anchor yourself in digital identity as a reaction to a very specific set of circumstances (like an unprecedented global pandemic)? Digital identity systems are relevant to everything from financial services to workforce requalification, and each has different requirements. Focusing on one industry without taking a longer-term vision can mean we miss out on opportunities, duplicate efforts, and create more challenging user experiences.
As it stands, there are very few regulations or industry standards to prevent fragmentation of technical solutions, protect privacy, or promote inclusiveness, interoperability and portability - all essential principles for digital accreditation beyond urgent use cases. As global society struggles to return to 'normal', there is a need to ensure potential solutions that embrace the use of digital credentials, harness the expertise of the digital identity community, consider a longer-term holistic vision, and create strong partnerships, with communities having a say.
2020 was the year of “institutional investing” in bitcoin, a buzz phrase seen in expert analysis of cryptocurrency rallies, referring to large-scale investments by players like MassMutual and Square. Financial institutions and service providers are likely to step up their own experiments and use of cryptocurrencies this year, either through investments or actual implementation.
In some cases, they are also used to improve internal processes. For example, on a Davos agenda panel, Hikmet Ersek, Western Union's chief executive, cited the company's use of a stable "WU coin" to exchange different currencies, done "21 times per second."
COVID-19 also raised the profile of the conversation about the central bank's digital currency exploration of blockchain technology. We saw the launch of some of the first blockchain-based systems nationwide, including in the Bahamas and Cambodia. At the same time, progress around China's digital currency / electronic payment platform continued in the background, and the People's Bank of China completed pilot tests in Shenzhen, Xiong'an and Suzhou, processing RMB 1.1 billion in 3,1 million transactions.
Still, many governments and central banks, including the US Federal Reserve and the ECB, continue to investigate whether central bank digital currencies (CBDCs) have potential, but have maintained that they see no value in issuing one, for now at least. Many are also looking at growth in the stablecoin space, with a total value now exceeding $25 billion, driven by decentralized finance (DeFi) and institutional interest. This has been matched by increased attention from regulators, for example the controversial STABLE Act in the United States and the recent letter from the Office of the Comptroller of the Currency. We can expect continued regulatory interest and activity in this area around the world for some time to come.
NFTs increase inclusive wealth
We've come a long way in the NFT space, but relatively little progress has been made in realizing the potential of non-fungible tokens, a crypto token that is indivisible and unique.
But we are already seeing changes around the inclusion discusion. Previously there was talk of democratizing access to high-value assets, such as art and in early 2021 we have seen some of this being implemented, with some notable digital art news over the last few weeks. While there may still be potential in the space, it's important to consider the implications for creators. For example, some have highlighted black artists and the role that crypto art can play in enabling greater ownership and wealth creation within the space, as well as art exchanges. We have also seen early signs of how this can translate into music, writing or other creative spaces.
The awareness of the power that large platforms and service providers have over our lives is moving beyond the crypto and blockchain and web3 community into the mainstream. Take the recent mass exodus from WhatsApp to Signal following a relatively minor change in Facebook's data-sharing policies as an example.
This can lead to strong demand for decentralized cloud services and platforms. In 2020, we saw the continued growth of Web 3 projects. The public and private cloud industry is among the most centralized in the world, with four cloud providers (AWS, Azure, GCP, Alibaba) controlling 4/5ths of the market. Decentralized cloud storage is as of now the only alternative that could challenge the cloud services status quo. Along with advancements in Artificial Intellence, this transition could lead to an expansion of the scope of human and machine interaction, and an acceleration of the transition to Web 3.
Even as we have been grappling with the consequences of the greatest social and economic disruption since the great depression, the pace of work throughout the blockchain ecosystem has accelerated. The good news is that awareness of the potential of decentralized systems now lives beyond the minds of a small minority and is slowly gaining awareness among a wider audience, although the bitcoin price index remains the main reason why, the one that most people pay attention to in the space.
As a result, we are likely to see continued interest from regulators and legislators around the world, especially around digital currencies. We are already starting to see further market consolidation, which may be a sign of greater market maturity. Regardless of what happens in 2021, it is sure to be a wild year and one for the books.