Ethereum 2.0
The biggest news in the last quarter of 2020 and the start of 2021 is without a doubt Ethereum 2.0. Even though Bitcoin remains the most valuable blockchain network, the pace of the technology is directed by Ethereum. Ethereum created the ICO boom of 2017, and the current DeFi wave of 2020. It is the most revolutionary project out there, and the industry follows its lead.
So, its upcoming update will set the tone and pace to follow for all those projects looking to grow their networks and value. Right now, Eth 2.0 has reached its staking goal and it is ready to begin implementing the beacon chain.
On the negative side of this news. Right now we are only at the start of the many phases needed to complete Ethereum 2.0. So, the benefits of the update won't be apparent until the end of 2021 or even 2022. This could take some wind out of the sails of Ethereum as faster blockchains begin to enter the market.
2 The protocol wars
Even though right now Bitcoin and Ethereum control 80% of the blockchain market, many projects are entering the competition with their technologies. Projects such as Cardano, Radix, Polkadot, Cosmos, IOTA, etc. are hoping to take market share from the big two.
The stakes of this competition will only increase in 2021. As finally, Ethereum begins its long-awaited upgrade, and other networks like Cardano, Tezos, and Polkadot launch their main-nets. All of these companies will begin to try to attract developers to their networks and start carving the market in small chunks.
So far, Ethereum is the undisputed winner of the race. It has many more live projects on its blockchain than any other by far. But Cardano actually has almost the same amount of developers already building on theirs. The final victor is hard to know at such an early stage, but the competition will heat up in 2021.
The final survivors won't be seen perhaps as late as 2025. Yet, next year is crucial as that is where most projects will build their foundations for what looks to be a long and protracted battle in the upcoming protocol wars.
3 Uncollateralized loans
Uncollateralized loans or unsecured loans are loans where the assets provided as a guarantee are less valuable than the total amount of the loan. In the legacy economy, things like credit scores, 3rd party guarantees, or other forms of legal contracts allow people to borrow amounts larger than what they currently own.
There is no such mechanism in the blockchain. In fact, loans in this economy are overcollateralized, meaning the borrower has to provide assets which value is higher than the original amount. This severely restricts the types of loans that can happen in the blockchain economy and who is able to get them.
In 2021 many DeFi projects are looking to break this barrier and provide unsecured loans. Projects such as Aave and Akropolis have already begun developing these products. Many more will join the race, as uncollateralized loans are seen as the key piece to expand the crypto economy.
4 Proof of Stake\
Proof of Stake (PoS) has been around for a while, but in 2021 it will take over the world of blockchain. All of the new networks entering the race are using modified versions of PoS in their blockchains. So, next year a shift will take place in the industry as PoS takes over Proof of Work (PoW) as the dominant technology.
The impact will be massive, as the resources to become a validator in a PoS network are far less expensive than to become a miner in PoW blockchain. We'll see an increase in activity in PoS blockchains and perhaps this will result in a decrease in interest in mining. News of this cryptocurrency trend will shape the future of the blockchain world.
The potential of this change will shock the foundations of the blockchain economy. It is crucial to track the evolution of the PoS vs PoW race and see if the PoW networks will be able to survive in this new world.
5 Interoperability
One of the great problems blockchains face right now is that each network works as an island. It is very hard to export assets from Ethereum to say Tezos, and this limits growth. This is where interoperability becomes a game-changer.
Networks that can successfully communicate with each other will have a tremendous advantage against those that remain alone. Furthermore, this incentivizes projects to seek allies among their competitors to face larger networks.
The shape and durability of these alliances will dictate to a large extent the result of the competition. In 2020 we already see a few of these collaborations start. Ergo and Cardano have allied to develop Oracle Pools and are actively sharing technology. Avalanche is already testing a bridge to Ethereum in the hopes of having it ready for 2021.
This is only the beginning of one of the most powerful current cryptocurrency trends taking shape. It will start unraveling in 2021, but we won't see its final outcome until 2025 and beyond.
6 Decentralized Finance
Of the cryptocurrency trends 2020, DeFi has been the most dominant. In many ways, it is the great success story of blockchain as it finally created a self-sustaining ecosystem of services people use. This is why in just a year it has grown exponentially.
In 2021 there is no reason why this trend won't continue. DeFi will grow on Ethereum, but more meaningfully as all the new projects enter the competitions, we'll see DeFi in other blockchains. In many ways, which network has the most valuable or talk about DeFi services will be the winner.
Stakes are high for Ethereum and other blockchains, attracting developers will be key in 2021. This way one of the metrics we can use for next year and forward is how big the DeFi ecosystem is in a network. Those with the most successful DeFi products will be ahead of the competition.
7 Non-fungible tokens
Perhaps one of the cryptocurrency trends with the potential to be as big as DeFi is non-fungible tokens (NFTs). Popularized by the game Crypto Kitties, NFTs have been growing on the sidelines of the industry for many years now. They are now being deployed in card games, collectibles, and other types of gaming assets. But they have even more potential.
As unique representations of an asset in the blockchain, NFTs can be many things. One of the most promising applications is artworks. As artists can create unique pieces or batches and place them on the blockchain for sale and trade. One example is Super Rare, an art marketplace on the Ethereum network.
In Super Rare artists are able to sell their digital artworks directly to the public. Each piece is unique and verified in the blockchain. Furthermore, those who buy it are then able to sell it at an increased price to a 3rd person at a later date. This is creating a vibrant market for artwork in the blockchain.
As NFTs evolve even more their applications will expand. They are one of the most important cryptocurrency trends for analysis moving forward and have the potential to be as big as DeFi.
8 Social Tokens\
A variation on NFTs, social tokens are growing in popularity. As it becomes easier for non-developers to create their own tokens a new cryptocurrency trend is taking over social media.
Social tokens are tokens created by internet personalities to reward their communities. They can be deployed on a blockchain network and distributed easily. With them, internet influencers can create valuable assets for their most ardent supporters. In turn, these can be traded, so people can make money from their fandom.
Right now there are only a few. But it is not hard to see their massive potential as the internet keeps growing and influencers look for new ways to connect with their audiences. In 2021 and beyond we'll see the proliferation of these instruments.
9 Central banks digital currencies CBDC\
Central Banks Digital Currencies (CBDC) will begin entering worldwide markets in 2021. As the promise of blockchain as a more efficient digital ledger has caught the attention of many government officials. Already in 2020 many countries in Asia did limited tests of CBDCs in their local markets, and the results have been impressive.
There is no doubt that these cryptocurrencies controlled by central authorities will have a big impact on the industry. How will the public ledgers interact with the CBDCs will be key for the future of blockchain.
There is little that can be known right now. But CBDCs are among the most important cryptocurrency trends of 2021 and beyond.
10 Regulation\
Finally, the question of regulation looms large on the horizon. As there are signs of new Bitcoin crackdowns in China, doubts on how a Biden administration will approach blockchain, and questions about the legality of decentralized stable coins, many are the regulatory challenges facing blockchain.
Again it is difficult to know how these will impact the industry. Many countries still are slow to adapt, and this uncertainty is no good for the industry or the countries in question. Regardless, we all must keep a close eye on the regulations applied to blockchain in order to navigate turbulent waters.
