With New Year just a few days away, it is once again time to reflect on the previous 12 months and look ahead to the next year.
Making predictions for the future of the ever-changing blockchain space is a difficult task, but with enough experience and knowledge about the industry, spotting emerging trends becomes easier. With that in mind, we turned to our resident blockchain whizzes – LimeChain co-founder George Spasov and leading blockchain architect Daniel Ivanov – to learn how they see the DLT space evolving over the next 12 months. Here’s what they had to say.
Twenty twenty has been a challenging year in many respects, but there have also been some major developments in the blockchain space. For example, this was the year that saw decentralized finance exploding onto the scene. Encouraged by DeFi’s potential, many talented developers jumped on the opportunity to experiment with the concept and develop dApps aimed at democratizing finance. Those early efforts helped establish prominent DeFi services, such as Uniswap, Compound, and Yearn.finance, which introduced people to new ways to earn money and access funds. However, they’ve also produced some less promising results.
According to Dani, the DeFi concept will be fleshed out and the space will mature over the next 12 months. The lessons learned during this year’s largely experimental phase in DeFi’s development will be applied to future projects in the sector. And as developers gain a deeper understanding of DeFi’s potential and limitations, never-before-seen services will continue to emerge. This year saw the emergence of yield farming and flash loans, which were only made possible through DeFi applications. Dani expects new and exciting DeFi services to pop up in 2021.
Meanwhile, George points to the variety of existing DeFi dApps, noting that the majority of popular products have their own takes on the DeFi concept, which makes them suitable for different applications. For that reason, George doesn’t think that we are likely to see consolidation in the DeFi space anytime soon. Instead, he expects that the DeFi landscape will become even more diverse over the next 12 months.
Another major development was the beginning of Phase 0 of the Ethereum 2.0 project which was marked by the launch of the Beacon Chain earlier this month. The Beacon Chain will introduce proof-of-stake to the Ethereum protocol. It is also an important first step in introducing chain shards, because they require staking to work securely.
“The launch will likely prompt exchanges and other major ETH holders to start offering staking services aimed at people who want to participate in the Beacon Chain, but do not have the crypto to do so,” Dani tells us.
On the technical side, 2021 will likely see Eth 2.0 growing and evolving through the launch of testnets.
Central bank digital currencies
Considerable progress has also been made this year with regards to central bank digital currencies, with the People’s Bank of China launching a pilot for its digital yuan project in four major Chinese cities. With the pilot having gained some traction, the viability of CBDCs has become more apparent. Dani explains why these could be valuable instruments for central banks:
“Central banks currently rely on commercial banks to roll out their monetary policies among the general population. In CBDCs, central banks will have tools to directly interact with the end consumer. These instruments will also enable central banks to quickly allocate funds, for example, financial aid for the most vulnerable or badly hurt during a crisis.”
While it’s difficult to predict whether CDBCs will be among the leading trends in 2021, Dani is convinced that there will be major developments in that space in the next five years.
Growing interest from governments
Initiatives such as CBDC research and development are indicative of the growing interest blockchain is drawing from governing bodies around the world. Multiple countries across Asia, including China and Singapore, have been quite active in their efforts to utilize the technology and become leaders in that space.
Closer to home, the European Union has identified blockchain development as a key part of the bloc’s strategy for building a digital economy. The launch of the European Blockchain Services Infrastructure (EBSI) – a network of distributed nodes aimed at delivering cross-border public services across Europe – reflects the EU’s significant interest in blockchain. Our colleagues expect 2021 to provide further evidence of the EU’s growing commitment to blockchain adoption.
From PoC to MVP
This year, the enterprise sector again showed hesitation to move past the proof-of-concept stage when it comes to blockchain solutions. The positive here is that the knowledge gained as a result of all that experimentation and prototyping could embolden businesses to take the next step and start developing minimum viable products and even more sophisticated solutions.
George expects businesses to start seeing blockchain primarily as a valuable tool for building solutions connecting various organizations across a single supply chain. The technology’s potential in supply chain management is already widely recognized and it’s time to be actively explored. The next year could see major developments on that front.
In contract, George anticipates that there would be diminishing interest in blockchain consortia. He argues that competing businesses have so far seen negligible benefits from joining forces to form such networks.
The journey continues
Being only a few days away from the New Year, we cannot help but feel excited about the future of blockchain. History has shown that no matter what happens, the sector continues to evolve. One chapter ends, another begins. The blockchain journey continues, often in unexpected, but exciting new directions.
Our experts anticipate that the blockchain sector will find new ways to surprise us in 2021 and beyond. Perhaps the growing interest in non-fungible tokens would spark a boom in the fledgeling market for digital art and memorabilia. Or maybe the video game industry would embrace digital tokens to fuel a new breed of virtual economies. We cannot wait to see what the future holds.
Here’s to 2021 and another exciting blockchain ride!