I recapped crypto last decade yesterday. Let’s look forward to the future now and what I expect will happen in the 2020s. Of course, no one can predict the future with great precision, but inventing it is one way to predict it more precisely!
In short, I expect that we will be experiencing a blockchain over the following decade, which is both more robust and has privacy features, reaching around the end of the decade (from about 50 million at the beginning of the decade). Adoption should happen both in emerging markets, where the financial systems are most broken, and first start-ups that produce products people want from a crop of new cryptographic technologies. By the end of the decade, most technology startups will have a crypto part, just as today, most technology startups use the internet. Governments and institutions will also step in a big way into the cryptocurrency sector.
In the 2020s, I believe we can see two solutions in the network or new blockchains that improve transaction efficiency by several orders. Just as broadband replacement of 56k modems led to numerous new Internet applications (YouTube, Uber, etc.), I think that the utility of cryptography involves scalability. Once we see blockchains with several order scalability improvements, new applications will also begin to develop faster
In addition to scalability, I expect that in the 2020s we will also see data protection incorporated into one of the dominant chains. Similar to the way HTTP started the internet and only later introduced HTTPS as a default on many pages, I think that in the 2020s, we’ll finally see a’ privacy coin.’ In most cases, it doesn’t make sense to transmit all payments on a clear list.
Several quality teams are currently working on the next-generation protocols (Dfinity, Cosmos, Polkadot, Ethereum 2, Algorand, etc) and fantastic teams are working on two-layer scaling solutions for existing chains. My prediction is that in the coming decade we will see a consolidation of chains (in growth, user base, and market caps). Some improvements will be made in the chains that advance scalability, anonymity, developer tools, and other features. We can even see M&A among these teams if you wish, where one chain is discarded and every token can be modified at a fixed rate. There are as many tokens as there are companies / open-source projects / DAOs / charities all over the world (so millions), but only a few chains are supplied with the basic infrastructure. The winning chains are likely to follow a distribution of power legislation on outcomes, like any other business.
From trading to utility
The 2010s focused largely on speculation and cryptocurrency mining, with the trading sector driving most companies and the best business models. This trend will continue in the 2020s (see below market structure and institutions), but in the 2020’s the best new companies to be developed will be driving the utility process (populations use crypto for non-trading purposes). We have already begun to see the beginnings of this phenomenon with more clients doing non-trading (staking, borrowing/loan/margin, payment cards, earnings, business, etc.).
The rise of the crypto startup
A new type of start-up is going to become commonplace this decade: crypto start-up. Just as the dot com craze started the concept of an Internet startup (and a decade later, almost every tech startup is somehow using the Internet), I assume that almost every tech start-up would have a crypto-currency portion by the end of the year 2020. What describes business crypto? Two things. Three things. Next, it raises money by cryptography (from a much larger pool of global capital and money unbundling in the VC industry). Second, cryptocurrency will be used to achieve the product market by offering tokens for early product adopters (turning them into evangelists), which are identical to the company’s early staff members. Fourth, they put together foreign cultures and markets at a rate that we have never seen before in conventional start-ups (which have to slowly broaden countries by countries, incorporating the strategies and regulations for each country one-on-one). It opens up myriad regulatory issues, but the benefits are so big, I believe the market will find away. Such start-up crypto companies will have the challenge of making what customers want. The next 100 m people who are exposed to cryptocurrencies are not going to come from them because they care about cryptocurrency; they are trying to play a game, use a decentralized social network or gain a livelihood.
Other than crypto-start-ups (mainly beginning to be a world first), the other sphere of acceptance is emerging markets where existing financial networks are a much greater panic. In particular, high inflation countries and large cash markets where cryptography can shine. In the 2020s, I expect we’ll see crypto-monetary acceptance in emerging markets grow to hundreds of millions of users and at least one country “tapping” to crypto-currency for the majority of transactions in its economy.
We also started to see small entities entering the domain of cryptocurrency. In the last 18 months, hundreds have entered Coinbase Custody. I would expect this fast growth to begin in 2020, with bigger and bigger institutions entering. Finally, only around every financial institution has a certain kind of crypto-monetary activity, and most funds hold a portion of their assets in cryptocurrencies due to unrelated returns and upside potential. Something like 90% of the world’s money is locked in banks, so the demand for crypto assets is likely to grow.
Central Bank Digital Currencies (CBDCs)
Although Libra ironed almost everybody in Washington DC, China started by digitalizing the yuan and making blockchain one of its key technology investments. The United States is now catching up, and there are active discussions about how the currency can be digitized. With its USD Coin, CENTRE could be the alternative the U.S. uses or the Fed can use blockchain to introduce its digitized currency. So I believe we will see basket digital currencies emerge either through a consortium such as Libra or CENTRE, or perhaps the IMF itself.
Maturing market structure
During the last decade, many of our businesses were simply brokerages, trade shows, custodians and clearinghouses, which we regarded as cryptocurrency exchanges. In the 2020s, I think we’re going to see the cryptocurrency market structure move closer to the mainstream financial world, isolated from a legal and regulatory standpoint. This is something already happening. For example, Coinbase Custody is a separate company, governed as a NY Trust Company, with its Board. Coinbase Pro will also be brokered and traded. As with traditional financial services, consumers of one company must compete with another and cross-pollination will occur. Once this more mature market structure is in place, I expect the SEC would support retail investors in a cryptocurrency index fund.
Decentralization will grow
Although exchanges are largely based on the traditional financial services model, in the strictly decentralized crypto-to-crypto sector, a different world is emerging. In other words, you will reach a magical innovation area, which is pure crypto-to-crypto, until your fiat currency is crypto. In the world, there are continuous improvement throughout accessibility and security in non-custodial wallets, DEXs, Defi and Dapps, and we will see numerous new applications coming from sports, online gambling and virtual worlds with their economies. Most devices and non-custodial wallets in this world are governed as software companies, rather than financial services companies, as they never store customer funds. The speed of innovation will be significantly increased and globalized from day one (instead of being geographically limited to certain countries). There will also be greater protection in this environment with increased adoption of privacy coins and non-custodial wallets. We will also see the rise of decentralized identities and the associated credibility standards, replacing rating agencies with a more modern/global approach. As the decentralized crypto-economy expands, more people are cryptographically alive and feel empowered, much like early American immigrants.
The billionaire flippening
Olaf Carlson-Wee and Balaji Srinivasan forecast that over half the world’s billionaires will come from cryptocurrencies, for a price of $200,000 per Bitcoin. If you think this is good or bad, it ensures that more development supporters will have exposure in the 2020s to large capital amounts. This will probably increase the interest in science and technology, and I agree that more cryptographers are turning to philanthropy.
We will see how many of these predictions are valid. In moving from cryptocurrencies primarily to trading and speculation to a true world value in the 2020s, the number of people owning and using cryptocurrency will increase significantly and the trend for global economic liberty can begin to truly change.
Can Bitcoin hit a million?
According to Wences Casares, CEO of Xapo and PayPal owner, bitcoin could cost in the next seven to ten years more than $1 million. Casares notes that his opinion will achieve at least 50% so it is not as optimistic as McAfee.
Casares ‘ prediction is motivated by Bitcoin’s popularity and how the cryptocurrency could be accepted internationally over the long term. In some geographies, the lack of reliable and cost-effective financial services could further increase the number of Bitcoin users.
Casares says that the price of Bitcoin can be determined by multiplying the number of investors by $7,000. Supposing that there are 3 billion Bitcoin owners, each Cryptocurrency unit will be worth $1 million as the cryptocurrency supplies are set at 21 million units.
We are still far from that target because there are currently about 7 million active Bitcoin users. Therefore, Bitcoin usage will expand rapidly in the future if the cryptocurrency hits the $1 million.