This post is part of CoinDesk’s 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Richard Chen is a partner at 1confirmation, a seed-stage venture fund supporting crypto-native founders fueling the decentralization of the web and society.
Bitcoin dominance. The rise of DeFi. Libra. QuadrigaCX.
Crypto always has its fair share of news and drama, and 2019 was certainly no exception. But underneath the surface, many teams are heads down building open financial products that the world needs.
As a fund, 1confirmation has been focused on backing teams bringing useful products to market this year – and a number of those products are starting to see real usage beyond pure price speculation.
Product usage is ultimately what’s going to push the industry forward in the long-run and I spend a lot of time thinking about what will get product-market fit. Here are three under-the-radar product trends that I believe will break out meaningfully in 2020.
1. Smart-contract insurance
Decentralized finance (DeFi) was ethereum’s poster child in 2019. Users committed over 2.7 million ETH as collateral to take advantage of a slew of yield-generating financial products. That means some $664 million was “locked in” to DeFi apps in 2019 as people looked to use their crypto without spending it.
One of the biggest advantages of DeFi over traditional finance is composability, and we’ve seen numerous aggregators like InstaDapp and Zerion being built with the MakerDAO, Compound and Uniswap money legos.
However, with DeFi composability comes systemic risk. If an underlying money lego like Compound gets hacked, then every project built on top of Compound suffers too. This is like in 2008 when defaulting subprime mortgages eventually caused Lehman Brothers and Bear Stearns to come crashing down like a house of cards. Furthermore, as high-yield DeFi savings accounts like Linen and Outlet target mainstream users, the first question…