After recently conducting a retrospective on my 2019 predictions, scoring 3/5 by my own self-assessment, I’m ready to issue some more for 2020.
NB Special thanks to Silicon Luxembourg who published these last week (minus some extra material here)
This year’s summary:
- DeFi will grow, fast
- China will be first to the CBDC punch
- Libra won’t launch
- Regulator strain will intensify
- Bitcoin safe haven status will be tested
DeFi refers to ‘Decentralised Finance’, which generally refers to an emerging financial system built mostly on Ethereum. As the name implies, it is a broad technological movement that includes digital assets, financial smart contracts, protocols and decentralized applications (DApps). Put more simply, it is “financial software on the blockchain that can be pieced together like Money Legos.” (Source: Defipulse.com)
DeFi is a natural evolution of the Blockchain ecosystem that is doing to finance what cryptocurrencies did to money. With a diverse array of applications already running, it’s typical to measure the scale of the DeFi industry in terms of the amount of value that has been ‘locked’ in DeFi-related smart contracts, which has grown rapidly from less than $2m in November 2017 to more than $695m in December this 2019.
I believe this trend is only just getting started. In the same way that email was only the first building block of the internet, cryptocurrency is only the first building block of blockchain technology. And, while many people might have been focusing on coin prices too much to consider what would come next, for me this was always what blockchain is all about! Completely new, decentralised financial constructs, including lending, derivatives, payments, asset management, and other services.
This is DeFi, and it’s going to get much bigger, much faster in 2020. The risks are that it is perceived as the next ‘ICO bubble’, with the invitation of ‘invest in me’ simply being replaced by ‘lock with me’. Some suggest that…