While the pandemic has dominated the news cycle in 2020, blockchain development companies have been working in the background, expanding security and usability to cater to users who are increasingly adopting more advanced online technologies. Here’s what to expect in 2021.
The rise of working from home and the closure of some traditional businesses has benefited those organizations that have a large online presence. With the risk of becoming ill ever present, even those people that were more resistant to adopting new technologies have enjoyed the convenience of being able to shop, pay bills and register documentation without leaving home.
No matter what happens in 2021, the genie is out of the bottle and people will continue to take advantage of online services. While many enthusiasts argue that blockchain solutions are the future, sadly, up until recently, there was insufficient uptake to make many interesting products viable. Finally, things are starting to change.
Blockchain development in 2021
Conducting an expansive review, market research company Forrester recently released a report claiming that Covid-19 and a strong uptake in the corporate sector will spur an explosion of new projects. Forrester predicts that global blockchain projects released in the next year alone will make up 30% of the total.
While the fulfillment of this prognosis would be great for the industry, the report also mentions the fact that permissioned blockchains will remain dominant. Companies such as Alibaba, Huawei and Microsoft are steaming ahead with blockchain-based development, and blockchain startups are entering the arena with innovative products, but public blockchains are still seen as too risky in terms of asset security and compliance. Despite privacy and security developments such as Monero’s ring signatures construction, “Triptych”, wider public acceptance is still a significant hurdle that blockchain technology must overcome.
Smart contract development
On the subject of public uptake, it is this issue that caused French giant AXA to discontinue its use of Fizzy smart contract platform based on the Ethereum blockchain, which was being used to deliver flight delay payments. AXA gave the reason that there was not enough appetite in the market for such a system at this point, noting that the tech was sound and could be used in the future if the market justifies it.
The benefits of smart contracts have already been demonstrated, with use cases from government healthcare to private finance corporations. While there are still some questions about security and reliability (see the DeFi section below), there are companies dedicated to creating rock-solid solutions that increase confidence. Chainlink is one of those companies, and has been rewarded with a stratospheric rise in its cryptocurrency, LINK. Chainlink’s signature technology is its decentralized and secure oracle network, which links real world data to smart contracts on blockchain. They say the data is tamper-proof, and the high level of investment shows that others seem to agree. With greater belief that smart contracts are indeed reliable enough, high profile companies will start to adopt this technology in 2021, opening the floodgates for others to follow.
Growth in DeFi and DApps
DeFi (or decentralized finance) grew at an astonishing rate in 2020. With the aim of creating a parallel decentralized finance system to the one we currently have in the physical world, in 2020 alone DeFi addresses increased 11 fold. This shows that people definitely have an appetite to borrow, lend, trade and gain interest without having to give an intermediary any personal details or undergo credit checks. While this promise of a decentralized and democratic financial market shows promise, recent issues such as high profile hacks and unaudited (or improperly audited) smart contracts means that more work needs to be done in terms of security to gain a wider user base.
As instruments of the DeFi sphere, DApps (decentralized applications) such as Uniswap and Compound became extremely popular. As with normal digital applications, DApps can be created to facilitate just about anything; however, as they haven’t been around for long, they have not even come close to fulfilling their potential. With a scattered release in 2021 and 2022, the Ethereum 2.0 blockchain promises to make DApps easier to create, which will undoubtedly fuel creativity and investment over the next year.
Amid concern that President Biden’s coronavirus stimulus package would fuel inflation of the US dollar, investment in Bitcoin resulted in an end of year evaluation of over $29,000. While once derided as too risky, investment in cryptocurrency services by companies such as PayPal has meant that Bitcoin is now being talked about as a viable alternative to gold, the safe haven for investors. Paypal’s 2021 cryptocurrency wallet development project is a huge sign of confidence in cryptocurrencies. Alongside the release of Ethereum 2.0 and the rise of companies such as Chainlink, there is every indication that there will be greater investment in cryptocurrencies, causing a price rise comparable to what we have seen this year.
When talking about cryptocurrencies in 2021, we need to talk about China’s DCEP. Backed 1:1 with China’s national currency, the Renminbi (RMB), this centralized currency has been slated by the Chinese government as a rival to Bitcoin. DCEP may indeed be adopted by many, but the main aim of Bitcoin is to have a currency free from state control. Rather than signalling the end of Bitcoin, DCEP will most likely increase interest and trust in blockchain development, digital wallets and other cryptocurrencies.
Put simply, tokenization is the digital representation of an asset. In a world of spiralling house prices and high thresholds for investment, tokenization means an expensive real world commodity can be divided into any number tokens and sold with an accurate record kept. A $30 million Manhattan condo development is just one high profile example of tokenization, demonstrating how people who wouldn’t normally be able to afford an expensive property could use their money to invest in something worthwhile. From this they got a return where they otherwise wouldn’t have been able. While you can’t cut up a $4 million piece of art, you can tokenize it, with users secure of their share due to blockchain’s decentralized and transparent nature.
In 2021 people are sure to explore this concept further, taking advantage of not just easier and more affordable investment, but also more convenient borrowing. Through tokenization, individuals are able to do things such as leverage the equity on their homes through more flexible terms. Rather than go to a bank or a lender that gives unfavourable conditions, a person can quickly and conveniently raise funds by tokenizing their residence in a way they see fit, selling parts to investors and then buying the tokens back when they are able to. One of the core principles of blockchain has always been democratization of the economic system, and this is a perfect example of how it can be done in the modern world.
The future looks bright
With 2021 already upon us, there is every reason to be confident about the direction blockchain is headed over the next 12 months. The case for robust digital solutions is there, having been given a boost by COVID-19, which caused a greater dependence on online services. While cryptocurrency price fluctuations tend to grab the headlines, continued blockchain development, the improvement of smart contracts, and the creation of DApps with universal application mean that greater adoption will occur, first by individual users (as seen with the DeFi boost of 2020), and then by a wider range of businesses.
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