The blockchain and digital assets space is well-positioned for even more growth and adoption in 2021 by mainstream consumers and institutions. The COVID-19 outbreak has dramatically accelerated the shift towards all-digital platforms and services because it’s no longer considered safe to visit physical business locations.
Medical experts believe that the second wave of the Coronavirus pandemic might create even more severe health problems. Because of these serious issues, it’s become necessary to use digital financial services, which can now be accessed from the comfort of our homes. As the Fintech sector continues to expand, the relatively smaller crypto-assets and blockchain industry should also see increased levels of adoption this year.
As covered in the Top Crypto and Blockchain Predictions – Part 1, we can expect Bitcoin (BTC) to be used more often as a store of value (SoV) and medium-of-exchange (MoE). Peer to peer Bitcoin trading marketplaces like Paxful and LocalBitcoins provide a very practical and useful way for consumers and businesses to complete everyday transactions.
Expect Bitcoin and other Cryptos to Help Provide Financial Services to the Unbanked
Ray Youssef, CEO and Co-founder at Paxful, notes that they aim to give “every human being on the planet access to every financial network on the planet.” Youssef explains that he can perform a bank transfer to any country in the world. Recently, he paid for a photoshoot (he’s designing his own clothes as well) in Estonia without actually going through the regular international banking network.
"You give every human being on the planet access to every financial network on the planet." A recap from last night's best-of compilation with @raypaxful. Give us a LIKE if you agree with this comment: Full Interview 🍿 🎬 👀 https://t.co/B9USFTjtny pic.twitter.com/u4QHGqh560
— cryptonitestv (@CryptonitesTV) January 14, 2021
Youssef revealed that he sold some Bitcoins to an individual based in Estonia in order to settle the transaction. While currently living in London, Youssef claims he’s been using Paxful to conduct Bitcoin transactions, so he can pay his rent. He pointed out that he doesn’t yet have an English bank account and his banking service provider in New York (Bank of America) won’t allow him to perform a wire transfer internationally unless he’s physically present in the branch itself.
He also noted that BoA is a “big shot” American bank yet they’re that “ghetto.” So what he does is that he signs onto Paxful and settles most transactions with Bitcoin, which is a decentralized, and open financial network that’s accessible to everyone across the globe.
“Isn’t that beautiful? I can access any bank account in the world or any financial network in the world. I was in China. I wanted to charge my phone. I was at a kiosk and they took Alipay or WeChat Pay but I didn’t have AliPay or WeChat accounts. So I went to Paxful, sold some Bitcoins, the guy accepted it for me, gave him the QR code and I’m done….[these services] make people rich. Without [them,] people would not have a way [to conduct these transactions.] The poor are used to paying more for financial services because they won’t be able to access [standard banking services.]”
In addition to helping more people access digital financial services, we can expect to see more compliant blockchain-based solutions to be deployed in 2021. Security tokens are still a relatively small segment of the larger cryptocurrency and distributed ledger technology (DLT) industry. However, there are now many companies and businesses offering security tokens including the real estate sector.
Compliant Blockchain Platforms and Security Tokens Should See Significant Growth in 2021
The tokenized real estate market cap stood at $25.75 million+ with $179,000+ in trading volume for December 2020, according to the latest report from the team at Security Token Market (STM), which is focused on re-inventing capital markets with blockchain or DLT-based security tokens.
The Security Token Market team notes that their website, stomarket.com, hosts live-trading data from 25 different security tokens across the globe. STM regularly prepares monthly reports which outline the performance of these assets on the secondary market.
As reported recently, the DLT-based security tokens market cap stood at $374 million+ in December 2020 with over $2.6 million in trading volume. The team at Security Token Advisors, which aims to “reinvent” finance with security tokens, had revealed (towards the end of 2020) that the world’s top 100 banks are also “reinventing” themselves by leveraging blockchain or DLT.
Kyle Sonlin, the Founding Partner at the Security Token Group and the CEO at Security Token Market (STM), had noted last year that the real estate sector had really dominated. We can expect this trend to continue during 2021.
Sonlin had pointed out that RealIT, an established tokenized real estate issuer, had tokenized 28 single and multifamily homes across the United States. RealIT has been focused on Detroit-based Section 8 housing, Sonlin confirmed.
Jonah Schulman, Head of Marketing at Security Token Market, had stated in an interview with Crowdfund Insider last year that “the most compelling advantages of security tokens to him are fractional ownership and democratization.” He added that “from an investors’ point of view, through democratization and fractionalization, investors are given the opportunity to diversify their portfolio in ways that weren’t really possible before.”
Meanwhile, the team at Singapore-based Propine, a regulated digital asset custodian, confirmed in December 2020 that just a few months ago, their company was selected by blockchain platform Zilliqa as one of 8 startups to take part in the ZILHive Accelerator program.
Propine, which has now “graduated” from the Monetary Authority of Singapore’s (MAS) Fintech Sandbox program, was granted a Capital Markets Services (CMS) license and is now fully regulated by MAS. It’s the first regulated firm of its kind in Singapore and claims to be the only digital asset custodian globally with ISO 27001 certification.
Propine CEO Tuhina Singh recently remarked:
“There’s been considerable uncertainty in the past as to how security tokens should be considered within the law. Today, there are clear signs that traditional market infrastructure is adapting to the token economy. Large institutions like HSBC, World Bank, Nasdaq, and many more are embracing the new reality that capital markets … will be fully tokenized.”
Expect Many More Crypto Firms to Offer Educational Resources During 2021
Andy Boyan, a researcher at decentralized oracle network Chainlink (LINK), recently revealed that people are no longer asking him simple questions about cryptocurrency prices. They want to actually learn about how these emerging technologies will provide real-world use cases.
The questions I get about crypto are exciting. People are not just asking – What do I invest in?
Instead I'm getting way more Qs like
-What are the projects with the biggest long-term potential?
-What tokens have real users?
-Where can I go to learn more?
Bullish on education.
— Andy Boyan (@andyboyan) January 18, 2021
As covered in March 2020, the University of Malta students who are enrolled in the Masters in Blockchain Program had been voting for student representatives using a decentralized application (dApp). It should be expected that in 2021, more universities across the globe will be providing educational courses on how blockchain and digital assets may be used to solve real-world problems.
However, all new technological breakthroughs bring many new challenges that must be overcome. Dr. Joshua Ellul, the Chairman of Malta Digital Innovation Authority and Director of Centre for DLTs, University of Malta, had published a paper (with Jonathan Galea, Max Ganado, Stephen McCarthy and Gordon Pace) titled “Regulating Blockchain, DLT and Smart Contracts: a technology regulator’s perspective.”
Dr. Ellul confirmed that the paper was accepted within the European Academy of Law Journal. The paper stated that blockchain, smart contracts and other forms of DLT allow users to ensure that processes are “verifiable, transparent, and tamper-proof.”
However, the paper’s authors had argued:
“Features that [aim to] bring decentralization also pose challenges to providing protection for the various users and stakeholders. Most jurisdictions which have implemented regulatory frameworks in this area have focused on regulating the financial aspects of cryptocurrency-based operations. However, they have not addressed technology assurance requirements.”
Dr. Ellul and his colleagues suggested:
“In the interests of not stifling innovation, we propose that such technology assurances be voluntary for sectors or applications that are deemed to be low-risk.”
“The field of cryptocurrency has brought technology closer to finance. Even though not all DLT platforms provide (or require) a cryptocurrency, they have been intertwined or at least, closely associated in the minds of many.”
In 2021, we should expect many more academics to join the nascent crypto and blockchain space. More than likely, this emerging industry is here to stay, but it will need the support of qualified researchers and engineers to guide further development.
Expect More Crypto Projects to Conduct Peer-Reviews before Implementing Solutions
Cardano (ADA), a major platform for building and deploying decentralized applications (dApps), finally saw its mainnet go live last year. Many industry participants had criticized the Cardano team for being too slow to introduce its solutions. However, we’ve now seen numerous hacks and malicious actors have exploited smart contract vulnerabilities because developers had been in too much of a hurry to launch platforms (without properly auditing the source code).
While the Cardano team may have taken longer than many others to deploy their products, they claim that at almost every stage, their work had been sent for extensive peer-reviews. That’s why it took more time to introduce production-ready software into the market, Cardano’s developers have previously explained.
It’s quite possible that in 2021, we’ll see more developers becoming careful with how they write code so that it’s not vulnerable to hackers. We should also see more companies like CertiK to continue auditing smart contracts for decentralized finance (DeFi) solution providers. The cybersecurity solutions provider has regularly been auditing code for DeFi protocols like Boost Finance. These practices should become the norm, so that we can significantly lower the number of exploits, because they cause real financial losses.
As reported last month, more than $8 million in cryptocurrency tokens were stolen from the Nexus Mutual Founder Hugh Karp’s personal account. On December 14, 2020 (at 09:40 am UTC), CertiK Skynet had discovered a very large transaction from Karp, Founder of Nexus Mutual, a “people powered” alternative to insurance built on Ethereum, which transferred 370,000 NXM tokens to an unknown cryptocurrency account. The total value of digital tokens was around $8.33 million.
While this issue has now been (somewhat) resolved, the CertiK report had emphasized that “the importance of insurance is fully illustrated by this incident that the account of the founder of a blockchain insurance platform was attacked.” They warned that “no matter who you are and what role you play, hackers will not bypass you in the blockchain network because of your fluke.”
The CertiK security verification team recommended that “any security system and operating environment requires not only program security verification, but also professional penetration testing to verify the security of the overall product.”
They also suggested that “in order to prevent the loss of digital assets from any non-technical reasons, the project team should purchase insurance for their products/solutions in a timely manner so that there will be multi-level protections for the project and investors, and the loss from any attack can be compensated in time.”
Expect More Crypto-related Insurance Services to Launch in 2021
Although the blockchain space is still in its early stages of development, it’s become clear that the financial services segment of this industry will require special insurance products and coverage.
Last year, digital asset Insurance firm Evertas secured $2.5 million in seed funding from Morgan Creek Capital, Plug n Play, among other investors.
Mark Yusko, Founder, CEO and CIO at Morgan Creek Capital Management and Managing Partner of Morgan Creek Digital Assets, had reportedly decided to join Evertas’ board of directors.
Yusko remarked (in mid-2020):
“One of the most critical components of well-functioning markets is the presence of robust insurance infrastructure. Evertas endeavors to build a comprehensive insurance platform to support the emerging Crypto asset markets and we are pleased to partner with the outstanding leadership team at Evertas to contribute to the establishment of this solutions focused enterprise. Morgan Creek Digital invests across all areas of infrastructure within the digital assets ecosystem and we’re excited to include essential insurance services in our portfolio.”
Let’s Do A Quick Recap
Based on these wide-ranging developments, it seems like all the pieces of the puzzle are coming together. Crypto-related infrastructure is being created by companies across the globe. It’s also become evident that blockchain and digital assets have real-world use cases like for supply chain management (being worked on by VeChain), decentralized ID verification (being developed by Ontology), and many other requirements such as document authentication.
While the Bitcoin and larger cryptocurrency market may be criticized for being too volatile, with prices fluctuating wildly, it’s now become abundantly clear that this industry is here to stay because it has proven to provide real-world solutions. In 2021, this industry will only become stronger and more resilient due to its digital nature which is ideal for a post COVID world.