The year gone by had many ups and even more downs, mainly due to the global outbreak of a devastating virus that has crippled nations and killed millions. But for those in the crypto and blockchain community, 2020 finally showcased the true potential of the technology.
There were, arguably, more developments last year that will have long-lasting positive effects on the industry than during the entire history of distributed ledger technology and Bitcoin (BTC). So, here are the top five developments of last year in the decentralized tech sector that will leave a lasting memory and a strong legacy for years to come.
BTC price breaks $20,000
Bitcoin price did a lot more than just break the $20,000 price mark that was originally set during the 2017–2018 bull run. First, the $20,000 mark fell. Soon after, so did $30,000. And now, even the $35,000 mark has been taken over.
Those seemingly wild predictions of a $45,000 Bitcoin price by the end of 2021 may not be so distant after all. What’s more is that the infamous stock-to-flow model developed by crypto trader PlanB, which predicts a $100,000 price for Bitcoin, is playing out as suggested.
So, yes, prices go up, but they can also go down. This has happened before and may happen again, right? In theory, however, many things have changed, not least the general perception of Bitcoin. This has been evidenced by the shift in demand from retail investors to institutional ones.
Bitcoin welcomed numerous high-profile companies that joined the industry for their own various needs, from firms choosing to hold BTC as a reserve, like Microstrategy, to the rise of crypto investment funds like Bitwise and Grayscale — and who knows which individuals are investing through those. All that is known is that they are willing to put billions into crypto. And then in late October, the real big news arrived...
PayPal launches crypto option
PayPal, a company that was originally founded with similar fundamental beliefs to Bitcoin itself, not only announced its foray into but actually entered the crypto space in 2020, at least in the United States. Additionally, it has been reported that PayPal is now one of the biggest buyers of Bitcoin as the company builds up reserves to satisfy customer demand.
The single word that sums up this development is “adoption.” Some 28 million merchants and over 361 million users all around the world will now be exposed to the “baby” version of owning and using crypto. According to the company, it is the custodian and is essentially just selling shares in its BTC holding. In doing so, it’s not following the traditional way of how people own crypto, and that’s fine.
To the average user, crypto is way too difficult to comprehend — all the cold and hot wallets, the passcodes, the 12-word recovery phrases, etc. PayPal is offering an easy-to-use way to get into the ecosystem, and once that happens, some may actually go the full way to discover more about how this technology should be utilized.
The Bitcoin halving was touted to be the big make-or-break moment for the crypto industry. It took place, yet not much actually happened. Various commentators expected BTC’s price to pump then crash, while others foresaw a drop-off in the network hash rate. Although those things did happen to a certain extent, it was nowhere near as dramatic as expected, and that was a very good thing.
The Bitcoin mining reward halving is an event that happens roughly every four years and cuts in half the amount of BTC that miners earn for discovering a block. This is a hard rule coded into the blockchain that limits the supply to just 21 million BTC and, in doing so, mimics gold’s finite supply.
Ultimately, the fact that Bitcoin’s price and fundamentals remained almost unaffected has led some to believe that the industry has reached a certain level of maturity. Perhaps this resilience was what ultimately led some of the biggest corporations, economists and investors to reconsider their stance on cryptocurrencies in general. The fact that the supply of Bitcoin is running out became even more apparent as the year went on.
It’s now in fashion for companies to go public, so it’s great to see that some crypto-native companies such as Coinbase are also joining in on the fun. It was half expected that such a move would come soon due to the overall regulation-open approach employed by the company, which was clearly set to appease U.S. regulators when the time was right.
What the move means, in essence, is that traditional investors will be able to sink millions into Coinbase equity — as much as $28 billion, in fact, according to Messari. The draft of the listing was also carefully timed with the jump in the price of top cryptocurrencies, and this will hopefully play into the exchange’s hands as it will no doubt face intense scrutiny from the Securities and Exchange Commission.
Ultimately, Coinbase can shine light into a dark alleyway leading up to mass adoption by investors and users alike. Other so-called “unicorns” may follow its example in 2021, so in a way, Coinbase is sticking its neck out. But it may pay off if they are granted the initial public offering and become the first truly major crypto company to do so.
Ethereum and DeFi
Bitcoin has investors, and Ethereum has its users, and the latter certainly stepped up in 2020 to make the decentralized finance boom a reality, finding use cases for all those decentralized applications that had been touted to change the game for some time.
All was calm before the month of July when it was announced that a highly anticipated project by the name of Compound launched its own token, COMP. It proved to be an instant hit, securing numerous listings on high-profile exchanges and establishing a new trend in DeFi.
The basic methodology behind Compound is simple: The platform acts as a decentralized lending protocol that pays interest to users that add their crypto to the pool. However, once funds are added to the pool, the platform issues an equivalent amount of cTokens that can be used as collateral on a loan, meaning that one token of any kind can be used twice.
As COMP’s price started to pump, it wasn’t long before other projects caught on to this new trend and began to unveil competing protocols or projects that supported the ecosystem. Just over one month later, Yearn.finance was launched and took the yield farming phenomenon to a whole new level.
Then came the decentralized exchange Uniswap, which also joined in on the action by opening up its own pools, and with its open listing policy, countless DeFi projects flocked in to list their tokens on the exchange. However, it also made an impact through its use of automated market makers, an idea developed in 2017 by Bancor. 2020 was really the year that AMAs took off through driving users to make transactions in tokens that are built upon the Ethereum blockchain. This ultimately brought thousands of active users onto the Ethereum network.
What’s more is that the Ethereum 2.0 upgrade was finally initiated after several lengthy delays. The combination of Eth2, the recently renewed interest in altcoins and the DeFi boom has certainly brought back interest in Ethereum and the Ether (ETH) token itself, propelling it to well over $1,200, a level not seen in almost two years, and close to its all-time high of around $1,450. Now, just seven days into the new year, some are certain that $2,000 will be coming fairly soon.