December 11, 2019
20 Predictions for Blockchain and Crypto in 2020
Posted by Andries Verschelden
We’re privileged to work day in and day out with companies and individuals on the forefront of blockchain tech and digital asset use cases. This exposure means we have our finger on the pulse of how the industry is evolving. So from our team to yours, here’s an early New Year’s gift — our predictions for the coming year.
- Every year seems to be a Year of Something, as summarized below. The days of ICO frenzy and “everything blockchain” are over, but amidst the junkyard of much-hyped and ossified technology, new lifeforms are sprouting left and right.
- 2016 – Everything Blockchain
- 2017 – ICOs
- 2018 – Stablecoins
- 2019 – Decentralized Finance
- 2020 – Government Coins and Corporate Coins
- China’s Digital Currency Electronic Payment (DCEP), also known as “RMB Coin,” is scheduled to soft launch in 2020. This will hyper-accelerate DLT payment adoption in China, while presenting a “Sputnik” moment for Washington and Brussels that kicks off the blockchain tech race. Many other governments will follow suit with their own version of a digital currency using elements of blockchain technology.
- This tech race will open up a regulatory sandbox for token and coin offerings. We will see new experiments with coins offered in a legally compliant way in the U.S.
- We will learn of at least five more large-scale corporate coin projects driven by one or more Global 100 companies, although without the publicity and backlash that Libra endured. Some corporate coins will be launched.
- Most of these government and corporate coins will use fiat currency pegging tools to maintain price stabilization.
- Existing stablecoins will also see an increase in proliferation, driven by decentralized finance (DeFi) innovation and enterprise test cases. More tokens backed by gold (and other precious metals and minerals) will be introduced.
- With the onset of a multitude of new stablecoin projects, there will be a trend toward more transparency and third-party validation over stabilization mechanisms. Projects unable or unwilling to follow suit eventually will not explode, but rather marginalize. Why would anyone accept risk where there is no return? Real-time audit reports will become the gold standard.
- DeFi will continue to grow in popularity and creativity, but not without a cost. A DeFi smart contract with a significant financial stake will fail, causing the most panic in the Ethereum ecosystem since the DAO. This will not cause an existential crisis to the technology, but rather curb some speculative activity and increase interest in third-party reviews and audits.
- The programming tools and experience for blockchain development is becoming easier and better. This will allow many more experiments benefiting end user applications. We will talk less about how blockchains work, and more about what they do. Finally.
- More enterprise use cases will face scrutiny in the coming year. R&D budgets for blockchain projects where no demonstrable improvements over traditional database technology can be obtained will tighten. Attempts to leverage blockchain technology in scenarios where decentralization is not mission-critical won’t stand the test of time.
- Infrastructure will continue to scale, but perhaps not fast enough. We will continue to gradually solve scalability and throughput for existing popular chains through a mix of solutions. However, latest generation blockchains will outpace this transition that existing projects are attempting to make, partially because of broken governance models. In most cases, this will result in developers, users and ultimately investors migrating to newer chains instead of trying to rebuild the old (the digital gold use case being the exception).
- One clear example is Ethereum, which continues to be plagued by lack of product improvement. Binance (Binance Chain and Binance DEX) along with other alternatives will chip away at ETH’s smart contracting leadership role.
- Tokenization of “real world” assets will continue to gradually grow as we experiment with unique business cases where this solution offers transformational value over its non-tokenized cousins. But this market is still looking for great product market fit. We’ll see more token experiments with different asset classes, especially in the contingent synthetic asset category: options, credit default swaps and asset-backed securities.
- We’ll have a bigger and more impactful “CryptoKitties moment” in the coming year; an application that can amass global popularity, except this time it is use case driven vs. speculation driven. The Brave browser certainly comes to mind.
- Privacy coins will gain in popularity as a counterforce to the growth in non-censorship resistant and privacy preserving digital assets.
- The exchange market will become more competitive. Expect to see lower trade commissions and free new services such as interest/staking as a service becoming the industry standard.
- Federal tax authorities will continue their efforts to access off-chain trade data from exchanges, and increasingly leverage on-chain data history. Keep in mind that blockchains double as tax evasion prosecution futures.
- Interest received in the crypto economy will ease off, but still be at least 3x as high as the non-crypto economy.
- Lightning and new income-producing DeFi products will raise many new accounting and tax withholding issues. (Don’t expect this to be resolved in 2020. Talk to a professional.)
- Demand for Bitcoin will continue to be solid as more investors want exposure to the most secure digital gold. Also expect upward pressure underpinned by the mining rewards halving, progress in Lightening adoption and non-speculative volume growing. The inability of any of the BTC forks to maintain value and volume is indicative of BTC strength and staying power.
We couldn’t be more excited about these new chapters being written in the book of crypto and blockchain, at the dawn of this new decade. We are on a mission to reinvent the tools that provide trust and transparency to markets in this brave new blockchain world. We’re honored to partner with this ecosystem day in and day out, and look forward to accelerating our efforts in 2020.
What a time to be alive…
Andries leads the Blockchain practice and brings a passion for growth to his clients. He works with a variety of crypto and blockchain projects and exchanges, helping them navigate accounting, audit, tax and risk best practices as they grow. He also helps non-crypto industry clients transform their business through blockchain technology enablement.
Prior to joining Armanino, Andries was CEO at The Brenner Group, a boutique Silicon Valley financial services firm. Before that, he was a partner at Moore Stephens Belgium. He started his career at PricewaterhouseCoopers. He grew up in Belgium, and lived and worked in New York and Shanghai before moving to California.
Co Authors :
Noah has more than 10 years of audit, legal, IT and regulatory compliance experience. Noah leads the firm’s Privacy practice and helps clients achieve and maintain compliance with international privacy regulations while keeping pace with a changing domestic privacy landscape. In addition, Noah is a leader in Armanino’s established and fast-growing Blockchain practice, having served virtual currency exchanges, broker-dealers, crypto projects for over three years. Noah has expertise in security compliance and third-party assurance attestations, including System and Organization Controls (SOC 1,2,3), cybersecurity (NIST, SANS), and HITRUST assessments for startup, mid-market, and large publicly traded companies.
Noah is a member of the Information Systems Audit and Control Association (ISACA), the American Institute of Certified Public Accountants (AICPA), the AICPA Blockchain Working Group, the California Bar Association and International Association of Privacy Professionals (IAPP). Noah holds certifications for the Linux Foundation’s Hyperledger permissioned blockchain and is a Certified HITRUST CSF Practitioner.
Jeremy is a manager in Armanino’s Blockchain practice, with more than 4 years of experience performing compliance, internal and blockchain-technical audits. He has experience leading and participating in cryptocurrency/blockchain engagements for exchanges, crypto-startups, and stablecoins. Jeremy authors Armanino’s blockchain audit memos, and he has helped develop proprietary procedures to test digital assets for reliance during an audit.
A Certified Blockchain Professional and member of the Cryptocurrency Certification Consortium, Jeremy is also a Certified Public Accountant (CPA) and Certified Management Accoutant (CMA). He holds a Bachelor of Business Administration, Accounting from California State University, Chico.