What to Expect From Blockchain Industry in 2020: A Researchers’ Take
For many crypto investors and rookie traders, 2019 was a year of much despair and uncertainty. The year started with a sharp drop in Bitcoin’s price, followed by a lengthy period of stagnation. The ICO fever, the once sacred cow of crypto, has all but died down. Several new blockchain projects popped up but ultimately offered no meaningful real-world use cases, neither they pushed the level of mass adoption.
But while some professed the dark age of blockchain technology, the actual industry analysts noted that blockchain, as a technology, was only now emerging from its fledgling state.
These sentiments were voiced in the annual report recently issued by R3, the consortium of global financial institutions focused on researching blockchain tech. Many other analysts and research facilities across the industry, like Deutsche Bank or Deloitte, echoed and reinforced these ideas, as well as offered some predictions for the general direction where the industry is going. In this feature, forklog.media sums up the global blockchain trends for 2020 as seen by the researchers.
Blockchain Tech Will Emerge From the “Trenches of Deployment”
The grand takeaway from R3’s 2020 report is the optimistic notion that the industry was not stagnating in 2019 but rather was hard at work to deliver on the projects started in 2017–18.
“It is primarily delivery, not disillusionment, that’s the reason for the apparent slow-down in blockchain/distributed ledger technology (DLT) activity. Those companies who were selling in 2017 (and for whom early engagements proved successful) have been busy building in 2018/19, and we’ll see the results in 2020, in terms of business value driven to end-users,” states the R3 report.
Richard Brown said in his Forbes article, hinting at enterprise blockchain developers:
“2019 was the year of build-out, deployment, and testing. And, as we enter 2020, the hard work is about to pay off.”
Deloitte research also registers the industry’s gradual maturation:
“The question for executives is no longer, ‘Will blockchain work?’ but, ‘How can we make blockchain work for us?”
UX Improvements Will Be Key for Mass Adoption
R3 report slammed public blockchains for being too complex to accommodate businesses and unable to solve privacy concerns. It further explained that public blockchains are by design not fit to be enterprise solutions, as their in-built censorship resistance is inherently at odds with enterprise privacy requirements.
“Blockchain platforms continue to launch retroactive fixes that add significant complexity in an attempt to reverse engineer privacy controls into their transaction mechanisms when what the market really demands is elegance and simplicity,” R3 report suggests.
UX woes in public blockchains have always been a known issue. Yet developers of public blockchains suggest that public blockchains have other tangibles advantages, which will be universally recognized at some point.
8. Public blockchains have a genuine competitive advantage over both centralized servers and consortium chains in credibly signaling neutrality. Right now it seems like benefits like this might not be worth the costs of public chains, but that's just the public chains of today…
— vitalik.eth (@VitalikButerin) December 10, 2018
Buterin also noted that “non-financial applications have a leg up over financial ones in one important sense: there is less at stake if they break, so fewer reasons to fear to deploy them fairly quickly. So they could be the first applications deployed widely, especially in institutional contexts.”
Deloitte researchers add that “consortia do not garner the same level of focus as such models as private and permissioned blockchains.”
Interoperability Becomes the Next Big Issue
Interoperability was another trending feature that was covered in the report. As the industry develops and blockchain businesses scale up, interoperability issues will come to the fore. R3 analysts believe that projects like their own will be best suited to lead the charge in that direction because the industry needs pragmatic, tailored for business solutions.
“In 2020 as the creation and movement of digital assets increases, interoperability hype focused on moving assets across applications and ledgers will increase, but advanced projects will prioritize interoperability efforts based on integration with established business networks and systems. Platforms that have considered business logic and enterprise workflow as part of their original designs will be best placed to deliver on interoperability in the future,” say R3 analysts.
This sentiment is supported by ConsenSys 2019 research.
“Commercialization promotes competition and innovation, incentivizing developers and entrepreneurs to build systems that work best for their customers,” note ConsenSys analysts. “As pressure mounts for blockchain to deliver on its promise, we will find commercialization place more and more stress on blockchain to be market-ready, no matter what ideologies it has to sacrifice in the short term.”
According to the research, for these reasons, public open-source blockchains often overlook this issue and start without any built-in features that would support interoperability.
Still, there are some blockchain projects that are specifically focused on interoperability, like Cosmos and Polkadot. Some of them may experience certain problems, though.
We’re Up for the Year of Regulated Digital Assets and CBDCs
The report notably did not touch upon the slippery topic of Libra and its 2019 tribulations. This was surprising as, while Libra had its problems, it did consolidate a lot of big names in finance and showed that corporations are very much prepared to endorse cryptocurrencies. And while regulators were savaging Libra, in its wake a number of countries showed rapidly growing interest in issuing their own blockchain-based digital currencies.
Regulators do realize that fiat money is slowly fading away. As mentioned in the recent Deutsche Bank’s report, growing inflation and reduction of means and will to keep it in check on the global level, raise many questions concerning fiat money’s sustainability in the long run.
“The forces that have held the current fiat system together now look fragile and they could unravel in the 2020s. If so, that will start to lead to a backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar,” states the Deutsche Bank report.
Another takeaway from Deutsche Bank’s report was that everyone seems to hate cash. While regulators are most concerned with AML hurdles, as cash is the most popular means of payment on the black market, banks and card providers seek to foster smaller payments with cards through technology innovations, such as contactless and mobile payments.
Corporate digital money may seem a natural answer to this conundrum, but the R3 report did offer a subtle and indirect debunking of Libra-like projects being a future trend. While it did establish that there is a growing demand for new settlement methods as business becomes increasingly digital and distributed, it suggested that instead of private sector initiatives central banks will step in to fill the void. CBDCs will ultimately be more successful than Libra ever could be, because they will be sanctioned by central banks and compliant with all stipulations suggested by the regulators
“Central Bank Digital Currency (CBDC) will remain a key headline driver in 2020. In 2019, the number of central banks exploring retail digital currency jumped from 15 in 2018, to over 50. 2020 will see focused domestic pilots and more countries will enter the exploration phase. The adoption of digital cash will continue to be driven through public/private partnerships,” R3 researchers predict.
Growing Demand for Mutualized KYC Solutions
Finally, the report outlined the growing demand for a universal KYC solution. The main reason behind it being the tightening control over the banking sector exercised by the regulators.
Centralized utilities do not work, the report claims. A new decentralized and mutualized solution is needed to ensure data security and privacy and to also cut costs and increase efficiency.
“We’ll see the first mutualized blockchain-based KYC platform launch in 2020, reducing costs and providing enhanced governance across complex counterparty relationships,” predict the R3 analysts.
As blockchain technology goes more mainstream, the community will become increasingly less wary of such traditional practices as KYC, while still appreciating the reliability and cost-efficiency of blockchain-stored data.
To an untrained eye, the blockchain revolution peaked in 2017–18 and was slowly going downhill since. R3 analysts suggest that after frantic crowdfunding campaigns of 2017–18, 2019 was, in fact, a year of quiet but determined development. And in 2020 we shall finally yield the fruit of this development. The industry at large seems to be in accordance with this sentiment.
The year 2020 will be the year of regulated digital assets and CBDCs, but the necessity to be compliant with regulatory demands will trample concerns of decentralization and anonymity. Interoperability will become another issue among blockchain scaling concerns, while the simplicity of deployment and UX will be key for mass adoption by individuals and businesses alike.
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