Among other things, cryptocurrency is also fintech, financial technology. With bitcoin (BTC) hitting its highest ever market capitalization in November, the financial part of this combination has received plenty of attention in recent months, but what about the technology part?
While they don’t quite make as many headlines as price rises (and falls), developers associated with Bitcoin, Ethereum (ETH) and other major platforms have been quietly working on upgrades throughout much of 2020, and their work is likely to become more prominent next year. According to industry figures and developers speaking with Cryptonews.com, these developers will build on growing interest in crypto by introducing new tech that aims to make crypto more accessible and usable for a wider user base.
From Ethereum 2.0 to Bitcoin’s Schnorr and Taproot, much of the focus will be on scalability and, to a lesser extent, privacy. At the same time, other platform upgrades — such as Cardano (ADA)’s Goguen — will improve on decentralization and also enterprise-level utility.
2020: What was predicted last year
Rewind to late 2019, and experts predicted something similar for 2020: greater scalability and a growth in “consumer crypto platforms” which simplify user experiences for retail investors.
2020 did indeed promise and work towards greater scalability, but, speaking of major platforms, we didn’t see as much in the way of finished products, platforms or upgrades.
For instance, Ethereum 2.0 received plenty of hype and attention, but its mainnet still hasn’t officially launched (after numerous delays), and is now estimated to arrive in 2021. Likewise, the long-awaited Schnorr and Taproot proposals were in fact merged into Bitcoin Core on October 15, but they have yet to be activated, although support among miners is growing steadily.
That said, we did see an uptick in cryptocurrency platforms geared more towards the ‘average’ consumer. Most notably, PayPal launched its cryptocurrency service in October, as did UK-based financial app Revolut.
2021: Scalability and privacy for real this time
Having delays to scalability and privacy tech in 2020 makes predicting 2021’s technology trends pretty easy, since we can hope on held-back upgrades finally being launched next year.
This means Ethereum 2.0, if it’s launched, will see Ethereum vastly improve its scalability by moving to a proof-of-stake (PoS) consensus mechanism.
“The move to proof-of-stake and sharding should allow the network to overcome its current scalability issues and high gas fees, especially in times where there is congestion on the network. It will also lower the barriers to participation and secure the network, thus making it arguably more decentralised than its current state,” said Simon Peters, eToro’s resident cryptocurrency analyst.
2021 might also finally see Taproot and Schnorr signatures — which improve Bitcoin’s privacy and increase the amount of transaction info that can be included in a single block — being activated, adopted and widely used as part of Bitcoin.
“I think the main topic and development focus in 2021 will be Schnorr and Taproot adoption that is coming to Bitcoin. This will mean a lot of benefits and also a lot of work for software and hardware wallet companies,” said developer Stepan Snigirev.
Snigirev also told Cryptonews.com that the adoption of Taproot and Schnorr will facilitate a number of other technology innovations for Bitcoin.
Put simply, technological developments in Bitcoin should enhance the privacy and scalability of its network, making it more usable in the process. But this focus won’t be particular only to Bitcoin, but will be a general trend throughout crypto in 2021.
Mimblewimble will improve Litecoin’s scalability and privacy, while another platform aiming to scale in 2021 will be NEO.
“We know that NEO 3.0 is close. We will certainly see it in 2021. It is hugely ambitious, and if it succeeds, we’ll see the first massively scalable blockchain with sub-second block finality. This is very important for bank-grade transactions,” said Mark Jeffrey, the CEO of GuardianCircle.
Usability and user experience is more important
But while Jeffrey acknowledges that scalability is important, he estimates that the main focus in 2021 will be on improving user experience.
“There are too many people scaling and not enough users,” he said. “User experiences will be the focus of 2021. More than anything, this is what we have to solve for first.”
ConsenSys’ Chief Marketing Officer and Global Fintech Co-Head Lex Sokolin also suspects that enhancing user experience will be a big aim as far as technology is concerned.
“We expect continued growth in both decentralized finance (DeFi) on the public chain, as well as on the enterprise side in financial services and global trade. Within DeFi, simplified and improved user experiences, like MetaMask, will drive further adoption and usage,” he told Cryptonews.com.
According to Csilla Zsigri, an analyst at 451 Research, usability will be particularly important in terms of making blockchains and platforms more useful for enterprises.
“We see vendor activity in the enterprise blockchain/distributed ledger technology space intensify up the stack — on top of core ledger protocols — to improve different aspects of the technology such as interoperability and usability, to ultimately make it more consumable for both developers and the average user.”
Sokolin agrees that improving technology for the benefit of enterprises will become increasingly important next year.
“Potentially the BSN (Blockchain Service Network) and DCEP (China’s digital yuan) are worth tracking as a platform that could have a meaningful impact on our space, and integrate increasingly more applications. The BSN connects into Ethereum, as well as other programmable chains [e.g. [URL=”https://cryptonews.com/coins/tezos/”]Tezos[/URL], EOS; NEO], and also the enterprise offerings of the Chinese fintechs like Alibaba,” he said.
More decentralized decentralization
Cryptocurrency is famed for offering a decentralized form of money, and 2021 will see various platforms concentrate on making their networks more decentralized.
“Having successfully completed their own major upgrade earlier this year, the Cardano network is now more decentralised. Development is underway for the next phase, Goguen, which is due to be released in March 2021 and will allow developers to build decentralized applications and run smart contracts on Cardano,” said Simon Peters.
Likewise, 2021 might see the launch of IOTA (MIOTA) 2.0, which will remove the centralized coordinator node that currently oversees consensus on the network.
“The IOTA team is currently working on a major protocol upgrade – IOTA 2.0 (aka ‘Coordicide‘) – scheduled for 2021, using a three-phased approach: Pollen, Nectar and Honey releases,” said Csilla Zsgiri. “Pollen and Nectar are testnets for testing and validating the new concepts of IOTA 2.0, while Honey will be the first version of the production-ready decentralized IOTA mainnet.”
Price and development
There’s one last question to consider: would any potential price surges in 2021 increase the impetus for technological development?
Opinion on this question is divided, with Jacob Illum expecting that there may be an indirect relationship between the two.
“I think the price rise will drive attention and adoption, which in turn will lead to technological upgrades to Bitcoin,” he said.
However, Stepan Snigirev isn’t so sure, and thinks Bitcoin development will continue at the same pace regardless of whether 2021 brings a massive bull (or bear) market for bitcoin.
“Development activity is not correlated with the price, so I think we will just keep working on stuff as usual.”
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