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The cryptocurrency came into picture with the launch of Bitcoin (BTC) in 2008, that inspired a new technological and social movement. They provide a medium for global, peer-to-peer transaction settlement preserving privacy and financial security of the parties involved.
Cryptocurrencies are powered by secure, verifiable transaction databases called blockchains. There are many stakeholders in the cryptocurrency network including validators, traders and builders. The validators secure the network, the traders speculate in these market-driven assets while the builders onboard people to this financial language.
The field of cryptocurrency is vast, and changing radically in the blink of an eye. Many new developments seem viable in this field that will help the asset market mature. It also might become a core feature in finance very soon.
Lets us see 4 most notable cyptocurrency trends that might shape the financial domain in 2020 and beyond –
Shifts towards a cashless society
The events of the year 2020 were unexpected and even dreadful for many. The COVID-19 pandemic disrupted businesses, paralysed industries and changed people’s thinking and their attitude towards life. As people are not able to move out freely or fear to go to ATMs, maybe it is really time to get rid of cash.
Shifting towards a cashless society will be like taking a step forwards to a new quality of life. Today, there are numerous apps for interaction with cryptocurrency. They have become straightforward as well so that people can easily use them to purchase digital assets with just a credit card. Stablecoin wallets are also in demand.
The blockchain field is expanding and many professionals are becoming interested in the field of distributed ledger technology. Today, Apple stock (AAPL) holds US$ 2 trillion market cap, dwarfing all the speculative capital held within the entire crypto space, which totals a mere US$ 342.8 billion according to CoinMarketCap.
As blockchain and cryptocurrencies are being widely acknowledged, some of the leading firms in the space are-
- Ripple– Ripple lets people move money to anywhere in the world instantly. Its aim is to change the “fragmented and complex” system of global payments. Ripple provides both a platform and a currency. Its platform is an open source protocol that allows fast and cheap transactions using the most advanced blockchain technology.
Founded in: 2012
Valuation: US$10bn
Headquarter: San Francisco, California
CEO: Brad Garlinghouse
- Axoni– Axoni’s aim is to overhaul the global capital markets infrastructure. It uses advanced blockchain technology and has collaborated with leading global financial institutions. Axoni’s enterprise software solutions track credit derivatives around the globe. Goldman Sachs, Citigroup and other banks have also launched a new Axoni-built infrastructure for conducting equity swaps.
Founded in: 2015
Valuation: US$ 171M
Headquarters: New York
CEO: Greg Schvey
- Everledger– It is a technology company that uses advanced blockchain technology, AI and IoT to track the movement of goods from raw materials source to sales. It aims to provide a greater clarity and confidence in marketplaces. Everledger digitally streamlines its customers’ compliance processes so that they can share the history of any asset more accurately and efficiently.
Founded in: 2015
Valuation: US$100mn
Headquarter: London, UK
CEO: Leanne Kemp
Crypto Regulations
As the use of cryptocurrency becomes more and more prevalent, the more will the regulations change with it. Businesses will encounter more robust laws in the coming years. Very soon companies that deal in the crypto space will need accountants with crypto experience to help them navigate the unknown.
In 2019, agencies around the world realised that cryptocurrency is beginning to become less of a component and more of the core element of it. The Federal Reserve of the USA revealed that it is mulling over a potential digital analogue for the dollar. The Internal Revenue Service also firmed up its guidance on reporting cryptocurrency transactions for the tax season.
The government of India is also in talks with the Central Bank, Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) for a regulatory framework for cryptocurrencies. While there is already a draft bill seeking to ban all cryptocurrencies except state-issued ones, the govt. is reconsidering its decision. Millions of dollars’ worth of transactions in cryptocurrency is being done every week in India, which is increasing each day due to the lockdown. The government would be losing out on precious revenue if cryptocurrency is banned.
Thus, it is possible that the countries which are apprehensive towards welcoming the cryptocurrency technology might brainstorm on robust regulatory mechanism to defend it in future.
Adopting Decentralized Financing
DeFi or Decentralized Finance has become one of the most prominent trends in crypto since late 2019. While cryptocurrency coins create a decentralized store of value separate from any government-backed fiat currency, DeFi creates decentralized financial instruments separate from traditional centralized institutions. DeFi has experienced a rapid growth in 2020. In early 2019, crypto collateral locked in the DeFi economy was US$ 275M. This amount increased to US$ 1B by Feb 2020 and US$ 4B in July 2020.
It enables traders to easily switch between different debt positions. Market operators such as Babel Finance are helping big-time miners to avail large capital by keeping crypto as collateral.
Many DeFi projects are coming up nowadays. In July 2020 Crypto projects Cosmos, Polkadot, and Terra announced a new DeFi savings product called Anchor that aims to offer dependable interest rates on stablecoins deposits.
Various companies operating in the blockchain field have introduced their DeFi products. Some of the popular protocols are Compound, Balancer, Curve and other platforms that have opened the door to a whole new world of crypto opportunities for investors. There are also huge opportunities for startups using cryptocurrency which is promising for the DeFi ecosystem’s diversification and growth.
Privacy in Transactions
The privacy of transactions is a matter of concern when it comes to cryptocurrency. A recent hacking of Indian Prime Minister Narendra Modi’s Twitter account by hackers seeking to scam people into sending cryptocurrency came at a bad time since the government is still working out its stance on cryptocurrency.
The money laundering cases via crypto are still relatively small compared to the volumes of cash laundered through traditional methods such as wire transfers. A British multinational security company BAE Systems has published a report along with the Society for Worldwide Interbank Financial Telecommunication, revealing how cybercriminals launder cryptocurrency. The report also talks about the money laundering methods employed by Lazarus Group, a hacking gang sponsored by North Korea. It steals the crypto funds from an exchange and then passes transactions through multiple exchanges using something called a “layering technique”.
Recently, many companies are developing some privacy tools. For example, Ernst & Young has developed Nightfall that allows private transfers to be batched in a single transaction Ethereum ecosystem.
From Bitcoin’s drop to sub-$4000 to Ethereum’s 51% attack to the US Congress’ panic about Libra to QuadrigaCX’s password losses, the crypto market faced some serious jolts in 2019. But huge institutions like JPMorgan Chase, Walmart etc. are exploring the technology and coming up with privacy solutions.
Digital assets have grown over the years and it will be interesting to see how the cryptocurrency space pans out in the coming years. The rise of stablecoins, decentralized exchanges and Bitcoin dominance are some trends to watch out for in this domain.
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Disclaimer : The article originally featured on VCBay
