By Graham Jenkin, co-founder and CEO of CoinList
Around this time of year, I usually make eggnog for everyone in the office. It's a standard. But nothing has been standard about the past 12 months. And while the chances are good that CoinList eggnog will be back by the end of 2021, nothing much else appears to be standard about the coming year. Here's what we're seeing.
1. Bitcoin everywhere
We took a bet on Wrapped BTC in 2020, and it's been a wild ride. But WBTC is just the beginning of a movement to unlock bitcoin’s power that will pick up steam in 2021. We're receiving requests from the communities of most major protocols to support their version of tokenized bitcoin. And why not? The world's crypto wealth is locked in bitcoin. It's a brilliant hedge against the irresponsibility of politicians who - with their lack of restraints - can print money virtually whenever they choose. And bitcoin’s price appreciation means that no one is willing to give up their BTC holdings. But smart investors want to do more with their bitcoin than just hold it as an inflation hedge. And “doing more” means moving your bitcoin to Ethereum and other protocols where financial innovation is thriving and yield is available.
In 2021, we'll see tokenized bitcoin not just on Ethereum and Tezos but on every major layer-one protocol as they build DeFi offerings. We’ll see new ways to port your BTC to other blockchains using centralized bridges like CoinList or decentralized ones like tBTC. Other tokenized assets will come online, but tokenized bitcoin will continue to dwarf them all. While CoinList has minted one-third of the world’s WBTC so far, only 2% of the world’s bitcoin has been tokenized. There is enormous upside in this market. Expect this number to increase significantly by the end of 2021.
2. Darwin’s law of token issuance
Many have predicted the death of token issuance. They couldn’t be more wrong. With bitcoin’s price going where it's going, more crypto capital will be looking for places to be put to work, and issuance is one of the primary places. It is one of the most dynamic corners of this industry, and we love being at the forefront of it.
Since 2017, every team we’ve worked with has come up with their own take on token issuance, and we’ll see even more diversity in 2021. Worklocks (thank you, NuCypher!) and their variants (thank you, Oasis!) will continue to gain popularity among well-funded projects looking to grow their communities, as will "community sales" like those of NEAR and FLOW. DEX offerings will continue to improve (thank you, Mesa, for addressing front-running issues) but will face pressure as regulators lean in. With momentum building around the Polkadot ecosystem, parachain offerings will debut and see a lot of community excitement.
And 2021 will also see more activity in seed-stage crypto. We’ve seen signs of this through our demo day for early-stage crypto startups — CoinList Seed. The Summer 2020 and Fall 2020 batches of CoinList Seed attracted incredible community and investor interest, and several Seed projects have already gone on to see significant token price, including Injective Protocol (2,500%), PARSIQ (12,000%), and Snowswap (500%). Financial risk is much greater at the seed stage, but so is the potential upside, and smart investors understand this.
With seed equity, as well as VC sales, community sales, stakedrops, fair launches, demo days, and pre-listing auctions, we’ll see a cornucopia of issuance and fundraising strategies in 2021. We’ve come a long way since 2017.
3. Constructive tension for Ethereum
Ethereum's ecosystem is remarkable. No other platform has directly driven as much innovation in crypto as Ethereum, not by a long shot. Efforts by so-called Ethereum killers to, umm, kill Ethereum have fallen flat. But the large winners in Ethereum DeFi are increasingly agitated with scaling issues and high fees. And two events that occurred in 2020 are signs of what’s to come: Compound's move to create its own chain and FTX’s choice of Solana for Serum.
In 2021, Compound Chain’s approach of reducing its reliance on Ethereum architecture while continuing to tap Ethereum-based liquidity will become a pattern. And the example set by Serum demonstrates to other well-financed projects that they can sidestep Ethereum from the get-go and instead work with platforms built by the smart, well-resourced communities of Solana, Algorand, NEAR, or others. These moves aren’t just limited to DeFi, of course, with Dapper’s launch of FLOW, their purpose-built blockchain for game development, being one non-DeFi example.
Eventually, all new protocols and dapps may view Ethereum as their proving ground rather than their destination. Once proven, they’ll move on to create their own chain or transition to other chains. But given the resilience of the Ethereum ecosystem and its massive community, it’s just as likely that Ethereum accelerates its evolution and addresses scale and fee issues. This is all excellent for the ecosystem in 2021.
4. Guard-railed bridges to DeFi
Decentralized finance (DeFi) has exploded in the last 12 months. But as DeFi projects like Uniswap, Maker, Aave, Yearn, and Compound became billion-dollar protocols, there was also a wave of high-profile security incidents that spooked the broader community. When the CEO of a popular DeFi insurance platform, Nexus Mutual, can be phished into giving up $8M, what hope is there for mainstream users?
In 2021, we’ll see a move from ‘degenerate finance’ to ‘regenerate finance’ where the community will set a higher bar for fiscal responsibility, smart contract security, and user experience. Some of this will be DeFi community-driven. But many innovations will come from players in CeDeFi (centralized decentralized finance). Onramps by CoinList and others will de-escalate fears of DeFi and accelerate broader adoption. We saw evidence of this in 2020 when we launched an easy-to-use onramp to Uniswap liquidity pools that attracted heavy interest from our community and returned UNI at 200%+ APY. These users could have earned UNI rewards on their own but instead chose a trusted centralized platform. Expect many more guard-railed bridges to DeFi from CoinList and other platforms in 2021.
5. More dogfights = more consolidation
All large centralized crypto finance platforms are starting to look the same. While some pundits predicted the unbundling of services, we see more sameness. Your average centralized crypto platform allows you to buy and store bitcoin and other common assets and perhaps earn staking rewards or interest. With Square, Paypal and others entering the space, there's even greater urgency to differentiate. But what is differentiating these platforms? Introductory high yields, discounted fees, and giveaways. We were promised a financial revolution, but instead, we’re getting discounts and debit cards. While some platforms may become big winners, this is a race to the bottom for most. As more well-funded players and Fortune 500s move in and converge on the same set of features and products, dogfights will ensue. The pace of consolidation will pick up.
But one thing remains true. As more capital, more competition, and more regulation move into crypto, these platforms will no longer be able to sustain their growth by relying on lower fees, better perks, or richer rewards. We will all have to step up and do the hard work of passionately serving our users. For CoinList, this means digging in and doing more of what we do best: discovering and vetting new and unique opportunities that excite our community and helping this ecosystem thrive. More exciting times - and more eggnog - ahead.
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