Bitcoin, the decentralized asset that remained quite a mystery to the mainstream world until recently, resurfaced into awareness this year. Covid-19 caused undeniable chaos across the globe, highlighting cracks in many of our existing systems. But it also became a catalyst for change — it was the push we needed to recognize that our current globalized systems, from financial to health and data security, are flawed.
Now, bitcoin is being taken very seriously by corporates, retail investors and institutional investors. While the financial incentive was a key driver of interest, we also saw its underlying technology becoming increasingly important.
Bitcoin is no longer only associated with Silk Road
There is no doubt that banks, institutions, and investors have long failed to understand the great potential of bitcoin. The asset that was once synonymous with the Silk Road, illicit activity, and money laundering had a huge reputational shift.
Players like PayPal and Square began embracing digital currencies and accepting them as a form of payment. This scarce resource, with its limited supply, became a critical hedge against inflation. Countries like Venezuela jumped onboard en-masse due to fiat hyperinflation, and around the world economies contracted.
Large institutions like Grayscale invested in more than 500,000 bitcoin, priced in the value of $8.3 billion. Research firms like Fidelity who hold trillions of dollars in assets launched a subsidiary specifically for the research and custody of bitcoin. MicroStrategy recently announced they plan to raise $400 million to buy bitcoin. The asset is hot.
While inflation rates exploded across the world, and central banks like Argentina lost tens of millions of reserves daily, reaching the highest levels of inflation in decades, bitcoin became a vital alternative and hedge. Countries like Venezuela who cannot predict how much more their currencies will inflate the next day or the next week, rushed to access bitcoin and other cryptocurrencies to protect their own livelihoods.
As more major institutions and investors seek to diversify in the face of rapid inflation, the scarcity versus demand has never been higher. But bitcoin became so much more than just a worthy investment that demonstrates the power of anti-inflationary and limited supply assets. Blockchain, the technology that underpins the innovation and revolution, also came into the spotlight.
The power of decentralization has been cemented
Bitcoin breaching its all-time high record this year is yet another sign that we are finally achieving the widespread adoption the crypto industry has long hoped for. In response to ongoing market uncertainty and inflation, Ethereum, an inspiration birthed from Bitcoin, also grew in popularity.
Our concept of trust in money was significantly altered when nearly 24% of all U.S. dollars were created in the last year. Government bail-outs favoring big businesses over small businesses which cost taxpayers hundreds of billions of dollars had the world asking: why are our existing systems so inefficient — and unequal?
Enter decentralization: a system that does not rely on central intermediaries and instead utilizes smart contracts on blockchains. People flocked to invest in both bitcoin and other decentralized financial assets because these systems are not greedy, centralized models with a small number of stakeholders who benefit. Instead, these are peer-to-peer networks that offer greater financial inclusion, greater financial equality, as well as greater financial returns.
Decentralized Finance (DeFi) exploded this year as people discovered a new opportunity to lend out their capital with greater returns that no traditional bank could offer. A new system of loans allows anyone with adequate digital asset collateral to be their own lender without selling their appreciating assets, or even going through vigorous and lengthy application processes. The systems were simply better.
These new forms of more equal finance without the middlemen highlighted that modern banking systems are failing to keep up with the needs of modern society.
Decentralization will surface beyond what our eyes can see
In 2021, we will see the investment of blockchain and decentralized technology accelerate, and users will be able to enjoy these benefits without even knowing they’re powered by blockchain.
This technology has already surfaced in other ways because the world has been demanding it. From counterfeit medical goods highlighting insufficiencies and lack of transparency along supply chains, to attempts of big tech companies to introduce contact-tracing applications that compromise personal data, blockchain technology has become a vital solution to solve some of the world’s most complex problems.
From health data to security, this technology has been adopted in many different ways. Self-sovereign identity on the blockchain gave us a new opportunity to return agency back to our data ownership — offering a new way to safely secure our private information without the risk of it being compromised by third parties.
Bitcoin will soon become mainstream
Widespread adoption of bitcoin, blockchain and other cryptocurrency is accelerating, and more governments are beginning to put more positive regulation around it. In the U.K., Standard Chartered recently announced they would be adopting crypto custody, while in Asia, Singapore’s DBS Bank announced they would permit crypto trade.
Many G20 nations have begun announcing national-level initiatives to adopt and implement this technology. In China, we’ve seen the introduction of a state-sponsored Blockchain Service-based Network that is helping lower the barriers of entry to blockchain. We will see mass acceptance of blockchain as a solution to modern-day circumstances in 2021.
This technology will be more ubiquitous without people’s knowledge. Blockchain services will become more prolific and integrated into the back-end of ordinary products and services. It will truly become a mainstream reality.