This year was an explosive one for the cryptoeconomy, and the star of the show so far has easily been Ethereum and its blooming DeFi and NFT arenas.
That’s interesting, seeing as how in 2019 folks had no shortage of 2020 DeFi predictions, but it seems now in retrospect almost everyone underestimated just how far the Ethereum ecosystem and its sectors would advance this year.
All that said, now it’s time to start calibrating our predictions for the coming year with the new information we now have available to us from recent months (which seem rather like years, right?). So, as an Ethereum analyst, here are my 2021 predictions, i.e. 10 milestones I think the Ethereum community has great chances of notching next year.
Uniswap Hits $10B
As Ethereum’s premier decentralized exchange, Uniswap was right at the heart of much of 2020’s DeFi swell. That propelled the trading protocol into being DeFi’s largest dApp right now with a total value locked (TVL) of +$2.6 billion USD.
I say Uniswap’s superior service and position continues to propel its growth to the point that the project’s TVL grows 4x from here and easily surpasses $10 billion in 2021. At press time, the TVL of the entire DeFi ecosystem was $11 billion, so if Uniswap accomplishes such growth so fast it’ll really be quite the show.
Rai = Serious Dai Competitor
Leading decentralized lending protocol MakerDAO used to only underpin its Dai stablecoin with ETH as collateral. As the project’s since embraced other tokens as collateral types, new kinds of risks that have been introduced that have turned off some users.
What’s attractive to more than a few folks in DeFi, then, is the idea of a more conservative Dai competitor. And that’s where the upstart Rai project comes in. Notably, Rai relies on reflex bonds (akin to a more stable version of ETH) for collateral and has a minimized-governance structure. This model makes Rai poised to gain some serious adoption in 2021 (and beyond).
Miners Will Be Officially Phased Out
The Ethereum blockchain has been bootstrapped by proof-of-work (PoW) mining. But this mining won’t be here for much longer.
— wolfofethereum.eth (@LUKACACIC) October 29, 2020
That’s because Ethereum is kicking off its “ETH2” Serenity upgrade in late 2020 with the launch of Serenity’s Phase 0. This puts Ethereum on pace to reach Phase 1.5 in late 2021, wherein the ETH1 blockchain will be immortalized as a single shard on ETH2’s Beacon Chain. At this point, Ethereum mining will finally be over.
Of course, the Ethereum community is no stranger to development delays, so it’s entirely possible that Phase 1.5 gets pushed back to 2022. But I’m going to go ahead and call it: Ethereum mining dies next year.
BTC on Ethereum Hits 5%
WBTC, renBTC, tBTC, HBTC, etc. — pick your flavor, because tokenized bitcoin projects atop Ethereum are officially in vogue.
Indeed, this year users flocked to ERC-20 BTC implementations to put their bitcoin to use earning yield in DeFi like never before. The influx of new users has made it so that roughly ~1% of the total BTC supply now exists as Ethereum tokens.
This phenomenon is only just beginning, though. I think tokenized bitcoin projects will continue to see explosive adoption leading to 5% of the BTC supply existing on Ethereum at some point in 2021.
Governance Projects Double Down on Defense
Governance tokens have come to the fore in DeFi this year. These assets allow holders to collectively decide on protocol decisions in a decentralized manner, so they’ve been increasingly embraced in the ecosystem in recent months.
The danger here, then, is if whale voters maliciously sway votes with huge token holdings. The stakes are higher now upon the introduction earlier this year of flash loans, which let traders borrow as many tokens as they want if they can borrow and pay the debt back in a single transaction.
This week lending protocol MakerDAO saw a governance vote affected by a flash loan scheme for the first time ever. That said, I expect protocols around DeFi to start to harden against this kind of attack vector in 2021.
Multi-Chain Trend Increases
Ethereum’s is the dominant financial system in the cryptoeconomy and will be for the foreseeable future. That said, we’re also starting to see things trend toward a multi-chain future where projects leverage hybrid infrastructures.
For example, Ethereum music streaming app Audius just announced that for some parts of its stack it’ll start leveraging the Solana blockchain. Of course, Audius is still keeping its core infrastructure grounded on Ethereum, so this is that kind of hybrid model that I think we’ll see a lot more of going forward. Another low-hanging fruit is seeing projects go serverless in 2021 by leveraging both Ethereum and Filecoin in combination.
Ethereum Staking Generates Major Activity
Staking’s already arrived in the cryptoeconomy, but once Ethereum begins its pivot to proof-of-stake in ETH2 in late 2020, we’ll see the space’s staking industry start to really kick off like never before. This trend will only generate stream throughout 2021, too.
New companies will rise. New users will come. New innovations will cater to the droves of new stakers. You can count on it.
DeFi Hackers Will Improve
DeFi has seen its share of sophisticated attacks this year. But the ecosystem is still early and blackhats have only begun to wrap their heads around how to exploit dApps accordingly.
Don’t get me wrong, either. I fully expect we’ll see dApps continue to harden and become much more defensible against attackers. But it’s because they’ll have to. And there will be some projects that become prey no matter well-intentioned their mitigation systems are.
NFT Market’s All-Time Volume Hits $5M
Ethereum’s non-fungible token (NFT) sector — which encompasses things like digital art, digital land, gaming assets, and beyond — really started to catch fire in 2020.
Indeed, earlier this year the NFT economy’s all-time USD sale volume crossed the $100 million milestone. I think that with NFT markets in the limelight like never before we’ll continue to see this sector trend upwards. Accordingly, I think NFTs will collectively notch $500 million in all-time USD volume by the end of 2021.
First $1M NFT Sale
Going off the last prediction, the price tags of big NFT sales should trend higher in 2021 too. The space hasn’t yet seen a $1 million NFT sale, but I think next year could be the first time it happens. And if it does, it’ll catalyze a surge of acute interest in the space that should only reinforce that NFTs are here to stay. The reality is that big sales leads to big attention and big attention leads to big sales, and the cycle goes on and on.
My 10 predictions here are ones I think have a decent to high likelihood of taking place in 2021. I’ve calibrated these predictions by trying not to underestimate the growth we’ll see next year because I’m forecasting another boom year and perhaps the undeniable beginning of a multi-year, Ethereum-driven bull cycle. In the meantime, we’ll have to kick back and see what happens, but I think if you’re sleeping on Ethereum going into 2021 then you’re on the wrong path.
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