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Standard Bank Group of Africa Becomes the First African Node Operator on the Hedera Network

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According to the latest announcement, Africa’s largest bank, Standard Bank Group, has collaborated with the decentralized public network Hedera Hashgraph.

The report notes that the African bank will also become a Hedera node operator to utilize distributed ledger technology (DLT) to ease bottleneck issues in cross-border trading in Africa.

Hedera’s official website describes itself as the trust layer of the internet. It is a decentralized public network aimed at making the digital environment just like it should be yours. Hedera goes ahead with Blockchain for developers to create the next age of fast and secure applications. It is owned and governed by the world’s leading organizations, including Google, IBM, LG, Wipro etc. Last year in February 2020, an announcement was made stating that Google is joining the Hedera Hashgraph Governing Council as a member and node maintainer to host parts of its ledger.

Partnership to Improve Cross-Border Trade in Africa

Ian Putter, head of DLT and Blockchain at Standard Bank Group, expressed his views regarding its partnership with Hedera. According to him, Hedera’s partnership is part of the bank’s focus on the use of DLT to develop and facilitate cross-border trade in the Africa region.

He further mentioned that Standard Bank Group views DLT as a feasible solution for promoting cross-border trading and also for connecting Africa to partners in major markets such as China. Putter highlighted that his key focus is to continue exploring and experimenting with DLT through partnerships and leveraging existing solutions to advance implementation and scaling.

According to the CEO of Hadera, Mance Harmon, Africa is poised to play a major leading role in the field of DLT. He stated that “We see a desire for African businesses to incorporate Blockchain and DLT to satisfy the changing demands of their customers with utilities such as M-Pesa that is now commonly used.”

He further explained that apart from the financial services, organizations have a strong interest in leveraging DLT for use cases in various domains such as healthcare, energy management, identity, and supply chains.

To get instant updates about Blockchain Technology and to learn more about online Blockchain Certifications, check out Blockchain Council.  

Standard Bank Group of Africa Becomes the First African Node Operator on the Hedera Network

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Tokenization of assets is not taking off, but it really should

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For years, experts have been talking about how tokenization — the act of creating a digital representation of an asset on a distributed ledger — of a financial or real asset can unlock trillions in illiquid assets, giving retail investors access to investments with previously high minimum capital requirements thanks to fractional ownership or settle trades on a distributed ledger instantly. 

But if we investigate the current tokenization offerings, none is truly taking off and attracting the masses. If the theoretical advantages are true, millions of investors must be onboarding on exchanges that offer tokenized assets. However, this is not the case.

What is the problem of most tokenization offerings?

Let us take the example of tokenized equity to showcase the current issues and hurdles. The tokenization lifecycle of an equity consists of multiple steps. The first is the legal structuring followed by the minting (creation) of the tokens, in most cases with ERC-20 tokens on the Ethereum blockchain. Contrary to many beliefs, minting is one of the easiest parts of tokenization — the bigger challenges follow. As the purpose of the equity tokens is to be traded, we need to have a marketplace. With this comes the questions of token custody, liquidity, settlement and regulatory compliance.

If we look at the current service providers in this space, there is nearly no one who can offer all the steps of issuance, custody, marketplace, liquidity, settlement, etc. in one integrated offering. This has some major implications for why tokenization is not taking off — namely, that issuers and investors must deal with multiple service providers. Most probably these service providers are also located in different jurisdictions, which adds a whole new dimension to it, as equity tokens should ideally be able to be traded internationally just like traditional equity. And that is not possible as regulation differs from country to country.

Another major problem of tokenization marketplaces is liquidity. Currently, there is very low liquidity on tokenized marketplaces if we are to look at the trading volumes while the volumes of cryptocurrencies are currently reaching new all-time highs on a weekly basis. A reason for this is that the few exchanges that are on the market cannot attract enough investors. The easiest solution to solve this issue is for tokenized asset marketplaces to be connected to traditional exchanges and to leverage their customer base as they already have the desired liquidity.

This is only possible if the UI/UX is equal to traditional exchanges, and the investors do not see and interact directly with the blockchain. If investors need to set up their own wallet and deal with the blockchain directly, then we will never see a big inflow of mainstream investors into tokenized assets, as this makes the whole process more difficult and inconvenient, which is the exact opposite of the end goal.

A good UI/UX is very important in tokenization offerings as opposed to crypto applications such as DeFi platforms, where the UI/UX may not be the best. But despite the fact that the product is revolutionary, the masses are unwilling to deal with tokenization because it’s inconvenient and not seen as a groundbreaking innovation.

Another big topic in tokenization is regulatory clearance. If we continue with our example of tokenized equity, there is the question of how to deal with a digital representation of a security. In most jurisdictions, a token is not a security by itself. Rather, the token just represents the right to own the equity, but the equity still also exists in its “traditional” form. In other jurisdictions, however, there is even less clearance.

While tokenization is without question one of the most promising use cases of blockchain technology, the current setup is in most cases worthless, as it renders things more complicated rather than effective. To change this, we need a clear regulatory environment, such as in Switzerland, for example, to integrate all elements of the tokenization lifecycle into one offering, and have a “traditional” UI/UX for the investors. If we can get these three elements right, there is nothing to stop tokenization to become a major game-changer and open many new asset classes to the market. I believe that tokenization marketplaces should partner up with traditional exchanges to offer liquidity, especially for tokenized equity.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Darius Moukhtarzadeh is in the sales and clients team of Sygnum Bank. Sygnum is a digital asset bank that received a Swiss banking license from the Swiss Financial Market Supervisory Authority in August 2019. Prior to Sygnum Bank, Moukhtarzadeh worked for Ernst & Young in blockchain consultancy and for several startups in the Swiss Crypto Valley.

Tokenization of assets is not taking off, but it really should

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Which Industries Have Adopted Blockchain Technology?

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Which Industries Have Adopted Blockchain Technology

Are you a Blockchain enthusiast? Wondering which industries have adopted Blockchain and how? Well, you have landed on the right page. This article enlists top industries that have adopted Blockchain for good. 

Table of Contents

  • Top Industries Leveraging Blockchain Technology 
  • Concluding Lines: Is Blockchain a Room for Development?

Top Industries Leveraging Blockchain Technology 

The majority of people understand Blockchain in relation to cryptocurrency. However, a number of mainstream industries, including finance, supply chain, gaming, and others, have started to use blockchain technology without any digital currencies. 

Let’s have a look at how such industries are using Blockchain for their operations. 

Finance 

Finance is one of the most crucial applications of Blockchain. In fact, it is easy to see how Blockchain’s properties make it ideal for financial applications. Banks and other financial institutions are already using Blockchain for seamless cross-border payments, clearing settlements, digital identity management, and for other varying purposes. By offering decentralization, immutability transparency, and security, it can facilitate international payments and help perform worldwide financial transactions. By removing irrelevant intermediaries, it can simplify the entire transaction process and allow instant payment solutions globally. 

AIB, Bank of Cyprus, China Banking Association, DNB, and many others are using Blockchain. 

Want to become a Certified Blockchain & Finance Professional? Why wait? Get started today!

Supply Chain 

As various top companies have started realizing the potential of Blockchain, they have started implementing it for real-time data access, privacy, traceability, and auditability for their supply chain management.

For instance, Walmart, a well-known American multinational retail corporation, is utilizing Blockchain technology to add transparency, reliability, and traceability to its food supply ecosystem by digitizing the entire food supply chain process. Similarly, De Beers, the world’s biggest diamond producer by the value of its gems, is using Blockchain to track every natural diamond from the mine to the retail counter.

Apart from this, FedEx, United Parcel Service(UPS), and others are using this technology for their efficient supply chain.

According to the WEF study, Blockchain could contribute to a $365 billion savings by reducing food loss and waste in the food supply chain by 2030. 

As demand for Blockchain professionals is increasing in the Supply Chain Industry, become a Certified Blockchain & Supply Chain Professional today!

Gaming Industry 

Blockchain has entered the gaming industry as well, and it is positively profiting both developers and gamers by providing a reliable and secure environment for developers with encryption techniques to secure crypto transactions. Also, with the concept of tokenization, it is enabling gamers to buy and sell game assets securely. Moreover, smart contract functionalities enable players to transfer all their in-game assets to their public addresses, thus providing complete control over digital assets.

Unlike traditional games, where powers are in the hands of players where they can abruptly shut down games, blockchain-based games give much access and control to players over their games.  

Age of Rust, Crypto Space Commander, CryptoWars, Gods Unchained are some of the interesting Blockchain-based games. 

Pharmaceuticals

Blockchain technology continues to attract attention in the pharmaceutical domain. Amid the COVID-19 pandemic, government institutions globally have incorporated Blockchain technology. Blockchain can help in maintaining a supply chain visibility, providing real-time logging and data visualization of disease spread, early detection of epidemics, verifying communities and workplaces that are risk-free from the coronavirus outbreak, and much more. 

In 2020, several government institutions made announcements regarding plans to adopt DLT for multiple use cases, including the healthcare space. For instance, recently, it was announced that Cyprus’s Mediterranean Hospital utilizes the VeChain platform to store its COVID-19 vaccination records. Similarly, in November 2020, it was announced that South Korean hospitals aim to usher in the new healthcare era by utilizing Blockchain technology. 

Looking for the best Blockchain Certification? Get enrolled and become a Certified Blockchain & Healthcare Professional now!

Voting 

Blockchain can play a significant role in voting as well. It can help in maintaining digital identity, prevents hacking and fraud, and allows anonymous voting. Moreover, Blockchain-based voting eliminates electoral malpractices like manipulations, tampering, recording errors, etc.

For example, South Korea has considered moving to the Blockchain for security reasons. Similarly, it was announced that the Indian state of Telangana is developing a blockchain-based electronic voting system to facilitate remote voting. Apart from this, Russia, the United States, and many others have already used a blockchain electronic voting system. 

 Concluding Lines

Of course, these aren’t the only industries that are exploring Blockchain, but the ones that have taken active steps towards near future implementation. If you are interested in learning more about Blockchain technology and its use-cases, check out the best Blockchain Certification courses at Blockchain Council and become a Certified Blockchain Expert.

To get instant updates about Blockchain Technology and to learn more about online blockchain certifications, check out Blockchain Council.

Which Industries Have Adopted Blockchain Technology?

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Cointelegraph Consulting: Research outlines how DeFi can merge with traditional finance

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Whilst public adoption of crypto assets is increasing, the global regulations continue to progress and recognise decentralized technologies as a suitable infrastructure for the dematerialisation of securities. In Luxembourg, the country that is second in the world in terms of assets under management, the country’s regulator adopted a bill that explicitly recognised the possibility of using distributed ledger technology for the dematerialisation of securities. 

The regulation is moving quickly elsewhere across Europe: Tokenized securities now fall under the same rules and regulations as traditional financial instruments in many other European countries including France, Switzerland, Germany, Italy, the Netherlands, Romania, Spain and the UK.

Read the ebook to discover how you can be part of this emerging digital asset industry. Download the full report here.

What next for the industry? Due to the increase in public adoption and the favourable regulatory environment, demand from the financial industry to access digital networks is on the rise. So far, banks have digitized the retail industry but not much has evolved in capital markets.

The digitization of this industry is now possible through the blockchain, an infrastructure now widely recognized by the largest governments globally for financial instruments. Funds and asset managers can now upgrade their distribution channels by launching Digital Asset Marketplace (DAM) and connecting to others via decentralized networks.

DAMs will help their customers discover new opportunities, manage their investments and even open secondary market possibilities. In this ebook, industry participants explain how capital market players can benefit from blockchain by launching a DAM and maximizing the monetization of their investor base.

Financial institutions are beginning to publicly embrace and adopt the technology. So far they have started, as expected, with crypto-assets. Once they begin to trust the technology and it becomes embedded within their portfolios, it will mean one thing: curiosity will peak and these institutions will realise the operational benefits of decentralized technology.

Driven by increased confidence in the technology, and pressured by DeFi replacing many traditional banking functions, institutions will begin to learn that the technology can solve long-standing and deeply entrenched industry problems, particularly in the opaque and highly illiquid private markets.

Digital Asset Marketplaces, i.e. primary and secondary venues where investors meet, will be the driver for this according to the study. However, open source standards like the Token for Regulated EXchanges (T-REX), are required to enforce compliance onchain in a heavily regulated world.

Cointelegraph Consulting: Research outlines how DeFi can merge with traditional finance

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BTC bounceback, ETH’s ‘legit crisis,’ Elon Musk’s DOGE stunt: Hodler’s Digest, Jan. 31–Feb. 6

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Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.

Top Stories This Week

Bitcoin eyes $50K less than a month after BTC price broke its 2017 all-time high

Bitcoin is showing signs of a newfound rally after breaking the $40,000 resistance area, fueling hope that we might be about to see a new all-time high.

It’ll be critical for Bitcoin to stay above this level in the foreseeable future. The uptick came days after MicroStrategy pitched Bitcoin to more than 1,400 companies.

Cointelegraph Markets analyst Michaël van de Poppe says BTC’s strength means its market dominance is rebounding at the expense of most altcoins.

He added: “An apparent breakout above the all-time high above $42,000 however, should propel Bitcoin’s price to $50,000.”

This is the first time that Bitcoin has surged above $40,000 for 23 days, but this time around, market sentiment is a lot calmer, and the derivatives market isn’t as overheated.

Some institutions have used this week’s surge to take some money off the table, with Ruffer Investment booking $650 million in profits after doubling its cash in just two months.

Ether price breakout to $1,750 sees Ethereum network fees hit all-time high

ETH has been building on recent all-time highs this week, climbing ever closer to $2,000.

After hitting $1,756.51, the world’s second-largest cryptocurrency took a little bit of a tumble, falling back to $1,672.99 at the time of writing.

The record high came off the back of intense trading interest in DeFi coins, many of which use the Ethereum network as their basis. Anticipation has also been building over the launch of Ether futures from CME Group.

There’s just one problem: Gas fees are rising. At one point this week, transaction costs surged so high that some exchanges were forced to halt withdrawals altogether.

Amid fears this could affect the smooth running of DeFi protocols, Blockstream developer Grubles warned: “This is a legit crisis. Going to have to stock up on popcorn to see how Ethereum digs its way out of this.”

“Ur welcome” — DOGE soars after Elon Musk returns to Twitter… to shill Dogecoin

To an extent, the surge in crypto prices could be attributed to Elon Musk. For reasons beyond understanding, the world’s richest man is obsessed with Dogecoin.

The Tesla CEO raised eyebrows this week when he shared a doctored photo of himself masquerading as Rafiki from The Lion King, with a shiba inu superimposed onto Simba’s face in the famous scene where the lion cub is held aloft on Pride Rock.

Musk helped DOGE surge this week, but remarks he made on Bitcoin during a Clubhouse discussion failed to have as much of an impact as last Friday when BTC leaped up by thousands of dollars because Musk added #bitcoin to his Twitter bio.

During the Clubhouse chat, the billionaire was quoted as saying: “I am late to the party but I am a supporter of Bitcoin.”

New research this week examined six times when Musk had tweeted about BTC or DOGE, finding that his remarks caused price surges and a “significant increase” in trading volumes.

But the paper from Blockchain Research Lab warned: “While Musk’s behavior and communication can be deemed positive or funny in nature (and therefore arguably uncritical), similar research has already revealed that negative tweets can also have a negative impact on financial returns.”

Reddit rage as XRP price crashes 50% hours after hitting two-week highs

XRP was the subject of a trading frenzy last week, enjoying an 86% breakout after becoming the new coin of focus in r/Satoshistreetbets, a spin-off of r/Wallstreetbets.

The pump came despite the fact that XRP’s legal woes have shown no sign of going away, with the SEC set to face off against Ripple later this month.

Telegram and Discord chats had encouraged people to buy XRP en masse on Feb.1 at 8.30 am ET, but as you might expect, the pump ended in tears. Within two hours, the altcoin crashed by almost 50%… burning new investors in the process.

Cointelegraph Markets contributor Keith Wareing tweeted: “Even though the $XRP army get aggressive when you warn them about the escrow shaped elephant in the room, I still can’t help but feel sorry for those that bought at 0.75c today. X R (I)P.”

PayPal to offer crypto payments for merchants, limited trading on Venmo

PayPal has revealed that its crypto trading service has “exceeded expectations” since its limited launch in the United States.

The payments giant is now set to double down on crypto, blockchain and digital currencies in 2021, with “significant” investment in a new unit. According to the company, those who bought Bitcoin ended up logging in twice as much as they did before.

Following on from the “exceptional response,” CEO Dan Schulman said that crypto will be offered as a funding source when users shop at any of PayPal’s 29 million merchants later this quarter, and an “extensive roadmap” of new services is going to follow.

In November, PayPal took a major step toward the adoption of digital assets by allowing its U.S. users to purchase crypto directly through the app. Customers based in the United States are limited to trading $20,000 per week. Since that time, crypto trading volume on the platform has reached record highs, peaking at $242 million in transactions on Jan. 11.

Winners and Losers

At the end of the week, Bitcoin is at $40,776.40, Ether at $1,676.86 and XRP at $0.44. The total market cap is at $1,218,786,711,013.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are UMA, 0x and PancakeSwap. The top three altcoin losers of the week are HedgeTrade, ThorChain and Fantom.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis. 

Most Memorable Quotations

“After a record-breaking year in 2020 that saw it jump more than 300%, Bitcoin looks to stay strong in 2021 as more retail — and big-name institutional buyers — enter the market.”

Jesse Cohen, Investing.com senior financial analyst

“While Musk’s behavior and communication can be deemed positive or funny in nature (and therefore arguably uncritical), similar research has already revealed that negative tweets can also have a negative impact on financial returns.”

Lennart Ante, Blockchain Research Lab co-founder

“If a single tweet can potentially lead to an increase of $111 billion in Bitcoin’s market capitalization, a different tweet could also wipe out a similar value.”

Lennart Ante, Blockchain Research Lab co-founder

“ur welcome”

Elon Musk, Tesla CEO 

“We also saw an exceptional response from our crypto launch […] The volume of crypto traded on our platform greatly exceeded our expectations.”

Dan Schulman, PayPal CEO

“The economic environment for Bitcoin right now could not be better.”

Duncan MacInnes, Ruffer co-manager

“Even though the $XRP army get aggressive when you warn them about the escrow shaped elephant in the room, I still can’t help but feel sorry for those that bought at 0.75c today. X R (I)P.”

Keith Wareing, Cointelegraph Markets contributor

Prediction of the Week

BlockTower Capital CIO estimates another 9–22 months of bull run for crypto

With renewed optimism around how Bitcoin is performing, the inevitable question is this: How long will the bull run last?

Well, according to BlockTower Capital’s chief information officer Ari Paul, we’ve got at least nine more months to look forward to.

He said: “This is where we get ongoing, dizzying rotation. BTC up, then when BTC takes a breather, ETH and some large caps (and in this regime, DeFi blue chips), then small caps, rinse and repeat. Of course, throw in some 30-60% retracements for fun.”

In terms of how Bitcoin will perform, Paul added: “Price wise — my guess is BTC ends the bull run between $100k-$400k and alts do better.”

FUD of the Week 

Guggenheim CIO under fire for the timing of his changing BTC sentiment 

Scott Minerd’s apparent shift from bullish to bearish and back again on either side of an SEC filing related to a $500-million investment in BTC has been raising eyebrows on social media.

The Guggenheim CIO had hit the headlines after claiming that BTC would see a “full retracement back towards the $20,000 level” — later adding there wasn’t enough institutional support to warrant a price above $30,000.

Days later, Minerd claimed Bitcoin has the potential to reach $600,000 in the long run based on its scarcity and the value of gold.

Some on Twitter were not impressed. Economist Alex Krüger wrote: “Remember Guggenheim wants you to sell #bitcoin so they may buy lower. Been trying to scare the market into thinking price will crash to $20,000, even though they think it’s worth $400,000.”

New class action against Robinhood alleges oligopoly manipulation

It’s been quite a week from Robinhood, the stock trading app that’s continuing to reel from the backlash it suffered after restricting trading in GameStop.

A class-action lawsuit has been filed that the drastic move denied customers a chance to profit from volatility in GME shares — manipulating the course of the stocks.

Meanwhile, some reports suggested that Robinhood was planning on postponing its planned IPO as it tries to focus on tackling the PR disaster. Other outlets have cast doubt on this, saying a stock market debut is going ahead as intended.

It’s also been claimed that Robinhood’s CEO, Vlad Tenev, is going to testify before the U.S. House Financial Services Committee over the firm’s role in recent volatility.

Robinhood, the stock trading app formerly popular with millennials, is facing another class-action suit, following its recent temporary suspension of purchases of GameStop and other “meme-stocks” through its platform.

Polish crypto exchange employee in induced coma after armed attack

A member of staff at a Polish crypto and gold exchange has been placed into an induced coma after an armed attack.

The offices of FlyingAtom, in the city of Olsztyn, were targeted on Jan. 22. The masked attacker managed to escape with gold worth approximately $120,000.

A suspect was subsequently detained in connection with the incident, with the exchange thanking the police for their help.

Best Cointelegraph Features

Time to shine? Crypto should be given a chance after GameStop drama

The GameStop pump may lead a number of amateur investors to finally learn about DeFi and the advantages it puts forth.

Going feeless is the only way to enable blockchain adoption

Feeless transactions can play a role in enabling DeFi, allowing the sector to further develop and grow in importance.

r/Wallstreetbets vs. Wall Street: A prelude to DeFi bursting onto the scene?

Was stock trading app Robinhood the villain in the GameStop saga? “In a decentralized trading market, no one would have that power.”

BTC bounceback, ETH’s ‘legit crisis,’ Elon Musk’s DOGE stunt: Hodler’s Digest, Jan. 31–Feb. 6

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The year 2021 will bring DeFi into adolescence

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Following the explosive growth of decentralized finance in the second half of 2020, we’re asking ourselves what the next chapter will look like. What would it take for DeFi to expand beyond crypto-native assets and communities and start eating financial services as we know it?

The second half of 2020 surpassed many of our expectations, and the market has only accelerated since then. Total value locked in DeFi rose from less than $1 billion at the start of June to $13 billion at the end of the year and over $27 billion since then. Catalyzed by Compound’s COMP token launch, we saw a wave of yield farming and a rapid inflow of assets.

Related: Was 2020 a ‘DeFi year,’ and what is expected from the sector in 2021? Experts answer

Perhaps more excitingly, we’ve started to see the foundations of a new financial system taking shape — with applications that enable everything from self-custodial exchanges to lending and borrowing, payments, portfolio management and insurance. New forms of value are being created: not just the promise of yield in a low-rate environment but also access to financial services for crypto-exposed businesses and individuals and for the underbanked more generally.

Today, DeFi is the preserve of a small subset of crypto-native users and assets and is seen by its critics as the wild west. Will this change? Here are a few thoughts on what comes next.

New asset types — New sources of liquidity in DeFi

The first iterations of decentralized exchanges were fraught with liquidity issues. Early adopters faced a significant lag in order matching, and token pairs were limited. Automated market makers and liquidity pools have become a widespread solution to this, with daily trading volumes on decentralized exchanges currently on the order of $2 billion — and DeFi projects continue to find innovative ways to incentivize the provision of liquidity. This will continue. For borrowers, we believe there remains a clear need to bring down collateralization requirements and indeed to use alternative forms of collateral.

Perhaps the greatest opportunity lies outside the universe of crypto-native assets. There are trillions of dollars of potential collateral up for grabs in real-world assets: Users want to borrow money against the assets that they already have and often cannot access the liquidity they need by conventional means. Tokenization of real-world assets can dramatically increase the size of the DeFi universe.

Scaling issues addressed at layer one and/or layer two

Ethereum’s scalability constraints are often cited as a factor limiting the adoption of DeFi. High gas prices and indeed high Ether (ETH) prices can render lower-value transactions unviable. This limits the attractiveness of nonfungible token marketplaces and other retail-focused services. Meanwhile, high-frequency professional trading requires layer-two solutions due to limited on-chain transaction throughput.

Related: Second layers will save the day in 2021, bolstering Ethereum and DeFi

It’s plausible that we’ll see this resolved in 2021, with at least three possible paths:

  • The successful rollout of Ethereum 2.0.
  • The emergence of dominant layer-two scaling solutions on Ethereum.
  • Widespread adoption of cross-chain interoperability solutions.

These three phenomena need not be mutually exclusive, and they collectively give us optimism that 2021 will be a year of significant progress on DeFi scalability.

Institutional demand — Convergence between CeFi and DeFi

We are beginning to see crypto-native institutional investors seek higher yields via stablecoins. Many of these investors use centralized exchanges, at least initially, but a handful of institutional-focused self-custodial products has emerged. Regulatory scrutiny on DeFi is likely to increase as these services gain traction.

Meanwhile, regulators around the world have enacted stricter rules for virtual account service providers, such as centralized crypto exchanges. The Financial Action Task Force’s travel rule and Europe’s 5th Anti-Money Laundering Directive demonstrate the movement toward stricter Know Your Customer standards in cryptocurrency, and October’s BitMEX charges brought this into sharp relief. This will ultimately touch DeFi: In the near term, we expect to see institutional products implementing pseudonymous/zero-knowledge solutions for self-sovereign identity.

There are ideological and practical questions that need to be addressed. Is KYC fundamentally incompatible with DeFi? And which regulatory frameworks actually apply to DeFi today and in the future? Trustlessness will be defined subjectively, and we’ll see a spectrum from truly decentralized products — built and used by anonymous users outside the purview of the Bank Secrecy Act — to products with a database of verified counterparties.

Better UXs for retail participants: DeFi that doesn’t feel like DeFi

For many users, the on-ramp into DeFi is simply too steep. A certain degree of sophistication is needed simply to set up a MetaMask wallet, buy ERC-20 tokens, and start lending. Meanwhile, many centralized products have grown thanks to intuitive interfaces resembling traditional digital banking products. We are now starting to see this trend play out in DeFi where one could ultimately enjoy a faster, cleaner onboarding experience, given the lack of KYC. As a good example, Yearn.finance was a pioneer in this regard, focusing on usability and lowering the barriers to entry that existed before its launch.

Adjacently, other Ethereum-based applications — such as NFT marketplaces for collectibles and digital assets — will continue to innovate the user experience. In 2021, we expect to see a wider emergence of Ethereum-based applications where customers do not know they are transacting on a blockchain at all.

More exploits as more capital flows in: Potentially the biggest constraint to growth

Given the increasing amount of capital at stake, it’s unsurprising that we have seen a rise in exploits. In 2020, approximately $100 million was lost in hacks, notably flash loan attacks, and this trend is likely to continue. For institutional investors, exploits will inevitably alter the perception of DeFi’s risk-adjusted yield opportunities.

Related: Roundup of crypto hacks, exploits and heists in 2020

This will be a critical factor influencing the scale of adoption and will bring a rise in demand for smart contract auditing and insurance, both of which have seen limited investments to date. Greater collaboration between DeFi projects is also a potential response to the rise in exploits. Such partnerships will allow projects to pool and strengthen their talent, security and treasuries, helping to prevent and mitigate the impact of future exploits.

The rise of crypto in the last decade has transformed the way we think about stores of value. The rise of DeFi in 2020 transformed the way we think about the future of financial services and true innovation in a space that changes very slowly. As the dust settles on a remarkable 2020, we now expect to see a massive increase in scale and professionalization as DeFi captures more regulatory and institutional attention.

This article was co-authored by Toby Coppel and Chandar Lal.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Toby Coppel is a co-founder and partner of Mosaic Ventures, which invested in various projects across Europe. The Future of Money is one of their core investment themes. Toby was previously the chief strategy officer of Yahoo.

Chandar Lal is a research associate at Mosaic Ventures, where he conducts thematic research and due diligence. He previously worked at Sequoia in Silicon Valley as part of the corporate development team.

The year 2021 will bring DeFi into adolescence

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