Coinbase CEO: The Next Decade of Crypto Assets | Classic Revisit

Author: Brian Armstrong (Coinbase CEO), Translator: Yu Shunsui | Odaily Planet Daily

This article is from the Coinbase official blog, first published by Odaily Planet Daily, originally titled "Coinbase CEO Looks Ahead to the Next Decade of Cryptocurrency"

Today, let’s look to the future and what I believe will happen in the 2020s. Of course, no one can predict the future with great accuracy, but one way to make a more accurate prediction is to create the future!

In short, I believe that over the next decade, we will see a more scalable blockchain that includes privacy features, reaching about 1 billion users by the end of the decade (up from about 50 million at the beginning of the decade). Adoption will occur in the most vulnerable emerging markets of the financial system, as well as in a batch of new crypto startups producing the products people want.

By the end of this decade, most tech startups will have crypto components, just as most tech startups today use the internet and machine learning. Governments and institutions will also enter the crypto asset space in a big way. 1. Scalability

In the 2020s, I believe we will see second-layer solutions or new blockchains emerge that will increase transaction throughput by several orders of magnitude. Just as broadband replaced 56k modems, leading to many new applications on the internet (YouTube, Uber, etc.), I believe scalability is the prerequisite for the utility phase of the crypto industry to truly begin. Once we see blockchain scalability improve by several orders of magnitude, we will start to develop new applications more quickly (see point 5 "The Rise of Crypto Startups").

2. Privacy

In addition to scalability, I believe we will also see privacy integrated into a dominant blockchain in the 2020s. Just as the internet started with Hypertext Transfer Protocol (HTTP) and later introduced HTTPS as the default on many websites, I believe we will eventually see a "privacy coin" or a blockchain with built-in privacy features gain mainstream adoption in this decade. In most cases, it makes no sense to broadcast every payment on a transparent ledger.

3. Consolidation

There are now many high-quality teams researching next-generation protocols (Dfinity, Cosmos, Polkadot, Eth2, Algorand, etc.), and many excellent teams working on second-layer scaling solutions for existing blockchains. My prediction is that in the next decade, we will see consolidation in the blockchain space (in terms of developer mindshare, user bases, and market capitalization).

Blockchains that make the most progress in scalability, privacy, developer tools, and other features will reap the greatest rewards. We may even see mergers and acquisitions (M&A) among these teams, which could be a reverse fork where one chain is deprecated, and each token can be exchanged at a fixed rate for the acquirer's tokens.

There will be as many tokens as there are companies/open-source projects/DAOs/charities in the world (so there will be millions), but only a few blockchains will power the infrastructure for these tokens. Like any other industry, the winning blockchains will likely follow a power law in terms of outcomes.

4. From Trading to Utility

The 2010s were primarily about speculation and investment in crypto assets, with trading driving most activity and the best business models. This trend will continue into the 2020s (see point 9 Market Structure and point 7 Institutions), but I believe the best new companies created in the crypto space in the 2020s will focus on driving the utility phase (where people use crypto assets for non-trading purposes). We are already starting to see the beginnings of this trend, with more and more customers engaging in non-trading activities (staking, lending/margin, debit cards, earning income, commerce, etc.).

5. The Rise of Crypto Startups

In this decade, we will see a new type of startup become commonplace: crypto startups. Just as the dot-com boom opened up the idea of internet startups (a decade later, almost every tech startup used the internet in some way), I believe that by the end of the 2020s, almost every tech startup will have some component of crypto assets. So what defines a crypto startup? Three things.

First, it will raise funds using crypto assets (drawing from a larger global capital pool, separating funding advice from the venture capital industry). Second, it will achieve product-market fit by distributing tokens to early adopters of the product (turning them into evangelists), similar to how early employees receive equity in a company. Third, they will gather global communities and markets at a speed never seen in traditional startups (which have to painfully expand country by country, integrating payment methods and regulations for each).

This brings countless regulatory issues, but the advantages are so significant that I believe the market will find a way. These crypto startups will face the same challenges all startups face: making what people want. The next 100 million people to touch crypto assets won’t do so because they care about crypto assets, but because they are trying to play games, use decentralized social networks, or make a living, and using crypto assets is the only way to use specific applications.

6. Emerging Markets

In addition to crypto startups (which will be the first world-class phenomenon), another area of adoption will be emerging markets, where the existing financial system is a greater pain point. Especially in countries with high inflation rates and large remittance markets.

In 2019, GiveCrypto.org paid crypto assets to 5,000 people in Venezuela, with over 90% able to make at least one transaction with local stores or cash withdrawal partners that accepted crypto assets. This indicates that these tools have begun to cross the availability threshold in emerging markets (where unreliable internet, outdated smartphones, and lack of education can be challenges).

In the 2020s, I believe we will see the scale of crypto asset adoption in emerging markets expand to hundreds of millions of users, with at least one country "gaining dominance," such that a significant portion of transactions in their economy are conducted using crypto assets.

7. Institutions

We are already beginning to see small institutions enter the crypto asset space. In the past 18 months, hundreds of institutions have joined Coinbase Custody. I expect this rapid growth to continue into 2020, with increasingly larger institutions coming on board. Ultimately, almost every financial institution will engage in some form of crypto asset business, and most funds will hold a portion of their assets in crypto assets, partly because their returns are uncorrelated. About 90% of the world's capital is locked in institutions, so this could drive significant demand for crypto assets.

8. Central Bank Digital Currencies (CBDCs)

While Libra has sparked outrage among almost everyone in Washington, China has proactively begun digitizing the yuan and investing in blockchain as one of its core technologies. The U.S. is now catching up, with active discussions on how to digitize the dollar. The CENTRE alliance and its USD Coin (USDC) may be a solution the U.S. turns to, or the Federal Reserve may attempt to leverage blockchain to create its own digital dollar. I think we will see a suite of digital currencies emerge, either issued by alliances like Libra or CENTRE, or by the International Monetary Fund (IMF).

9. Maturing Market Structure

In the past decade, many companies we consider crypto asset exchanges are actually bundled brokerages, exchanges, custodians, and clearinghouses. In the 2020s, I believe we will see the market structure of crypto assets evolve to resemble that of the traditional financial world, with these functions being separated from a legal and regulatory perspective.

This is already happening to some extent. For example, Coinbase Custody is an independent company with its own board, regulated as a trust company in New York. Coinbase Pro will also be split into a brokerage and an exchange. Just like in traditional financial services, customers of one product will become competitors of another, and there will be many cross-influences. With these independent components, I expect the SEC and other agencies will find it easier to create a crypto asset index fund for retail investors.

10. Decentralization Will Expand

While fiat/crypto trading will largely follow traditional financial service models, a separate world will develop in the realm of purely decentralized crypto-to-crypto trading. In other words, once you convert your fiat currency into crypto assets, you can enter a magical land of pure crypto-to-crypto trading.

In this world, non-custodial wallets, DEXs, DeFi, and DApps will continually improve in usability and security, and we will see many new applications emerge, from gaming to online communities to virtual worlds with their own economies. Because they do not hold customer funds, many applications and non-custodial wallets in this world will be regulated like software companies rather than financial services companies. This will significantly accelerate the pace of innovation.

This world will also have more privacy, with privacy coins and non-custodial wallets gaining more adoption. We will also see the rise of decentralized identities and related reputation scores. As the crypto economy develops, more and more people will make a living using crypto assets and find opportunities in this new global network economy, driving global economic freedom. 11. The Billionaire Flippening

The final point, as a bonus, is that my friends Olaf Carlson-Wee, founder of Polychain Capital, and Balaji Srinivasan, former CTO of Coinbase, estimate that at a price of $200,000 per Bitcoin, more than half of the world's billionaires will come from crypto assets. Whether you think this is a good or bad thing, it means that in the 2020s, more professionals will gain significant capital.

This is likely to increase investment in science and technology, and I believe we will also see more crypto individuals turn to philanthropy (we have already seen this through efforts like the Pineapple Fund, GiveCrypto.org, and GivingPledge).

How many of these predictions will prove true? Let’s wait and see: by shifting the focus of crypto assets from primarily trading and speculation to real-world utility, the number of people holding and using crypto assets in the 2020s will increase significantly and begin to truly drive global economic freedom.