5 crypto space developments to watch for in 2020

At the time of this writing, the final year of the 2010s is quickly drawing to a close. It will not be long before revelry of all sorts ushers in 2020 and all of the potential promise it holds.

In the Bitcoin and cryptocurrency space, 2020 could prove to be a pivotal year in many respects. From Facebook's entry into the stablecoin arena with Libra to Bitcoin's halving, the next 12 months could be a very interesting ride.

It would be fruitless to follow the lead of so many other posts by attempting to predict what will happen in the cryptocurrency space over the next year. Not only are there plenty of predictions already out there, but history has demonstrated how inaccurate such predictions can be. So rather than taking that approach, this post focuses on developments that are already underway.

In the following paragraphs you will read about five things in the crypto space to keep an eye on in 2020. How each one plays out in the coming months will have an impact on what cryptocurrency looks like a year from now.

1. New technologies for private transactions

One of cryptocurrency's biggest selling points is its decentralized structure. Without governments and central banks in control, cryptocurrency users are free to trade and transact business without fear of being manipulated by the banking sector. There is a trade-off, however: typical cryptocurrencies - like Bitcoin and Litecoin for example - exist on public ledgers distributed across the world. That may not be good to some security conscious traders.

Anyone wary of a publicly distributed ledger can take an extra step to protect privacy by trading on private networks instead. For example, there are private networks that use a technology known as CoinJoins. This is a technology that combines multiple cryptocurrency transactions together and then scrambles them so as to make it impossible to figure out which transactions belong to which wallets.

Private network operators can use the technology to not only increase user privacy but also encourage new users to get on board. Unfortunately, CoinJoins' inherent weakness is that it is useless when there aren't multiple people trying to conduct transactions at the same time.

There is another potential technology that could solve those problems. It is still just in the concept stage, but PayJoins does much the same thing without requiring multiple transactions simultaneously. PayJoins needs only a sender and receiver to mix transactions.

Another advantage of PayJoins is that it does not require the internet to work. Its developers have created another project, known as Project Snowball, that utilizes Bluetooth technology instead. Users can connect directly to one another using a Bluetooth peer-to-peer network, complete a cryptocurrency transaction, and then disconnect and go on their way.

There seems to be demand for new technologies for private cryptocurrency transactions. The only question is whether or not the demand is high enough to facilitate development of these new technologies. Keep an eye on it for 2020.

2. The Calibra and Libra projects

Next year's biggest cryptocurrency development could easily be the launch of the Calibra and Libra projects. The former is Facebook's digital wallet platform designed to usher in the latter. Both projects are tentatively set for launch sometime in the next 12 months. Whether or not they actually do launch is another matter.

Before Libra can be made feasible, Calibra must prove itself ready for prime time. The ironic thing is that it might be easier for Facebook to get Calibra off the ground without having to satisfy a ton of U.S. regulatory concerns. After all, it is essentially little more than a digital wallet. Facebook is going to have a tougher time convincing regulators to allow Libra to go.

As our blog posts have explained numerous times in the past, a number of national governments have already aligned themselves against Facebook. France and Germany have been bold enough to declare they will fight to not allow Libra in Europe. British and U.S. lawmakers are equally skeptical.

So what should we look for in 2020? Look for Facebook CEO Mark Zuckerberg to continue pushing Libra as both a humanitarian and patriotic necessity. It is his contention that Libra's failure to become a stablecoin with global reach will allow China's pending digital currency to become the stablecoin of choice. Whether genuine concern or just PR, Zuckerberg continues to insist that only his company's pet cryptocurrency project can stop China from becoming the world leader in digital currency.

3. China's cryptocurrency project

Zuckerberg's concern leads directly to the third thing to watch for in 2020: how well China's central bank digital currency (CBDC) project works out. It was only a couple of years ago that China began hinting it was working on a CBDC. Throughout most of 2018, the People's Bank of China wavered in its public commitment to digital currencies. But then 2019 happened.

Few were entirely sure of China's plans until June, when Facebook made its Calibra and Libra announcements. That is when all of the fetters came off. Facebook's announcement sent the People's Bank of China into overdrive in the race to launch a CBDC. Now we know that China's CBDC is on the eve of its first round of public testing.

Four commercial banks and three telecoms in China have been tasked with testing the CBDC in a few select cities over the next several months. We do not know exactly what the system will look like because each of the four banks are being allowed to formulate their own test scenarios. But rumor has it that the system will mirror Libra to some degree - at least in terms of cross-platform payments.

Look for Facebook executives to continue pushing the humanitarian and patriotic aspects of their two pet projects. Look for U.S. regulators and members of Congress to continue voicing their mistrust. Look for China to court Russia, North Korea, Venezuela, and other anti-Western nations to join them in creating an alternative global financial system. And look for China's CBDC to play a central role in all of it. It could be a game changer in a big way!

4. Bitcoin's next halving

Even if Libra and China's CBDC become the two biggest news makers in the 2020 stablecoin arena, they will probably not hold a candle to Bitcoin and its projected mid-year halving. Cryptocurrency analysts and traders alike have been anticipating this event for quite some time. Irrespective of anything else going on in the cryptocurrency space, halving is always a major event. It always has a significant impact on markets.

What is halving? It is an automated process by which the reward earned by cryptocurrency miners is cut in half. Halving was built into Bitcoin in order to protect the value of coins as they were released into circulation. It results in a lower reward for the same amount of work required by miners, thus making each earned coin more valuable. This offsets the potential price drops that normally occur when the volume coins in circulation increases too quickly.

The thing to watch for in 2020 is how Bitcoin's price responds once halving occurs. Historically speaking, halving generally encourages price increases. Some past increases have been fairly dramatic while others, not so much. No one really knows how Bitcoin will respond this time around.

Some of the most wildly speculative predictions have Bitcoin eclipsing six figures in the months immediately following halving. Other predictions are more moderate, suggesting Bitcoin could find its way just above $20,000 by the end of the year. No one really knows. The one thing no one wants to see is a bear market continuing from now until halving occurs.

5. Greater differentiation between tokens

With Bitcoin, Libra, and China's CBDC potentially dominating the headlines in 2020, there is bound to be plenty of confusion among casual cryptocurrency users. Much of the confusion will be the direct result of not understanding the differences between several kinds of tokens.

Bitcoin was the very first commercially viable cryptocurrency ever released. As such, its nature and characteristics are the epitome of a genuine cryptocurrency. Libra is similar to Bitcoin in some respects, but quite different in others. It is considered a stablecoin rather than a true cryptocurrency for two reasons: it is backed by other assets and it is centralized to some degree.

China's CBDC is also similar to Bitcoin and Libra in some respects. However, what makes it so different is its origin and control mechanism. China's CBDC is a creation of the state. As such, it is not decentralized. It is also not a stablecoin in the same sense that Libra is. China's CBDC will not be backed by another asset, it will be a digital replacement for the country's existing fiat.

We say all that to say this: look for influencers in the cryptocurrency space to make a greater effort to differentiate between tokens. The last thing they want is for the space to get so muddled that consumers cannot distinguish one token from the next. Because if that happens, cryptocurrency has no hope of ever competing with the government-backed digital currencies that now seem inevitable.

This past year was an interesting year for the crypto space. Next year should prove equally interesting. We may ultimately discover that 2020 was the most pivotal year for cryptocurrency yet.