What 2020 was for Ethereum network and few 2021 predictions

Motto: ''Those who cannot learn from history are doomed to repeat it. Those who do not remember their past are condemned to repeat their mistakes.'' (George Santayana)

The most notable thing in 2020 was the fees level, first time ever when Ethereum miners were paid on par with the Bitcoin ones, or even more for few short time intervals. We also known two important tendencies going on in 2020, NFT and DEFI. All kind of artists, musicians and creators started to make art as NFT, selling it for personal or charity purpose for ETH, for a lot of ETH in some fortunate cases. Of course, there is WAX, for us, the common people, but the big money were always on ETH. And we got DEX, and then DEFI, a little wave that became a tsunami, reaching now more than 15% of the centralized exchanges volume. And to end the year gloriously, on 1st of December we got the ETH 2.0 first upgrade - the beacon chain. There is still work to be done, but, well, a thousand miles journey starts with one step. And then another. And then another. 

Then, world popular crypto was not Bitcoin, despite its maximalists claim. In 2020, ETH transferred $1.6 Trillions, while BTC just $1 Trillion, so, 60% more assets were moved via ETH. But, there is always a but, at the end of the year, the fees were so high, that most of the people, including me, stopped using ETH and started to look to other blockchains (BSC, TRX, DOT). Unless you were a ETH miner, then you had a great year. In 2019, there were four times more fees paid to use BTC, than to use ETH. However, in 2020, Ethereum fees to be paid were double than the BTC ones. Just to give one example, in August 2020, we had days when ETH fees paid on Uniswap were on par or even bigger than all the fees used to pay on BTC. But this is not the end, BTC still has a higher marketcap than ETH, and is the gateway crypto for anyone new to crypto-market. 

But we didn't stop here. For artists like Trevor Jones or Beeple, selling crypto-art paid off, the latest one making more than 3.5 million dollars selling NFT. And they were not the only ones. NFTs make other well known artists millionaires, and to name just a few: Mario Klingeman, Joanie Lemercier and Murat Pak. We got musicians releasing fan tokens, promising to offer unique experiences to their fans, in exchange for them. RAC, 3LAU, Tokimonsta and Portugal.TheMan were experimenting with this nifty way of promoting their art or music. Many new platforms appeared (some of them unusable at the moment as the fees on itselves are a joke) - Rarible, Opensea, Niftygateway, KnownOrigin, Superrare. 

Decentralized exchanges got adopted, with all the drama involved. We got Uniswap daily volume increasing more than 5000% ($58 B traded in 2020). We got Sushi vampire attack siphoning users away from Uniswap. We got Uniswap UNI airdrop and all the people migrating back from Sushi to Uniswap. In September, Uniswap had more volume than Coinbase. Coinbase. Imagine that. The combined DEX volume went from under 1% in 2019 to over 16% of all CEX in 2020. 

And DEFI. In February DEFI locked $1 B, but i must to admit that i heard first of defi in June-July, when i put some BAT into Compound. When Compound introduced liquidity mining for the first time, and the use of a governance token $COMP, new opportunities to grow arised. In November, DEFI users as unique addresses were reaching 1 million. In December 2020 all DEFI had $15 B locked. In January AAVE introduced flash loans, as a wat to offer unsecured, uncollateralized loans. This lead to better arbitrage, but also to some clever exploits and hacks on the less audited, less secured DEFI protocols. Even Bitcoin made its way to DEFI, as wrapped BTC. You can use it to lend it and get interest, or as collateral to get a loan. From 1000 wrapped BTC in January 2020, we got more than 1% of the  BTC marketcap by the end of the year. 

And all the hype on Ethereum 2.0, all the way to the launch of the beacon chain. There is still work to be done, but ETH PoS is something like a dream coming true for many of us. And we hope that, by the end of 2021, the merge of both versions ETH 1.0 and ETH 2.0 will be done, opening the way to sharding, zK rollups and other similar inovations in order to improve scalability. zK rollups are a layer 2 scaling technology, preserving the data safely while greatly increasing the speed. And sharding will increase the speed from 3000 transactions per second to 100.000+, in a similar way with LoopRing and Fuel. 

Some will even say that ETH is closing the gap, getting closer and closer to BTC. The developers are not as fast as we wish, but they are doing a thorough testing, and they are weighting up any vulnerability before the official 'good to go' time. We can only hope that the strategy will build up and not disappoint us. There are so many ETH killers waiting to be unleashed. They are not catching up this year, but given enough time, they may become competitive enough. My bets are of DOT and ADA to fight for the second and third place in the DEFI race. EOS did not use all the money they got in 2018-2019 optimally, and i do not see them catching up. Tron is doing what Chinese to best, copying and adapting fast the proven methods, but their DEFI trials are still in the incipient phase. Binance Smart Chain is doing an aggressive campaign and they are currently developing some good projects. Long term guess - i think over-collateralized DEFI loans can make their way to the day to day life, once they will become capital efficient, as at the moment they are not big enough to compete on the macro-economical scale. 

Another big thing in 2021 will be creating bridges between one platform and another. Any bridge between ETH and another competitor will be highly appreciated, even if at the moment this is still more of a trial and error process. REEF is one of my wild horses, and SYSCOIN seems to do notable work on their project too. Pancake is doing a good job bridging from BSC to ETH, for minimal fees, but i did not have the heart to try the other way (ETH to BSC seems still crazy expensive). 

Even in i have BTC and ETH in equal amounts as my first two cryptocurrency choices in my own portfolio, i am more bullish on ETH long term. Even with all the institutional investing on BTC (as this at the moment it is still a cat and mouse game, with big data trying to shake the weak hands and to buy poor people crypto in order to drive the price up after. I am still seeing BTC oscillating between 30-50K for the rest of the year, while ETH got potential to grow further. 

Yours truly,
George

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Disclaimer: This text is also re-published on my personal blogs, such as this one.