• David Doss

FinTech and Crypto Trends to Contemplate for 2021-2022

2021-2022 will likely experience an increased focus on enhancing the value of centralized and decentralized exchanges, fostering interoperability, building layer-two solutions, facilitating cross-border payments, banking the unbanked, and unbanking the banked.

Centralized exchanges (CEXs) and decentralized exchanges (DEXs): While many in the crypto space have historically tended to pit decentralized projects against centralized ones, we are increasingly seeing the two types of project carve out complementary territory within the crypto space. For example, centralized exchanges are starting to gain more dominance in terms of onboarding fiat money into the crypto spheres, and providing the mainstream market with access to top cryptocurrencies, while decentralized exchanges are starting to establish themselves as centers for developing the market liquidity of small- to medium-cap cryptocurrencies where professional traders and other crypto enthusiasts can potentially capitalize off of a constantly shifting landscape.


Interoperability: Decentralized finance (DeFi), which is mostly blockchain-based, has grown by over 10X in the past couple years. DeFi has been focusing on interoperability, for example building Bitcoin use cases on the Ethereum network. So, increasingly the question seems to be less and less about this token or that token is winning out, and more about how the different lego blocks can be assembled and re-assembled.

Layer-two solutions: Relatedly, as an overall trend in crypto, the focus lately seems to be less about creating a bunch of tokens, and more about building out the functionalities of existing tokens and cryptocurrencies (e.g. via the Lightning Network). In this sense, many of the main cryptocurrencies may stay fairly dominant, as new projects are increasingly focused more on improving existing cryptocurrencies, rather than on the new project itself becoming “the next Bitcoin” (as was the case back in 2017).


Cross-border payments: Crypto- and DeFi-based cross-border payments can make a lot of sense in specific cases: especially for low-value, high-frequency instances such as international remittance payments to friends and family, or micro transactions such as the purchase of online gaming items and other virtual goods from an international provider. Companies such as Stellar (with their cryptocurrency, Stellar Lumens) have been making excellent progress on these and similar use cases. However, in many cases, the types of users who actively / knowingly sign up for a blockchain-based solution remaining relatively low. While blockchain-based solutions for these use cases often can be faster and less expensive, the real adoption potential is through partnerships rather than through B2C customer acquisition. In other words, the major impact is when already known and well-established mainstream services make use of these blockchain-based solutions. PayPal’s 2020 entrance into the crypto game bodes well for the future of cross-border payments.


Banking the unbanked/unbanking the banked: These two movements are poised to mutually support one another over the years. As of 2021, hundreds of millions of people around the world have been unable to access banks due to political, technological, geographical, and other challenges. At the same time, hundreds of millions of people are living in countries experiencing 10% or higher inflation, making it potentially less and less attractive for both the banked and the unbanked to rely on the traditional financial system. These trends can open up new avenues for FinTech and Blockchain solutions.


Disclaimer: Not investment advice. Do your own research.


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