Cryptocurrency has been commanding attention among enthusiasts and regulators since its inception in 2009 with the launch of the first blockchain technology and Bitcoin as a cryptocurrency for payment. Since then, BTC has become the regulators’ nightmare because it is a virtual currency with (physical) asset value and traded against fiat currencies around the globe.
For many years, sheer speculation and hype have plagued the Cryptocurrency Market. Bitcoin has shown some of the most meteoric rise and fall episodes in the last three years, and still, people are willing to trade cryptos. Open source decentralised platforms such as Ethereum and EOS hit the headlines with software technology that would take the hardware mining of BTC out of the cryptocurrency market equation, but neither of these got away without a few hiccups when starting out.
For many crypto enthusiasts, it is precisely this speculation that drives market volatility that makes profits for investors and traders; financial markets continue to find a place for cryptocurrency in their asset registers and the flood of shady ICOs and under-delivered schemes continue to put government regulators in a quandary.
Looking ahead for the digital asset market in 2020, three significant developments will undoubtedly play a pivotal role in the future of cryptocurrency, Financial Technology, and the global asset markets.
- Bitcoin Halving [Halvening]
- Facebook & Libra Coin
- Fintech and Crypto Unite
1. BITCOIN HALVING
- What is Bitcoin Halving or Halvening?
In January 2009, Bitcoin launched with a caveat that every four years, the reward for mining would halve. The reason Bitcoin referred to as “digital gold” – like gold, the supply of BTC is finite: once the network reaches 21 million generated coins, it will stop producing.
The current Bitcoins in circulation is around 85% of total tap = roughly 18 million. However, this is not an indication that the crypto is almost at its limit. This is due to the coded halving protocol: For each 210,000 blocks, the miners’ transaction verification reward cuts by 50%; therefore, new coin production is more difficult.
- What is BTC “Block Reward”?
The BTC blockchain or digital ledger stores transaction information in blocks of around 1MB. For example, when one person sends Bitcoin to another person, this transaction and about 500 additional transactions that occurred at the same time will be stored together in the same block. The block can only be added to the chain after verification through a “hash” [256-bit number], and this mathematical puzzle is solved by miners using enormous power driven specialised computational hardware, for which they receive cryptocurrency rewards.
- How much BTC will Miners Receive in 2020 Halving.
In 2009, Bitcoin miners received 50 BTC per block, generating 10.5 million BTC by November 2012 at the next halving when the reward reduced to 25 BTC per block. It is relative, at this stage because the value of Bitcoin has increased (and to be sure, in some instances dropped majestically: In June 2011, Bitcoin value was $31, but this fell to $2 by the end of the year!)
At the third halving episode scheduled to commence on 18 May 2020 (although speculation has the event coming earlier), the reward for each new block produced = 6.25 BTC (about $45,000 per block at current BTC value). Before leaping to the conclusion that this is exorbitant money to pay people to mine, the cost of mining is ever increasing and authorities in China, where most of the mining has taken place over the last five years or so, are taking a hard look at the economic costs vs. sustainable energy consumption. The date for the halving has not been set due to network speed: currently, average generation speed is 10 minutes per block.
Takeaway on BTC Halving:
The final halving predicted for 2140 with the final mining of the 21-millionth BTC. This is all speculation, given that the generation of power to drive the mining hardware is not sustainable and could price mining out unless the BTC value goes through the roof, keeping the percentage reward value attractive – provided governmental agencies are willing to allow it to continue in such vast quantities.
2. LIBRA COIN
- Libra Launch on Hold
Facebook, the owners of Libra, are still uncertain about the launch date for their new stablecoin: Libra, although tipped to be sometime towards the middle of 2020. Regulatory policy is standing in the way, and Mark Zuckerberg, FB CEO, and his legal team await legislative approval, which has probably been given more to think about since Paypal, eBay and MasterCard pulled out of the deal. However, the Libra Association: Calibra founding members, made up of a wide geographical spread of multiple business and non-profit organisations, each invested $10 million to get this open source project up and running.
Libra has a multi-fiat capitalisation [USD, Euro, and Yen], from the major banking sector and corporate funds. The currency will have low volatility, unlike BTC and other tradeable asset value crypto currencies; therefore, it is stable!
- Why Libra is Important
The billions of international users without banking facilities, notwithstanding, Libra has the potential to get 170 million United States users to adopt the Calibra Wallet as a means of transferring funds and making payments with the added incentive of lower transaction fees. Millions of FB members could suddenly pick up the pace and bring cryptocurrency firmly into the 21st Century mainstream financial ecosystem.
- Libra & Regulators
All it takes is one, but it appears that the people at Libra Coin and online wallet Calibra have an uphill battle trying to get government regulators around the globe to understand “anything”! This is not the first case, and until the regulators get their acts together, and come up with a solution to their clearly objectionable views and find a more non-political subjective and acceptable legal framework, cryptocurrency as standard financial technology will remain “an enemy of the state.”
When one looks at government intervention, it is clear that it is becoming rather like the space-race – it will happen eventually!
It is all about being the first to the table, using smoke and mirrors to persuade the public that they are holding back out of national interest; we have yet to trust a politician on anything, let alone altruistic values.
No surprise then when the People’s Bank of China (Reserve Bank) announced their intention to launch a digital Chinese currency while banning the use of several cryptos within the Chinese Ecosystem. Many countries give the arguments within the EU and don’t stack-up from a legal standpoint, and the US still has to find out if the left hand knows what the right hand is doing when it comes to crypto.
Takeaways on Libra Coin:
- Facebook is still funding the Libra Association project: 21 founding members have adopted a wait- and-see approach and have yet to transfer the $10 million investment/membership fee, although some of the initial devotees, Paypal, eBay, and MasterCard have pulled out.
- FB employees on the Calibra team are using the LibraCoin amongst themselves, but the massive office space is in mothballs for now.
- Libra technology called “MOVE” is one of the most significant FinTech software developments that is designed to move digital crypto assets safely using decentralised blockchain.
- The potential for cryptocurrency in the future with the possibility of third party developers using Calibra to build their own digital wallets and currencies would be as monumental to FB and financial ecosystem markets as the Apple iOS to developers ten years ago.
3. FINTECH AND CRYPTO UNITE
Financial Technology and Cryptocurrency have been at odds when it comes to formulating a clear path that will allow regulators to understand better, how to manage and facilitate the fourth industrial revolution.
- The Saga Solution
Saga launched the SGA (saga token) on 10th December, getting out of the starting gates with the first global stablecoin ahead of Libra, who is still in a standoff with legislators in both Europe and the United States.
The need for the globalisation of business and populations allowed the SGA technology designers to join forces to allow users to store and move funds through digital currency transactions across borders without hindrance or governmental intervention.
The development team at Saga, led by Ido Sadeh Man, founder, and president, and assisted by JPMorgan Chase, outgoing chairman of international business, Jacob Frenkel, Professor, and Nobel Prize-winner Myron Scholes, and VIX volatility index co-creator Dan Galai. All on the advisory board of Saga and all economics experts with strong international pedigree, to allay any fears by federal regulators.
- Saga Collaboration with Banking and Financial Sector
The aim of the developers to collaborate with financial institutions, regulators, and the banking sector to bring SGA into the mainstream use of digital currencies to reduce risk and build trust with users. As a stablecoin, SGA replicates central bank national mechanisms to apply the methodology globally.
- Saga employs central-banking apparatuses to apply a digital monetary prototype.
- By using a democratic voting system, SGA gives power to its global holders rather than apply single corporate or governmental decisions.
- To reduce crypto or monetary volatility, the SGA stable coin backed by fiat asset reserves utilising IMF (international Monetary Fund) SDR valuation of EUR, USD, CNY, JPY, and GBP.
- The Saga KYC (Know Your Customer) process applies online scrutiny to ensure non-anonymous Anti-Money Laundering (AML) compliance while maintaining customer security privacy.
Ido Sadeh Man, the Saga founder, believes that SGA will address the urgent need for digital currency to become a cross-border payment system to cover the global requirements of billions of customers. He is confident that the use of an internationally available non-governmental stable cryptocurrency is the most positive first step in Regulation coming together with Financial Technology.
Takeaway on SGA and FinTech:
The key features of Saga are to provide liquidity through a financial blockchain based software model that adjusts the SGA supply to demand while keeping the proceeds accrued from new coin issues in regulated bank reserves where they are stored as liquid assets in the form of SDR currencies.
FINAL WORD ON CRYPTOCURRENCY FOR 2020
The predominant argument for cryptocurrency is that it should be mainstream, and it definitely needs to be regulated; neither of these issues has been addressed in 10 years since the entrance of Bitcoin or the blockchain technology.
Cryptocurrency as a stabilised digital payment is definitely a way forward to suppress crypto volatility and allow more people into the crypto ecosystem, which has remained the domain of only those willing to take risks involved in crypto asset trading.