Despite gloomy figures in economies all over the world as a result of COVID-related slowdown, spending in the decentralized industry jumped by 57.7% to $4.7 billion in 2020.
Despite positive outlooks on the developments of the novel coronavirus across the globe, with accelerated vaccine development and programs already kicking off, the full extent of economic and social impact has yet to be made clear. What is apparent is that countries and people may take decades to heal.
However, amid the chaos, a handful of industries have somehow defied the odds to flourish in the past 12 months, including emerging technology sectors like blockchain.
The State of Blockchain in the COVID-19 Era
Blockchain has been hailed by some as the digital miracle of modern times, with many talking about its benefits related to the speed of operations, the efficiency it brings to processes and how these would help usher in the next industrial revolution.
Though nothing new to add for the past many years from this angle, the importance of blockchain has never been more clearer. Furthermore, the case for blockchain may even have been strengthened in the past year, as COVID-19 has unwittingly exposed the weaknesses in our current technologies, supply chain and medical care among others. With industries and markets closed, the financial and economic downturn has hit countries across the globe hard. Hospitals, banks and firms have scrambled to ensure operations continue to run, records are kept updated and markets continue to flow.
During times of tough economic situations, it is normal for businesses to conserve their financial resources, pulling away from non-critical expenditure, including in experimentation with unproven or new technologies. Yet this has not been the case for blockchain. Last year, a Forrester’s report called COVID-19 Is Accelerating Critical Enterprise Blockchain Initiatives noted that DLT and blockchain initiatives have increased as businesses invested in the technology to adopt it for logistics and supply chain purposes.
DeFi has been the buzzword in the last year too. As developed economies across traditional finance and banking oversee record low interest rates and the injection of large sums of cash stimulus to revive markets, people are now looking towards alternate means of hedging their money and protecting their asset values.
Using smart contracts and its peer to peer nature, decentralized finance has given the public the means to not only preserve their wealth but to also interact with financial products and services that offer them higher yields and lower cost and wider access. How big is DeFi today? The locked value in the DeFi at the start of 2020 was a little over $688 million but currently has around $40 billion invested.
That being said, the picture is not all rosy for decentralized technology. With money constraints, financial backers, whether individuals or institutions, have cut down on their investments in blockchain projects. The industry largely relies on funding, as the norm is to showcase the project to potential backers and then use the funds for development. Secondly, promotional events such as conventions and conferences are no longer possible with social distancing. Cash strapped projects have seen considerable delays and with no roadshows or other traditional methods to promote their works, many have been unable to see the light of day.
Outlook for 2021 and Beyond
Though blockchain looks set to flourish as wider recognition and acceptance of its potential happens globally, there will be setbacks. The new norm has led to many different strategies for promotional and funding methods, but not all will be successful.
Adopting technology to solve problems is one thing, but to use technology for the sake of technology has never been a sustainable strategy. Out of the many that will be deployed, only a select few will live on and be widely adopted.
As such, more effective use of dwindling resources, with longer-term objectives and sustainable results, should be prioritized in developing and marketing blockchain projects.