3 Under-the-Radar Product Trends for 2020
This post is part of CoinDesk's 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Richard Chen is a partner at 1confirmation, a seed-stage venture fund supporting crypto-native founders fueling the decentralization of the web and society.
Crypto always has its fair share of news and drama, and 2019 was certainly no exception. But underneath the surface, many teams are heads down building open financial products that the world needs.
As a fund, 1confirmation has been focused on backing teams bringing useful products to market this year – and a number of those products are starting to see real usage beyond pure price speculation.
Product usage is ultimately whats going to push the industry forward in the long-run and I spend a lot of time thinking about what will get product-market fit. Here are three under-the-radar product trends that I believe will break out meaningfully in 2020.
Decentralized finance (DeFi) was ethereums poster child in 2019. Users committed over 2.7 million ETH as collateral to take advantage of a slew of yield-generating financial products. That means some $664 million was locked in to DeFi apps in 2019 as people looked to use their crypto without spending it.
One of the biggest advantages of DeFi over traditional finance is composability, and weve seen numerous aggregators like InstaDapp and Zerion being built with the MakerDAO, Compound and Uniswap money legos.
However, with DeFi composability comes systemic risk. If an underlying money lego like Compound gets hacked, then every project built on top of Compound suffers too. This is like in 2008 when defaulting subprime mortgages eventually caused Lehman Brothers and Bear Stearns to come crashing down like a house of cards. Furthermore, as high-yield DeFi savings accounts like Linen and Outlet target mainstream users, the first question that always comes up is, Whats the risk?
Historically, smart contract audits and formal verification have failed to catch critical bugs. Traditional insurance companies are too slow and bureaucratic to get into this space, leading to the rise of new crypto-native insurance projects. Three projects – Nexus Mutual, Upshot and Convexity – are respectively using mutuals, prediction markets and financial derivatives for insurance. Each of these products have benefits and disadvantages and are useful in their own right, often for different purposes.
Im most excited about the mutuals approach to insurance. Over the last few years in ethereum weve seen lots of experimentation with DAOs, from The Dao to MakerDAO to MolochDAO to Metacartel DAO and others. The insurance version of a DAO in the real world is a mutual, which is community-owned and operated like a do-it-yourself insurance company and the benefits are for its members.
There have been instances in history when insurance companies have been slow to move into a particula ...