🚢 The 2020 Crypto Must Ship List — Issue No. 79

📰 News

The New Year is here, and Build Blockchain is back to break down dense technical topics, along with their implications, in an approachable manner. I hope you're ready, because 2020 is shaping up to be a critical year for crypto. A number of high profile projects, many of which have been under development for years, are set to ship sometime in the next twelve months.

The execution and subsequent adoption of these projects could reshape the crypto landscape. We might look back at 2020 as a pivotal year for the buildout of decentralized infrastructure. Conversely, if some or most of these projects fail to materialize, it would spur further concerns about an industry many already doubt. In no particular order, let's discuss each of these projects in turn.

Filecoin

First up is Filecoin, one of the highest profile token sales of the hype cycle of 2017. They raised $257 Million. One has to wonder how many of those investors would still have put in money if they'd known 2020 would arrive without a mainnet launch. To the Filecoin team's credit, all signs indicate they're spending that money trying to do exactly what they promised. They've been heads down building software. Last month, they launched a public testnet. If no showstopping issues are discovered, it seems likely we'll get a mainnet launch this year. Link.



The folks building Filecoin know what they're doing. It's largely the same team that built IPFS, a decentralized filesystem that lacks one critical component: assurances about data availability. Filecoin tries to solve this through a blockchain network backed by a new consensus algorithm. In this system, a miner's "hashpower" is proportional to the data they store, rather than raw computational power. If it works, you'll be able to pay to "rent" encrypted data storage on the network by paying miners with Filecoin.

If there was one pre-launch project in the space at which I could wave a magic wand to make it deliver on its promises, it would be Filecoin. Reliable, decentralized, censorship resistant file storage is a much needed missing piece in the ecosystem. Despite having a capable team and a lot of funding, it's far from guaranteed that Filecoin will be a success. At the end of the day, this is just a really hard problem. I'm rooting for the project, and I'll be keeping a close eye on it.

Schnorr / Taproot

Last year was a slow one for Bitcoin, at least on the technical front. That's OK. Bitcoin is well known for its conservative approach toward network upgrades, and as I've written about extensively before, I think that's actually a rational approach for a project aiming to be the best gold-like, digital store of value possible. Link.

That said, as we enter the third year since Bitcoin's last soft fork— the one which activated Segregated Witness— it's fair to wonder if the network has ossified too far, too fast. This year will be a test of that.



After two years of discussion and review, it seems the community is aiming to deploy Schnorr and Taproot in the coming months. The former enables more efficient transaction signing, while the latter enables more complex rules to be encoded around who can spend certain Bitcoin. Combined, the changes also allow for improved privacy. Schemes like complex multi-sigs, or the opening/closing of Lightning network channels, could execute on the network without requiring additional data, or revealing the signers involved in the transaction. Link.

Schnorr and Taproot are not game changers. They do make modest but meaningful contributions towards efficiency, security and privacy. This is exactly the way Bitcoin tends to evolve, and as I've mentioned, that's a good thing— even if it makes technical enthusiasts feel a bit bored at times. Still, it would be worrisome to me if this upgrade failed to materialize this year. There is a point at which prudence becomes stagnation.

Ethereum 2.0 Phase 0

If the Bitcoin network is at risk of stagnating, one could argue the Ethereum network risks being too aggressive about upgrades. This is exemplified by the striking plans for Ethereum 2.0. The upgrade isn't just a hardfork, it's actually a brand new network, one that will use a totally new Proof-of-Stake consensus mechanism, and hopes to scale via sharding— parallel blockchains that share security and communicate with one another. Link.



Ethereum 2.0 will launch in three phases, and after many previous timelines have been pushed back, Phase 0 is looking like it will finally roll out this year. While some are hoping it will launch in Q1, my gut tells me it will be more like Q3. I'm betting we won't see the second phase until sometime in 2021. Link.

The Phase 0 network will not replace Ethereum 1.0, and its functionality will be quite limited. In fact, other than transferring ETH to the new network and using it to stake, you won't be able to do anything on Phase 0, not even transact! Regardless, launching the first phase this year would be a huge milestone.

Regular readers of this newsletter will know I'm a self described "hopeful skeptic" when it comes to Ethereum 2.0. I want it to work, but it's extremely ambitious, and I have my doubts. Additionally, a credible path for Ethereum 1.0 to scale sufficiently has emerged recently, specifically via novel Layer 2 constructions like Optimistic Rollups, ZK-Rollups, or ZK-Sync, all of which may also ship this year in some form. Ethereum 2.0's biggest competitor may end up being Ethereum 1.0. Let's see what happens!

Polkadot

Speaking of Ethereum competitors, I suspect one of the reasons for a sense of urgency around Ethereum 2.0 is the impression that competitors could start playing catch up this year. I'm not sure how well founded those fears are, but if there's any new network that has a chance to rival Ethereum's dominance as a smart contract platform, it's probably Polkadot.

Polkdadot is co-created by Dr. Gavin Wood, one of the co-founders of Ethereum. He has unquestionable technical chops, and was a huge contributor to the launch of Ethereum itself. One interpretation is that Polkadot is Gavin taking all the lessons learned from Ethereum, and rebuilding a "better" blockchain from the ground up, without the baggage of the old system.



Like ETH 2.0, Polkadot is a Proof-of-Stake network that achieves scalability through parallel chains which share security. Unlike ETH 2.0, these shard-chains are called "parachains" in Polkadot, and they're not homogeneous. Different chains can have different rules and properties, yet still communicate with one another. Link.

Personally, I'm intrigued by Polkadot's technical approach, but I remain skeptical of its odds of achieving meaningful adoption. Speaking as a software engineer, I know it's always tempting to do a rewrite. While it's fun to start with a clean slate, this approach ignores the intangible benefits of proven software and real users running in the wild. For a decentralized network, these elements are even more critical. Either way, it will be interesting to see how things play out.

Ship It Or Shut It

The aforementioned four projects need to ship this year. Each of them is high profile and hotly anticipated. Most of them are behind schedule already. For any one of these projects, failure to ship would leave their respective network in a precarious position. The good news is that I expect most of them (if not all) will ship this year.

These four projects, while critical, are hardly the only ones worth watching this year. There are a bunch of other exciting developments I'll be keeping a close eye on. These include the Zcash funding fork, various rollup layer 2 constructions on Ethereum, Uniswap DEX's V2, and tBTC — a trust minimized BTC to ETH bridge.

There are plenty more I could name. This is really shaping up to be the year of "Ship It Or Shut It" in crypto. I'm glad. After all, more than anything, what Satoshi Nakamoto did was to deliver code that worked. I'm hoping we'll be seeing a lot of that this year.