Blockchain: Predictions for 2018
2017 was a year of interesting developments in the blockchain area. Not all happened as was expected. Many, including me, predicted 2017 to be the year that blockchain would move from proof-of-concepts into real world production. Yes, we did see some great successes here, like IBM, R3CEV, … But the number of real world applications that entered the market was far less than anticipated.
On the other hand there were some unexpected ones. This year the concept of blockchain started to capture also people’s attention. But that was triggered by the specular and unexpected rise of the Bitcoin and other cryptocurrencies. And also the ICO boom came out of the blue.
Now we are nearing the new year, it is time to look forward. What will bring 2018 for blockchain and distributed ledger technology? How will Bitcoin and other cryptocurrencies develop. And how the acceptance of blockchain technology will evolve in 2018? In this blog I like to share my ideas and opinions on what trends and developments to look for in 2018.
Another chaotic year for cryptocurrencies
2017 was the year of the cryptocurrency hype. This is expected to continue for some time. 2018 will be another booming year for cryptocurrency yet, but with many hiccups. Bitcoin and cryptocurrencies as a whole will continue to experience great volatility though 2018 and may experience a significant correction. The main question is: where will Bitcoin’s floor be when it lack of utility becomes apparent to investors?
We will see further widespread buying of Bitcoin and other cryptocurrencies. It has been primarily retail investors pushing the price of bitcoin and other cryptocurrencies. But with a futures market and options to reduce the risk profile, more institutional investors will finally be able to start jumping in.
Private investors however should be aware. For Bitcoin to sustain its rally, scaling solutions must work in the real world. And that is not expected to happen overnight. None of these cryptocurrencies are suited to playing the most basic role of currency, as a relatively stable medium of exchange. We are therefore not going to see Bitcoin or other cryptocurrencies emerge as a payment network. It will just be used as a speculative asset and store of value.
Regulators are stepping in
2008 will be the year of increasing regulation in a growing number of countries. This year legislators and regulators worldwide already stepped in especially in the cryptocurrency area and ICOs. The South Korean government recently announced new rules to regulate the trade in Bitcoins. South Korea, an important hub for Bitcoins, aims to regulate the trade in Bitcoins, forbid anonymous Bitcoins accounts and wish to have the possibility to close trading houses. Earlier China announced the closing of a number of these trading houses. While British and American supervisors expressed similar warnings.
Europe is still on the regulatory exploration phase. But there are increasing signs that they will also become more active. The Central Banks of Germany and France have expressed their wish to reign in cryptocurrencies. Also the European Commission has plead for “increased vigilance” towards cryptocurrencies. In 2018 legislators and regulators worldwide will intensify their watchdog role on both blockchain and cryptocurrencies. As a result we will see a growing number of regulators come with regulatory measures to close the gaps where blockchain and cryptocurrencies was violating existing law. Crypto exchanges will get audited and regulated. Some will even be taken down. This may cause heavy corrections in the Bitcoin and other cryptocurrencies rates.
Not the end of the ICO
One of the spectacular and unexpected developments in 2017 was the ICO boom and the launch of tokens. Regulators worldwide have started to reign in ICO’s in order to protect investors. And we will see further regulation tightening on ICOs in 2018 in a growing number of countries. Though this will not mean the end of ICOs, there will be a shakeout in ICOs and a capital flight to quality. ICOs will be cleaner and tighter, and investors will level for governance and put of their due diligence. It will be harder to get funding simply on the back of a white paper. Investors will demand sound business plans and high levels of transparency, with all that entails. Regulation will trigger traditional players to get involved. There will be a lot more institutional capital that will all go to the highest quality projects.
We will also see the rise of securities tokens in response to increased regulation. Especial people with experience and expertise in the IPO world are expected to embrace tokenization as a technical platform.
Despite an increase in regulation in the crypto space, it is expected that blockchain as a technology will not be hindered by heavy regulation. Based on this, we see even bigger achievements on the horizon for 2018, with blockchain becoming a more widely adopted mainstream technology not only in the financial sector but also beyond including retail, logistics and healthcare.
We will increasingly observe a wider range of use cases for blockchain — across small and large-scale applications and across a wide range of industries within both the public and private sector.
Some early mover projects will stop/weeding out
2018 will be the year of reckoning for blockchain initiatives, according to Forrester. We will see a serious weeding of blockchain projects in 2018. Initiatives will increasingly be assessed against standard business benefit models. We therefore expect to see a number of projects stopped.
Some early movers who overestimated the effect of blockchain technology in the short run, especially those companies and projects that fail to meet the long term needs and hope for immediate industry and process transformation are expected to write off their investments and will give up leaving the blockchain arena.
Others who have a deep(er) understanding of the technology and its transformational potential in the long run of blockchain technology – so the more advanced and longer term looking - will continue to forge ahead.
Blockchain is becoming more mature.
2018 will be another big year for the blockchain, a year that overall will show maturation and growth for the blockchain space. Overall, blockchain robustness and thereby its resilience will grow.
Blockchain will move rapidly from exploration into mission-critical production scenarios. Overall, we can expect to see a lot more blockchain applications in 2018 — the possibilities are endless and the drive into research and development in this area is growing at an accelerating pace. Big players in the financial and technology sector begin introducing new platforms and tools based on blockchain and/or distributed ledger technology in the maturing space. We also expect a huge surge in use cases of blockchain beyond today’s main use case areas.
For 2018 we expect to see blockchain becoming a widely adopted mainstream technology. The adoption of blockchain is expected to continue at an even faster pace in 2018. This is a world-wide phenomenon and early production successes will come to light. This will transform a whole host of industries from financial services and retail, to logistics and medicine.
Wider application across the financial sector
We can expect to see even more Blockchain applications springing up in the financial sector in 2018. In fintech, the two most promising short term use case remain payments and trade finance.
Larger banks, including correspondent banks, will increasingly be interested in the blockchain payment systems, because they are tempted by the advantages blockchain may bring in terms of real-time processing, lower risk profiles, lower costs and transparency. As we saw payments top in 2017 and this trend being continued in 2018, also trade finance will begin to go live on blockchain in 2018.
But also the insurance sector is expected to emerge as a “hot” area for blockchain technology. Claims processing and complex multi-party processes like subrogation will show the business value of blockchain-based automation.
More use outside of finance industry
The blockchain technology is rapidly gaining traction also in other industries.
Manufacturing and industry
It is expected that blockchain implemented in the manufacturing and production industries, will embody the second generation of the digital revolution. One of the biggest growth areas of blockchain in this segment in 2018 will be supply chain management, as it provides transparency to the supply chain - especially in the complex supply chain industries such as the automotive and retail industries. Blockchain can be used to minimise errors in logistics and to track deliveries and transactions in the supply chain with improved accuracy, security and speed compared to previous solutions.
