Blockchain Predictions for 2018
2017 has been a crazy year. From a rapid rise of cryptocurrencies that count up to more than 1300 right now and are collectively worth about $333 billion, to the craze in the Initial Coin Offering (ICO) space (in 2017 there were more than 220 ICOs that have raised over $3.6 billion).
Obviously, the common denominator for the above things is blockchain. The blockchain infrastructure has been the driving force for cryptos and ICOs. Hence, it is not surprising at all that blockchain-focused projects attracted about 35% of all the ICO funding. An additional $240 million came from venture capital in the first six months of 2017.
Blockchain is one of the most popular buzzwords today.
Data from Google pretty well illustrates that blockchain is one of the most popular buzzwords of 2017, with 4 times greater popularity than in 2016. This most definitely will rise even further the following year.
Having this in mind, let us take a look at what we might expect with regards to this technology in the very near future. Here are my TOP3 blockchain predictions for 2018.
Less Hype – More Reasoning
One of the key problems clearly visible today when it comes to blockchain is too much hype and over-positive expectations.
Many executives and leaders in various industries tend to believe that the magic word blockchain is the solution to all of their problems. But it is not.
You simply cannot just take your existing business model (whether you are in FinTech, Financial Services, Banking, Lending, Advertising, Insurance etc.), put it on a blockchain and expect cost savings, more efficiency and whatever else you may read in the media.
In fact, quite the opposite is true – you should carefully evaluate if blockchain would work precisely for you (and you only), otherwise you might just be doing more harm than good. Remember that in very simple terms blockchain is a really slow database, which you might be inclined to use if you don’t trust anyone.
In very simple terms, blockchain is nothing more than a really slow database.
Hence, in 2018 I expect that this will be finally understood and fundamental analysis will help companies to cut through the hype and solve some real problems.
More Applications Beyond Finance
Up till today, majority of the potential blockchain applications have been focused around the financial services. This is quite fair since financial services are known to be heavily reliant on the old legacy systems, which require information sharing among many different parties. This is obviously inefficient and consumes a lot of time and money. If deployed in clearing & settlement, payments and trade finance, blockchain could help saving billions of dollars per year.
To give you a perspective on the money at stake – quite recently Goldman Sachs, one of the best known financial players in the world, conducted a report and revealed that only in stock market operations distributed ledger technology could save up to $6 billions annually.
Yet, there are many other businesses that might find added value if blockchain technology would be properly employed.
One of very possible candidates might come from the food industry. Employing blockchain, companies could fight food poisoning and waste by tracking food from the supplier to the shelf. With the help of distributed ledger, supply chain could be able to trace and find the root cause of any poisoning outbreak that would hit the stores. This would result in billions of dollars and food supplies saved (it is estimated that food loss accounts to between 1/3 to ½ of all the food produced, which in Europe amounts to circa €143 billion lost). Quite promising thing is that Walmart, the US retail giant, is already piloting such a technology. To add, the same Walmart along with Nestlé, Costco and other have started collaborating with IBM on a global blockchain initiative to fight for food safety. Expect more retailers joining in 2018.
Another possible area of blockchain application might come from the Legal space, particularly the one that involves tracking the transfer of ownership. Especially in the developing world, it is quite hard to keep track of who owns which land deeds. Therefore, distributed ledger might add value and clear the confusion with a public blockchain that would be easily verified – all the parties (from government to the land owners) would access the same information to see who owns what, as well as the track record of the ownership changing hands. Due to irreversibility of transactions there would be much less paperwork and confusion. I have to note, Dubai is doing pretty good job in this space – it not only is developing a system that would record all the real estate contracts on a blockchain, also it has plans to secure all government documents on blockchain by 2020. Will others join? Hopefully.
Finally, the public sector is also an area where blockchain technology could add value. Especially with regards to voting. That’s right – although nowadays technological capabilities are greater than ever before, majority of the democracies all over the world still conduct voting in an old-school manner. Despite that Sweden, Latvia and Switzerland are among countries that have tested the Internet voting, Estonia is the only one that allowed online voting for all of its citizens since 2007. This small state in the Baltics is offering unparalleled eGoverment services, with an e-residency programme that is is fact powered by blockchain. This Easter European country offers Digital ID cards for its citizens, which have cryptographic keys that are stored on the blockchain network. Having these keys, Estonians can securely vote online for general elections, as well as use other governmental services (i.e. access the Healthcare Registry). Other democracies should be actively investigating this, as there are lots of inefficiencies in the public sector that blockchain could easily address.
Thus, in 2018 I expect to see more and more possible blockchain applications with a clear added value coming out of other industries than financial services.
ICOs Will Slow Down
As 2017 can be fairly called the Year of Bitcoin (with Satoshi Nakamoto being named as Man of The Year), it can as well be called the Year of ICOs.
This new way of raising funds for your project has way passed the venture capital investment within the same period, and has nearly become a default option for attracting money for your start-up these days.
Nevertheless, only looking at the statistics we can already see that things are slowing down. September continues being the best month thus far, while October has raised $200 million less, not mentioning November, which will be even more behind.
The key driver of the downward trend (or to be more precise, not so steep upward trend) will be the loss of investor confidence, which in turn is influenced by many ICOs being scams (I would argue that 9 out of 10 ICOs are worthless), lots of pump-and-dump schemes, as well as failure to execute and deliver (for example, look at what is happening with Tezos).
With more regulatory oversight and pro-activeness, ICOs can become the dominant way of raising money for your start-up in 21st century.
However, despite the fact that in 2018 we will see less money being poured to ICOs, I expect that more reasonable projects will emerge that will nevertheless collect the required capital, and most importantly – deliver what’s promised. In the long-run, it will be a win-win both for the investors and overall ICO community. With more oversight and initiative from the regulators, ICOs can become the dominant way of raising funds in the 21st century.
Bringing it all together
Trying to predict the future is nearly a mission impossible. Yet, it nevertheless is exciting and compelling thing to do.
What matters about blockchain, in 2018 we should see companies cutting through the hype with the help of fundamental analysis rather than buzzing around with magical words. Food, legal and public sectors should be the ones that most definitely should start taking advantage of the blockchain technology. Finally, we shall see less worthless ICOs being launched, but with the help of the regulators and increasing public awareness, this new model of attracting capital can become a de facto option of the 21st century.