Welcome to the Fourth Industrial Revolution — 19 Blockchain Predictions for 2019
Welcome to the Fourth Industrial Revolution — 19 Blockchain Predictions for 2019
ConsenSys’ Andrew Keys delivers his annual take on what the year ahead holds for blockchain, Ethereum, and decentralization.
From the steam engine to silicon chips, innovation has compelled society forward.
We’ve seen three industrial revolutions turn farms into factories, steel into skyscrapers, and computer networks into a connected world. But with each revolution, newly created wealth has consolidated with the few and fewer.
As Klaus Schwab, founder of the World Economic Forum, explains of our late capitalist state: “The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital — the innovators, shareholders, and investors — which explains the rising gap in wealth between those dependent on capital versus labor.”
For the first time in humanity’s history, we’ve built a technology capable of reversing that centralization. As blockchain digitizes the world’s assets, automates the world’s agreements, and enables self-sovereign digital identity for every person, place, entity, and machine, we will all have something to gain.
As the Internet transformed and commoditized how society communicates, blockchain will transform and commoditize how society agrees, trusts, and transacts.
The emergence of blockchain tech takes place while similar transformative developments in technology, economics, and geopolitics are aligning to initiate what is known as ‘The Fourth Industrial Revolution’.
Here are my 19 predictions for what happens next:
- Beginning in 2019, the Fourth Industrial Revolution will move exponentially faster than preceding revolutions
This year, the Fourth Industrial Revolution will ignite, as the buzzwords of artificial intelligence, robotics, internet-of-things, quantum computing, and biotechnology actuate from proofs-of-concepts into production. All of the aforementioned technologies will be deployed on blockchain substrates. This revolution will be marked by the further embedding of technology into daily life in unseen, but powerful ways, and the disintermediation of exchange.
Cognizant of this, enterprises from Wal-Mart to Fidelity will launch live blockchain systems, releasing a flood of network effects. Amazon, Facebook, VC’s, industrial manufacturers — they’re all making quiet moves already. This particular revolution will move lightning quick, in a percentage of the time of preceding revolutions. But this time around, every participating individual, not just billionaires, must hold a stake in the benefit. Decentralization will be a necessary development for the Fourth Industrial Revolution to occur.
2. The end of token fever will lead to higher quality tokens
From 1996 to 2006, over 85% of Dot.Com companies saw their market cap go to $0. Still, we witnessed the birth of the Internet and a flourishing digital economy that drives the global market today.
Twelve years after the birth of the ’96 production Internet, Apple launched its first App in the App Store on July, 2008:
Dial Up started in ’96 but the first AppStore App didn’t go live until ‘08
I show this illustration so we can recognize the time it took for Web 2.0 to achieve mainstream adoption. While in 2018, token launches and ICOs were incredible experiments in fundraising and tokenomics, these were early use cases.
In 2019, we’ll witness a further sophistication of the token economy, with a more comprehensive business logic embedded into the token, which will lead to greater functionality. Blockchain use cases and token economies that operate beyond the primitive payment use case of cryptocurrency —will be unshackled and expand in ways society can’t yet imagine.
Think of employment agreements that are paid by the minute, a food stamp that forbids the purchase of alcohol or tobacco, a tokenized electron that can be shared between neighbors from a solar panel…we’re currently only scratching the surface.
3. Legacy market volatility will migrate investors to digital assets
In increased times of uncertainty, scarce commodities are often seen as a safe harbor. It’s one reason Bridgewater founder, Ray Dalio, structured his famous “All Weather” fund to hold 7.5% gold and 7.5% of a basket of other commodities to weather periods of increased volatility, and hedge against cyclical risks in equities or bonds. Between central bank interest rate hikes, an inverted yield curve, tweets from the U.S. president about a trade war with China, and fears the decade-long growth cycle which followed the Great Recession may finally slow, 2018 was certainly uncertain. By November ‘18, 90% of the 70 asset classes tracked by Deutsche Bank posted negative total returns for the year, according to The Wall Street Journal. That’s compared to just 1 percent of asset classes delivering negative returns in 2017. Globally, stock market indexes closed the year with their worst annual performance since the financial crisis.
During this tightening cycle, in which many fear a U.S. recession is imminent, I expect interest in digitally scarce crypto commodities as an underlying technology set to power the next wave of innovation, will surge. A contrarian view could be that in a global RISK-OFF state, investors could also de-lever from from digital assets due to their volatility.
4. Your dad’s career advice no longer applies
“In the Information Age, a ‘job’ will be a task to do, not a position to ‘have,’” James Dale Davidson wrote in The Sovereign Individual in 1997. As that reality approaches ever faster, blockchain will be a primary vehicle of transition. The bullshit “sharing economy” of Uber, Airbnb, et al gives a glimpse of what the future could hold, but those intermediaries extract a lion’s share of the revenue for providing thin identity, reputation, payment, and GPS coordinate layers.
The next generation of apps will provide a similar user experience, but will decentralize the equity. Value will flow from the intermediaries to the counter parties of a transaction. The first wave is live on the Ethereum already. Civil’s 18+ newsrooms are breaking news daily, while pioneering sustainable journalism that’s extricated revenue models from the grasp of advertisers. Over 1,000 artists have published their music on Ujo, reducing their reliance on record labels and streaming platforms. Gitcoin, a platform to monetize open-source software creation, has onboarded 17,416 developers, and facilitated 2,690 complete transactions to 763 unique coders since its launch in November 2017. Bounties.Network’s ‘Bounties for the Ocean’ pilot saw individuals and teams all over the world incentivized to pick up trash and create communities with cryptocurrency. Blockchain will directly impact the ‘future of work’ — not just what jobs are available, but how value will be exchanged through a decentralized, peer-to-peer workforce.
5. The institutional herd arrives, slowly but surely
All aspects of institutional capital markets will be available to blockchain-native digital assets by the end of 2019. This includes trading custody, insurance, registered exchanges, USD-crypto real-time settlement, and proper investment vehicles. This is a slow process. These institutions do not turn on a dime, so the changes are methodical, rather than set to the instantaneous expectations of the crypto community.
- Following a delivery of several custody solutions from blockchain-specific firms, traditional participants like Fidelity Digital Assets, Nomura, Northern Trust and others will set an infrastructure for funds, investing in many asset classes and instruments.
- Insurers have started providing coverage to funds and as a credit-enhancement for blockchain-specific custodians via Lloyd’s of London. The coverage amounts will increase, and we may see insurance linked products by year-end.
- There is still a need for a strongly regulated marketplace, which will be filled with OTC matching platforms. ErisX, launched by derivative genius Don Wilson of DRW, will further round out an institutional digital asset exchange in Q2.
- There are several firms racing to expand from cash-settled futures contracts to a physically delivered contract. With better custody solutions in place, these contracts will come to market. One of these is ICE, the parent of the New York Stock Exchange, which plans to trade its first physically delivered digital asset futures contracts in coordination with Bakkt, their digital asset exchange, this month. Assume more exchanges to follow with both ETH and BTC contracts. These derivative contracts will provide forward pricing curves that are necessary to the genesis and evolution of digital-asset exchange traded funds.
- A tremendous amount of stablecoins have come to market, but some bring regulatory risk for institutions. A solution where fiat can still be tracked by banking regulators to ensure AML is essential for institutions to participate. Several digital USD tokens will come to market. One that has already gained substantial traction with over 65 counter parties is True Digital Holdings and Signature Bank, an FX solution for mid-sized banks to avoid the middlemen fees charged by larger, primary dealer banks.
- The days of HODLing and calling that an investment strategy are over. There are smarter people (and algorithms) buying your troughs and selling your peaks. As institutional infrastructure becomes more professional, so does the caliber of investment vehicles. Firms such as DARMA Capital exploit these opportunities by combining blockchain expertise with professional management of market risk and the many risks of digital assets. Proper risk management will set the groundwork for more institutions to be able to participate in this asset class.
6. Not a killer dApp, but a killer ecosystem, will cause the ‘Lego Effect’ to ‘stack’
Thanks to the hard work of BUIDLers — devs, engineers, security professionals and entrepreneurs — along with maturing essential components and standards, the developmental landscape is now full of elements that can be composed into a powerful decentralized application in a way previously not possible. These elements include browsers, tokens, wallets, swap protocols and exchanges, data feeds, markets, IoT protocols, registries, name services, legally and automatically enforceable agreements, all functioning interoperably behind the scenes of a user experience. We will see this synergy manifest into a number of groundbreaking dApps in 2019.
Moreover, in 2019 we’ll start to see disparate projects begin to fit together, creating fully integrated stacks for industry verticals built on Ethereum. Take FinTech: The digital asset safeguarding solutions offered by Trustology, real-time fiat payment solutions of Adhara, and financial reporting systems of Balanc3, could create an integrated stack, starting the path for interoperability between blockchain platforms and business networks. In verticals from FinTech to music to healthcare, the “Legos” will start “stacking” into place.
7. The evolution of ConsenSys 2.0 will continue to blow people’s minds
Early on, ConsenSys 1.0 was creating software with no developer tools, on a platform that wasn’t yet released, in an ecosystem that didn’t yet exist. So we built it. Over the last 4 years, we’ve trained hundreds of thousands of engineers, enlightened millions to the power of decentralization, and our distributed infrastructure handles billions of requests per day.
Recently Joe Lubin wrote the entire 1,100+ person company a letter about our evolution from ConsenSys 1.0 to ConsenSys 2.0. I believe his metaphor is excellent: “The whimsical view is that in ConsenSys 1.0, we built a laboratory instrumented to demonstrate the moon existed, using various demonstrations, maths and creative philosophical arguments. Now, we need a powerful, streamlined rocketship to get us there, since the actual proof, ultimately, is in the landing. Even in the face of enormous gyrations over the years, our ecosystem retains its sights onward and upward, to the moon.”
ConsenSys 2.0 signals the next phase of Web3. We’re taking everything we’ve learned, the tools and infrastructure we’ve built, and the global community we’ve converged, and laser focusing them all on achieving results. This will match similar developments in the greater Ethereum and blockchain ecosystems, and by the end of 2019, a Web3-enabled world will be within reach.
8. Blockchain will ignite an efficiency explosion in global banking
Global finance operates much less efficiently than most people would imagine. There’s still an enormous paper trail, and the digital tools that do exist offer a poor, disjointed user experience.
Production blockchain implementations like komgo, built by ConsenSys and running on Kaleido, are rapidly developing to add a seamless user experience. Last year, komgo connected 19 stakeholders — including ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Société Génerale — across a coordinated trade financing network.
DrumG is taking steps towards delivering a fully live and operational end-to-end workflow of its Titanium Network for OTC consensus data for their anchor partner Credit Suisse, built on Enterprise Ethereum and running on Microsoft Azure.
This year, banks and institutions will ramp up blockchain adoption in a big way, as they decrease settlement latency, enhance data management, unclog paper dependent workflows, optimize the KYC process, and eliminate human errors. Blockchain networks will take a massive leap towards reducing counter-party risk and fraud, allowing companies to proactively manage risk rather than just reactively responding to risk.
9. Blockchain UX/UI Is The Missing Link
While so much development in the Ethereum ecosystem in 2018 has been focused on elements under the hood, it’s first and foremost through user experience that audiences connect with dApps. With a few notable exceptions, design in blockchain has lagged behind the lofty aspirations of its protocol.
Following the lead of Rimble — an open source toolbox of beautifully designed, blockchain-compatible elements — design standards for decentralized apps will be raised in 2019. With better design and more seamless integration available, the next generation of dApps will be all about user experience or will be left behind. dApps will catch up to Coinbase — which has provided the first non-horrible user experience as yet in blockchain — and blockchain UX will mature fast in 2019.
10. FOAM’s Proof of Location Will Begin to Challenge GPS
The Global Positioning System — or GPS — is a utility taken for granted by most, despite being ubiquitous in everything from Google Maps to military operations. A centralized surveillance tool owned by the United States government, the GPS apparatus is fraught with problems, many of which blockchain has proven to be solvable. Peer-to-peer, private, decentralized, censorship-resistant, and consensus-driven, Proof of Location technologies like FOAM present an impressive challenge to the GPS standard. Already live on the Ethereum, FOAM’s Proof of Location protocol is using a peer-to-peer network and token staking model to create a live map of the world that can be leveraged to track anything, from items along a supply chain to autonomous vehicles.
11. Regulation Around the Globe Will Start to Catch Up
Blockchain technology cannot reach its full potential until we can systematically prevent fraud and protect consumers and investors in the cryptosphere — the same problems upon which regulators and policy makers are focused. The Brooklyn Project is a community of 1,500 lawyers, regulators and industry participants that actively collaborate on community-curated documents like the “Consumer Token Framework,” and has taken the lead in interfacing with governmental bodies in the US and Europe.
Brooklyn Project’s engagement with regulatory bodies like the Securities and Exchange Commission has led to a slew of encouraging developments and acknowledgments in the US, while countries all around the world are recognizing that crypto-assets like general payment and consumer utility tokens are not necessarily “securities” or “financial instruments.” The passage of HB70 in Wyoming is the opening bell for action in congress on the state level, and lawmakers are working fast to move forward legislation that provides a solid base for the blockchain industry to prosper. 2019 will see significant movement in regards to blockchain and cryptocurrency law.
12. Decentralized finance is already working on Ethereum, and we’ll see a 10x increase in users in 2019
- Rather than an egregious double digit interest rate loan from hedge funds who don’t understand that crypto’s collateral is just as good as any other another asset class, one is able to borrow as for as low as .5% annually on Maker DAO today.
- Market Protocol has created the ability to trade ANY derivative relationship using Ethereum such as the price of Apple stock, oil, or S&P 500.
- DX Exchange uses Nasdaq’s Financial Information Exchange (FIX) protocol that allows users to swap tokenized stocks in major global companies, including Amazon, Baidu, Apple, Facebook, Google, Intel, Microsoft, Netflix, Nvidia, and Tesla.
- Projects ranging from Coven Network to Token Foundry are opening doors previously only accessible to venture capital firms, and the further development of tokenized securities will widen the entryway for everyday investors all over the world to engage in building value and wealth. Blockchain will continue to break down barriers for entry to both employment and investment.
13. Blockchain will compel substantive social impact — in good and bad ways
In 2019, blockchain will be relied upon in moments of great change and crisis in the far flung reaches of the globe. Blockchain-enabled development and social good initiatives like Project i2i, which partnered with Union Bank to drive financial inclusion in rural parts of the Philippines, or the Radiant Earth Foundation, which built a POC on Kaleido to provide transparent, verifiable, and open data sets for NGO agency collaboration in crisis regions, will lead the charge.
Utilization of blockchain and cryptocurrency by governments and their adversaries in moments of socioeconomic upheaval will also increase. This has already become evident in places like Venezuela and Cameroon, and although it won’t be pretty in most instances, many in developing nations will experiment with digital assets to combat hyperinflation. As this develops, it’s key to remember that we share an imperative to make sure blockchain technology and digital currencies are used as a force of decentralization and not the opposite, and must rally to ensure its social impact is a positive one.
14. Blockchain tracking goes from nice to have, to need to have
Vigilant shoppers are going to demand transparency in regards to where their food, clothes, and products come from. Today, the supply-chain process is opaque and often slow: In 2018, the U.S. Food And Drug Administration recorded dozens of recalls for foods potentially contaminated with Salmonella, Listeria, E. Coli and even glass particulates. Retail manufacturers and luxury fashion brands use forced labor to produce the t-shirts and jeans we all buy, and often engage in environmentally damaging practices.
Blockchain-tracked attestations of a product’s provenance and distribution — like diamond producer DeBeers’ Tracr platform or Lane Crawford’s Luxarity — are going to become industry standard for retail brands. Platforms like Viant are at the forefront of this technology, and enable consumers to know exactly what they’re buying. Even retail giants like Walmart have taken major strides towards reinforcing supply chains with blockchain-based tracking and tracing — it aims to have all of its vegetables tracked via blockchain tech by September of 2019.
15. Cloud storage will decentralize to combat increasing hacks and censorship
Many will remember 2018 as a year of data breaches, with incidents like Facebook’s Cambridge Analytica debacle, Marriott’s 500 million guest information leak, and the $400 million Equifax credit divulgence. People are paying attention to issues pertaining to central server storage of their personal information, and rightfully so. Decentralized storage — as evidenced by projects like IPFS, Filecoin, Storj, and Maidsafe — presents the best possible way to avoid the pitfalls of centralized data silos, while not sacrificing increasingly important values like user privacy, access to information, and security.
More hacks of centralized servers are on the way. As this problem grows into an epidemic with very real consequences for everyday people, users and companies will look to blockchain and distributed storage solutions for an answer. As projects like the Interplanetary File System mature, decentralized cloud storage will become a backbone of the Web3 experience.
16. Non-fungible tokens will get creative
The rise of the Internet has created disparate results for artists. Social media has empowered artists to communicate and promote directly to followers easily. However, the ability to copy artists’ musical, print, or digital works impedes on their ability to earn a living. With Ethereum and smart contracts, it is now possible to issue unique, provably-scarce, digital tokens to easily sell and track ownership of limited-edition and rare works of art.
SuperRare, creates a royalty system the likes of which an artist could only previously dream: there is no commission on primary sales, and a 3% commission on secondary sales. The artist also receives a 10% commission of secondary sales, providing passive revenue from an artwork if it continues to trade on the secondary market.
Imagine creating a work of art, and every time it was sold from one person to the next, you’d automatically receive a 10% commission — forever. This is the power of smart contracts being embedded in a tokenized asset.
17. As Web3 takes shape, users will take back identity from Facebook and Google
Thanks to technologies like uPort, Metamask, and Opera, consumers will take greater control of their own digital identities — a central aspect of what we call Web 3.0. Here’s how the new Web will work: Instead of logging into an application like Google Chrome, Safari, or Facebook, consumers will log into a personal, cryptographically authenticated browser they themselves own. The “Tim Browser,” “Anne Browser,” or “Sue Browser,” will be open source software, audited by network participants and enabled by some type of biometric confirmation, whether a thumb print or an iris scan. Self-sovereign identity will be baked into our browsers. Users will have the equivalent of a digital passport, able to build reputations across Web3 and interact with economies without sacrificing privacy, value, or security.
18. Growing geopolitical instability will raise the need for decentralized infrastructure
Growing political tensions around the globe — from riots in Paris, to Brexit strife, to tumultuous elections in Brazil and the U.S.’ own government shutdown — will continue to create instability and uncertainty. As trust in the security of sovereign powers continues to come into question, a technology that isn’t reliant on the strength of nation states — or their fickle leaders — becomes ever more appealing. Today, people around the globe face great institutionalized and systemic barriers to freedom through censorship, exclusion from the financial system, and a lack of economic opportunity. Over 1.7 billion adults remain unbanked. As much as 50 percent of the world’s population lives under an authoritarian regime. In 2019, decentralized technologies will capture minds around the globe, not as a speculative way to get rich quick, but as a solution for all people regardless of citizenship to transact, express ideas, and prosper.
19. Blowing bubbles: Web 3.0 Will be Built With IMPAKT
To use a simple analogy, 2019 in the blockchain years, is only the equivalent of 1995, if the production Internet started in 1996. We’re still very, very early. As with many technological evolutions, bubbles can form. It’s important to note the different types of bubbles: Some — like the housing crash of 2008 — leave behind debt encumbrances and waste, while others — like the dot.com bubble — established foundational infrastructure and crystallized key organizations, which went on to flourish. In the wake of crypto markets’ irrational exuberance in 2017 and subsequent downturn in 2018, the infrastructure needed for Web 3.0 — IMPAKT — has materialized, and will be the backbone of the next wave of development and success.
- Infura provides scalable blockchain infrastructure to the tune of 10 billion+ requests per day, 2.5 petabytes of data transferred per month, and 50,000+ developers and dApps Served.
- Ethereum browser extension Metamask has earned over 1 million downloads, connecting many users to the decentralized web for the first time.
- PegaSys is making Ethereum for enterprise a reality, and has launched a Java-based, open source, and enterprise-ready client to support and scale the Ethereum mainnet.
- Alethio is illuminating the Ethereum network with real time data analytics delivered beautifully.
- Kaleido’s partnership with Amazon Web Services has opened up a worldwide marketplace for blockchain-as-a-service.
- Truffle’s sweet suite of developer tools has been downloaded over 1 million times… the most in the world for the smart contract creation space.
It is still the best of times and the worst of times, but we begin 2019 with a blossoming global community of dedicated BUIDLers, a robust infrastructure for development, and a quickly clearing path towards success and adoption. The world has been turned on to what blockchain can do, but we’re still just getting started. Decentralized networks will connect the dots of the Fourth Industrial Revolution, and 2019 will be remembered as the onset of this new era.
What a time to be alive,