Blockchain: Predictions for 2018

| 11-01-2018 | Carlo de Meijer |

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. Let’s go!

1. 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.

2. 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.

3. 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.

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Carlo de Meijer

Economist and researcher