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 in 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 through 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.
5. 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.
6. 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.
7. 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.
8. 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.
In 2018 we can also expect to see blockchain further being used in recruitment and HR. In these areas blockchain CVs have already been developed which will streamline the selection process by verifying candidates’ qualifications and relevant experience. HR departments may screen CVs in efforts towards streamlining and optimising the hiring selection process.
There will be many platforms on the market which provides users with "smart" profiles on the blockchain network. Not only will these profiles contain users CVs, but also information about their career merits and achievements, certificates of competing educational programs and any other vital information. Besides, educational institutions and employers will have access to profiles to confirm this information, thereby making it fully reliable.
Blockchain technology has also attracted the interest of the health industry. 2018 should see significant progress in that direction. In the next few years, it is expected that the blockchain technology will be used in many areas of healthcare.
In its study "World forecasts of the healthcare industry 2018", IDC Health Insights predicts that by next year 20% of organizations will be actively developing blockchain projects. By 2020 blockchain will be used in operational management, as well as for maintaining databases of patients.
Legal work, which involves tracking transfer of ownership, will also be made more efficient through implementation of distributed ledgers. In 2018, we can expect to see blockchain being applied towards managing the legal side of transfer of ownership. Examples include intellectual property and property deeds.
9. Upcoming of new use cases
In 2018 we will also see the upcoming of new use cases for blockchain technology in other segments such as travel (loyalty programs), government (identification, voting, and land registration), luxury goods, and anti-counterfeiting (rights management) of electronics, media and entertainment.
We will likely see social media platforms such as Reddit, Medium or YouTube integrate a blockchain token to reward and incentivize their content creators. 2018 will also see the first wave of everyday applications of blockchain for every use starting from obvious case studies like Uber for blockchain or Airbnb for blockchain.
10. Year of smart contracts
Blockchain has the power to incorporate smart contracts into everyday transactions —adding speedy and secure automatic verification and processing of pre-defined contracts. We can expect to see more smart contract applications being rolled out across potentially all industries in 2018 and beyond. New ecosystems with smart contract technology will arise as integration platforms between existing industries. There are seemingly infinite use cases where blockchain based smart contracts can be applied. This by creating blockchain networks to manage identities, keep records, and secure digital relationships.
Specifically, a hotly anticipated growth area in 2018 in the financial industry is in smart contracts that have the potential to speed up processing times of credit applications and credit management considerably. Last summer, IBM, AIG and Standard Chartered completed pilot testing of blockchain-based “smart’ international insurance policy to oversee the creation of complex insurance policies which require international cooperation. They will further develop this project on a massive scale in 2018.
11. Rethinking of governance
Growing interest in blockchain in will also trigger many developments in the field of blockchain network governance in 2018. Governance is the key ingredient in making blockchain projects more efficient and fair compared to legacy solutions. These developments will include new consensus mechanisms, updated principles for acting decisions regarding network updates, and most importantly, which stakeholder should have the final say over a network’s development.
Creating proper incentives through governance will help with adoption and encourage positive behaviour, especially preventing scammy or malicious actors stealing money. The more these new blockchain based tools and networks are used, the more value will be created for those using them.
12. Corporates focus on changing business models
Blockchain is already transforming the global financial industry. It is changing not only the financial and insurance sectors, but is now also beginning to influence other industries just as profoundly including healthcare, retail, but also the public sector. And it is expected that in a few years’ time blockchain to have the disruptive standard in modern commerce.
Companies are increasingly focussing on changing business models as blockchain begins to transform market structures. In this regard in 2018, many companies will have to adapt their business models to meet the requirements of the new markets. Companies will have to learn to be more open to becoming partners in ecosystems or on broader platforms. That, in turn, means deciding what kind of business models they want – whether it’s platform-based, product-based, omni-channel based etc.
13. Blockchain links to IOT and AI
During 2017 companies have paid more and more attention to the new kinds of services that blockchain enables, particularly if blockchain combined with the Internet of Things (IoT) and Artificial Intelligence (AI). Recently IOTA, an innovative Internet of Things (IoT) based crypto platform, announced a partnership with Microsoft alongside 19 other prominent sector names to bring the first IoT cryptocurrency market into operation. This partnership has the power to enhance many areas of business and everyday lives of individuals. The encrypted and decentralised nature of blockchain is very useful form monitoring the ever growing number of devices on IoT.
This may become the start of a key trend expected for 2018 — blockchain technology being incorporated into the growing network of IoT applications. IoT devices will increasingly converge with machine learning, artificial intelligence, fog computing and blockchain technologies. This will help companies move from IoT initiatives that merely produce incremental gains, to those that create entirely new business models and revenue streams. These may create new kind of marketplaces where industry silos come down in favour of broad, horizontal structures. This will allow companies to obtain greater value from their IoT investments and drive broader adoption.
14. New approaches on scalability and performance issues
One of the key challenges of existing blockchain technology is scale and performance. Current blockchain frameworks are still lagging behind when compared to transaction speeds offered by traditional corporations. The issue of scalability is becoming another hot topic continuing into 2018.
In 2018 we will see some major breakthroughs in the scalability of blockchains. There will be a search for new platforms for the next generation of distributed applications. We will see alternatives to current blockchain technologies that will be more scalable, faster and minimize energy consumption. Or even a super blockchain as an equivalent of the World Wide Web. One of the biggest use case for blockchain may be the launch of hyperledgers for securing and authenticating documents.
15. Greater attention to security issues
2018 will be the year where corporates’ CIOs will increasingly exploit the potential of blockchain technology. In addition, CIOs, CISOs will pay greater attention to blockchain security, and blockchain will start to transform fraud management and identity verification. Where blockchain’ s security features will really come into their own will be in their coupling with IoT. With an ever-increasing number of connected devices, 2018 will need blockchain’ s security architecture to protect IoT applications and users from sophisticated data breaches.
Advancements in cybersecurity technologies, specifically encryption technology, cryptography, and access control, coupled with blockchain, will be the recipe for success in the security industry in 2018. As we move forward in 2018 and beyond, more and more entities will adopt a blockchain infrastructure for data integrity and transparency as they see the benefits from those that are currently using blockchain.
16. Blockchain and data analytics
2018 will also be the year where it will become clear that the use of blockchain in a variety of applications across multiple industries will enable new data analytics with high accuracy, privacy and identity protection that would provide significant value to both businesses and individuals.
For example, in the finance and real estate industries, analytics around the mortgage approval process could be greatly streamlined. Borrowers could elect to share accurate personal income and expense metrics with lenders via a blockchain.
Other powerful possibilities exist in health and wellness, pharma, life sciences, finance, and additional sectors.
17. Central banks embrace blockchain
Governments and central banks long stayed far form blockchain and cryptocurrencies. 2018 will be the year that central banks will begin to embrace digital assets as a means of exchanging value on the blockchain securely and in real time.
Blockchain-based payment systems using fiat-backed digital currency will allow central banks to interoperate more easily and partner with retail banks to process cross-border payments with immediate settlement finality.
18. Public sector will enter the blockchain arena
Governments and institutions worldwide have long been on the sideline when adopting blockchain. But that is changing. There are growing signs of these technologies catching on at the public and institutional levels, as its potential for creating efficiencies in both financial and public services become more apparent. Governments already having started to work on their own blockchain projects. Some are already testing blockchain as a way to replace current voting systems. More ambitiously, blockchain technology could formalize identity for everyone in the world, regardless of their residency status.
2018 could be the year that a growing number of governments finally get on board the blockchain bandwagon and start to look closely at this technology. We, therefore, predict that 2018 will see sustained growth and adoption.
19. Consumers increasingly becoming aware of blockchain
By investing in cryptocurrencies such as Bitcoin, Ether etc. also a growing number of consumers are discovering the blockchain technology and its benefits. A growing number of consumers begin to see the effects of blockchain technology on the issues that impact them. Though many do not yet know the complete ins and outs of blockchain technology, that is expected to change rapidly. 2018 will be the year of mass public awareness for blockchain. Consumers will soon become more familiar with the notion of decentralised systems, and begin to realise the inherent benefits of this technology. The indirect benefits of blockchain in personal identity and health will already be seen in 2018.
Blockchain is already being used in applications that can directly benefit consumers, such as identity management and consumer and luxury goods traceability and authentication. In 2018 companies will also begin to find ways to enable consumers to trace the lifecycle of a product they purchase using blockchain.
20. Large-scale, widespread development of blockchain is not imminent
While cryptocurrency is not necessarily the future, it looks as though blockchain will be. While we expect blockchain to emerge as a potential disruptor across many areas of technology in 2018, everyone’s agreed that large-scale, widespread deployment of blockchain-based (or indeed blockchain-inspired) networks isn’t imminent.
The true transformational potential of blockchain-based networks will take a long time to materialize, for non-technical as much as technical reasons. It will take several years before all vulnerabilities can be addressed and the technology is considered mature enough to act as a basis for enterprise security.
Those who nowadays persevere with their blockchain initiatives should not only be aware that the technology is still at a very early stage of development, but also understand that this isn’t really about technology, but about business.