Blockchain applications get set to emerge from the shadows.
Since the turn of the century, an entirely new phenomenon has arrived to improve the lives of consumers and businesses alike.
Still in its infancy, blockchain technology is developing at seemingly breakneck speeds to solve many of the as yet unresolved problems in modern business. As an early sign of what’s to come – and also to wet the appetites of consumers globally – cryptocurrencies have emerged to deliver a kaleidoscope of benefits to users.
Faster payments, better accounting, secure storage, precise shipping – you name it and blockchain technology can deliver it.
The ongoing developments of the blockchain industry are delivering a variety of solutions, but still, many problems remain unsolved. One of the major challenges has been translating the blockchain prowess from the highly technical into the understanding for the layman. In other words, how to make such poignant technology usable, functional and popular amongst hordes of people, rather than just for a few niche businesses.
From this perspective, cryptocurrencies, blockchains and distributed ledgers remain at the embryonic stage of development. However, 2019 promises to advance the gifts of this so-called new technological dawn into the stockings of the mainstream.
“The gap between what is relevant and what is people understand is so large, there is going to be a large lag time when new technologies come into the mainstream,” says Benjamin Cordes, from Macro Exchange.
“For Bitcoin this was about eight years, for Ethereum it was around four. The advance I am most excited about is improvements on the core economic protocols, namely the proof of work algorithm. And more generally for systems to become available which allow for a decentral economy, democratising finance and access to markets,” says Mr Cordes.
Blockchain to make its chargeSeveral blockchain projects stand ready to make a meaningful impact in 2019. With special regard for the mainstream consumer, one of the prime development focuses are cryptocurrencies and their future.
Some industry experts like Tim Draper argue (quite rightly) that for every growth step taken by the world’s leading spearhead cryptocurrency (Bitcoin) will likely mean reciprocal legislative measures are also undertaken to enable safe passage for its prior growth to continue.
“Identity and Know Your Customer (KYC) are certainly hot topics but focusing on the Blockchain as some sort of magic is misguided. It is like giving a 5-year-old a mobile phone without a network connection – after about a minute what was cool becomes useless, unless you add connectivity,” says Bradley Hall, Founder and Chairman of ICON Capital Reserve, a financial software company that’s currently advancing a rather unique crypto product that aims to secure investor interest in gold.
In terms of gold, a trusted store of value with a 6000 year legacy, I think Ray Dalio founder of Bridgewater Associates put it best when he said ‘Those who don’t allocate 10% of their portfolios to gold, don’t understand history, economics or probably both.’ It seems the future has arrived and it is getting a little more evenly distributed,” says Mr Hall.
The company’s flagship product is AUREALS – a fusion of Gold and the blockchain that insulates holders from currency, institutional and systemic risks.
“PC’s first created by IBM were ornaments until Microsoft offered them DOS and then changed the game entirely when they embedded Windows software on OEM devices. Sir Timothy John Berners-Lee created the ultimate geek club with the World Wide Web, but the internet was unleashed when Netscape re-imagined his browser and Google began to index the treasure trove of information,” says Mr Hall.
The same evolution is occurring within blockchain whereby a magnificent root invention is now being harnessed by various companies in a variety of ways, for the benefit of consumers.
Not forgetting regulationChina is readying a draft of regulations concerning cryptocurrency and blockchain companies that are expected to come into effect in February this year.
Nick Szabo, one of the pioneers in blockchain, notes that more people will turn to cryptocurrencies. Thus, different approaches will occur given the decentralised nature of the entire concept, and also, to accommodate the variety of applications required by users.
For example, security tokens were offered through Security Token Offering, which is designed to protect investor’s ownership rights. By taking possession of a particular token, the holder gets a certain amount of rights within the ecosystem and can help trade value within it. It also acts as a toll gateway in order to use certain functionalities of a particular system.
On a wider global scale, the first legitimate national cryptocurrency is set to be launched later this year, linked to a fiat currency from a G20 nation. Several industry experts concur that improving the image of cryptocurrencies will be one of the most challenging goals faced by blockchain and cryptocurrencies – possibly because of the inherent risk of loss when used as a speculative investment vehicle.
Banking and cryptocurrencies, a match made in heaven?According to Microsoft’s founder Bill Gates, “there will always be banking but not necessarily banks”, and it could well be the blockchain industry and cryptocurrencies that facilitate what may turn out to be Mr Gates’ prophetic claim.
However, it’s not just the private sector that wants to get in on the action when it comes to blockchain and cryptocurrencies.
From an establishment perspective, it is expected that central banks might start to supplement their gold reserves with cryptocurrencies as a result of growing mistrust of foreign central banks and governments and the vulnerability of national gold reserves.
Furthermore, it is expected that additional integration with different platforms will occur in terms of being able to pay for services. New types of cryptocurrency have the stage to make their ascent, like Stable Coins. Unlike Bitcoin, these coins are designed for price stability and to be largely insulated from often volatile market conditions.
According to Margot James, the British government is committing millions of pounds to fund blockchain projects in areas such as energy, voting and charity through Innovate UK and research councils. Solutions like Lightning Network, a Bitcoin protocol which makes small transactions possible using its native smart-contract scripting language, are also expected to continue their growth in 2019.
Silvio Schembri, Malta’s Junior Minister for Financial Services, declared that “2019 will see the materialisation of The Blockchain Island, firmly putting Malta at the epicentre of this industry”. One of the applications is “digital remote voting” that is believed to be widely adopted after the successful pilot program in West Virginia, USA.
Another variant is Hybrid – a blockchain that attempts to fuse the best parts of both private and public blockchain solutions, when, for instance, governments are not able to become entirely decentralised by using only public blockchains.
According to Mr Hall, “there is a bit of an arms race going on in financial services and in particular in payments where DLT-based solutions like AUREALS are disrupting incumbents, as the command and control hierarchies of the last 70 years begin to decay and implode under their own weight.”
The private sectorDespite the rumblings coming from public institutions, governments and central banks, the private sector is where the major blockchain developments are set to find fertile ground in 2019.
“The next wave of innovation is being constructed with distributed ledger technology (DLT) but simple ledger entries that act like ‘claim checks with nothing to claim’ will revert to their intrinsic value of zero – as Voltaire noted all fiat currencies do and powerful replacements representing assets and cash-flows will take centre stage,” says Mr Hall.
In the private sector, an increasing number of companies are transforming their business models and operations to adapt blockchain into their existing business processes. One of the largest being deployed is by the world’s largest retailer, Walmart. The US company is currently developing and testing a blockchain system to streamline its sprawling global consumer market empire.
Smart contracts are also evolving. One example is ‘Ricardian contracts’, which unlike standard smart contracts, can be read as it uses human-readable text. Another system called Chainlink uses cryptography and a type of secure hardware called a ‘trusted enclave’ to securely feed data to smart contracts on the blockchain.
Other applications being developed are seeking to integrate blockchain with artificial intelligence (AI). According to Nick Dryden, 2019 is going to be a year which sees biometrics flourish, whereby personal data will further rely on such uniquely human traits like veins.
Further examples of blockchain technologies that are expected to be seen in 2019 include CyberLogitec’s soon-to-be-launched solution, dubbed ‘FREIGHT9’ and ‘OPUS9’ which promise to pave the way for a purely digital system for maritime businesses, eliminating the hassle of paper-based documentation for all shipping.
The Hedera Hashgraph Platform presented solutions using the virtual-voting consensus algorithm and asynchronous Byzantine fault tolerance (aBFT). The Energy Web Foundation is building a “blockchain of blockchains” that wants to let consumers sell the energy they generate at home in markets worldwide using the EWF open-source software application, thereby helping to create a confluence of digital links between existing energy trading platforms.
“The area we are working on at economic networks is algorithm trading, market making and open source finance. The current financial system is dominated by large institutions which are ineffective and very costly. The future of markets is a global one and driven by protocols. The Internet so far has been mostly a medium for communication, but we mean to repurpose it for use as a robust transaction network,” says Mr Cordes.
“If you currently book a flight online you will access two systems: the web for the website and a financial network in the background. The future will be a seamlessly integrated hollistic network,” he adds.
According to the highly-respected publication MIT Technology Review, the year 2019 is when blockchain technology “finally becomes normal”. With so much happening at once in blockchain development all at once, in some respects, the gold rush is far from over but is only just beginning.
The result is that this coming year is set to deliver applicability in all sectors spanning the public and private divide – and possibly most satisfying for consumers – will work for the benefit of all market participants.
Written by George Tchetvertakov in collaboration with Dr Demetrios Zamboglou
Published by JAXenter