2018 was an eventful year for blockchain. While many cryptocurrency investors have been disappointed in the trend of prices over the past year, blockchain adoption and development has continued. The blockchain ecosystem continues to mature, with scaling solutions and practical smart contract development seeing major attention.
Increasingly, enterprise-level companies are investigating and testing blockchain solutions for large-scale systems. These test deployments are often proprietary and happen behind closed doors, so much of the new developments in blockchain are now private. Whereas 2017 was the year of the flashy, public ICO, 2018 has been a year of consolidation and heads-down practical application.
Looking back at 2018, we’ve put together a list of major trends from this year that indicate where blockchain is headed in the future. The exciting news is the influx of interest and investment in blockchain in 2017 has led to lots of new development in 2018. However, new legal regulations, shifting power dynamics, and interest from major institutions has fundamentally changed the blockchain landscape moving forward.
Here are 2018’s major blockchain trends in review.
For the cryptocurrency market, 2018 started off on a bad note and didn’t get much better. After what many investors considered a frenzy and a bubble in late 2017, the majority of market analysts expected a cryptocurrency contraction in the beginning of 2018. That contraction came swiftly in January and February with prices falling 70% over the first months of 2018.
What many investors didn’t expect was a continued bear market for the entire year. Cryptocurrency prices have fallen in nine of the past twelve months, with November seeing another sharp decline. In the face of such a bear market, many investors have lost the majority of their assets. Most of those who bought cryptocurrency at the height of the frenzy have since exited the ecosystem, and the market is now the domain of established traders with long-term interests in crypto.
The 2017 frenzy was great for blockchain technology because it brought the public attention to blockchain use cases. In a way, the 2018 market contraction has also been good for blockchain, weeding out the scam and non-serious projects and investors, leaving only the long-term, committed cryptocurrency products standing. Without the distraction of rapidly rising prices, many of these projects have made significant headway on technical challenges over the course of the past year.
Initial coin offerings defined blockchain’s 2017. Every week, there was a new multi-million dollar ICO. This influx of easy money added a lot of capital to blockchain development and allowed many niche ideas and use cases to propagate. Surprisingly, 2018 has surpassed 2017 in the number of ICOs and amount raised. So far this year, according to ICO Data, blockchain projects have raised over $7.5 billion though 1,224 ICOs.
The interesting thing to note, however, is the majority of ICO funding came in the first four months of 2018. Since then, ICOs have cooled off significantly. In September through November 2018, ICOs raised less than one billion dollars. Compare that to the same time frame in 2017, where ICOs raised nearly three times as much.
Two major factors have contributed to the decline in ICOs over 2018. The first is the trend of banning cryptocurrency advertisements. Nearly all major social networks have banned ICO marketing from their advertising platforms, as has Google with its AdWords program. In the absence of major advertising channels, ICOs have found it much more difficult to get the attention of potential investors.
In addition, more formal global regulations and lawsuits around coin offerings have driven down interest in operating an ICO. It’s now commonly recognized that running an ICO is a legal liability. You’ll need a competent legal team and specific type of token offering in order to avoid regulatory repercussions.
Just because ICO funding has declined and the crypto markets have contracted doesn’t mean interest and investment in blockchain has gone away. Far from it. 2018 was the year where blockchain entered the mainstream for enterprise corporations. Hundreds of companies are looking at potential blockchain use cases within their industries to make data more decentralized and secure.
According to PwC’s survey of 600 executives, 84% of companies have some active involvement with blockchain. 15% have a live solution in production, another 10% are running pilot programs, and 32% are in active development.
Transparency, security, and reduced reliance on intermediaries are the reasons executives cite for exploring blockchain solutions. Financial services is by far the leading industry to explore blockchain applications. However, manufacturing, energy, and healthcare aren’t far behind in terms of their exploration of blockchain potential.
By 2030, Gartner predicts blockchain will have a global business value of over $3 trillion, with blockchains powering 10-20% of the world’s economic infrastructure. Before it gets there, however, blockchain has some serious hurdles in scalability and user trust to overcome. As more people come to understand blockchain, and more companies start using it, blockchain’s value-add to enterprise could grow exponentially.
To date, people typically hear about Bitcoin first and then come to understand blockchain later as the technology that powers Bitcoin. As such, blockchain has been heavily associated with cryptocurrency and making payments. Of course, readers of the draglet blog will know that blockchain’s use cases expand to nearly every industry where data security, reduced reliance on middlemen, and value chain transparency is important.
2018 has seen blockchain develop its own identity independent of currency and payments. Increasingly, the public has come to be familiar with other possible use cases for blockchain technology. It’s now seen inside tech circles as a data structure that’s highly secure and distributed, albeit with notable speed and scalability limitations.
This more realistic view of blockchain has allowed corporations, governments, and the media to talk more openly and without bias toward the technology. Regardless what you think of cryptocurrency, blockchain as a way to store and share data has many potential applications. Speaking frankly about it as a technology can only be good for blockchain’s development.
Another major trend in 2018 is the growth of Asian leadership in the blockchain space. The same PwC survey of tech executives found that 30% of those surveyed thought China was a rising blockchain leader. With aggressive research, access to hardware manufacturing, and some of the world’s leading blockchain companies already located in China, the Chinese see controlling the market for blockchain development as their ticket to challenging Silicon Valley for global tech dominance.
Adoption of blockchain and cryptocurrency has certainly gone further in Asian countries than anywhere else in the world. Japan and South Korea are rising leaders in the cryptocurrency market, especially as they craft common-sense legislation and regulations toward overseeing and accepting crypto. Their dominance will only continue to rise as western regulators fall behind in accepting and providing official channels for cryptocurrency usage.
Despite the growth of blockchain over the past year, there are still major issues with distributed ledger technology that are limiting its adoption. Foremost among these is blockchain’s inability to scale to meet the demands of thousands or millions of concurrent users. If new efforts can’t reduce processing times for blockchain transactions, blockchain’s impact on the global economy will be limited at best.
In payments and smart contracts, Bitcoin and Ethereum are both working on scaling solutions to address these problems. The Lightning Network and Ethereum Casper promise to scale blockchains well beyond their current limitations. If successful, they could fundamentally change the way we think about blockchain transactions and what it means for a transaction or piece of data to be secured by a blockchain.
Outside of Bitcoin and Ethereum, other proprietary and open source blockchain projects are similarly focused on scalability. It’s the biggest challenge facing blockchain solutions at the moment. How do we keep the block history that lives on every node in the network from growing too quickly while still facilitating hundreds, thousands, or tens of thousands of transactions per second?
These trends from 2018 will certainly play an important role in 2019 as well. It seems clear that blockchain has reached an inflection point. Independent projects around the world are now experimenting with blockchain in myriad ways. It’s only a matter of time before blockchain solutions become ordinary in business and possibly everyday life.
The road ahead won’t be easy, though. There’s plenty of work to be done in 2019 to solve blockchain’s issues. Building and testing the first truly successful applications in the enterprise space will be a major victory for blockchain, and we can expect these successful applications to arise in the coming years.