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No Fear. No Panic. Relax - The Blockchain Industry is Alive and Kicking

January 31, 2019

 

While Bitcoin roared into 2018, posting a trade value well into the thousands… it didn't last. The price fell, and today, Bitcoin is worth only 25% of its peak value. Does that mean Bitcoin is dead? Is the Blockchain Revolution over? Was it all just a fad that came and went?

 

Absolutely not! My faith in Bitcoin has never faltered, and it’s not faltering today.

 

Whether Bitcoin is worth $22,000 or $22, Bitcoin itself, as well as the blockchain technology behind it, continues to flourish. Bitcoin gets all the press coverage with its up and down prices, and while I continue to have a lot of faith in it, it’s important for all of us to remember that the industry is now focusing on blockchain as a valid infrastructure, and not a financial infrastructure specifically. There are many directions which Blockchain technology is considered effective, and time will reveal its other uses.

 

The US government recently issued an $800K research grant through the National Science Foundation to find ways to collaborate through broadly shared ledgers. Diar, a well-recognized analyzer of the global digital currency industry, just published a report on governmental agencies looking into blockchain research.

 

This year, Forbes published a list of 50 companies exploring blockchain for everything from expanding and monetizing membership rewards to controlling traffic flow. Venture capitalists, whose job is to predict the future, are betting heavily on blockchain technology and cryptocurrencies with a 280% rise in investment.  And then we're back to Diar for confirmation, which found that "while projects are now more reluctant to raise capital through ICOs [than they were in 2017] traditional venture capital continues to up their risk in the Blockchain space." According to data confirmed by Pitchbook, in just the three quarters of 2018, blockchain and crypto companies have raised nearly 3.9Bn through traditional VC - indeed 280% more when compared to last year.

 

IBM is strongly interested in blockchain technology; they’re even coming out with their own blockchain platform as part of its enterprise solutions. Companies signing up for the platform are transforming the food industry, financial services, and even media and entertainment. The platform predicts that trust and collaboration - the hallmarks of blockchain technology - bring benefit to any industry.

 

Even Facebook, the very model of widespread technology adoption, announced plans for its own cryptocurrency to help make WhatsApp not only popular, but also profitable. That means 2 billion users will soon be pushed toward the new coin as a way of making payments. That, on its own, has the potential to change the way people use currency. 

 

Clearly,  fear for the industry’s “life” has been greatly exaggerated. It's more vital now than ever and its impact on the world is only starting to be felt.

 

And Bitcoin, by the way, isn't doing badly at all. While its value may have slipped from the lofty heights it scaled at the start of 2018, the original cryptocurrency is gaining widespread, mainstream acceptance as a payment system.

 

The next steps for blockchain technology remain unwritten. Although none of us can predict the future, we all know that it takes time for innovation to break through the surface and find its place in society. Far from dying, blockchain technology and its effects on a number of industries is still very much in the making.  

 

ICOs, STOs and the Path Forward

 

As with any new product or industry, the world of blockchain technology, which absolutely includes cryptocurrencies, has seen tremendous innovation and creativity. Some of the big ideas will scale up and become a part of the core concept. Others will be remembered more as noble experiments that did not bring the results its initiator had hoped. 

 

 

The ICO - Initial Coin Offering -  is likely to fall into the latter category, though the jury is still out on the concept as a business model. The challenge here is governmental and regulatory involvement (China has banned ICOs outright!); without it, the theory proved viable. The coins, sold by smart contracts, were buttressed by belief in the product they represented, with an understanding that the product, as it developed, would increase the coin’s value.

 

Regulatory pressure, however, dictated the STO over the ICO. The coins were divided into two different categories: security tokens and utility tokens. Many of the ICO offerings fell into the latter category, meaning that they must be registered with the US Securities and Exchange commission. Any time the coins are considered revenue drivers, rather than investments, tax implications enter the picture.

 

Originally, the ICO idea was to help people fund new coins with special uses. The tokens were intended to serve an additional purpose beyond just raising funds; the utility tokens specifically were designed as digital assets with the intention of spending them within a specific blockchain ecosystem. As Cryptopotato documented, Filecoin, for example, uses its tokens to pay users who offer data storage space. Civic, on the other hand, pays users to verify identities and create attestations on their blockchain.

 

Looking at it from a 100,000 feet view, while some coins have risen in value, most have either dropped or died. A vibrant industry, however, can tolerate experiments that don't work out exactly as people hope they would. In fact, innovation demands it. There is no way to find the right approach without trying a variety of solutions. 

 

I’m not sure I’m ready to call the ICO a failure; the concept may still provide value by giving way to something new. Media reports of fraud in ICOs attracted attention from anxious regulators. To assuage their concerns, a new idea was born. STO - Security Token Offerings - offer a similar model to an Initial Public Offering on the stock market even to the point of presenting reports to government regulators.

 

As a result, some of the Wild West appeal of cryptocurrencies could be tamed because STOs will not be completely free of government oversight. But it could also mean a great deal more business investment and integration, and ultimately, a wider adoption of blockchain technology. 

 

Ultimately? That means that the change we were all so excited about - the revolution we’re ready to participate in - is still in the making, and even taking root.

 

The Innovations Continue

 

The Gartner Hype Cycle provides useful insight into where blockchain is headed. The research firm placed 17 emerging technologies on a hype graph and divided them by how long the technologies will need to reach their plateau. According to the graph, blockchain technology has already passed its greatest hype stage, but still needs 5-10 years to reach its height as a technology.

 

It takes time for the public to align with the technology. Some companies will not survive the drop in hype. But the most vibrant ones are growing and getting stronger. Within about five years, they could be part of the fabric of life. 

 

Today, people are broadening their interest in the underlying blockchain technology, and that’s fantastic! They are seeing the difference between a product and the platform it’s built upon. And that means they can see the potential for blockchain as an independently valid technological infrastructure, financial or otherwise. 

 

Even with many ICOs failing to bring a measurable profit, the world of blockchain is expanding. In Israel alone, a year ago, there were 44 companies doing business with blockchain technology. Today, there are over 100! The revolution that started with Bitcoin has only grown stronger. Blockchain, regardless of its valuation, is already being implemented with existing infrastructure like Microsoft’s Azure. It’s built on serverless technologies and integrates blockchain with both Microsoft and third party SaaS. 

 

Given the current volatility of cryptocurrency, there are already solutions in the making to stabilize the valuation of the coins. In fact, when Facebook enters the market, it's likely to be with a Stablecoin, whose value will be tied to the value of the dollar.

 

The fact is this - the world is growing more collaborative thanks to the emergence of blockchain technology, and Bitcoin is a great example of this!. Valuing blockchain as an independent technological infrastructure has created a new way of considering information sharing and open source. It may take a few more years for financial results, but blockchain technology as an industry is only getting stronger.

 

Ultimately, the point is this: regardless of the fluctuations in the valuation of any particular venture, whether the ICO concept comes out of the spiral smelling like roses, or falls flat completely, whether Bitcoin price continues to falter, whether STO flourishes... blockchain technology is here to stay. It has proven itself technologically sound, and offers endless opportunities. I have unwavering faith that the best is yet to come. 

 

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