What 2018 will mean for Blockchain and CryptoJaspreet Bindra
2018 is the year that Bitcoin and Blockchain turn ten years old. It was in the ruins of the Lehman crash and the transition to the Obama era, ten years ago, that Satoshi Nakamoto conceived of the technology that now as the potential to change the world. However, when my gym instructor asked me the other day whether I was trading bitcoin, that it hit me: Bitcoin was mainstream in India! That also set me thinking what would its 10th birthyear be like for Bitcoin, other crypto currencies, and more importantly for their conjoined twin-mother: The Blockchain. Here is my two-BTCs worth:
1. We are beyond the hype
Both this year and last, Blockchain reigned at the top of Gartner’s Hype cycle rubbing shoulders with machine-learning, autonomous vehicles, IoT and other such luminaries. I believe that 2018 is when it will start sliding down this curve, and become more real. This will primarily be driven by a combination of things: crypto currencies becoming more mainstream, many initiatives failing, regulators coming in, and governments starting to embrace it. It will also mean that start-up pitch decks with the word ‘blockchain’ sprinkled generously across them will not automatically receive funding, and that business cases and consumer applications around Blockchain will start getting built.
2. More use outside of finance
Blockchain, wrongly in my opinion, is labelled as a fintech technology. That has primarily been because its first and biggest use case has been around money, and therefore crypto, and because the BFSI sector has been the first to adopt it. However, as we know, any asset can be placed on a blockchain – land, people, goods. This will mean that substantial non-finance use cases will come into their own in 2018. IDC Health Insights has predicted that a fifth of healthcare providers will have operationalized blockchain by 2020, and therefore 2018 will see a lot of action in healthcare. There will be significant adoption in Supplychain: Walmart, Foxconn are enabling blockchains to track transactions. Closer to home, Mahindra Finance has innovated a blockchain implementation in bill discounting. We will see blockchain use cases across HR, Legal, government, luxury goods, auto, and multiple other non-finance sectors.
3. PoC (Proof of Concept) to Production
If 2017 was the ‘Year of the PoC’, 2018 will be when many of these go to actual production. Enterprises were experimenting with Blockchain this year and last, and hundreds of PoCs were executed across multiple use cases. Many of them, as expected, were done just as ‘tick-mark PoCs’, so as to accomplish one of the KRAs of the resident CIO or CTO. A few of them, however, will go into production next year. The aforementioned Mahindra Finance PoC is one of them. PoCs being done for provenance (food, diamonds, luxury goods) will move to production, so will some of the larger global trade finance ones. Enlightened governments like those of Dubai, Estonia and Delaware will take registry, financial transactions and legal use cases to scale. We must remember, though, that Blockchain as a technology is still work in progress and there will still be PoCs done in 2018, perhaps even more than in 2017.
4. Indian Blockchain Startups on the horizon!
This is more in the Indian context, than global. Globally, blockchain startups have attracted close to $2bn in VC financing this year, and that does not include the ICO money raised. However, both the number and investment in Blockchain startups in India has been severely disappointing. Besides Unocoin and Zebpay, both crypto wallets, attracting VC interest, there has really been no deal of note, I can think of. Angel investors have been moderately active in the space, but again not up to expectations. I believe that will change in 2018: just the sheer numbers of startups, meetups, actual events, online and offline groups that I have started seeing over the second half of this year has been encouraging. I do believe that the number of legitimate blockchain startups in India will touch three figures, and we will see at least a couple of genuine VC deals in this space next year. Fingers crossed!
5. The Rise and Regulation of Crypto, State-Sanctioned Crypto Currencies?
This is where we will see perhaps the most interest. There are more than a thousand crypto currencies today, and more being born every month. Bitcoin is on a tear, crossing $8000 in value, despite giving birth to Bitcoin Cash. The various strains of Ethereum are stable, and going strong. A lot of what happens in crypto will depend on how governments and regulation comes in. China gave one in the solar plexus this year, and BTC price plummeted but recovered again. There are murmurings in multiple national governments, including in India, about delegitimising or banning crypto currency. Conversely, there is also talk on creating ‘fiat backed’ or state sanctioned crypto currencies. However of an oxymoron that sounds, we will see moves in that direction: Russia, China, even India, and a few smaller nations are talking of developing their own crypto currencies (LakshmiCoin, anyone?). Tantalisingly, there are also prospects of some countries legitimising Bitcoin, or equivalent, as legal tender; keep an eye out for smaller, forward looking, Estonia-like nations for that one.
6. Governments will invest in Blockchain
While Governments will continue to be chary of cryptocurrencies, they will muscle into Blockchain in 2018. Some of this has already started this year, with countries like Dubai, Estonia, UK taking the lead. I have always believed that the biggest and most transforming use cases in Blockchain are Government-led. Blockchain has the potential to solve massive problems that governments have in land records, asset registries, auto records, voting fraud, national identity and KYC, financial transaction records and traceability among others. In fact, at a philosophical level, Blockchain has the potential to eliminate corruption in Government! While this could be a disincentive, more than 80% of global governments will start experimenting with multiple blockchain use cases. Besides the early adopters, we will see Canada, European countries, and even India coming in. Of late, news broke on Niti Aayog led IndiaChain: the government’s plan to implement a full-fledged blockchain infrastructure that will complement IndiaStack, and might leverage Aadhaar. This could have a major impact on subsidy distribution, provenance, regulating land records, KYC in banking, SME-financing, energy distribution, court cases etc. Exciting times ahead
7. Blockchain marries IoT and AI
This is the one which interests and intrigues me the most. The emerging digital technologies – blockchain, AI, IoT, etc. - will not live and prosper in silos; but it will be the combination of these which will bring real disruption and transformation. The more than 50bn ‘things’ which will be connected through IoT will be a security nightmare; it could be Blockchain which brings in the security layer through its crypto-protection and immutability features. Cryptocurrencies on these blockchains would perhaps be the perfect solution to microtransactions between machines. Smart contracts would protect IoT connected supply-chains from inefficiency and fraud, and enable transactions and closures. AI, on the other hand, would provide the decision making and analytics layer on top of Blockchain. Everledger, for example, has combined IBM’s Watson with blockchain to detect ‘blood diamonds’. AI and blockchain, put together, they provide a double shield against cyberattacks. These combo AI-Blockchain use cases abound in autonomous vehicles, digital rights, e-governance, precision medicine, and others.
8. A large number of blockchain initiatives will fail.
Many blockchain PoCs and implementations have been done for one reason: FOMO, or the Fear Of Missing Out. Blockchain is a new technology, and is perhaps in the same phase as the Internet was in early 1990s. We did not know that the Internet will go beyond its basic Mosaic browser and dial-up modems to gift us an Amazon or a Google. The only popular, consumer app that Blockchain has today is Bitcoin. Given its hype and its ‘sexiness’, there will be massive amount of experimentation and interest in doing new things with it. In fact, Blockchain will suffer as the ‘solution for everything’. However, every problem or use case is not ‘blockchainable’ – there are perfectly good, sound, scalable technologies around which should be used instead. My all-time favourite Blockchain tweet is: “Blockchain is the answer, now tell me the question”. Too often, we succumb to this, and create initiatives which are bound to fail… A thousand initiatives failing is a good thing. Only from a thousand failures will a massive success emerge, and change the world as we know it. The Internet solved many major problems for us: the information problem with Search, the connectivity problem with Email and Chat, and the distribution problem with digitization and ecommerce. However, there are two problems it was supposed to solve, but did not: the disintermediation problem and the trust problem. In fact, the Internet has created far more powerful intermediaries than ever – think Google, Facebook, Amazon, Uber. And it has created massive distrust and security problems. The Blockchain is supposed to solve these two massive problems, and therefore we believe it will be as big as the Internet…
(The above article was carried in Mint newspaper on Dec 28, 2017 : http://www.livemint.com/Technology/bMqJqQAHwSBDYsVgkcPF2N/What-does-2018-hold-for-bitcoin-and-blockchain.html )