The Death of the ICO And 4 Other 2018 Predictions
In case 2017 was the season of the ICO, 2018 is going to be the year of the excellent ICO hangover. It is going to also be the year leading financial institutions to embrace electronic resources, and indicate the arrival of hybrid blockchains.
1. The death of the ICO token
“Cryptocurrency” turned into a major buzzword in 2017. Suddenly, all eyes were on these new resources with speculators jumping into the market in droves and authorities greatly scrutinizing them.
Actually, in early December, the combined market capitalization of digital currencies surpassed the JPMorgan, the biggest U.S. bank. Initial coin offerings (ICOs) similarly exploded, increasing hundreds of millions of dollars around the planet in a matter of months.
While they left for exciting headlines, however, I anticipate the exuberance of ICOs to fizzle in 2018.
What’s more, I also anticipate authorities and regulators worldwide to come down hard to fraudulent ICOs from the new year. That’s because most ICOs skirted existing regulation so as to raise equity — without a solid company to back up the offering. Money raised from a number of these ventures have begun to disappear, and regulators, like the SEC, recently declared that they are getting ready to crack down on them.
I would not be amazed to see hefty penalties, litigation and even jail time for people standing on the wrong side of the ICO issue.
Past the regulatory crackdown, questions will appear around the usefulness of special-purpose tokens. Why would a file hosting company accept payment in Filecoin, if a general-purpose digital advantage is much more liquid and therefore easier to turn into fiat?
We don’t utilize different currencies to buy clothing or cover our mortgage from the world and ICO token holders are going to recognize that the economics are not any different online.
2. Financial institutions will adopt digital assets
If speculators entered the electronic asset marketplace in droves this past year, 2018 is going to be the year that significant institutional players enjoy asset managers, pension funds and other financial institutions, for example, payment providers, enter the area.
We are already seeing increased over-the-counter (OTC) trading of digital assets, for example, bitcoin on the Chicago Board Options Exchange (CBOE), inducing liquidity throughout the marketplace to market. It is actually a matter of when, not if, listings of additional cryptocurrency futures on OTC exchanges will happen. My bet? We’ll see the listings by next summer.
Between this and brand new institutional players entering the current market, I believe digital assets have loads of space for expansion. However, the crypto space will not be without its challenges. Forking, regulation, and banking — oh my!
Governance issues will continue to plague some digital assets — inducing forks like the person with bitcoin and bitcoin cash. This uncertainty will be debatable for many who wish to enter the market as it raises questions regarding supply as well as the level of danger involved.
While countries like Japan and the Philippines have embraced digital resources in their economies and regulatory frameworks, you will find much more worldwide without clear policies and laws for these assets.
For instance, there are just a couple of financial institutions in the U.S. which will bank businesses in the cryptocurrency space. If they were to depart, or when the regulation was to come through that prohibits vulnerability to the electronic asset market, this might have quite serious, adverse consequences on the enhanced services being developed. Banks need clear guidelines from regulators on how they are able to lawfully bank those connected with cryptocurrencies.
3. Blockchains will start to interoperate
In 2017, we have seen bitcoin’s share of the cryptocurrency market drop from 87 percent to under 50 percent. Countless coins and tokens launched and are now being traded.
To create the broad use of digital assets really mainstream, however, I believe we will need the many blockchain networks that now exist to interoperate. The truth is that there will not be one single dominant blockchain network in the long run — just as there isn’t any dominant internet or email supplier globally now.
Currently, we can all email family, friends and colleagues from Gmail to Yahoo to Outlook easily and immediately. The value should proceed across all ledgers in the exact same manner — irrespective of the blockchain network, PayPal wallet or traditional bank accounts involved.
Indeed, we’ve already seen attempts in 2017 to address blockchain interoperability.
Raiden, the ethereum interoperability solution for ERC-20 tokens, established its token in September, although the Interledger Protocol (ILP) was used to connect seven ledgers including bitcoin, ethereum, and XRP in June.
If all networks were to become ILP-enabled, it ultimately wouldn’t matter if you stored bitcoin, ether, litecoin or even XRP. ILP would permit you to make payments to a merchant that only takes bitcoin, for example, utilizing XRP — all in only a matter of seconds.
4. The birth of hybrid blockchains
Until now we have noticed a proliferation of the two public blockchains such as bitcoin and personal blockchains such as Hyperledger Fabric. Moving forward, I believe we will start to see the growth of hybrid vehicle blockchains, which combine the best of both worlds.
A hybrid blockchain runs over the open internet and is available to anyone like a people blockchain, but it employs a smaller group of validators and is more geared towards a particular use case like a private blockchain.
Deploying an ethereum contractor creating an ERC-20 token will be replaced by launching your own mini-blockchain, which can be tuned to the exact needs of a certain project.
Need more decentralization? Less? More powerful functionality? Should it be upgraded frequently or remain very stable? 1 size doesn’t fit all, but next year you’ll finally have the ability to choose.
This is a part of a bigger trend for blockchain networks to specialize. Current systems try to be everything for everyone. In the future, we’ll see more targeted implementations designed for a definite use case. The perfect way to explain why this is necessary is to point to the Yahoo example — a tech giant that spread itself thin across too many services and products and couldn’t be truly successful in some of these.
In precisely the same manner that Google focused on info or Apple online design, I feel these blockchains that focus on a single center offering (e.g. a pure database such as BigchainDB) will survive, and thrive.
5. Specialization or generalization — a contradiction?
Over the course of this article, I have argued that general-purpose tokens will replace special-purpose tokens and I’ve also said that special-purpose blockchains will replace general-purpose blockchains.
This may look as a contradiction at first, but as blockchains become more interoperable, blockchains and tokens will simply be combined together. This transition will involve more growing pains, so it is guaranteed to be a fascinating year.
I’m excited to see how everything plays out.