What Is Next For Blockchain?
Consortia, Stable Coins, Killer Apps, ETFs, And Others
The number of large companies embracing the blockchain technology and keen to start using it in different ways is growing every day. Many tens of thousands of people are currently being recruited to enable this implementation. The various major challenges of technology, such as speed, energy consumption, and privacy, are rapidly being picked up by the many thousands of startups in the sector. Blockchain is also called “the internet 3.0” and is often compared to the rise and impact of the internet on our society. The developments in technology and everything associated with them is going incredibly fast. In my previous post, I listed some special, working implementations. In this post, I will take a look at the five important follow-up steps for technology in the coming period.
Standards & Regulations
It is often said that the best prerequisite for companies to innovate is to have as few legislations and regulations as possible. Yet the demand for legislation and regulation, like for standards, is increasing. Whereas policymakers now primarily focus on regulating the trade in cryptocurrencies and ICOs, half of the implementing companies indicated in a recent major study that current regulations are hampering further implementation.
Since many solutions are not yet mentioned in the current legislation, such as the crypt graphic storage of medical data, innovation and development are being hampered.
The demand for standards for this technology is much greater. Github (the Facebook for software developers) is currently aware of over 6,500 active blockchain projects, all of which use different platforms, protocols, privacy standards, and programming languages. To be able to continue taking major steps, it is important to look closely at standards that will be used for the development and implementation of blockchain applications. This can help companies to cooperate better in terms of development, integration within existing systems and better alignment with each other. Hyperledger has already developed the first standards, the Decentralized Identity Foundation, and Ethereum Enterprise. These are already a major step in the right direction.
Collaborating Consortia
As I mentioned in my previous point, a collaboration between companies is essential to facilitate major breakthroughs with blockchain technology. There are currently 51 active consortia that band more than 300 companies to work on certain standards, train staff, explore possibilities and build applications. This is a very positive development for the technology since it clearly indicates how important the (often large) affiliated companies consider this to be. Some consortia have originated in certain industries, others to provide technical implications.
The best known are R3 (which unites more than 100 companies in the financial sector), B3i (which does the same with 15 major insurance companies) and MOBI (which does the same with major car brands such as BMW, Renault, and GM). One of the best-known consortia is Hyperledger. This is an “open source” blockchain to which Accenture, IBM, and SAP are connected and where they collaborate on a “permissioned” blockchain. Although this is at odds with the original blockchain principles (which is meant to be “unpermissioned”), the first jointly developed product, Fabric, has already been successfully launched.
Technological Challenges
One of the biggest points of criticism of the blockchain that is often mentioned is the transaction speed. This is partly due to the various consensus methods (the process with which a transaction can be agreed within a blockchain network) and the structure of the chain itself.
The speed of Bitcoin (3–7 transactions) is often compared to that of VISA (24,000), but in reality, VISA performs “only” 1,700 transactions per second. Blockchain startups such as ICON have already reached a speed of 10,000 transactions per second.
New consensus methods have also greatly reduced the required computer capacity and associated energy consumption to run the blockchain networks. While Bitcoin uses the energy-guzzling “proof of work” method, some fifty others are already being used. This includes “proof of stake” and the “Federated Byzantine Agreement”.
By means of Directed Acyclic Graphs, the structure of the block chains itself is also critically considered. Directed Acyclic Graphs allow for faster confirmation of transactions.
According to many blockchain specialists, we are now in the third generation of the blockchain. What started with simple transactions from Bitcoin (1st) and was expanded with “Smart Contracts” (2nd), we now consider the form in which the different block chains and other techniques work together.
Financial Receivables
Investors in cryptocurrency are anxiously waiting for a so-called “ETF” (Exchange Trade Fund) to be approved by the US SEC. More than 25 requests have already been submitted, but they have always been rejected because there is still too little regulation and price manipulations are still the order of the day. ETFs, ensure that you can trade in cryptocurrency without owning any. Therefore, it is expected that activating an ETF will bring large amounts of money onto the market, which will certainly increase the value of the various cryptocurrencies. Often the comparison is made with the first ETF that became available for trading in gold, which strongly multiplied the underlying price.
The high volatility of the different cryptocurrencies have been great for some early investors, but disastrous for many who joined late. To greatly reduce volatility and to ensure that the coins actually retain the same value, various ‘stable coins’ have been created. Where there were only five projects at the start of the year, there are currently 30 with several hundreds of millions of euros in raised investments.
Stable Coins
One of those is the controversial “Tether”, which claims to be linked to the US Dollar. In addition to money, these ‘stable coins’ are also linked to precious metals such as gold, coupled to other stable coins (crypto-collateral, such as Haaven), ‘Central Bank Mechanisms’ (applying the same method that central banks use to regulate price stability) and ‘hybrid solutions’ (a combination of two or more techniques). The development of these coins draws a mixed response since on the one hand, it will greatly reduce the manipulation of the rates and thus accelerate the creation of an ETF, but on the other hand, it can also offer the authorities more control over the market when they introduce their own coins.
Apart from the ETFs, much work is also being done on “Digital Asset Receipts” (a type of ETFs) and “Bakkt”, which will make Bitcoin future contracts possible.
Killing The Hype
The big commotion about the advance of Bitcoin at the end of last year and the explosion of ICOs afterward has, in my opinion, helped to give blockchain technology a bad name. ICOs sometimes raised tens or hundreds of millions of euros, despite that they only had a draft plan, but we’re drowning in money and all the negative consequences that that entails. Last year some 85% of the ICOs turned out to be a scam, and the result was that investors almost always lost their stake. As many people still consider the blockchain and cryptocurrencies to be the same, many feel they have been let down by the technology.
In addition, the technology is often presented as a solution for everything that is going wrong in the world or is being used as a solution for issues for which it is not required in the first place. This can be harmful as the growing number of promised solutions that cannot be delivered can put the overall implementation in a negative light.
Waiting For The Killer App
Like in the early years of the internet, an awful lot of funny, interesting and useful applications are added to/built for the technology. These are applications that offer enormous efficiency gains, solve problems or even offer functionalities that were previously not possible. However, we are still waiting for the real “killer app”, similar to what email and social media were for the internet. Not CryptoKitties, but a real solution that will lead to massive, global adoption of the technology.
Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.
Jan Scheele werkt dertien jaar op het snijvlak van deep tech, strategie en leiderschap. Als keynote spreker en dagvoorzitter maakt hij technologie tastbaar voor boardrooms, directieteams en grote podia, zonder de complexiteit te versimpelen of te verbergen achter buzzwords.
Zijn achtergrond ligt in het bouwen. Als CEO van een technologie scale-up, oprichter van meerdere techbedrijven en organisator van meer dan vijftig TED-events wereldwijd zag hij van dichtbij hoe technologische keuzes doorwerken in strategie, governance en cultuur. Vanuit zijn betrokkenheid bij het World Economic Forum en de BCNL Foundation kijkt hij daarbij niet alleen naar wat technisch mogelijk is, maar ook naar wat bestuurlijk houdbaar en maatschappelijk wenselijk is.
Hij publiceerde vijf boeken, waarvan twee Amazon-bestsellers, en schrijft wekelijks over AI, blockchain en de organisatorische gevolgen van deep tech. Zijn blogs bereikten inmiddels meer dan twee miljoen lezers.
