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Blockchain and finance in 2019
Cryptoassets in 2019: What Needs to Happen for Mass Adoption?
Blockchain and cryptoassets were relatively niche concepts before 2017, but that year their popularity and value exploded, as exemplified by bitcoin’s successes. A single token of the original mainstream cryptocurrency, launched in 2009, cost $900 (£695) in January 2017. In December of that year, at the peak of the market, one bitcoin was worth $19,500 (£15,000) — a 1,850 percent increase.
The bull run of 2017 generated global awareness of cryptos, enriched early adopters, and in turn propelled the initial coin offering (ICO) mania — whereby tokens of a new protocol are sold to investors — that has since subsided. It also precipitated a pull back in the markets the next year, with many dismissing the new asset class as an archetypal economic bubble.
However, blockchain — the secure, distributed database underpinning bitcoin and countless other cryptos — is a transformational innovation that numerous experts believe has the potential to be more revolutionary than the internet. As such, cryptos — the first use case of blockchain technology — will not, despite the 2018 retracement, be going anywhere any time soon.
If cryptos are to achieve significant growth in the near future and gain mass adoption, as many predict, a handful of things should — and could — happen in 2019.
Fiat and Crypto Compatibility
Blockchain was created as a decentralized system for the exchange and storage of a new form of digital currency, bitcoin, with the vision of challenging the status quo of centralized banking systems and fiat money.
Indeed, in October 2008 — only weeks after the collapse of Lehman Brothers, then the fourth largest investment bank in America — Satoshi Nakamoto, the mysterious and still-masked figurehead of the bitcoin movement, proposed “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”.
There are a number of ways to exchange fiat currency for the cryptocurrency, though there are far fewer options available for currency conversion between crypto and fiat in developing-world regions that have large “unbanked” populations.
Some organizations are seeking to take advantage of the untapped wealth that these economies possess. For instance, Electroneum has been partnering with businesses around the world and lobbying for the acceptance of cryptocurrency to empower the unbanked and give their lives purpose.
Regulation of cryptoassets — which are, by definition, decentralized and extranational — has always been a contentious issue. Since the dramatic expansion of the ICOs, during which many investors fell prey to bad practices, the reins have been tightened by the community. The cryptocurrency space is no longer the “Wild West” many detractors label it, though admittedly bitcoin’s association with Silk Road and other Dark Web websites frequented by criminals does not help the case for mass adoption.
Additionally, some regulators struggled initially with the technological literacy required to fully comprehend cryptos and the potential of the blockchain, and some countries have banned them outright (not least in China). In this digital age of exponential change, where science fiction is becoming science fact, they are yanking up the handbrake on progress.
In 2018, there was a groundswell of movement within the crypto ecosystem to better collaborate and encourage more self-regulation, while cooperating with authorities and independent bodies to construct standardized regulatory frameworks. The strengthening of bonds and greater education about cryptos is helping to foster healthier relationships between innovators and those in authority.
The aforementioned ICOs were the most prominent form of cryptoasset fundraising in 2017 and grew faster than they had in any previous year. They have since come under fire from critics over the lack of security that they offer investors.
The backlash against ICOs began in 2018 and the new big fundraising vehicle in the crypto world is security token offerings (STOs). STOs combine the best attributes of traditional security offerings — namely investor protection — with the increased efficiency, speed and future liquidity of blockchain-based tokenization.
In 2019, you can expect to see the rise of STOs, alongside other innovative methods, to support blockchain companies so backers can be more confident in the safety of their investments.
Furthermore, cryptoasset exchanges and trading platforms must continue to bolster their cybersecurity defenses to combat hackers, providing peace of mind for investors of all levels.
Stable Coins vs Price Volatility
The meteoric rise of ICOs in 2017 ultimately proved to be unsustainable, and in early 2018, the value and market capitalization of almost all cryptoassets fell fast.
Stablecoins were invented as a means of securing token holders against such volatility, as well as acting as an intermediary trading token. Towards the end of 2018, there was a rapid rise in the number of stablecoins on the market.
At the start of 2019 there were reckoned to be about 50 stablecoins. The verdict is still inconclusive as to which of these new stablecoins is the most reliable, though a leader is sure to emerge soon enough.
Next Killer App
Many blockchain enthusiasts have been either collaborating or competing to develop the next “killer app” solution to boost public interest in cryptos and push forward stagnant adoption rates.
It is likely that the next great application will take the form of a future-proof “middleware” solution that helps complete the convergence of blockchain and traditional technology.
One of the greatest obstacles facing mainstream adoption of cryptoassets is the fact that there aren’t many ways that people can use it like Visa, Mastercard or PayPal. Even while more and more businesses are finding a path to accepting crypto payments, usage remains low among the general public. Any solution that can overcome this barrier would certainly be considered a “killer app” and could pave the way for mass crypto adoption.