Expect to See These 5 Blockchain Trends in 2018

Venture capital firms have invested over $1 billion in blockchain-based firms within the last five years, according to the Harvard Business Review. By all indications, this investment may begin to pay off soon, as the coming year is expected to bring blockchain mainstream popularity and a staggering $2.3 billion in spending to the market for blockchain solutions.

To get a clearer picture of what the future of blockchain may look like, check out the following five trends that experts predict they will see surrounding this innovative technology in 2018.

1. The U.S. government will further embrace blockchain.

Government entities have already begun to use blockchain in various capacities over the last few years, including the states of Delaware, Texas, New York, and Illinois. Blockchain-based programs within the Department of Homeland Security, Health and Human Services Department, and the General Service Administration are also already in place. We can also expect to see more publicly advertised uses of the technology this year from the FDA, the U.S. Department of Defense Transportation Command, and even the U.S. Army Medical Research and Materiel Command.

2. The number of ICOs will rise.

In 2017, there was plenty of conversation surrounding initial coin offerings (ICOs) and the need for regulations, prompting a public statement from SEC chairman Jay Clayton on the U.S. Securities and Exchange Commission website in mid-December. In spite of the potential risks associated with unregulated ICOs, industry experts expect 2018 to be another bull year for the trend, potentially even overtaking this year’s levels of venture capital funding. Expect this growth to attract more experienced investors who will bring a higher degree of professionalism, greater accountability, and more stringent due diligence to the process, making ICOs more like the traditional fundraising methods that they are poised to usurp.

3. AI, IoT, and blockchain will move toward integration.

The Internet of Things, artificial intelligence, and blockchain are indisputably the three current megatrends of technology, and 2018 may be the year that they take the first steps toward convergence. Blockchain stands to further the development of both, as it can provide IoT with advanced protection by securing points of failure and may establish an avenue for affordable access to big data for AI companies looking to further enhance machine learning processes.

4. The Asia-Pacific region will push hardest for blockchain technology.

Although North America and Europe, respectively, represent the first and second largest investments in the global blockchain marketplace, the Asia-Pacific region has the greatest potential for aggressive growth in the coming year and beyond. Countries such as South Korea and Japan already have banking sectors that are embracing blockchain in order to reduce costs and improve efficiency. Their media, retail, and insurance industries will also contribute to increasing demand for blockchain-based technologies in this area of the globe.

5. The overall blockchain economy will witness an upward growth trend.

While excitement about digital currency helped blockchain to attain its status as one of the most profitable investment trends of 2017, the coming year will secure its position as an independent technology with lucrative possibilities. Although cryptocurrencies are likely to experience a surge in growth, as well, we should anticipate that blockchain will drive disruption across industries over the next year and garner a high degree of interest and investment within the tech sector outside of its use as a platform for cryptocurrencies.

Unregulated Cryptocurrencies Could Pose Potential Risks

While Bitcoin has experienced its share of ups and downs, interest in cryptocurrencies is on the rise. The public has expanded its focus beyond Bitcoin to lesser-known but promising cryptocurrencies such as Litecoin, Ripple, and Ethereum, each of which is witnessing steady gains as people grow more willing to invest in digital currency.

One of the hottest topics surrounding cryptocurrencies is the question of whether or not the governments will place regulations on this innovative technology. Those who wish for cryptocurrencies to remain free of regulations argue that lawmakers’ involvement will stifle growth and diminish the integrity of the market. However, it’s important to consider the potential risks that a market comprised of unregulated cryptocurrencies could pose.

The growth of cryptocurrencies has naturally led to the development of products and services that investors can use to access and store their digital currency in the marketplace. This includes cryptocurrency exchanges—digital marketplaces that act as intermediary platforms where owners can buy, sell, or convert their cryptocurrency, similar to a stock exchange.

The difference between a cryptocurrency exchange and a stock exchange is that the latter is bound by regulations that help to keep investors protected against fraud. A lack of security policies could expose them to the possibility of theft and loss. Without regulations that establish compliance laws as to which companies can call themselves cryptocurrency exchanges, investors could fall victim to thieves who want to advertise themselves as legitimate businesses when they are really no more than criminals who want to steal investors’ cryptocurrencies. The law can also require those exchanges which operate on a legitimate business model to abide by more stringent security measures in order to protect investors from hackers. Consumer protection is a major concern so long as cryptocurrencies remain unregulated.

Cryptocurrencies are vulnerable to criminals for three primary reasons: the inherent anonymity associated with their use makes them difficult for law enforcement to track, they can be easily converted to traditional forms of currency, and there is not much government involvement in the market. This makes cryptocurrency an attractive form of payment for illegal items sold on the black market, and sites such as Silk Road have taken that concern from theory to reality. Beyond contraband such as drugs, cryptocurrency can be used to make purchases that could perpetuate human trafficking and terrorism and make it much more difficult for authorities to put an end to them in order to protect the public.

Ultimately, the law may provide cryptocurrency with its best chance at having a real future in the global economy. Regulations would help to brand cryptocurrencies as a substantial investment worthy of the attention of the government, which could lead the general public to feel more comfortable sinking investments into this form of digital currency. This kind of legitimization is also likely to come with some government-backed guarantees and protections that will make people more likely to embrace the concept.

Without the support of the general public, cryptocurrency cannot become as well established as its proponents hope it will be. Remaining unregulated will make it much more difficult for the technology to shed its reputation as a volatile investment used by criminals and those willing to gamble their investments on an unstable asset.

3 Things that Could Happen if Cryptocurrency Remains Unregulated

The lack of regulation in the cryptocurrency market has contributed to the success of iterations such as Bitcoin, which climbed in value in 2017 from just under $1,000 to a peak of almost $20,000 12 months later. While many who have invested in Bitcoin or alt-coins such as Ripple XRP and LiteCoin on a personal or professional level contend that these digital currencies must remain unregulated in order to reach their potential and thrive, they have become so popular that to leave them unregulated could have adverse consequences. Here are three things that could happen if cryptocurrency continues to grow without a reasonable degree of macro-level regulation.

 

1. Inexperienced investors could fall prey to fraud.

 

One practice that has gained popularity as a result of the unregulated cryptocurrency market is the “initial coin offering,” or ICO. These business transactions bear some resemblance to the conventional IPO used to issue company stocks. However, instead of earning shares in a company, investors involved with ICOs earn a digital asset, known as a “token,” which provides the issuing company with the money that it needs to fund its venture and investors with the promise of a financial stake in the company’s future.

 

Unfortunately, the popularity of ICOs has drawn the attention of scam artists and hackers, who pose a serious threat to inexperienced investors who want to become involved in the cryptocurrency market. While some would argue that the fault lies with investors who fail to perform adequate research, it’s important to consider the fact that regulatory bodies have placed restrictions on IPOs to protect investors from fraud.

 

2. It could diminish the reputation of the industry.

 

The reputation of cryptocurrency has been negatively affected by the dark web and questions about whether it could be linked to activities such as terrorist financing. The U.S. Department of the Treasury is concerned enough about the prospect of terrorists leveraging cryptocurrency to commit crimes that one of its officials recently testified before the Senate Banking, Housing and Urban Affairs Committee in an effort to push for stricter regulations on cryptocurrency exchanges. Several instances of terrorists hosting online Bitcoin fundraisers to support their groups have been identified since cryptocurrency began to grow. The anonymous nature of cryptocurrencies exchanged via blockchain technology makes terrorists’ actions difficult to track, providing them with a secure way to purchase supplies for their efforts and offering them a form of currency that can be easily exchanged on the dark web for commodities. A lack of regulation could diminish the industry’s reputation.

3. It could be the beginning of another global financial crisis.

 

In the wake of the rise of Bitcoin last year, professionals within the finance sector likened the phenomenon to that of “tulip mania” in the early 1600s and the 1987 stock market crash. While most experts agree that cryptocurrencies do not have the economic power to cause a global financial crisis, many are concerned about the effect that they could have on the world economy if they continue to grow quickly in popularity and to be used without any restrictions. Major financial institutions are already trading in Bitcoin, the best-known and most widely used form of cryptocurrency. In the event that this practice becomes widespread among all major financial institutions, a surge in growth without any regulation could destabilize the international market and pose a serious threat to the world economy.