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.

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.

3 Things You Need to Know About the Taxation of Cryptocurrency

In 2017, the dramatic rise in the worth of the popular cryptocurrency Bitcoin dominated the news cycle for good reason: the price of a single Bitcoin on New Year’s Day in 2017 totaled just under $1,000. By mid-December in that same year, its value had exponentially increased to almost $20,000, leading to an international conversation about the long-term stability of Bitcoin and generating great interest in many lesser-known cryptocurrencies, such as Ripple XRP, LiteCoin, and Ethereum. While Bitcoin’s value has declined since December to its current worth of around $11,000, a general public interest in cryptocurrency remains, particularly among younger Americans. According to an article published by Markets Insider, investments firms have witnessed significant interest in investments in cryptocurrencies from the millennial generation, while Google reports that the number of searches for the phrase “buy bitcoin” have surpassed the number of searches for “buy gold.”

 

While this technologically advanced form of currency possesses the allure of modernity to draw in young Americans, it’s important to note that novelty does not absolve any cryptocurrency from the regulations to which traditional forms of money are subjected. Below are three things that anyone who is thinking about investing in or using cryptocurrency should know about how they are used and taxed.

 

1. Cryptocurrency is treated as property, rather than as currency, for tax purposes. This decision, which was handed down by the Internal Revenue Service (IRS) in 2014, means that cryptocurrencies are subject to the rules that apply to intangible forms of property such as stocks, bonds, and other capital assets. Due to this classification, lower capital gains tax rates are applied to cryptocurrencies instead of the higher income tax rates applied to traditional forms of currency.

 

2. While tax rates on cryptocurrencies are lower, the fact that the IRS has labeled them as property makes purchases more difficult. If you choose to make a purchase with a digital form of currency—even something as miniscule as a meal from a crypto-friendly restaurant—you must keep thorough records of these “taxable events.” The taxes applied to the transaction are on par with those of deals like stock transactions. Buying goods and services through cryptocurrency will require users to translate the digital currency into the fair market value of the U.S. dollar at the time they make a purchase, and they may also owe sales taxes depending on the location and nature of the transaction. While exchanges like Coinbase will typically keep a record of a user’s cryptocurrency transactions within their database, experts still suggest that users maintain their own records.

 

3. The purchase of cryptocurrencies using traditional currency is not considered a taxable event. A buyer will not pay taxes during the initial transaction, wherein standard currency like the dollar is converted into digital currency like Bitcoin. Capital gains taxes generally apply to cryptocurrency transactions only if they are the result of a purchase, trade, or sale. Some people choose to purchase cryptocurrencies and hold on to them indefinitely in the hopes that they will grow in value, never using them in transactions. In those cases, when cryptocurrencies are held by a person for over a year without using them, a long-term capital gains tax will then be applied to the digital currency.

How Blockchain Can Dramatically Improve these 3 Major Industries

In a January 2018 article published on the Forbes magazine website, blockchain was named as one of 11 industries poised to become among the most significant digital disruptors of the future. While the experts believe that all industries will be affected by blockchain in the next several years, the following will have particularly significant gains to make if they choose to fully embrace the technology.

 

1. Real Estate

 

The real estate sector could benefit most from blockchain in an important way: the ability to abandon paper-based records in favor of a highly secure digital approach. Even the simplest real estate transaction is rife with paperwork. Every step—from opening escrow and obtaining insurance to securing mortgage approval and negotiating closing services and costs—requires hours of paperwork sent back and forth between the buyer, seller, and all involved intermediaries. In addition to unnecessarily prolonging the property-buying process, all paperwork is susceptible to human error, creating the possibility for mistakes that could later become public record. Paper-based records also have a greater potential for fraud, which can result in higher operating costs. Since the blockchain can automate the process of tracking documents, confirming their accuracy, and seamlessly transferring property deeds, real estate transactions can be conducted quickly, cleanly, and more precisely. Additionally, blockchain could completely eliminate the need to involve escrow companies, as funds within a real estate transaction could be released to the appropriate parties once the conditions of a smart contract on the blockchain are met.

 

2. Health Care

 

The field of health care has a lot to gain from the implementation of blockchain technology because it has the potential to restructure the entire health care system in a way that can help patients to obtain more accurate information and more comprehensive care. One of the foremost problems that health care providers struggle with is the inability to access the full picture of a patient’s medical history. This is due to the fact that patient data is not always easy to track down from past medical providers and because sensitive information is difficult to share with new doctors due to security threats posed by cyberattacks. Blockchain presents medical providers with the option of storing their patients’ medical history within a secure hub where they can safely and easily be shared with other professionals. Ultimately, this leads to a reduced likelihood that records will become lost, which can cause an individual to encounter issues with continuity of care. The more accurate of a picture that members of the medical community have of their patients’ entire medical history, the more likely they will be to correctly diagnose illnesses and prescribe treatments that save lives.

 

3. Crowdfunding

 

The impact that blockchain can have on the crowdfunding industry has everything to do with its affordability. Crowdfunding is a relatively modern concept that many in the business world see as a more accessible, small-scale alternative to venture capital funding. However, what these two forms of raising capital have in common are the high fees that entrepreneurs encounter when attempting to fund their creative ventures. Centralized crowdfunding sites such as Indiegogo and Kickstarter serve as an intermediary between individual online investors and the entrepreneurs who are trying to gather financial support for their ideas. They retain investors’ donations in escrow until the contract between an entrepreneur and his or her investors has been fulfilled. While this is in the best interests of donors, the fees for using these services are surprisingly high, and they reduce donations that could otherwise be put directly toward the entrepreneurial venture that donors intended to support. To retain these donations in full, entrepreneurs can use the blockchain to issue their own cryptocurrencies, which investors later have the option to trade in for services, products, or cash from the entrepreneur’s company. These investments are secured by smart contracts in which rewards and equity in exchange for contributions to a venture are distributed automatically once the terms of the blockchain-based contract are met.