Blockchain will prove its value and move beyond the hype
Blockchain – and more specifically bitcoin – has been a huge buzz at the beginning of 2018. The soaring value of many cryptocurrencies at the start of the year made even the most technophobic of investors sit up and listen. At the same time, the notorious volatility of the cryptocurrency market, which is particularly susceptible to hacks and talk of government regulation, has increased fears of a bitcoin bubble.
In the midst of these inflated coin prices and wildly fluctuating markets, there is one thing we can be sure of. Even if the bitcoin bubble bursts, the technology behind cryptocurrencies is fundamentally here to stay. Blockchain will play a crucial role in the way we interact with financial institutions, browse the internet, and use consumer products in the future.
More than just bitcoin
Bitcoin was the first major application of blockchain technology. Although revolutionary in its time, it’s now the old man of the decentralised network world and has limited applications. Paradoxically, as interest in bitcoin has grown, the functionality of the tech has decreased. Low data limits on ledger entries and more transactions in the network mean slower transaction times, which has led users at times to wait over 1,000 minutes for their payments to be confirmed. What’s more, for a technology created with principles of democracy and egalitarianism in mind, bitcoin is not living up to its potential. Its mining algorithms mean that it is basically impossible for individuals to mine coins successfully. Purpose built mining farms in China dominate bitcoin production, giving undue control of the system to a select group of people. The existence of so much mining power in any one country invalidates the very idea of bitcoin’s status as a decentralised network. It also exposes the technology to serious geopolitical risks.
Enter Ethereum and co.
The future value of blockchain technology now looks likely to come from developments separate from the bitcoin protocol. These seek to make blockchain suitable for an ever growing range of uses. It is here that Ethereum is making its mark in the sector. Whilst Ethereum is the most advanced blockchain system for smart contracts, it also offers developers the possibility of creating their own platforms, cryptocurrencies and decentralised applications (dApps). As interest in the blockchain grows, many developers are choosing to launch their projects on the Ethereum network. When these new organisations raise funds, this in turn increases Ethereum’s market value.
Such Blockchain-as-a-service (BaaS) applications will enable the integration of blockchain technology into our everyday lives. The real revolution in blockchain tech will come when blockchain based interfaces replace the traditional digital platforms we are used to. In 2018, we can expect to see blockchain developments relating to spending digital currency in the real world, social networks, currency exchanges, identity verification services, and corporate finance. The pursuit of increased privacy in blockchain transactions will also remain a priority for many developers, who wish to facilitate truly secure and anonymous interactions via the blockchain.
Some concerns are here to stay
One of the most touted facts about blockchain technology is the amount of energy that is required to process transactions. As the oldest and most sought after cryptocurrency, bitcoin in particular has come under attack for burning through as much energy in a year as some entire countries. It’s clear that this kind of situation cannot continue. The algorithms used to process blockchain transactions must become more energy friendly. Some developers, including those behind Ethereum, have already outlined their plans to switch to greener blockchain models. However, in order to have a significant effect, there needs to be consensus on this issue across all developers.
Another concern that will continue to plague blockchain in 2018 will be the hacks and scams that have consistently dominated the headlines in the past. The lucrative status of cryptocurrencies and their lack of regulation have made them the ideal target for fraudulent behaviour. Whether it is launching scam cryptocurrency coins in an Initial Coin Offering (ICO), or hacking into digital currency exchange platforms, blockchain based crime is only set to rise with crypto coins’ increasing market value. Governments will seek to regulate blockchain related activity in order to crack down on shady anonymous transactions, but the efforts of the entire blockchain community will be required to target more general hacks and scams.
Blockchain is the future
The volatile nature of the cryptocurrency market worries investors who have capitalised on the explosive growth of crypto tokens. But the blockchain market is so fickle largely because the pace of change is so high. As a relatively new technology, blockchain is gradually proving its potential by expanding its reach in various different sectors and services. The more that blockchain is able to replace – and improve – traditional tech, the more the hype surrounding it will calm down.
Sky high cryptocurrency prices might have grabbed the public’s attention at the beginning of this year, but it is the potential applications of this technology that will secure blockchain’s place in the mainstream consciousness for good. Watch this space in 2018.