I’m approaching my second anniversary working within the Blockchain and digital currency sector, but already it feels like a lifetime – such has been the pace at which the industry has grown and evolved.
The number (and size) of Initial Coin Offerings (ICOs) in 2017 was staggering. The cryptocurrency markets were equally breathtaking for their price gains (and corrections), matched only by the speed and extent to which some regulators responded. It was a rollercoaster ride, but by the end of the year, it’s fair to say this new asset class had finally arrived.
My personal (but far from unique) view on cryptocurrencies in general is that they represent a new asset class. As such we are seeing huge opportunities for investment and innovation, backed by Blockchain and other decentralized and distributed ledger technologies (DLT), as well as some truly innovative and disruptive solutions. There is still some hype, and considerable asset price volatility, plus pure investor speculation; but there are some great projects out there building solid business models; and sound investment cases for network protocols, industry utilities, scalable solutions and core platforms.
In 2018, I expect to see one or more of the following developments:
- A fully deployed, government-backed Blockchain project that will change the way citizens engage with public services
- A truly decentralized autonomous organisation that learns to make decisions for itself (based on a set of dynamic, self-replicating governance rules) as to how resources are allocated, stakeholders are rewarded and participants are incentivized (for all its faults, the DAO was possibly the first new corporate structure since the joint stock company)
- Following Japan’s lead, more governments will recognise cryptocurrencies as legal forms of payment, while at least one Central Bank will issue a public digital currency as a form of legal tender (not just an inter-bank instrument)
- Traditional securities (equities, bonds, commercial paper, asset securitization) will be issued in the form of digital tokens (via a new form of Token Issuance Program) leading to wider distribution, fractional ownership and reduced cost of capital raising, plus streamlined share registry and custodial services, thanks to DLT
- Likewise, “traditional” digital tokens will be issued as formal securities, backed by new types of financial products, allowing for greater financial innovation and funding flexibility
- At least one crypto-backed ETF will list on a major exchange, along with more crypto-derivatives such as swaps and options.
- One or other crypto-currency will be adopted as a day-to-day payment solution for micro-payments
Only two or three years ago, none of the above seemed very likely, or at least not in the short-term. Today, there are multiple initiatives working across each of these trends. So this is not a case of “if”, but “when”.
Enjoy the ride!
Next week: Bring Your Own Change