In the last decade, blockchain and distributed ledger
technology has had an immense impact on a multitude of industries, with
84% of organizations experimenting with the technology, with more than
half (52%) of blockchain projects in the research and development phase,
according to the PwC Global Blockchain Survey.
The industries making important strides forward with blockchain include financial services, manufacturing, energy and utilities, health care, as well as government sectors,
but the potential of the technology is limitless. Ultimately, any
business that is looking to simplify the processing method of large
volumes of transactions while ensuring the verifiability of these
transactions — stands to benefit from the use of blockchain technology.
So,
what does the next decade hold for blockchain, and what barriers are
there to overcome in order to see true mainstream adoption?
Cryptocurrencies: The next-generation portfolio diversifier
Blockchain
technology has often been mistakenly associated with Bitcoin’s
volatility. While blockchain is indeed the underlying technology
powering Bitcoin and other cryptocurrencies, it has little to do with
its peaks and troughs.
Bitcoin and cryptocurrency price
volatility is primarily driven by investors’ perceptions of the security
of their holdings along with the prospects for Bitcoin and other
cryptocurrencies to become a reliable portfolio diversifier as
institutional adoption increases.
In the last year alone, gold has risen by 10%, while Bitcoin has soared
by over 180% against the United States dollar. The U.S. Federal
Reserve’s recent slashing of interest rates for the first time since the
financial crisis signals a return to monetary and fiscal stimulus in
the form of quantitative easing, which could negatively impact
confidence in fiat currencies. If this ends up being the case, we could
soon witness capital flight that could result in a decline in the
performance of the U.S. dollar, should there be a significant loss of
trust in central banks.
One-year crypto performance. Source: coin360.com
Cryptocurrencies,
on the other hand, have proven to be one of the top-performing assets
since the start of the year, outperforming other, more traditional asset
classes, such as stocks, commodities and real estate. While it might
not be prudent to put all of one’s eggs in a single basket, the case for
including digital assets as a long-term portfolio diversifier is
stronger than ever, but it remains to be seen how cryptocurrencies will
perform during times of extreme macroeconomic or market stress.
Facebook see, Google do? The business case for blockchain
When
Facebook says “Jump!” users ask “How high?” However, it is not enough
for companies to hop onto the blockchain bandwagon without further
investigation into the viability of blockchain and whether it is the
right solution for a business.
The applicability of blockchain
very much depends on whether a business fulfills a number of criteria,
including whether multiple parties share and update data; if the
business has a customer database, whereby there is a verification
requirement; third-party intermediaries adding complexity that
blockchain could potentially remove; whether interactions are
time-sensitive; and if transactions interact.
Blockchain
stands to see far greater adoption when organizations' and
institutions' approaches and application methods of decentralized ledger
technology become more targeted, as opposed to adopting a
one-size-fits-all framework. This allows companies to mitigate the risks
associated with integrating blockchain into their businesses
unnecessarily.
New kid on the block(chain): The Internet of Things (IoT)
The
increasing spread of internet connectivity to things in our everyday
lives — such as smart thermostat Nest, Philips Hue smart bulbs,
wearables like Garmin smart watches — means that there is a vast amount
of data being collected that could benefit from being stored in a secure
and verifiable manner.
This is where blockchain comes into play. With the overall number of connected devices projected to grow to 29 billion
by 2022 (18 billion of which will be IoT-related), there is an
increasingly urgent need to safeguard the sheer volume of data that will
be collected by them. Blockchain eliminates single-point failure with
its distributed network of computers, as well as potential
inefficiencies as a result of overburdened centralized systems.
Blockchain’s additional layer of security also means that personal data —
including the data collected by implantable cardiac devices (!) — is far less vulnerable to being hacked.
The future of fundraising: From ICOs to STOs to IEOs
July
31 marks the sixth anniversary of the introduction of the first ever
initial coin offering (ICO) in the blockchain space, with J.R. Willett
launching Mastercoin (now Omni). As the industry matures, the nature of
fundraising in the space has changed. We’ve witnessed a shift away from
ICOs, with security token offerings (STOs) launching in public markets and a further progression toward initial exchange offerings (IEOs) in 2019.
While
ICOs require reduced upfront capital and have lower barriers of entry
for investors, they were plagued by fraudulent token sales and scams,
which ultimately scared investors off. This was followed by a
significant shift toward regulatory compliance, which is essential if
these fundraising practices — and blockchain in general — is to see
widespread adoption. Unlike ICOs, security tokens issued during an STO
are supported by an underlying asset that reflects a monetary value,
which offers investors greater transparency.
Oversight by various
regulatory bodies — such as the U.S. Securities and Exchange Commission
and Swiss Financial Market Supervisory Authority — can provide some
measure of protection. On the flip side, these same regulatory
guidelines mean that participation in STOs is limited to institutional
investors. So, what might the future of fundraising look like in the
blockchain space moving forward?
IEOs — i.e., token sales
conducted directly via an exchange, with issuers paying a listing fee —
are the newest form of fundraising. While they are slightly less
regulated than STOs, Know You Customer and other checks are mandatory,
with exchanges ensuring due diligence before a token is listed. Also, as
all transactions take place via an exchange, this method of fundraising
is seen as being more secure compared with ICOs, whose project websites
may lack the necessary security measures.
As blockchain
technology transitions from being reserved for the high-tech elite to a
technology that can be applied to the masses, we will undoubtedly
witness a shift in perception on a global scale. As the market matures
and the technology follows suit, we will see real-world applications
across industries, redefining the way we do business.
Alexandra Tinsman
is president of the NEM.io Foundation, which aims to introduce, educate
and promote the use of the NEM blockchain technology platform on an
international scale to all industries and institutions. The focus of the
NEM.io Foundation in 2019 is to support the commercialization and
launch of Catapult, the next iteration of the core NEM engine.
With
more than 20 years’ consumer and B2B product marketing experience,
Alexandra has worked with some of the world’s biggest brands in
software, hi-tech gaming, entertainment and online services, including
Microsoft Xbox, Xbox LIVE, Bing, Windows Phone, Skype and MSN, in which
she developed, executed and managed global marketing campaigns and
go-to-market strategies.
She also worked on
some of the world’s first tradable digital assets used in Pokémon
Online, Magic: The Gathering Online, League of Legends and the Xbox
Digital Marketplace.
