According to a Gartner survey, it seems that only 10% of companies will attain radical digital transformation using Blockchain technology by 2023. The road to adoption is paved with many challenges that are yet to be confronted as 2018 comes to an end. As a pioneering technology, Blockchain has had tremendous impact on a variety of industries throughout the years as increasingly more startups and early stage ventures develop new applications for it.
In 2018, we’ve seen many viable initiatives go live. Some projects are delivering on promises made in 2017; others are still struggling to build communities and strengthen their unique selling proposition. Regardless, Blockchain is maturing in spite of ongoing hype and speculation. As a form of distributed ledger technology, Blockchain has gained tremendous attention in niches that go beyond cryptocurrencies. In 2019, it is anticipated that some industries will succeed in fully integrating Blockchain technology into their solutions model. As far as trends are concerned, the following might apply.
Security tokens become the new utility tokens
Following the SEC’s decision to mark all cryptocurrencies as securities, the crypto community bets that utility tokens will be replaced by security tokens in 2019. Government officials believe that any form of investment that is looking to make a profit should be seen as a security. As a consequence, ICOs dropped massively throughout 2018, as well as ICO scams that plagued the market in 2017. Security tokens are digital coins that feature similar benefits to conventional securities, such as bonds or stocks. People who choose to invest in an STO (security token offering) receive ownership of that STO’s profit, stake or other regulated offerings.
Security tokens are “programmable”, meaning that code determines the way they’re being used. A digital loan, for example, could pay out automatically based on a scheduled agreed-upon repayment. Such code executes without using third parties, such as a government entity. Liquidity is yet another benefit of security tokens because it helps tokenize illiquid assets (e.g. cars, venture funds), making them easier to trade online. Easy trading diminishes frictions, which leads to increased liquidity.
Harbor is a project that seeks to “reengineer private securities with Blockchain”. Following a $28M Series B investment, the company seeks to leverage its proprietary “R-Token standard” to encode custom token rules, and permit certain investors to invest after they’ve successfully completed KYC/AML verifications, and more. Other companies working on implementing security tokens are CoinList, Overstock’s tZero, and Securitize.
BaaS (Blockchain-as-a-Service) to replace the SaaS model
Based on, and similar to the SaaS (Software-as-a-Service) model, BaaS (Blockchain-as-a-Service) enables customers to implement cloud-based solutions to develop, host, and use proprietary smart contracts, blockchain-based apps, and other decentralized functions. One of the key benefits of BaaS is that it indirectly helps adoption across a wealth of industries and businesses.
Both IBM and Microsoft already possess entire departments dedicated to developing BaaS. Microsoft recently teamed up with Ernst & Young to launch a Blockchain-based solution for royalties management and content rights for entertainment and media industries.
SAP, HP, Oracle, and Amazon Web Services are also jumping on the journey. With integrations of Blockchain-as-a-Service into their business model, companies can test the distributed ledger technology (DLT) without the risks commonly associated with deploying Blockchain in-house.
Blockchain technology jumps on the IoT journey
IoT-based apps are distributed by definition, meaning it’s only natural for DLT to play a fundamental role in the way smart devices communicate with each other. Blockchain was designed to have an application foundation that involves transactions and interactions. With the increase in popularity of smart contracts, it doesn’t just improve IoT compliance, but also efficiency. With Blockchain at the core of IoT-powered devices, communication is streamlined because smart contracts are automated, and transferring data can be done faster and more securely.
IOTA’s unique value proposition is to leverage Blockchain and IoT to “empower a global community to build a new sharing economy”. By 2025, IOTA predicts that the number of connected devices in use will reach 75 billion. In 2019, there’s a high chance more Blockchain-based projects that leverage IoT will rise above the surface to disrupt the way people and smart devices connect and interact.
Supply chain on Blockchain to improve internal processes
Managing supply chains and dealing with the hurdles of distributing goods is incredibly complex. Supply chain can include hundreds of different stages, numerous locations (e.g. national, international), and a multitude of processes; not to mention that it’s an industry with numerous players and entities involved. Lack of transparency and the complexity of current supply chains has made the industry tap into the perks of Blockchain.
DLT could help improve recording, tracking of purchase orders, receipts and shipment; as well as verify certifications, connect goods to bar codes and serial numbers, and a lot more. IBM Blockchain, for example, has already signed deals with Nestle, Kroger, and Walmart; companies that expressed an interest in using the company’s proprietary TradeLens to track their food supply and increase transparency.
With Blockchain, shippers could benefit from increased transparency for documenting the journey of a product across many supply chains while reducing recalls with regulations. Since it’s a tamper proof ledger with established coding rules, Blockchain could potentially eliminate unforeseen audits that internal processes and systems require.
Decentralized exchanges go mainstream
Decentralized exchanges (DEXs) are becoming a promising use case for Blockchain in 2019. Centralized exchanges (CEXs) are a lot cheaper and faster. But although backend operations occur in a database – rather than on a blockchain – they feature high fees and are easier to hack than a DEX. Exchanges like Etherdelta, Bancor and IDEX are increasing in popularity with their P2P, non-custodial, trustless and fully independent exchange solutions. Trades are conducted on the Blockchain, thus eliminating the need for an intermediary or central authority to hold a client’s funds. Added security is one of the main benefit of a DEX, and we estimate more decentralized exchanges with even better benefits to emerge as 2019 unfolds.
“Speculating on the future of Blockchain is like attempting to predict the future of the World Wide Web in 1993”. (Source)
Blockchain technology is on the verge of revolutionizing business processes on a global level. More industries will jump on the journey, although industry experts argue that real adoption takes times and effort. Throughout 2019, we can anticipate governments to strengthen regulations on cryptocurrencies even more than they did in 2018. More countries will be accepting that Blockchain is here to stay, and that the benefits of the technology are undeniable.
Though we will witness the fall of many Blockchain startups, entrepreneurs will gain more knowledge and experience on how the technology should be implemented. ICOs are not going anywhere any time soon, but following a year of pure hype (2017) and a year of corrections (2018), we anticipate stronger business models based on more valuable use cases for Blockchain.
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