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2019: The Year Blockchain initiates the great separation of finance

Asheesh Birla is senior vice president of Ripple's product.

The following is an exclusive contribution for the 2018 year of CoinDesk under consideration.

2018 years in review

The full-fledged industries, from telecommunications companies to food stores, desperately try to preserve their most precious asset: the package. Conventional wisdom goes "if you control access and distribution, then consumers have little choice to go anywhere else".

Unfortunately for the weak incumbent bundles, we have seen companies like Netflix and Amazon that destroy almost every part of our lives. The same is now underway in crypts and finance, where some of the largest financial institutions are seeing their packages face serious obstacles.

While the unbundling resumes in 2019, I expect it to create opportunities for smart blockchain companies that can find their niche and succeed. But with this opportunity comes a great risk. If entrepreneurs and builders take off their skis or promise too much, like many at the beginning of 2018, they risk losing credibility and giving up the advantage of the first move.

Asia leads the way

For decades, major global financial institutions have controlled much of the financial system underlying the global economy.

Blockchain has already begun to level the playing field by disrupting the corresponding banking system and democratizing payments. In 2019, the blockchain will begin to move beyond payments and will begin to separate securities, loans and other financial derivative products. Companies such as Securitize *, Dharma, Dydx, Compound Finance and The Ocean are all attractive companies working on the next stage of Decentralized Finance (DeFi).

In recent years, mobile app companies like Grab, Gojek and Paytm have expanded their offers to include payments, investments, remittances, loans and insurance. They are rapidly catching up-to-date consumers as many Asian economies switch from cash to digital.

Regulators in Asia are providing clearer guidelines on blockchain and crypto projects, in part because they consider the blockchain a catalyst for economic growth.

Furthermore, over 80% of all cryptocurrency trade volumes are based on Asia, so there is a strong interest in building a viable infrastructure. If Grab, Gojek and Paytm can control distribution on a new set of consumers, they will then start looking at the blockchain to find a better experience for payments, loans and other financial derivatives.

Return to the basics

In recent years, cryptographic space has deviated from the original vision of financial access, which was well articulated in Satoshi Nakamoto's bitcoin white paper. Similarly to the boom and the failure of the Internet, almost all imaginable use cases, from tracing the freshness of the flowers to Kodakcoin, used blockchain as the word of order to get influence and attract the eyeballs.

However, just like in the internet, the use cases must coincide with the technology being developed.

For example, Netflix would not be successful in streaming TV programs in 2000, when less than 1% of people had access to broadband. In recent years, it has become clear that payments are the case where the Blockchain works today.

In 2019, the blockchain will develop this momentum and branch out to decentralized financial applications such as loans and insurance products that exploit blockchain-based smart contract platforms.

I have always found that some of the best buildings occur in the downward markets. As long as manufacturers can stay focused on solving very specific cases of use, we will see more competition, innovation and much needed separation.

This is a great thing for the whole industry.

Revelation: Ripple's Xpring is an investor in Securitize.

Have an opinion of 2018? CoinDesk is looking for proposals for our 2018 under consideration. News via e-mail [at] coindesk.com to learn how to be involved.

Parts of watches via Shutterstock

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