Trends blockchain and cryptocurrency for 2019 | Business IT

Ten years ago, in 2008, following the catastrophic collapse of subprime mortgages, for some a ray of hope shone: the promise of a completely decentralized monetary system, distinct from the irrationality of the market and the destructive tendencies of the government and even big banks to fail & # 39 ;. The idea of ​​the insurgents, leaked quietly on niche forums on the internet, was, of course, bitcoin.

Cryptocurrency has not completely overturned the established economic structures as some had hoped, but it certainly has had an impact on the world.

Although it was initially exploited by cybercriminals as a means to facilitate illicit transactions, cryptocurrencies continue to represent a potential as a vehicle for anonymous payments and fraud-free for the average citizen.

What is most interesting for many other segments of the industry is the underlying technology, blockchain. Transparency blockchain systems offer, together with their ability to provide a shared view of every transaction that occurs within the system combined with the difficulty of hacking them, making the blockchain an attractive technology.

The level of decentralization varies depending on how open the blockchain system is. While the first samples of the blockchain – and some decentralized apps today, as we will see – offer completely public blockchains, private or semi-private blockchains have proved to be more attractive to large companies.

Here's what we expect to see in blockchain and crypto in 2019.

Banks and cryptocurrency

An industry that has taken note of the blockchain from the beginning is banking.

For some years, banks have been experimenting with blockchain, especially with applications to make transactions cheaper and easier. While one of the main features of bitcoin has been conceptualized to be decentralized, centralized banks are examining ways they could absorb some blockchain-like systems.

Take the cryptocurrency Ripple, which was founded in San Francisco in 2012 and has since been successful working with major banks. One of its products, xCurrent, is used by a number of banks, including Santander, and greatly accelerates the process of verifying the information required to make transactions.

Ripple also launched xRapid in 2018, which targets companies in emerging markets, where preloaded local currency accounts are generally required for payments, increasing transaction costs and time.

Instead, xRapid will quickly convert the fiat currency into a cryptocurrency, XRP, to move it through the system before converting it back to whatever currency is required at the end.

At the time of the launch, Ripple CEO Brad Garlinghouse predicted that most major banks would adopt the service in 2019 as a liquidity tool.

However, despite some companies, including Western Union and Moneygram trialling xRapid, Garlinghouse said the lack of adoption is due to uncertainty about regulatory constraints on the blockchain.

This could be set to change with the establishment of legitimate currency exchanges in Gibraltar and Malta.

Goldman Sachs expressed interest in setting up a cryptocurrency negotiation desk, although nothing is carved in stone and the company seemed to turn back to the idea when Business Insider reported that the company had dropped the idea.

However, since the value of cryptocurrencies fell in free fall, this was scolded with a counter-notification by the bank that denigrated the report as "false news".

"A big demand for cryptocurrencies in 2019 is if we see a stock exchange traded by Exchange approved [American regulatory body] the SEC, "commented Ruchir Dalmia, Blockchain Consultant of Deloitte Computerworld United Kingdom. "This approval would probably be a catalyst for further investment by institutional investors, such as funds and trusts, in encrypted markets and cryptocurrency demand.

"There are currently many expert candidates in the examination, but after several rejections and postponements during 2018, it is not clear whether the SEC will be ready to allow such an undertaking in the short term."

It is important to underline that Christine Lagarde, president of the International Monetary Fund (IMF), recently made comments that seem to encourage banks to become more involved in cryptocurrencies, also suggesting that banks should experiment with the launch of their cryptocurrencies to prevent cryptocurrencies becoming of havens for scammers.

It could also suggest that Lagarde believes that cryptocurrency might one day come out of its relatively niche user base and enjoy widespread dissemination.

This possibility could prove to be of concern for central banking systems as it would present a direct challenge to their hegemony. Since this would only happen if cryptocurrencies become much easier to use for the average person, perhaps Lagarde wants to deny this possibility by encouraging banks to become the leaders of this position and to offer a more user-friendly cryptographic product before others.

Although all this seems contrary to the raison d'être, there are ways to create less decentralized coins and incorporate a central mechanism that controls the supply of "coins". This means that it would be possible for banks to launch their own form of cryptography without embracing a truly decentralized system.

To this end, there is also a growing market for "stablecoins", which are linked to the fluctuations in the prices of a fiat currency set up, for example the dollar.

Initially suggested as a means to deny the wild price fluctuations suffered by bitcoin and the like, clearly, this offers a mechanism whereby a digital currency could offer the benefits of the crypt but without really challenging the underlying economic systems at work – a prospect that it could be very tempting for central banks.

However, it should be noted that currently due to regulatory ambiguity, companies could theoretically also launch their own forms of cryptocurrency.

Given that technology giants like Google and Facebook can move much faster than the government in creating and adopting technologies, there is also the possibility that these companies may be interested in launching their cryptocurrencies – even taking over the reins. from central banks if they wish.

Our bet is that eventually the "encryption" of some form will take hold, given the massive incentives in terms of frictionless and low-cost payments, but is unlikely to be tied to any real form of decentralized "bank" in the near term.

Regulatory obstacles persist

Obviously, for this to happen, a definitive change should be made to the current regulatory framework for crypto and blockchain, both in the UK and globally.

In the United Kingdom, there is currently no official legislation for the use of blockchain technologies by the Financial Conduct Authority (FCA), the UK regulatory body in the field of finance. While the FCA does not explicitly regulate cryptocurrency, the applications built on the basis of the blockchain in the fintech space are under the mandate of the organization.

At the beginning of 2018, an intervention by Mary Starks, director of competition at the FCA, outlined the main applications of the blockchain as "records, including the registers of contracts, transactions, property ownership and proof of identity".

He noted that "the two goals of regulation are to protect the consumer and to help innovation flourish". He added the importance of ensuring global collaboration on this issue, pointing to Global Digital Finance as one of these international bodies that aims to promote the adoption of digital finance technologies.

Among other things, the FCA has created a sandbox initiative that allows companies to test blockchain applications and experiment with technology within a closed environment.

However, 2019 may be the year in which regulation becomes more conducive to testing technology in the financial and commercial sectors.

In a recent Blockchain Live event held in London, the minister for digital and creative industries Margot James signaled the British government's interest in developing blockchain capacity in British industry.

"As the prime minister recently said, the UK is 100% committed to supporting the development and adoption of new technologies," said James, making a parallel between the government's interest in blockchain. and the urge to launch the 5G.

However, James emphasized the importance of considering the applications of the blockchain beyond the financial world. He highlighted numerous blockchain projects to praise in particular the partnership between IBM, Nestle and Unilever to improve traceability of contaminated food products.

"Actions like this, which work behind the scenes for consumer protection, have the capacity to make huge improvements to people's lives," he said, noting that in recent months he has met numerous companies that develop blockchain applications to improve supply and increase trust in social financing.

James added that the British government had committed £ 10 million to fund blockchain projects in areas such as energy, voting and charity through Innovate UK and research councils.

However, Britain and other governments around the world are still struggling to develop a regulatory framework for the blockchain given that decentralized elements pose important legal problems, not to mention settling into a common framework.

ICO and dApps

In 2018, the "Initial Coin Offerings" (ICO) market – an alternative financing method in which a blockchain startup increases capital in exchange for tokens – has boomed compared to 2017, but this trend may be down in 2019 .

As the market was growing, in parallel with the growing hysteria around the blockchain, there was a strong demand for ICO from both real blockchain believers who supported decentralized systems for ideological reasons, and opportunistic investors looking for quick-rich schemes.

Given their notoriety for pump and landfill schemes – which allow scammers to artificially inflate the price of tokens before cash out – there is evidence that the "lawless" rules are approaching ICOs.

Research suggests that it is increasingly difficult to obtain sufficient funding in this way. A high profile failure was Civil, a blockchain-based news organization that failed to meet its market capitalization despite extensive publicity, including the Financial Times, the New York Times and our sister publication Techworld.

It is hard to say that once the excitement of the first mover is exhausted, what will remain? Will the whole market fall into darkness? Or will the truly committed evangelists remain? If it is the latter, the interest can be sustained long enough to get the traditional appeal?

"It would seem that beyond any initial interest in a dApp [decentralised application]They struggle to maintain any form of significant user base once the excitement has turned off, "said a spokesman for Everledger, a British startup that built a scalable commercial application for diamond industry, colored gems, art and wine on top of blockchain technology. "For the most part, it seems that dApps are a challenging concept to understand compared to popular and easy-to-use web-based apps like Facebook, Instagram and Twitter, which they are also free to use – if they set aside the unbridled collection of personal data and exploitation of users, that is ".

But apart from the traditional appeal, considerable obstacles remain, such as the need to invest in a "cold wallet" and sometimes go through a complex registration process to participate in this ecosystem.

Organizations like the Token Foundry are trying to bring legitimacy into the area by requiring a more rigorous approach to registering buyers.

Ruchir Dalmia of Deloitte said Computerworld United Kingdom that the service multinational has seen a decrease of over 80% in most cryptographic activities due to the lack of returns and canceled projects.

"With the growth of investors and regulators, token projects are kept to higher standards and clearer regulatory guidance is pushing new encryption initiatives to adopt better processes, as well as stronger teams and technologies," said Dalmia. "This, however, has a considerable cost: combined with the already high cost of blockchain product development, the effect of asset-rich teams selling ICO profits to finance product development has produced difficult market conditions, which is why we expect the market for ICOs to remain subdued in 2019. "

In the United Kingdom, Digital Catapult, a quango that promotes digital technology and innovation, has conducted research on over 260 DLT (distributed ledger technology) companies.

Informed by this research, they divided DLT companies into four main categories: distributed registry developers (13 percent), decentralized app developers (35 percent), service providers (37 percent), and centralized systems (15 percent).

Despite the focus on finance and fintech, they found that these companies covered a range of vertical industries, including manufacturing and creative industries. In fact, 38 percent of the companies surveyed believe that their technology can be applied to all vertical markets, not just to fintech.

Regulatory uncertainty has been cited as the most urgent concern by 74% of these companies, with the irreconcilability of GDPR with public blockchain and the lack of clarity on ICO regulation as the main issues.

45% of these companies had to consult with specialized lawyers to help establish their organizations, but they were not sure if they had received a valid opinion because of the novelty and complexity of the area.

tokenization

To discuss tokenization, it is important to delineate different types of tokens, which are related to a different kind of blockchain ecosystem.

Altcoins are forms of cryptocurrency so named because they are an alternative & # 39; at the bitcoin.

Utility Tokens: originally called appcoins, these are tokens that are mainly used within blockchain-based ecosystems of platforms. They maintain internal value on the platform but can also be traded for different currencies in trades. They can also act as "shares" in blockchain platforms.

Finally, security tokens embody the value of real-world resources, such as real estate.

"We believe that tokens are the catalyst for the re-imagination of completely new constructs and the construction of completely new systems," he told our sister Sanaya Mirpuri, head of product marketing at Token Foundry Techworld in relation to utility tokens. "We believe in projects that create token-based ecosystems, not just payment tokens or tokens that people can pump and download, but create an ecosystem, where people can actually use tokens."

But decentralized companies that support token economies adopt a radically new business model, in which monetization can be a dirty word.

"We do not like using the term 'monetization' because we think it's essentially what the centralized platforms – Periscope, Instagram, YouTube – do," said Kevin Yeung, CEO of FanX, a decentralized live streaming platform Techworld. "They monetize their users and content generators."

Therefore, it is difficult to see how these types of companies will adapt to the accepted business model. However, a symbolic economy could also attract established traditional companies.

For example, CEO of YEAY, a decentralized social media platform, said Melanie Mohr Techworld: "Looking at other apps that could also use the WOM token, frankly, it could also be pursued by Snapchat or Bitmoji."

However, it is not certain that these decentralized ecosystems will ever become mainstream.

One of the most widespread potential application of tokenization is in security tokens. Security tokens can make trading more transparent and inclusive due to the lack of barriers between different currencies and countries.

As ICOs are increasingly slowing down, STOs (Security Token Offerings) are on the rise, due to their greater regulatory compliance. In fact, security tokens are already fully compliant with SEC regulations, unlike utility tokens. This is mainly due to the fact that the value of the security tokens is linked to the value already existing in the world. For example, properties, shares or items of value to which a value in fungible tokens is assigned. Many of the STOs that have been launched to date are types of investment funds.

Everledger commented that the UK government is pushing the regulation forward: "Cryptoassets that are security tokens fall under the existing regulatory scope as specified investments.

"However, the task force recognized that the fictional nature, complexity and opacity of many criptoassets means that it is difficult to determine whether they qualify as a security token.To provide further clarity in this area, the FCA will consult perimeter guidelines on the application of these tokens by the end of this year. "

Blockchain and big industry

Some high-profile blockchain startups focusing on the financial sphere include the R3 consortium comprised of over 200 companies including Barclays, Accenture and AWS. In 2016, they created the open source Corda platform that was designed for all users on which to build, in addition to the Corda Enterprise platform, which can be adapted by different companies for different use cases.

Another group is IBM's Hyperledger Fabric, an open source blockchain framework designed to help you create a blockchain for your corporate network, even with paid options.

Companies outside the financial sector have been particularly interested in exploiting the tracking capabilities offered by blockchain technology. A partnership between IBM, Nestle and Unilever has led to the development of blockchain to improve traceability of contaminated food.

Blockchain may also have a growing application in health and pharmaceuticals. IBM and the US Food and Drug Administration (FDA) have collaborated to achieve a scalable exchange of health data using blockchains, with the goal of addressing the lack of transparency in health data and improving trust in the privacy of patients.

Meanwhile, logistics giant DHL is currently working with Accenture to develop a blockchain-based tracking and tracking system in six areas around the world.

This is still a nascent area, but increasingly technology giants offer "blockchain-as-a-service" options, making technology more accessible than ever. Some of the companies that offer products like these include Oracle, IBM and Microsoft.

Read ahead: The best blockchain-as-a-service options

A survey by Deloitte at the beginning of this year found that 84% of respondents now consider the most secure blockchain systems of systems built using conventional technologies.

Ruchir Dalmia of Deloitte said Computerworld United Kingdom that there is a growing impetus for the use of blockchain platforms in business and we are starting to see the launch of large-scale platforms.

"Business leaders are starting to take ambitious steps to move from small-scale experimentation to real-world execution, with organizations pooling resources and expertise to build shared platforms," ​​said Dalmia. "Investments in consortium-led projects have taken hold in many areas, for example in the launch of VAKT, an organization backed by several major energy companies, which launched its post-trade management platform for goods. ; beginning of this month.

"In 2019, we expect the launch of several new large-scale business solutions."