Daniel Newman, CEO of Broadsuite Media Group, author of Futureproof and principal analyst at Futurum writes that while Bitcoin continues to blow away stock market analysts, its popular cousin, blockchain is yet to find its place. He predicts that this may happen in 2018.
According to Gartner, by February 2017, Blockchain was the second top search word on its website, a 400 percent increase in just a year. This is no surprise as the technology is gaining significance with 20 percent of global trade finance expected to use it by 2020. The financial sector will lead the way in the use of blockchain technology which will later be applied in other areas including:
- public administration
- supply chain management
- tracking of digital rights in music and movies
- smart contracting and
- Recording of patient health data.
In 2018, investments in blockchain technology will continue as has been the trend since 2016 when a total of $1.1 billion of venture capital was invested in the sector. The continued investment is informed by the potential of the technology to transform the way business is conducted. However, most investment today is in the financial services sector, which is perfectly understandable as there is a close association of blockchain with cryptocurrency.
Deloitte predicts that blockchain may soon overtake other technologies such as cloud computing, data analysis and internet of things in venture capital investment. However, it may take long before attaining the level of hype that surrounded internet in the late 1990s. Some challenges bedeviling blockchain technology may spill into 2018 and beyond as by the time of writing this article, there is no substantial progress in addressing them.
Scalability has been a major setback in the application of the technology. Traceability, a key feature of blockchain can only be achieved by storing full details of every stage of a transaction. This increases the size of blocks and a consequently the time required to validate a transaction. The number of storage nodes also increases making synchronisation more difficult with the result that a transaction takes longer to be confirmed in the blockchain network. While past paced industries such as financial services need to process thousands of transactions every second, blockchain can only validate and record seven transactions per second. Fortunately, blockchain networks like Bitcoin and Ethereum are developing capabilities for multiplying transaction volumes to about 45,000 per second.
The slow reception of blockchain in areas such as the financial services industry has been partly due to lack of privacy. Blockchain’s public ledger is accessible to all members of the network which may compromise the privacy of individual transactions. Experts are also addressing the problem of privacy by developing the idea of private blockchains as epitomized by the hyperledger project. These private blockchains will only be joined on invitation ensuring that only those who have been vetted and approved by the existing members of the network will be allowed to be members.
As we approach 2018, much still remains to be done to ensure blockchain technology reaches its full potential. This creates a perfect opportunity for investors and innovators to lead the way in unlocking its potential.