4 Blockchain Macro-Trends: Where to Place Your Bets

The challenges (and opportunities) ahead for enterprise applications of distributed ledger tech.

2016 was a rollercoaster year for those of us following blockchain and distributed ledger tech. Whether it was bitcoin pushing toward $1,000, a consortium of banks open-sourcing software with R3’s Corda, or government and central banks supporting blockchain experimentations, you can’t deny the subject has been everywhere. While some have grown tired of the endless press releases and bickering about ledger designs, in the background, real progress is being made, and major organizations are already placing their bets. In 2017, I’m watching for maturity in the active projects both from startups and blockchain communities, as well as the incumbent financial services companies. Evolution and revolution are necessary, and I believe we can learn from both. But, if you’re new to this space, it may not be obvious where you should invest your time or resources. To help you make those decisions, I’ve identified four macro-trends I see happening in 2017.

1. Revenue becomes the big question

“Where is the end product?” My projection is, this will be a common question this year as executives and mainstream media look but fail to see the traction being made. But for the first time, 2017 might see it answered as the launch of the first real distributed ledger products go live, likely with a focus on gold trading. Right when you think you don’t have to do anything, real-world, scalable financial products hit the financial markets. So while the ‘end product’ question will emerge (and go away), others will debut. As 2017 is unlikely to be the year DLT scales for corporates, many will begin to ask, ‘Where’s the revenue?’ The business cases are out there, they’re just not obvious from 30,000 ft.

2. The beginning of ‘new businesses’

While everyone is obsessed with who’s in what consortium, what’s more interesting is what systems people are building and what that will mean. We’re seeing the beginnings of real structural change in financial markets. If you imagine financial markets today as being 100% centralized, with bitcoin being 100% decentralized, then financial markets are taking baby steps away from centralised power. Over time, any shift in the first number is significant. My guess is that as banks talk more about “smart contracts” and DLT instead of “blockchain.” The market will recognize that these corporate things are neither shared databases nor blockchains, but some new interesting thing. For now, this has been given the label “DLT,” but likely needs a more accurate one. Yet, in financial markets, where new asset classes or financial agreements become revenue opportunities for banks and financial market participants, a new narrative must emerge. One that moves away from “cost and efficiency” only.

In 2017, I’m watching for maturity in the active projects both from startups and blockchain communities, as well as the incumbent financial services companies. Evolution and revolution are necessary, and I believe we can learn from both.

3. Bitcoin goes enterprise

I’ve long been an advocate of mainstreaming bitcoin and (outside of rising interest in DLT) I predict mainstream attitudes are starting to change about bitcoin. Companies like PwC, Deloitte and others are making major plays in bitcoin and ethereum, and companies like Bloq and Blockstream have started to resemble the early days of Linux enterprise companies, making open-source “wild” software tame and consumable for large corporates. In this environment, institutional investors may start to leverage bitcoin’s infrastructure and even go deeper into bitcoin investing. Given that the line between the bitcoin world and the banking world could start blurring (as new business models emerge beyond payments and remittances, and wallets are released) this seems even more likely to occur. It will be very small at first, but projects like t0 are the types of things we may look back on in 25 years as a watershed moment.

4. Experimentation will continue

The current experimentation environment is super interesting to watch, and new business models will emerge. However, there will be failures, as well. We might have one, maybe two, smaller DAO-like failures in the public blockchain space. As we go through this learning and experimentation, a more useable, more robust framework for token or smart contract-based businesses compatible with local laws will start to emerge. There is no good reason why you couldn’t build a business this way now, it’s just much harder than a bog-standard token sale. There has been some good legal advice on how to do token sales well, but the idea that these “products” should be pre-sold to fund these efforts needs rethinking. My guess is we’ll begin to see more creativity beyond the ICO as we know it today. This post first appeared in the CoinDesk 2016 in Review special feature. Revenue image via Shutterstock.