What Does Blockchain’s Future Look Like Following Bitcoin’s Disastrous 2018?

There are times when “nothing can be more deceptive than an obvious fact.” And nothing seems more deceptive these days than the value of Bitcoin and other cryptocurrencies.

The innovative power of blockchain technology — the core engine of Bitcoin and other cryptos — offers the ease of anonymous transactions with the possibility to disrupt financial institutions. This may have been one of the factors that led to inflated expectations and fueled the hype around Bitcoin.

Then there is also the alleged market manipulation, which research suggests bolstered Bitcoin’s rise in 2017. This news came out shortly before Bitcoin finished off a disastrous 2018, losing over 70% of its value. Analysts at Bloomberg Intelligence predicted this past November that Bitcoin’s drama is just starting and that its worth could fall to $1,500. Seeing as how the cryptocurrency took a major hit to end 2018 and has yet to rebound in the new year, this prediction might be very optimistic.

A deeper analysis of how cryptocurrencies are used and viewed by users, traders, miners and “investors” might reveal other possible reasons behind this precipitous decline.

Cryptocurrencies have been viewed as either a storage of value such as gold, a digital currency mimicking fiat money or securities such as stocks. A closer examination of these comparisons reveals that none would pass the basic definition or qualities of such financial instruments.

For Bitcoin to be a storage of value or “digital gold,” it needs to have a relatively stable value. But when it rose 1,824% in less than a year in 2017 and then decreased by 70% this year, this would fit the market definition of a boom and bust. As clarified by a KPMG report, “To fulfill the requirements of store of value, cryptocurrencies must be much more stable.”

In regard to the notion that cryptos are digital currencies that could replace fiat money, when examining the number of transactions conducted in Bitcoin blocks over time, the highest number of transactions maxed at 2,704. Furthermore, these are likely speculative transactions to sell and buy Bitcoin rather than a true exchange in value such as buying a cup of coffee or music online.

And the idea that cryptos are securities failed when Bitcoin and cryptos were not classified as securities by to the Securities and Exchange Commission (SEC). Also, if Bitcoin and cryptos are none of the above, what are they then? What can they be useful for, and what will be their future?

Simply put, Bitcoin and other cryptocurrencies are nothing more than hype with very limited economic utility and are nonproductive-assets that will most likely end in a long and painful demise. However, there are two intriguing questions: Will there ever be successful cryptocurrencies that could be universally accepted and used? And what is going to be the future of blockchain technology?

I believe there will be universally accepted cryptocurrencies in the future, and in the long run, some of them might eliminate the need for fiat currencies. There are many requirements for such cryptos to succeed, and one of them is solving the technology and architectural issues with blockchain.

On the technology side, there are many challenges that blockchain needs to overcome to be truly transformative. Early on, many have compared blockchain’s disruptive power to that of the internet. However, for blockchain to accomplish that, it needs to provide similar foundational technologies to those of the internet.

Conceptually speaking, blockchain needs a communication protocol like HTTP, a standard markup language such as HTML, and a universal browser (such as Chrome, Safari or extensions to them) that can interpret the chains and display their content in a user-friendly, consumable format. These technologies allowed the internet to be transformational. The lack of these foundational technologies is limiting the impact of blockchain and hindering its transformational potential and disruptive power.

Just like the success of the Internet was possible due to the HTTP protocol, the blockchain technology is in dire need for a universally agreed upon communication protocol between different blockchains. There are still no technologies that have been developed in regard to interoperability to create the “internet of blockchain” or “chains of chains.” Despite some attempts at blockchain interoperability, blockchains exist as islands in oceans with limited communications between them to allow for the exchange of value or simple cross-chain messaging. Interoperability at an internet scale needs to be native, seamless, foundational and require no third party. Furthermore, interoperability is critical to the transformational power of smart contracts that can be implemented in different blockchains.

Blockchain also needs to have an architecture that allows for high-volume transactions to overcome the current limitations on most cryptos.

It might be blasphemous to say it…

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