With its original focus on cryptocurrency, blockchain technology made strides, expansions and evolutions this year.
“In 2016, we saw a diversification of the distributed ledger beyond cryptocurrency. I definitely see this trend continuing,” said Paul Hensel, an electrical engineer and blockchain expert from Hamburg, Germany. “It’s not like the focus is shifting away from crytocurrencies, but more like the whole space is getting more spotlight.”
More spotlight indeed. More industries have discovered the advantages of blockchain tech.
From the banking industry, blockchain has now been incorporated into real estate, the wine and diamond industry, state governments, election politics and even the fishing industry.
“2016 was the year of the blockchain POC, where consortiums were embraced, pilot projects were initiated across the globe and banks and corporates alike demonstrated their fear of missing out on blockchain and raced to be first movers, viewed as innovators, and actively influencing the way blockchain will be perceived and understood by market participants and regulators alike,” said Sandeep Kumar, managing director of Capital Markets Solutions at Synechron.
So, how will blockchain evolve in 2017? Some experts believe it will be the year that regulators narrow in on the technology. While the technology has been around for more than a decade, it seems as though only recently have regulators begun discussing what to do and how to address blockchain.
“In 2016, regulatory bodies have taken a wait-and-see approach, publicly stating they are researching blockchain and examining projects to understand it better,” said Kumar. “While 2017 may be the year that regulators become involved, perhaps more importantly, 2017 will be the year that real blockchain applications and ecosystem take hold, giving regulators real, fully functional business applications of the technology in action to understand.”
Some experts say that the reason that regulatory bodies will get more involved with the technology is the sheer fact that blockchain is starting to inch its way into the mainstream through certain use cases.
“The use case will likely be related to accounts receivable/accounts payable, in an industry where blockchain’s simplicity and transparency can make a big difference — something like the buying and selling of collectibles or fine arts,” Peter Horadan, CTO and EVP of engineering at Avalara. “Eliminating the need for banks, credit card processing and paper-based invoicing will accelerate reconciliation, increase transparency and confidence and simplify auditing, creating an environment that can help the industry grow and support new types of transaction.”
But even if 2017 turns out to be a bang-up blockchain year, the best may yet be still to come. Analysts say blockchain technology applications are slated to reach nearly $20 billion by the year 2025.
“I see $20 billion by 2025 being a viable outcome if the parties all get aligned, recognizing that nine years is the equivalent of multiple lifetimes for some technologies,” said Andy Schmidt, principal executive advisor at CEB. “It’s important to keep in mind that 2016 was really the first year that the financial services industry began to take blockchain seriously, as evidenced by the growth in R3. In order to achieve this growth, the use cases for blockchain need to solidify and gain scale — something that should accelerate as the first few major use cases (e.g., smart contracts) get off the ground.”
Kumar at Synechron also sees that estimate as reasonable and not surprising. In fact, he said it could even go beyond that.
“As a technology that has the potential to be as transformative as cloud technology was 10 years ago, if you look at the problems related to fraud, reconciliation, compliance around regulations like KYC and the efficiency gains blockchain can address, $2 billion of investment per year over the next 10 years seems even a conservative estimate,” said Kumar.
And the other reason behind blockchain’s growing value is, according to experts, the people and the investment being thrown behind it.
“Everyone wishes they had invested early in Google. Public blockchain assets as a category remove any excuse for not trying,” said Charley Hine, chief product officer at Shift Payments. “An ever-increasing number of technologists and investors continue to realize this, and we’re starting to see digital currency-exclusive hedge funds backed by A-team investors.”
So, as the technology charges ahead, it may indeed be interesting which businesses and industries end up not jumping on the blockchain bandwagon.