Investors Expected To Go In Big On Blockchain In 2018

The debate over bitcoin is heated, and everyone seems to have an opinion. But as analysts and industry players voice their cryptocurrency predictions for 2018, some are looking more closely at blockchain technology rather than the digital coin itself.

This year, the blockchain market was worth $411.5 million, according to analysis in a report published this week. That report also estimates the blockchain industry will grow with a whopping compound annual growth rate (CAGR) of 79.6 percent, reaching a $7.7 billion valuation by 2022. The expansion will likely be driven by spiking demand for blockchain solutions, declining cost of ownership and growing demand for improved speed and efficiency in business processes that are addressable by the technology.

Payments are expected to be the largest segment of the blockchain space, of course, while the Asia Pacific region is expected to see the fastest blockchain industry growth rate during this time.

So, what’s in store for blockchain in 2018? More money, for one.

Reports in Wired this week reinforced the idea that investors will be attracted more toward blockchain than bitcoin in 2018. One investor, Venroc partner David Pakman, noted he is considering investments in apps running on blockchain, among other use cases. Canvas Ventures partner Rebecca Lynn, meanwhile, said blockchain is a target as the firm seeks to invest in companies that are building technology infrastructure.

“The boring picks and shovels are where people are going to make their returns,” Lynn said, adding she’s particularly interested in health record storage and data management using blockchain technology, as well as using the technology to track copyrighted and trademarked content.

Analysis by Statista, covered by American Banker reports this week, found U.S. FinTech companies will land $4.7 billion in new investment in 2018, and blockchain will be a particularly hot target for many types of investors.

Use Case Exploration

“There’s a lot of interest right now in the ecosystem around finding the right use cases for blockchain technology,” said Silicon Valley Bank head of payments strategy and solutions Reetika Grewal. “People are willing to put money into them, though there might not be a strong return on investment just yet. Are we going to hit the use case next year? I’m not sure. It’s still a young technology, so it will have continued investment and experimentation and learning from early solutions out there.”

Tyron Canaday, managing director at consultancy firm Protiviti, explained that one key use case for blockchain in 2018 will be identity management.

“There will be more use of blockchain in security because I think it’s needed, and a good way to leverage that technology and protocol,” Canaday said.

Lex Sokolin, global director of FinTech strategy at Autonomous Research, noted “building out traditional finance infrastructure for crypto as an asset class is a very clear theme of 2018.”

In an article penned for the Economic Times of India, Vikas V. Gupta, Ph.D., CEO and chief investment strategist at OmniScience Capital, said smart contracts may be the use case that propels blockchain in 2018.

“So far, we have only addressed the visible and widespread uses of blockchain as currency and speculative instrument,” Gupta wrote. “The most important and beneficially disruptive use of blockchain is for transactions. It is likely that smart contract platforms will emerge within private ecosystems, probably backed by some large financial institutions, which will allow the participants to transact with each other.”

In India, that means use of smart contracts in government and smart city initiatives.

“This is likely to be adopted in pilot projects for very specific, limited use cases on a trial basis within 2018,” he added.

Beyond Money

In 2017, blockchain use-cases included cross-border payments, supply chain finance and smart contracts. Further exploration of potential applications of the technology is inevitable in 2018, and investors are expected to act quickly and back the innovators.

The potential for massive gains is huge, but some analysts say the benefits of blockchain could reach beyond dollars and cents in 2018.

“By shifting data ownership and control, once passive consumers can become active participants in society as a whole,” wrote ConsenSys director of product and innovation Thessy Mehrain in an article for Coin Desk. “Equipped with tools to audit supply chains, values like labor safety, fair trade, organic production and other values can be verified, replacing advertising jargon with proof, replacing trust with auditability. Being involved in the blockchain space today feels like being part of something larger, grander, something with a socially valuable purpose.”

In 2018, Mehrain continued, education of blockchain technology will be one of the industry’s top priorities.