Blockchain technology endured a rollercoaster ride in 2018. Heading into the year, it was one of the hottest sectors in tech, in part because of the then-surging prices of Bitcoin (BTC) and Ethereum (ETH), both of which are blockchain-based. The decline in BTC and ETH prices in the subsequent months had the predictable effect of dampening enthusiasm about blockchain in general.
However, blockchain is far from finished. It can potentially be much more than the basis for digital currencies, with additional possible applications in supply chain management, logistics, data storage and contract management, to name a few of the most talked-about use cases. Let's take a look at what might lie over the horizon for blockchain in 2019 and beyond.
More focus on "off-chain" protocols
The default setup for a blockchain is as a publicly viewable ledger governed by numerous nodes that must approve and process each transaction. This is how the BTC blockchain works, for instance. It's a design that delivers excellent transparency and stability (blockchains are virtually immutable), while struggling with scalability. For example, a financial blockchain can handle only a fraction of the transactions per minute of any major credit card network. There are simply too many bottlenecks in the consensus mechanisms of typical blockchains during periods of sustained heavy use.
Off-chain, or sidechain, protocols might address this problem. Most were in limited beta testing as of the end of 2018, meaning that they might actually launch to wide audiences in 2019. These protocols are secondary components of blockchain, designed to perform functions such as messaging that can offload capacity that would have otherwise gone toward the primary chain. Examples include TrueBit, Raiden Network and the Lightning Network for Bitcoin. They make blockchain more scalable while preserving its central immutability.
Blockchain-based tokenization of real estate
This particular use case gained a lot of attention in 2018 and should accumulate more momentum in 2019. It entails transforming illiquid assets like land and commercial buildings into tradable securities managed on a blockchain, with all of the well-known associated benefits including fewer/no middlemen, transparency and immutability.
Indices of tokenized properties could become especially popular among startups working on blockchain technologies. The logic of an index is that it removes the risk of buying a bunch of tokens in a building that might not even get built or has the bulk of its value tied up in a mortgage, in which case investors would be getting smaller shares of a property than they actually were paying for.
Further integration between Internet of Things applications and blockchain
The Internet of Things (IoT) is a vast galaxy of different devices, many of them without the conventional interfaces and operating systems of a smartphone or PC. The IoT's variety makes it well-suited to unique use cases such as tracking via embedded sensors or controlling household appliances with voice commands. However, its stark technical limitations also make it a potential nightmare for anyone trying to track the status (e.g., whether a critical security patch has been applied) of individual devices.
Enter blockchain. Its secure, immutable recordkeeping should be a perfect fit for IoT management. Tracking the SIM cards in cellular-enabled IoT devices and keeping tabs on complex inventories within pharmaceutical supply chains could both be simpler with blockchain technology.
Less blockchain, more distributed ledger technology
What's in a name? For blockchain, quite a bit of negative reputation – the term has accrued some unfortunate connotations over the years due to its close association with the volatile market for BTC, ETH and similar projects, wherein the price of 1 BTC or ETH can often fluctuate by 10 percent or more in a single day.
Going forward, we might see a move away from blockchain lingo in favor of the term distributed ledger technology (DLT), which is already favored by firms like Forrester Research. DLT is a superior description of the underlying tech, since it emphasizes decentralized structure instead of the blocks formed by the distinctive operations of a BTC blockchain.
The Paramount team is here to help you navigate the blockchain and DLT possibilities in the years ahead. Contact us today to learn more.