What to Expect From Blockchain in 2018: Top 5 Predictions

No doubt that 2017 was the year the blockchain technology started gaining traction and the cryptomarket, in general, saw unprecedented price fluctuations (e.g., BTC price increased by a whopping 1400% from $980 to $14,000), and the exponential growth of the entire crypto economy by 3400% from $16 billion to $550 billion. Such a sweeping growth is attributed to two primary factors: an increased demand for Bitcoin and booming ICOs as a new way to raise funds for blockchain product development fast and more seamlessly when compared to traditional VC fundraising.

Now is a good time to look into a crystal ball and make predictions about how the blockchain industry will evolve during 2018. Having analyzed what some of the most notable blockchain experts and enthusiasts say about the future of this technology, I’ve put together a list of top 5 predictions. Here we go.

1. Off-chain scaling

The year 2017 went under the auspices of a scaling debate, i.e., a global aggressive debate about the further evolution of public blockchain projects in general and BTC in particular. It provoked the Bitcoin Cash hard fork that actually undermines the entire blockchain network in the guise of a rescue ranger that is supposed to help solve its scalability issues. In reality, it doesn’t solve any issues due to the fact that as the currencies prices increase, commission fees will be almost the same, while the block size increase implies centralization and extra load on the network.

The most logical scaling solution is to build an infrastructure on top of the existing blockchain network (like, for instance, Raiden in Etherium and Lightning in Bitcoin). The idea is to create secure cryptographic channels between users and hubs that allow for the instant transfer of tokens with significantly lower commission fees when compared to storing transaction within blockchain. These channels periodically save the current account balance with the help of on-chain transactions inside the block, while enabling infinite scalability of any blockchain in case of mass usage.

2. Taxation and regulation of crypto-to-crypto exchange

For three consecutive years governments and central banks all over the world have been actively discussing how cryptocurrencies should be regulated. In December 2017, the US Securities and Exchange Commission (SEC) issued a statement about the nature of tokens used to raise funds in ICO and stressed out in particular that “a change in the structure of a security does not mean that securities laws should not be followed”. The whole crypto world perceived this statement as a warning that SEC will come down hard on ICO going forward and start taking steps to regulate this rapidly growing market. 2018 will likely be the year when tax authorities in all progressive economies of the world will finally formulate rules of acquisition and exchange of crypto assets as well as new rules of taxation. If SEC outlaws use of utility tokens for ICO and insists that all tokens used for ICO should be registered as securities, this will definitely pave the way for taxes to be imposed on crypto assets.

It’s also interesting to note that crypto-to-crypto exchange regulation is becoming another hot topic as far as crypto taxation goes. It’s evident that the exchange of different tokens isn’t a like-kind exchange operation. For example, BTC/BCH/LTC/XMR are currencies and payment methods, while ETH/SJCX/SNM are digital commodities, Iconomi and Melonport are stocks, and tokens like Lykke are closest to equity or other types of securities. The US Republican Party has already submitted a bill according to which any crypto-to-crypto exchange should be considered to be a taxable event. Other countries will most likely catch up with similar bills and propositions in 2018.

According to Perry Woodin, CEO of Node40, “throughout 2018 we are going to see lots of media stories about new Bitcoin millionaires being under investigation by the IRS for neglecting to self report their gains.”

3. The first really significant Bitcoin fork

Crypto enthusiasts seem to have finally started buying into the idea and concept of Bitcoin hard forks in 2017. However, apart from highly politicized Bitcoin Cash fork, we haven’t yet seen a truly meaningful and significant fork that would make a strong competitor to Bitcoin. According to a Bitcoin evangelist Stepan Gershuni, the year 2018 will likely bring us the first really meaningful Bitcoin fork that will be able to increase the value and technological perfection of the blockchain network.

Such hard forks will potentially address the enhanced anonymity (СТ, Schnorr, zkSNARK/STARK) or a “more just” distribution of coins within a current BTC protocol.

4. Volatility

Unlike most of utility and security tokens, the price of Bitcoin and other cryptocurrencies doesn’t have any clear fundamental indicators except the fact that the amount of coins is strictly limited and the price will always depend on the public demand. Yet, given HODL is the most rational way of holding BTC, the amount of coins in free circulation will decrease which will give an extra push to the price increase.

Who’s most interested in the price drops? Bearwhales (or profiteers), market manipulators and large crypto holders. While having a gigantic BTC stack at their disposal and the unlimited access to fiat capital, they’ll attempt to lower down the price for the optimal entry point at finance markets. This will make the crypto prices highly volatile.

In general, 2018 is expected to break the record as far as fiat capital penetration with the crypto world, and this will become the critical factor affecting the price mooning.

5. A new gaming economy

A staggering success of CryptoKitties proves blockchain to be a very prospective technology for the gaming industry. First of all, it relates to in-game collectibles and multiplayer games implying that a player should collect in-game stuff and generate specific value to progress further and win. Blockchain enables the creation of a direct mechanism of in-game items trade and exchange that many gamers have badly wanted for many consecutive years. DMarket is an example of such a marketplace enabling in-game items trade and conversion into real assets with real value. It’s the first blockchain project in gaming promising to provide proof of items ownership to gamers that has already launched the demo version and blockchain testnet and that has clearly shown in their white paper how blockchain will make virtual items trade possible and make transactions more transparent and secure.

The year 2018 will likely see the burgeoning of an alternative gaming economy worth of over $450 billion and involving over 2.3 billion gamers worldwide.

What other blockchain predictions for 2018 have you heard of?