The State of Blockchain Part 2 : Predictions for 2019

In my previous article I made a critical recap of my own statements about the future of blockchain in 2018 done a year ago. In the second part I will make an attempt to capture some of my insights regarding the things to come with regards to the blockchain market from the perspective of suppliers (i.e. startups, fintechs, technology providers, consulting companies) and the demand side (clients, consumers). Let us see through the crystal ball again to envision the future of blockchain!

Prediction #1: Show me the money!

After years of investment from all directions, fueling wide array of blockchain ventures, 2019 will be the year of settling the accounts and — if necessary — cutting losses. As a result, many interesting developments in the area of blockchain will never see the daylight, some will reduce the initial agenda and others will be postponed until further notice.

There are two major reasons for that to happen. First, the debacle of ICOs has dried up most of the hot money available in the market directed towards promising (albeit risky) revenue streams. It also increased the overall mistrust among investors and affected the price of cryptoassets which often remain the only mean to pay the operational expenses of many startups.

Secondly, the shifting monetary policies implemented by Federal Reserve (FED) since 2015 through a series of interest rate hikes is a sign the we are definitely leaving the times of near-zero-interest debt. By no means this trend is going to remain isolated to the territory of the United States of America. This change will strongly affect corporations which leveraged debt for investment purposes or R&D efforts.

How does it apply to the blockchain sphere? The consequences of the two events described above, taking place at the same time, will hit particularly hard the organizations which relied on the value of cryptoassets issued in the course of crowdfunding efforts or still rely on external funding and/or debt to actually run their business. It will also require large, publicly listed organizations to face the fact that some of their investment into new technologies did not bring increased shareholder value in form of a steady increase of quarterly revenue streams.

My prediction is that institutional investors will progressively shift their focus back to more traditional form of investment (such as government bonds) and cash out from non-conventional ventures (such as blockchain startups) in order to redirect the liquidity towards stable but promising markets (U.S. first and emerging markets afterwards). Shareholders owning stock in publicly listed corporations will question business strategies including blockchain made by the Board of Directors.

In absence of individual investors who were almost completely wiped out in 2018 cryptocurrency slump, this will result in an overall reduction of the number of ventures developing or using emerging technologies such as blockchain to build new products and services. We can somehow see the first signs of this process with recent rumors about R3, Consensys or Bitmain but I think that news like this will be more and more frequent in 2019.

Prediction #2: In search of measurable results

Due to the limited patience on the financial side which I described in detail above, any new product or service based on blockchain in 2019 will have to be specific about “boring” metrics such as Return-on-Investment (ROI) and Total-Cost-of-Ownership (TCO) on the demand side and Total Contract Value (TCV) on the supply side.

As we are inevitably leaving the times when blockchain projects were driven by hype and constituted a nice addition to PR stunts, the expectation towards blockchain-based solution or service will be similar to other, mature equivalents. As a result, Board of Directors will require a clear roadmap towards new revenue streams; Individual consumers, however, will look for an affordable killer app. In exchange, blockchain-based implementations will become more scalable from the business perspective which is a plus when the supply side needs to internally convince its own stakeholders that the opportunity pipeline related to blockchain will generate satisfactory contract value.

Therefore, I predict that in 2019 the space for experimenting will end to give place to fewer, but more viable implementations using blockchain in their backbone. This will obviously impact existing developer communities, enterprise blockchain consortia or industry solutions based on blockchain which have often been built during the rise of the blockchain hype and have until now profited from investor complacency. Once this process is reversed, some of these mentioned above will stagnate and eventually dissolve.

As a result, 2019 will show will a solidification of the amount of suppliers and platforms available on the market, thus bringing us closer to mature standards. Similarly to last year’s predictions about the end of the hype for blockchain, I also consider the above to be a rather positive sign which confirms a certain familiarity of the market participants with blockchain. However, this also means that there is a limited space for new entrants since only the companies that can actually refer to past implementations will be able to confirm the actual value brought by blockchain.

Prediction #3: The rise of new business models

Cryptoeconomics aside, several other models have been implemented to generate new revenue from blockchain implementation. On the supply side, companies apply different approaches to their own business models, some of which I listed below:

• keeping the blockchain solution in closed source to retain exclusivity over the entire development and delivery process (Digital Asset, formerly DAH);
• giving away only part of the blockchain solution to the open source community while retaining the control over its critical elements in order to retain exclusivity over the delivery process of production-ready deployments (R3);
• retaining intellectual property rights over the deliverables based on an open source blockchain platform which constitute a solution served to the market (various);

Each of these approaches reduces the overall business scalability of blockchain products and therefore, negatively impacts the potential for addressing challenges that could otherwise be embraced by the majority of participants in a given industry.

My prediction for 2019 is that we will see these models progressively questioned by potential clients or users. Due to the nature of blockchain which serves as a foundation of trust in multilateral world, suppliers or consortium members using a blockchain solution will have to develop new ways of investment repayment which do not come up from retention of IP, control of the code or the exclusive platform development governance.

Conclusion

The crystal ball is an amazing tool which has an advantage of giving boundless opportunities to imagine how the future will look like. However, with a technology such as blockchain which is undergoing such radical changes, the time will show if these predictions will actually come true. Let’s meet again in 365 days and see the results! In the meantime, feel free to leave your comments. Any addition to the ongoing discussion is most welcome.