4 Crypto trends that can survive the slowing market
By Noam Coyote on ALTCOIN MAGAZINE
Is the crypto market still alive? The short answer to this challenging question is very simple: yes.
The crypto market was slowing down through most of 2018, and in the recent weeks it seems to be free falling. Those who are crypto-skeptical will say that the bubble has crashed, and by looking at some of the numbers it would seem like they are right. But from a more balanced and long term perspective, the picture looks very different.
We should separate the hot air and speculations from the real progress of the technology and the ecosystem, follow the continuous investments in various projects and identify the most promising enterprises. If we do so, we’ll come to realize that despite the crash in prices, crypto and blockchain are still alive and kicking (and if they do so a bit more quietly than before, that might be progress in a positive direction).
In this article I will give an overview of four significant trends that have the highest potential for long term growth in the crypto market. If you have any questions or remarks, you are very welcome to comment or to massage me.
1. Security tokens
One of the prominent areas in the crypto ecosystem nowadays is security tokens (STO). Security tokens are a form of ownership of an asset made through distributed ledgers, such as blockchains. These assets can be traded on various platforms, ranging from fully decentralized networks to private blockchains — all the while enjoying the advantages of distributed ledger technology (DLT), i.e global use, transparency, lower costs and improved security.
Tokenization of assets might be relevant to any stock or bond, but it is mostly effective with assets with low level of liquidity. Centralized markets, with trillions of dollars of assets, can develop into global and digital markets through STO, including real estate, start-ups and even art collections. At the same time, these developments are eliminating the boundaries between local exchanges — enabling rapid and low cost investment in any asset from anywhere in the world. Security tokens can also offer fractional ownership, allowing small investors to get a share in a wide range of assets which are currently beyond their means.
Unlike the unregulated ICOs, the trade in security tokens has to follow the relevant regulations for securities in different countries, a necessity which also guarantees a more stable business environment for this field. At the same time, regulators around the world, including the Security and Exchange Committee (SEC) in the US, have already started adapting to this new phenomenon. The biggest exchanges in the world are also getting in. The Swiss Stock Exchange (SIX) has recently announced that it is developing an exchange for tokenized securities, and other exchanges, including Australia’s ASX and Hong Kong’s HKEX, are following the same route. ICE, the second largest owner of financial exchanges in the world, which includes New York Stock Exchange (NYSE), is launching a crypto exchange next month, under the name Bakkt.
Relevant enterprises in this field:
- Trading and issuance platforms: Neufund, Polymath, Securitize, Hilltop.
- Tokenizing of a specific company: Lottery.com (mobile lottery service) SPiCE VC (VC fund).
2. Trade settlements
Morgan Stanley published an analysis about the crypto market in October, and stated that the cases in which blockchain technology works best include: B2B payments, Cross-border payments and Trade settlements. Such initiatives are already being tested by the biggest banks in the world, including Credit Suisse, Deutsche Bank, Bank of America, HSBC and ABN Amro.
Why are trade settlements so relevant to crypto? Because today if you need to transfer goods around the globe or send money between countries you still face barriers that haven’t changed in decades or sometimes even longer. The valuable goods need to go through many intermediaries, controlled either by governments or business firms. Coordination between the various players is limited and demands a lot of back-and-forth exchange of data and permissions. Blockchain-based networks can provide a secure solution that will be permissionless and at the same time keep the desired balance between allowing transparency and promising privacy.
Morgan Stanley highlighted the most significant proofs-of-concept in this field:
- Marco Polo initiative: BNP, Commerzbank, ING, TradleX and R3 have joined to create a solution for post-shipment trade financing, which is now in pilot stage.
- Fusion LenderComm: BNP, HSBC, ING and other banks are already operating a blockchain-based marketplace for loans, which enables direct connections between lenders and bank loan services.
- Quorum by JPMorgan:
Platform for private smart contracts and transactions between banks. - Distributed ledger for Swap trading: JPMorgan, Citi and GS (by Goldman Sachs) are developing a platform for tracking of swap contracts.
Other projects by global key players include:
- IBM has created Hyperledger, an open source blockchain platform for businesses, hosted by the Linux foundation. Among the enterprises that are already using Hyperledger:
- TradeLens, joint venture of IBM and the Danish transportation conglomerate Maersk, for a global and digitized supply chain through distributed ledger technology (DLT)
- World Wire, a platform using Stellar protocol for clear and settle of cross-border payments.
- EY accounting and consulting firm has launched a privacy solution, based on Zero-Knowledge Proofs (ZKP), over Ethereum’s blockchain.
3. Side chains and state channels
Bitcoin has just celebrated its 10th anniversary, but developments in its infrastructure never stop. A key component in this arena are the projects which develop various types of side chains and state channels. Such networks and platforms will enable transactions off the main blockchain, allowing faster and more scalable trade, while arguably lowering the level of security. This improvement seems like a critical phase for a wider usage of blockchains.
Channels like these may serve as proof that many current projects in the crypto and blockchain arena — especially those which focus on building a separated blockchain — are actually irrelevant. Side chains will enable a broad range of solutions while standing on the wide shoulders of Bitcoin — which was and still is the biggest and most robust distributed ledger, without any significant rival to this very day. Side chains are being developed around the second largest blockchain, Ethereum, as well.
Relevant projects in this arena:
- Lightning: Decentralized and secure network for payments that is built as a second layer over Bitcoin.
- Liquid: Secure and fast side chain for exchanges, market makers and financial institutions over Bitcoin.
- Liquidity: Similar to Lightning — but over Ethereum.
- FunFair: Secure and low cost payment channels for the gaming industry over Ethereum.
4. Privacy
Privacy is one of the biggest challenges for our society. Leaking databases and personal data abuses put everyone’s privacy at risk. Bitcoin, as opposed to common misconception is not anonymous.This fact is a challenge to any user of the leading cryptocurrency but it also guarantees that no company will manage its business through a network that can be used to surveil on them.
Since the invention of Bitcoin, there are efforts to find solutions to the privacy issue. There is still a long way to go till we can use a decentralized network that keeps our secrets but at the same time enables security and follows legal requirements. But there are many interesting projects that are pushing hard in this direction.
I’ve highlighted some of the most promising paths towards a successful crypto product, but the road is still long and bumpy. One thing is clear: The mainstream system is still broken, and suffers from inefficiency and corruption. The search for alternatives will not stop, and crypto is still one of the most promising arenas for finding solutions to these issues.
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