By Hitters Xu Nebulas Founder & CEO
Cryptocurrency’s total market cap has surged more than 1,200% according to Forbes.com last November, bringing in huge inflows from traditional VCs and PEs. This market cap reached $558 billion today, with a 24h volume of roughly $24.8 billion according to CoinMarketCap.
There is indeed a bubble in the industry. The reason underlying is blockchain’s close relationship with capital assets. Blockchain is a rapidly-developing, transformative technology, but its outstanding investment returns and appeal to speculators is alarming.
We have yet no effective regulations of this technology and the responsibilities and rights of originators and operators of public blockchains are yet to be clearly defined.
Don’t get me wrong. I am still very optimistic about the future of blockchain. Even a dot-com style collapse won’t kill blockchain.
In 2000, the dot-com bubble had its clear demography. It happened in Silicon Valley within investment groups, from seed rounds, angel rounds to series A, subsequent investment rounds and IPOs. Everyone was busy passing the baton. As soon as one major investment group refused to follow-up, the whole system crashed.
The crypto bubble nowadays has its own traits in terms of geography and target groups.But unlike the dot-com boom, which was precipitated by a narrower group of technology investors, Blockchain is global and has direct access to end users, so it’s could be destined to be bigger than any other bubbles, which is concerning.
Blockchain is a true breakthrough, but there is undoubtedly there is a bubble in the industry. We don’t know when and how the bubble will burst and affect the market, but there are definitely things we should do before it does.
It’s of great importance that blockchain technology make a technological breakthrough and find its killer applications before the bubble bursts. If not, the industry will be devastated.
Nebulas Founder & CEO Hitters Xu
Achieve Tech Breakthrough Through Scalability and Accessibility
Currently, blockchain technology is not widely used because of its technical limitations. I think the future of blockchain technology depends on us making two major technical breakthroughs.
The first is ‘scalability.’ Enhancing processing power throughout the blockchain network ensures that blockchain can bear host to greater decentralized apps. If we use the Internet as a reference, in its early days, its scalability was very limited and bandwidth was very low.
But technology develops in an upward spiral. When we achieve greater scalability with blockchain, we create an environment where more and better applications can be developed on top of it.
The second goal of future blockchain technology is to improve the blockchain’s ‘accessibility.’
In order to further the development of blockchain, we need more end users. The real questions are: How can we make this geeky technology more understandable and accessible to end users？How do we turn blockchain into a technology that can truly benefit hundreds of millions of end users?
Accessibility to blockchain is essential. Ethereum’s CryptoKitties, for example, has had a significant impact, and showed that turning blockchain into a game is a good way to expand its appeal. Another draw that can bring users into the ecosystem? The size of the blockchain economy, now worth$558b in digital assets.
Scalability and accessibility supplement each other and grow together. At present some other technologies in this area, such as lightning network, SegWit and new consensus algorithms, are also conducive to achieve this end.
After leaving NEO, we started our own blockchain project — Nebulas. A large part of our mission is to improve the scalability and accessibility of blockchain technology.
Nebulas is an foundational public blockchain, structured in an easily accessible framework, which everyday users and experienced developers can easily familiarise themselves with.
Meanwhile, the Nebulas Rank serves as a decentralized credit system to rank and curate information, including content, addresses, smart contracts, distributed applications (DApps) and other entities on the blockchain. It can greatly enhance the processing and development of and build links between the blockchain world and real life.
Discover Killer Apps of Blockchain
Many people predicted that 2016 would be the ‘Proof of Concept Year’ for blockchain technology, and 2017 would haven seen practical applications. Now 2017 has passed, and many of those people have expressed their disappointment about the pace of blockchain’s mass adoption.
People have always spoken of a ‘killer application’ of blockchain, one that would give rise to mainstream popularity. But perhaps there is a lack of understanding about about blockchain because it is often thought of in relation to traditional industries and existing paradigms.
Public blockchains, private blockchains and consortium blockchains are fundamentally different from one another. Public blockchains are trustless and don’t provide privileges. They are the opposite of consortium and private blockchains, which are still based on centralized permission.
Consortium blockchain treat blockchains with a traditional mindset, asking “what the blockchain can do for me.” Public blockchains represent a new, disruptive mindset: We should think more about “what I can do for blockchain”.
If we look at the Internet two decades ago, and the truly valuable things that werehappening within it, It’s clear to see that it provided a new kind of value, and not merely an enhancement of the tools that were present at the time.
The most successful beneficiaries of the internet were not traditional industries that added an Internet strategy to their operations, but new companies who built their Internet vision from the ground up. That’s not to say that consortium blockchains are the wrong path to follow, but big enterprises and institutions may view blockchain from the wrong frame of reference. .
What we should do is believe in blockchain and explore its intrinsic value.
Blockchain is not merely a type of technology or a tool. It stands for a future economic model with decentralization, decentralized applications (DApps),community, and digital tokens as its central characteristics.
A ‘token’ in this context is actually a carrier of ownership of data. Internet is a form of data connection. Blockchain is the next breakthrough in value transfer of data.
In the future, blockchain technology will be more closely linked with the Internet of Things (IoT) and AI. Many more applications native to blockchain will appear. For example, AI will use blockchain to validate as carrier of data ownership, and to do transactions.
To be able to see the future requires an open mind. I think we should try to find the ‘killer app’ for blockchain. Instead of using it as a tool to improve our current scenario, we should focus on unearthing the intrinsic value of blockchain system and discover whole new category of apps powered by blockchain.
To achieve all these aforementioned goals, we need talented individuals to search for the ‘killer app’ of blockchain technology. From my point of view, , blockchain is not an enhancement of the present scenario, it is something that we have never seen before.
Provide Effective Governmental Supervision
The supervision of blockchain is a challenge for all the governments due to the anonymity and transnationality of blockchain and digital currency. Because blockchain is a borderless technology. it has, to some extent, more influence than a sovereign state. But a lack of regulation can also lead to detrimental market effects and harm to consumers. Regtech could help dealwith such problems in the future.
The Chinese government’s previous regulations and policies are all great attempts. In fact, sayings like “China’s influence in blockchain is weakening”or “China’s blockchain industry has phased out” are ridiculous.
Based on my experience, in this field, at least one third of all blockchain employees work in China. China still has its influence on ‘mining,’ on tech innovations of blockchain and in cryptocurrency exchanges.
The key to having such influence lies in technological innovations.
In the near future, regulators will also provide incentive and support to blockchain’s innovation and development, instead of negating it. This is what we all hope to see as blockchain insiders.
I think governments will, without exception, focus on tackling the bubbles of blockchain industry in 2018. I believe the majority of countries will promote the development of blockchain technology with a responsible and practical attitude to protect people from bubbles.
Also, the players in the blockchain industry should be given more opportunities to communicate with governments. With such dialogue, , regulators can gain a better understanding of blockchain technology and formulate better regulations.
For me, he key word of blockchain in 2017 was ‘magic.’ In January 2017, the market cap of this industry totaled $17 billion, and by the end of 2017, it had exceeded $600 billion, 30 times what it was at the beginning of the year.
The growth is breathtaking. The speed of development is beyond imagination, and the need for talent is much the same. Nevertheless, the danger of a bubble is a concerning issue for the industry, and we need self-discipline and regulation to fix them.
I hope the key word of 2018 will be ‘breakthrough point.’ If 2017 is when people witnessed the rapid growth of blockchain, then 2018 is when they will witness the breakthrough of this technology. We need to reach as many as possible end users to come to reach critical mass,, and finally drive the emergence of killer apps.
In 2017, the blockchain industry attracted a lot of attention from retail investors and speculators. . It has grown into a hot topic and accumulated a strong base of interest. In 2017 we also saw the emergence of many extraordinary blockchain projects.
This year, I’m hopeful that blockchain will experience major breakthroughs, and I look forward to a killer application that serves millions, even tens of millions of people
Written by Hitters Xu
Founder & CEO of Nebulas, Founder of AntShares (NEO), a blockchain pioneer in China, the former Director of Ant Financial’s Blockchain Platform (Alibaba’s financial arm) and part of Google’s Search & Anti-Fraud team. Since 2013, Hitters has founded BitsClub(the very first Blockchain/Bitcoin community in China), ICO365 (one of the largest ICO platforms) and FBG Capital (one of the earliest Crypto funds).
Written by Alicia Zhong
Edited by Robert Elder
The original Chinese version of this article was first published on China Financial Herald №66.