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The Death of the ICO (And Four Other 2018 Predictions)

The Death of the ICO (And 4 Other 2018 Predictions)

Stefan Thomas is chief technical officer at Ripple and co-creator of the Interledger payment protocol.

The following article is an off the hook contribution to CoinDesk’s 2018 te Review.

If 2018 wasgoed the year of the ICO, 2018 will be the year of the excellent ICO hangover.

It will also be the year major financial institutions adopt digital assets, and mark the birth of hybrid blockchains.

1. The death of the ICO token

“Cryptocurrency” became a major buzzword ter 2018. Abruptly, all eyes were on thesis fresh assets with speculators hopping into the market ter droves and regulators strongly scrutinizing them.

Ter fact, te early December, the combined market capitalization of all digital currencies surpassed that of JPMorgan, the fattest U.S. bankgebouw. Initial coin offerings (ICOs) similarly exploded, raising hundreds of millions of dollars around the world te a matter of months.

While they made for arousing headlines, tho’, I expect the exuberance around ICOs to fizzle ter 2018.

What’s more, I also expect regulators and authorities worldwide to come down hard on fraudulent ICOs te the fresh year. That’s because many ICOs skirted existing regulation te order to raise equity — with no solid business to back up the suggesting. Funds raised from some of thesis ventures have already began to vanish, and regulators, such spil the SEC, recently announced that they’re getting ready to crack down on them.

I wouldn’t be astonished to see hefty fines, litigation and even jail time for those standing on the wrong side of the ICO kwestie.

Beyond the regulatory crackdown, questions will arise around the utility of special-purpose tokens. Why would a verkeersopstopping hosting company accept payment te Filecoin, when a general-purpose digital asset is so much more liquid and therefore lighter to turn into fiat?

Wij don’t use different currencies to buy clothes or pay our mortgage ter the brick-and-mortar world and ICO token holders will realize the economics are no different online.

Two. Financial institutions will adopt digital assets

If speculators entered the digital asset market ter droves last year, 2018 will be the year that major institutional players like asset managers, pension funds and other financial institutions, such spil payment providers, come in the space.

Wij’re already watching enlargened over-the-counter (OTC) trading of digital assets, such spil bitcoin on the Chicago Houtvezelplaat Options Exchange (CBOE), causing liquidity across the market to deepen. It’s indeed a matter of when, not if, listings of extra cryptocurrency futures on OTC exchanges will take place. My bet? Wij’ll see the listings by next summer.

Inbetween this and fresh institutional players coming in the market, I think digital assets have slew of slagroom for growth. However, the crypto space won’t be without its challenges. Forking, regulation, and banking — oh my!

Governance issues will proceed to plague some digital assets — causing forks such spil the one with bitcoin and bitcoin specie. This instability will be problematic for some who want to inject the market spil it raises questions about supply spil well spil the level of risk involved.

The uncertain regulatory environment te the U.S., China and elsewhere could also stifle further development of the digital asset market. While countries like Japan and the Philippines have embraced digital assets te their economies and regulatory frameworks, there are many more worldwide without clear policies and laws for thesis assets.

They should take a pagina from the respective books of Japan and the Philippines te order to enable fresh services, increase financial inclusion, and lower barriers to economic growth.

For example, there are only a handful of financial institutions ter the U.S. that will handelsbank businesses ter the cryptocurrency space. If they were to uitgang, or if regulation were to come through that prohibits exposure to the digital asset market, this could have very serious, adverse consequences on the improved services being developed. Banks need clear guidelines from regulators on how they can lawfully handelsbank those associated with cryptocurrencies.

Three. Blockchains will embark to interoperate

Te 2018, wij’ve seen bitcoin’s share of the cryptocurrency market druppel from 87 procent to under 50 procent. Hundreds of fresh coins and tokens launched and are now being traded.

To make the broad use of digital assets truly mainstream, however, I think wij’ll need the many blockchain networks that presently exist to interoperate. The truth is there will not be one single vooraanstaande blockchain network te the future — just spil there isn’t any prominent internet or email provider globally today.

Presently, wij can all email family, friends and colleagues from Gmail to Yahoo to Outlook seamlessly and instantly. Value should budge across all ledgers ter exactly the same way — irrespective of the blockchain network, PayPal wallet or traditional handelsbank account involved.

Indeed, wij’ve already seen efforts ter 2018 to address blockchain interoperability.

Raiden, the ethereum interoperability solution for ERC-20 tokens, launched its token ter September, while the Interledger Protocol (ILP) wasgoed used to connect seven ledgers including bitcoin, ethereum and XRP te June. My money is (unsurprisingly) on Interledger.

If all networks were to become ILP-enabled, it ultimately wouldn’t matter if you held bitcoin, ether, litecoin or XRP. ILP would permit you to make payments to a merchant that only accepts bitcoin, for example, using XRP — all ter just a matter of seconds.

Four. The birth of hybrid blockchains

Until now wij’ve seen a proliferation of both public blockchains like bitcoin and private blockchains like Hyperledger Fabric. Going forward, I think wij’ll commence to see the rise of hybrid blockchains, which combine the best of both worlds.

A hybrid blockchain runs on the open internet and is accessible to anyone like a public blockchain, but it uses a smaller set of validators and is more targeted towards a specific use case like a private blockchain.

Deploying an ethereum contract or creating an ERC-20 token will be substituted by launching your own mini-blockchain, which can be tuned to the precies needs of a given project.

Need more decentralization? Less? More powerful functionality? Should it be upgraded frequently or remain very stable? One size doesn’t getraind all, but next year you’ll eventually be able to choose.

This will be part of a larger trend for blockchain networks to specialize. Current systems attempt to be everything to everybody. Te the future, wij’ll see more targeted implementations designed for a clear use case. The best way to explain why this is necessary is to point to the Yahoo example — a tech giant that spread itself lean across too many products and services, and couldn’t be truly successful ter any of them.

Ter the same way that Google focused on gegevens, or Apple on vormgeving, I think those blockchains that concentrate on one core suggesting (e.g. a zuivere database like BigchainDB) will get through, and thrive.

Five. Specialization or generalization — a contradiction?

Overheen the course of this article, I’ve argued that general-purpose tokens will substitute special-purpose tokens and I’ve also said that special-purpose blockchains will substitute general-purpose blockchains.

This might seem like a contradiction at very first, but spil blockchains become more interoperable, blockchains and tokens will simply be less coupled together. This transition will involve more growing aches, so it’s sure to be an interesting year.

I’m excited to see how it all plays out.

Think you have a better idea? CoinDesk is looking for submissions to its 2018 te Review series. Email [email protected] to pitch your idea and make your views heard.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake te Ripple.

The leader ter blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a rigorous set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests te cryptocurrencies and blockchain startups.

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