There is no question that 2017 has been a very important year in the history of Bitcoin and of digital currencies in general. In mid-November, Bitcoin reached an all-time high exchange rate of $7,800 before retreating by $1,000 as it forked into Bitcoin Gold, the second digital token issued this year due to a lack of consensus on how the blockchain should continue to be developed in the future.
Although it seems as if 2017 has been the “Year of Bitcoin,” it would be more appropriate to call it the “Year of the Blockchain.” The cryptocurrency market is garnering attention not only because of the meteoric rise in value of Bitcoin, Ethereum, Ripple, Litecoin, and other digital tokens. The underlying technology that makes cryptocurrency transaction has seen significant development and reached various milestones this year, which means that the future of the blockchain has certainly arrived.
Individuals who remain skeptical of Bitcoin will often note that the cryptocurrency has fallen short of its original goal: to become a widely used and accepted method of settling electronic payments. While it is true that merchants have not wholly embraced Bitcoin, it should be noted that the cryptocurrency has seen significant circulation in Venezuela and Zimbabwe, two nations where the sovereign fiat has failed.
The decentralized nature of Bitcoin is a characteristic that central banks are not excited about; however, this has not stopped government officials in Russia and Singapore from implementing high-level blockchain solutions. The central banks of these two nations now manage electronic versions of their respective national currencies, the Russian ruble and the Singaporean dollar.
Major financial services providers such as MasterCard and Fidelity Investments have shown interest in the blockchain, and retail banking giant JPMorgan Chase has worked with financial technology startups that develop blockchain applications.
The blockchain and distributed ledger technology holds a lot of promise in the financial technology field; however, prospective entrepreneurs should carefully consider their entry point. At this time, developing a new cryptocurrency wallet would not be a profitable idea due to market saturation. With regard to cryptocurrency exchanges, it would be very difficult to compete against the likes of Coinbase.
What prospective blockchain entrepreneurs should be looking at are fields such as real estate and healthcare. Blockchain solutions have already been proposed to serve as land registry systems for nations such as Haiti, where land ownership is a mess due to decades of neglect and civil strife. In the case of healthcare, blockchain systems could be developed to support health information exchanges where digital medical records can be securely stored, transferred and managed.
When the original Bitcoin blockchain was developed and the genesis block was mined, the founding team knew that distributed ledger systems would one day be used to develop applications other than digital currencies.
Viable ideas are needed to implement blockchain technology in the enterprise world. Entrepreneurs who have already dabbled in Big Data should take a look into blockchain startup opportunities because these two fields have quite a few aspects in common. The key is to understand why companies such as Spotify, the most popular music streaming service, are acquiring blockchain startups at amounts that they are not willing to publicly disclose.
In the end, entrepreneurs who can “time the market” in terms of sentiment should pay attention to the trends shaping blockchain development, and they should not view digital currencies with tunnel vision; this does not mean that they should completely ignore Bitcoin and Ethereum, but they should not forget that the blockchain, just like personal computing, has quite a few potential applications that could be quite lucrative.
With the Chinese State Council embracing blockchain in its 13th Five-Year Plan, and a 30-fold increase in the total cryptocurrency market capitalization in 2017, blockchain and cryptocurrencies have become a hot topic. Chinese policymakers are eager to set the framework and standards that accelerates industry adoption of blockchain technology, while protecting and educating investors amid the nascent and unregulated cryptocurrency ecosystem.
The results can be confusing. While officials at the Annual Meeting of the New Champions in Dalian in June 2017 welcomed a World Economic Forum whitepaper, “Realizing the Potential of Blockchain”, less than three months later the People’s Bank of China (PBoC) announced an immediate ban on ICOs – initial coin offerings, through which crypto start-ups raise funds for development – and the shutdown of all domestic cryptocurrency exchanges.
At the same time, Sun Guofeng, the Director of the Institute of Finance at PBoC, clarified that the ban “should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology”. Two weeks later, China’s Ministry of Industry and Information Technology launched the Trusted Blockchain Open Lab. The lab promotes the exploration of blockchain technology without becoming involved in issuing cryptocurrencies, or the exchanges that trade them.
These pro-blockchain, anti-cryptocurrency policies are a step in the right direction, given that the public still lacks the right understanding. Although, in the short term, they limit retail investor funding in highly speculative start-ups, they allow, in the longer term, higher calibre and better-resourced players to unlock real value from the technology. One such company is Alibaba, who in April 2017 decided to establish the very first blockchain industrial zone, nicknamed the Blockchain Valley, located at Alibaba’s Hangzhou HQ. Their pathway is now followed by other major tech companies establishing their own blockchain R&D centres, often in collaboration with one of over 150 Chinese blockchain-enabled companies.
The importance of blockchain technology is already obvious. Blockchain is not only a powerful application of bitcoin, it can be applied in a lot of scenarios and has a favorable impetus for all industries. This is also why the Chinese government has been vigorously developing blockchain on the one hand. The world is now in a battle for blockchain.