Current state of cryptocurrencies may suggest how blockchain technology is at the edge of the “trough of disillusionment”, but it only serves to highlight how there is still a long way yet before the real opportunities for it to add value to the economy are realized
The plummeting price of bitcoin has dominated headlines for the past weeks and months, with analysts cautioning any price recovery to be a dead cat bounce. In fact, the digital currency once heralded as the symbol of a decentralized economy has lost over 80% of its value in 2018, and over 50% in the last month alone. Already, the cryptocurrency bull run of 2017 and the record-breaking number of ICOs it powered feels like a distant memory. The ailing fortunes of bitcoin and other major altcoins beg the question – is this the death knell for mainstream adoption of cryptocurrencies?
DLTs at an inflection point
On the 10th anniversary of blockchain’s public debut, it is perhaps a fitting opportunity for the industry to reassess it as the underlying technology intended to catalyze a breadth of business cases, instead of a get-rich-quick scheme it perpetuates – and as it is often unfairly portrayed as. The ICO hype of yesteryear has sufficiently proven a distraction from the actual development of distributed ledger technologies (DLTs) for conventional enterprise adoption. Rather than fuel the glut of speculation on when bitcoin prices will bottom out, the industry sorely needs to accelerate efforts to scale the technology which ultimately transcends cryptocurrencies and offers the distinct possibility of a decentralized global economy predicated on trust and security.
Scaling blockchain for mass adoption
Deloitte’s 2018 global blockchain survey revealed 84% of respondents expressed confidence that blockchain technology is broadly scalable and will eventually achieve mainstream adoption. Yet, vexing concerns persist around its current performance, governance, and the lack of trust and interoperability in the ecosystem, resulting in many organizations finding it difficult to justify its implementation. While the number of use cases have swelled across sectors such as financial services, supply chain and healthcare, until the deficiencies which currently plague the most commonly known proof-of-work (PoW) blockchain are addressed, real adoption remains a pipe dream.
Indeed, the staggering fall of bitcoin only serves to underscore the fundamental deficiencies of PoW protocols. The required mining is heavily consumptive of energy and extremely cost inefficient, while there are also limited use cases due to its sluggish throughput. In contrast, newer models like proof-of-stake (PoS) and proxy staking algorithms remove the energy and computational power requirement of PoW, bringing a more advanced level of security and decentralization to distributed ledger technology. High-profile projects such as EOS and Cardano run on PoS algorithms, while the proposed Ethereum Casper Protocol has also reinvigorated the DLT community.
At Hedera, the proxy-staking implementation of the hashgraph consensus algorithm we have developed provides a new platform for achieving distributed consensus, similarly enabling developers to build an entirely new class of decentralized applications. Ultimately, any successful DLT needs to fulfill the basic requirements of being fast, fair and secure. The hashgraph consensus algorithm has been validated as asynchronous Byzantine fault tolerant (ABFT) – mathematically the highest possible level of security for distributed systems – Coq proof Only when the ecosystem recognizes this and commits the necessary resources to accelerate the development of performance and security standards, will we begin to observe signs of blockchain scaling for enterprise adoption.
Regulation needed for blockchain to mature
While the current state of cryptocurrencies may suggest how blockchain technology is at the edge of the “trough of disillusionment”, it only serves to highlight how there is still a long way yet before the real opportunities for it to add value to the economy are realized. On that note, increasing regulatory frameworks initiated by government institutions are a welcome sign. In fact, the lack of oversight to begin with arguably led to the wild west of cryptocurrency. There remains a compelling need for such regulation primarily because blockchain’s applications in domains such as cryptocurrencies and fundraising have become a target for bad actors. Judicious governance and regulation applied can not only cohesively improve safety and performance standards, but also underscore the recognition of distributed ledgers as a technology which truly have the potential to change our economy. Crypto companies are already taking their first steps towards acknowledging this. It is time for the rest of the world to do the same.
What’s next for DLTs?
Notwithstanding the deficiencies of blockchain, the emergence of bitcoin has spotlighted DLT as one of the biggest factors influencing global economic growth. If the conversation in the next decade is to revolve around how DLTs have disrupted the world for better instead of worse, use cases for the technology need to start evolving beyond cryptocurrency applications. We, as a community, cannot allow the ‘crypto winter’ to distract from the task of rebuilding confidence in the technology and that begins by changing the narrative to one of continuous development and enabling mass adoption.
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