6 Trends From CoinDesk – s Fresh two thousand seventeen State of Blockchain Out Today
Mar 6, two thousand seventeen at 12:00 UTC by Bradley Miles
CoinDesk Research’s two thousand seventeen State of Blockchain report summarizes key trends, data and events in the public and enterprise blockchain sectors in 2016.
This article previews six of the key takeaways as identified by our research team. To download the utter report, visit CoinDesk Research.
2016 signified a strong shift in several areas of the blockchain industry.
Announced today, CoinDesk’s State of Blockchain two thousand seventeen report provides a 100-slide analysis of that shift – covering developments in the bitcoin, public blockchain and enterprise distributed ledger technology (DLT) sectors.
Our total report dives into these takeaways, as well as overall data and trends in the public blockchain space.
Here, we highlight six of the most significant trends that defined both Q4 and over the last twelve months.
1. Bitcoin’s ‘true volume’ exposed
Bitcoin’s two thousand sixteen exchange data tells a complicated story.
Looking back, for example, the three largest China-based exchanges (OKCoin, Huobi and BTCC) at very first show up to account for 94% of the global annual volume. Using simply reported volumes, four hundred fifty nine million bitcoins were traded in Q4 2016, more than a three-fold increase from Q4 2015.
But, since China has historically suggested no-fee bitcoin trading, these numbers, however record-breaking, had always seemed inflated.
Prior to China instituting a immovable plane rate charge of 0.2% on all bitcoin trades, cryptocurrency enthusiasts had attempted to estimate a ‘true volume’ – a more realistic trading volume for Chinese exchanges that may indicate the region’s actual dominance in the market.
Now State of Blockchain two thousand seventeen can ultimately expose data that sheds light on the matter.
China’s major exchanges introduced trading fees amidst regulatory pressure from the People’s Bank of China earlier this year, and CoinDesk Research delved deeper into the fresh post-fee market shares to build up a more realistic outlook on bitcoin exchange traded volume.
In post-fee world, the former ‘Big Trio’ have seen a startling drop in exchange traded volume. Re-interpreting their market share, it emerges the true aggregate volume of OKCoin, Huobi and BTCChina is closer to 35% of the global bitcoin market.
Integrating the fresh implied market share into two thousand sixteen trading volume gives us a more realistic interpretation of the year’s volume than recorded data seemed to showcase.
At 35% market share, Chinese exchange volume steps down to $103m of bitcoin traded daily, down from the apparent $1.6bn-worth traded daily before the implementation of fees.
Amid the shifting regulatory landscape it seems that some traders have determined to stick with these Chinese exchanges.
Coindesk Research will proceed to track exchange volume closely to see how the story unfolds via 2017.
Two. Enterprise incumbents stir on blockchain
To date, the enterprise blockchain market has had two main participating groups – incumbent banks and financial firms, and startups. It was perhaps the former group that gained the most ground in 2016.
Rather than simply testing proofs-of-concept, incumbent firms began to take more dedicated steps toward making their vision of blockchain’s influence apparent over the course of the year.
For example, PwC’s Vulcan blockchain is more of a technology that seeks to create interoperable digital assets that trade alongside established cryptocurrencies like bitcoin. Built in conjunction with Bloq, Netki and Libra, the Vulcan platform is PwC’s effort to deploy enterprise grade blockchain-based applications.
Likewise, Microsoft’s business development director Marley Gray describes Project Bletchley as the company’s effort to produce an open and pliable blockchain-as-a-service (BaaS) suggesting.
At the end of Q3 2016, Microsoft released a white paper outlining Bletchley as way to construct permissioned consortium blockchains.
JP Morgan ended two thousand sixteen with two blockchain offerings, Juno and Quorum. The joint effort by the bank and Ethlab, Quorum shows up to be an enterprise-ready distributed ledger mainly targeting long and costly settlement times. Juno is run on a different consensus model entirely, inspired by a variant of Raft consensus. Current versions of JP Morgan’s Juno blockchain can treat up to five hundred transactions per 2nd.
Accenture separated itself from other blockchain incumbents through its ‘editable blockchain’. Accenture capital markets lead David Treat suggested that, in the long-term, blockchain solutions will need to compensate for real-world emergencies or even mistakes where information will need to be redacted or modified.
IBM has a standalone blockchain separate from its work with Hyperledger, however, its core product suggesting runs on the same code. VP of blockchain tech Jerry Cuomo sees IBM’s blockchain as a way to leverage clever contracts, automating business processes for supply chain management, trade finance and IoT among other industries.
Eric Piscini, a Principal at Deloitte, sees Deloitte’s Rubix software platform as a way to accelerate the auditing process of transactions that occur on the blockchain. Rubix piloted test use cases across the pharmaceutical supply chain including drug safety, drug channels and any end-consumer issues with pharmaceutical drugs.
In the scope of enterprise blockchain, R3’s associate director sees two thousand seventeen as the “year of the DLT pilot”. This year may see newer enterprise blockchains thrust hard against industry standouts like R3CEV and Chain.
Three. Token sales challenge traditional VC investment
While two thousand sixteen traditional blockchain venture capital investment reached $496m (near-stagnant growth when compared with 2015’s figures), a fresh method of raising money is challenging old norms.
Over the year, blockchain token sales, colloquially known as ‘initial coin offerings’ or ICOs, quickly became an alternative to traditional venture capital.
Since investor money was returned in the collapse of the DAO via ethereum’s hard fork, some analysts who report on the space have chosen not to include The DAO in yearly investment figures.
While CoinDesk Research understands why investors still retaining their funds may preclude some from including The DAO in yearly ICO investment, we felt that excluding the figures obscures the influence that ICOs have had.
Accounting for The DAO, ICOs raised $236m in 2016. This amount represents almost half (48%) of all the money raised through traditional VC and angel investment.
The average size of a finished ICO for the year was $7.3m, slightly below the average traditional blockchain investment of $9m.
Our latest ICO spotlight probe goes into more detail on market sentiment regarding the influence of blockchain token sales on venture capital.
Four. Consortia build up steam
While incumbent financial institutions released notable standalone projects, blockchain consortia were hard at work courting fresh business as well.
Banking consortium startup R3CEV loosely released the code for its Corda platform in tandem with its subjugation to the Hyperledger project.
After conducting a successful KYC-based registry using the Corda blockchain, R3’s Associate Director Clemens Wan discussed Corda’s unique features, “CorDApp development” and the future of R3.
Drawing an analogy inbetween the Corda platform and the Xbox gaming system, Wan went on to describe it as the “ecosystem” and “connectivity” needed in order for developers to build financial-grade distributed applications.
In other consortia news for the year, with the introduction of four China-based companies, Hyperledger has officially passed one hundred members. As Hyperledger proceeds to grow and Chinese company membership hits 25%, the project has made a commitment to the region with the Technical Working Group China proposal.
Still, there were those who suggested a counter-example to this model.
Blockchain startup Chain has so far bucked the idea that it needs to be a part of Hyperledger (or other consortia) debuting its fresh tech at Construct two thousand seventeen months after open-sourcing the Chain Protocol.
Chain product architect Oleg Andreev showcased a fresh method to implement privacy inwards of the cryptographic protocol.
With what it calls ‘Confidential Assets’, transaction amounts and account identities on the Chain Protocol are kept private. The Confidential Asset scheme adds ‘noise’, or inconsequential data, to hide asset IDs and values. A key is then required to obtain and subtract the noise values in order to arrive at the original data.
Andreev went on to compare Confidential Assets with other blockchain networks like zcash and monero that are leading the thrust towards privacy, ultimately citing scalability issues with zcash in certain enterprise instances.
Also at Construct, Chain’s Chief Product Officer Devon Gundry noted the company is working to develop Confidential Assets as an enterprise product suggesting within the Chain Protocol.
Five. The shove for privacy resumes
Privacy has become an significant consideration in blockchain protocols and old and fresh networks alike are establishing themselves at the forefront of the field.
While some may have sidelined monero as a legacy cryptocurrency, enthusiastic developers like Riccardo Spagni remain evangelistic toward monero and proceed to champ its potential, two thousand sixteen metrics and current market cap standing in 2017.
Monero now has the sixth largest market cap in the cryptocurrency space, one position above ethereum classic and $20m away from eclipsing litecoin. Developers like Spagni proceed to emphasize the sizable increases in monero’s transactional growth over its price, which peaked around $14 in early Q3 2016.
The presumptive explanation for renewed interest in monero is arguably the cultural shift towards privacy on the blockchain, a foundational element of the monero protocol.
Monero’s uniqueness comes from its implementation of a cryptographic instrument known as ‘ring signatures’ that permit users to send and receive funds without the transaction details being exposed on the blockchain.
The extreme volatility zcash experienced through Q4 two thousand sixteen also signals the industry interest in privacy protocols. Zcash’s Zero-Knowledge Succinct Non-interactive Argument of Skill technology, more conveniently referred to as zk-SNARKs, sought to be the all-encompassing solution for confidentiality on the blockchain with enhanced privacy features.
As the price of zcash crashed to $28 towards the end of Q4 from $Four,800 at launch, some enterprise blockchains have cited potential scaling issues in the underlying technology of zcash as a reason to look elsewhere for privacy solutions.
These concerns, compounded by reports that hardly anyone is using optional privacy features on zcash, signal an uphill road for the cryptocurrency in two thousand seventeen in order to regain its position in the industry shove to privacy.
6. Bitcoin volatility proceeds
The last year spotted developments in the long-standing debate over whether bitcoin can truly provide the basis for a payments system, or if it is better considered as a novel asset class.
While Q3 two thousand sixteen signaled slight evidence of bitcoin prices stabilizing and reaching something of a ‘safe haven’ status, Q4 two thousand sixteen disrupted this notion with a level of volatility the industry had not seen for a few months.
In what may come to be historically known as the ‘Trump bump’, the price of bitcoin soared post-election, as did volatility, which approached 62% for Q4.
Albeit Q4 volatility was not necessarily a year high for bitcoin, looking at the swings from quarter to quarter provides a decent counter argument to analysts and firms that see bitcoin approaching the status of an off-risk asset and safe store of value.
With bitcoin now at record highs and the Trump Administration still figuring out public policy amidst geopolitical uncertainty, analysts are scraping their goes with regard to near-term bitcoin price predictions.
If two thousand sixteen is any indication, we may be in for another wild rail.
To download the utter State of Blockchain two thousand seventeen report, visit CoinDesk Research.
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