Many are expecting 2017 to be a great year for blockchain technology. As 2017 began, the price of Bitcoin, one of the most-recognized digital currencies using blockchain technology, rose to over $1,000 in the wake of market uncertainty surrounding Brexit, the U.S. election, and other global events. Moreover, while banks and other investors have already invested significant amounts of money in the blockchain technology that underlies Bitcoin and other crypto-currencies, large financial institutions such as State Street are also testing other blockchain tools.
Predictions for growth are enormous and suggest an increasing normalization of blockchain technology. One prediction: blockchain technology will become mainstream with at least one central bank putting cash on the blockchain, with entrepreneurs using current infrastructure to solve problems rather than creating their own blockchain infrastructure, and with others using blockchains to solve supply chain issues. Products for solving privacy issues currently existing in blockchain technology will emerge and the price of Bitcoin will grow to over $2,000.
Current trends support these predictions. This year will mark the first time that blockchain technology will be used to manage the filing of important documents within the State of Delaware: incorporation documents, which create the foundation of securities markets, and UCC documents, which form the foundation for secured lending, within a state that is home to more than 66% of Fortune 500 companies, 85% of initial public offerings, and a large number of private companies. Furthermore, with proposals to rollback regulations under a Trump presidency, particularly those under Dodd-Frank, regulations that might otherwise stymy growth in the blockchain industry are expected to be removed.
And yet blockchain technology faces challenges in its growth. One expert predicts that blockchain startups’ explosion will slow as “hype condenses into products,” reflecting the technology’s normalization but also perhaps limiting innovation. Likewise, before states and private actors adopt blockchain technology for the types of contracts used in business-friendly Delaware, some argue that technical changes and a clear governance mechanism for blockchain technology need to be in place first.
Regulation by state controllers and other regulators also continue to be a major hindrance to widespread adoption of blockchain technology. For example, some fear that recent IRS action taken to require Coinbase to disclose client transactions could discourage the use of blockchain for cryptocurrency and instead encourage use of other transaction media.
While there are a number of challenges facing blockchain technology and its widespread adoption, optimism about cryptocurrency and blockchain technology remains high. Will the expectations for growth in blockchain technology be achieved in 2017? Only time will tell.