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Bitcoin or Blockchain? Bet That Both Will Thrive in 2018

Caitlin Long is the chairman and president of Symbiont, an enterprise blockchain platform. 

The following article, an exclusive contribution to CoinDesk’s 2017 in Review, outlines Long’s personal views and is not intended to provide investment advice.

Bitcoin and blockchain are often pitted against each other, but I come from both worlds and believe that both are game-changers in their own right.

I first learned about bitcoin in 2012 through liberty-oriented channels, which I’d discovered during a search for answers about the financial crisis in 2008. But I also took a deep dive into enterprise blockchain in 2014 while at Morgan Stanley, as a side interest to my day job of running its pension solutions business. In August 2016, I joined Symbiont full-time.

When I look ahead, I see 2018 as a year of maturity for both the bitcoin and enterprise blockchain parts of the space. Bitcoin will yet again prove its anti-fragility, more corporates will embrace it for payments, and the community will successfully resist its financialization. Enterprise blockchain will gain wider acceptance in production applications.

Bitcoin goes corporate

Bitcoin will increasingly be used for B2B foreign-exchange payments by multinational companies in 2018, as bid-offer spreads continue to tighten, daily liquidity consistently exceeds $5 billion and corporate new entrants gain comfort with liquidity providers (which enable corporates to use bitcoin for “cross-currency” transactions without touching the bitcoin itself–in other words, as an intermediary currency for foreign exchange in illiquid currencies).

Corporate bitcoin use will remain predominantly for payments in markets where banking systems are not well-developed. A tell-tale sign that corporate demand is sustainable would be this: when foreign exchange (FX) trading desks start making markets in bitcoin non-deliverable forwards (NDFs).

When that starts – possibly within the next 2 years – Jamie Dimon will admit his mistake and encourage corporate clients to route payments through JPMorgan’s foreign exchange desk, which will become one of the most active market-makers for cross-currency FX involving bitcoin.

Cryptocurrencies will continue to attract users as more folks learn about distortions in mainstream financial markets that just don’t make sense, such as this:  household net worth in the U.S. was $96.9 trillion, up $7.2 trillion in the year ending September 30, 2017 (according to the Fed’s latest Z.1 report).

This means the U.S. economy supposedly generated wealth at a rate equal to roughly 40% of its annual income (GDP), despite Americans consuming virtually all of their income and saving very little. Wow, that’s a miracle!

Remember this: all prices are fractions. Prices can go up either because numerators go up or because denominators go down (such as when central banks dilute fiat currencies). So…are financial markets climbing because we’re truly getting richer, or because of central bank-induced asset price inflation? Are quantity-constrained cryptocurrencies a safe-haven alternative? Time will tell, but I predict cryptocurrencies will broadly benefit as more folks come to understand what’s driving distortions in financial markets.

One of the “big 3” cross-currency central banks will announce in 2018 that it is preparing to issue its currency on a blockchain. The “big 3” are the “super-regional” central banks through which most “cross-currency” foreign exchange transactions settle, including the Fed, the Bank of England and the Bank of Japan. The Fed is behind the curve, but in 2018 either the BoE or the BoJ will step forward to allow tokenization of its currency to be executed by institutions in regulatory sandboxes. Corporate treasurers around the world will cheer at the prospect of same-day FX settlement through one (or two) of these “big-3” currencies because it will free up hundreds of billions of capital currently trapped on corporate balance sheets, due to payment system latency.

Yet for all bitcoin’s strengths, I believe advances in the enterprise blockchain will outpace those of bitcoin in 2018.

Let’s face it – enterprises are slower to move than the cryptoasset sector, which moves-fast-and-sometimes-breaks-things.

I believe 2018 will be the year in which a watershed event happens: an enterprise blockchain platform passes a CISO (chief information security officer) audit and is deployed inside the firewall of major financial institutions.

Enterprise goes live

Consensus 2018 will be “back to the suits.” Let’s face it: attire at industry’s biggest conference has been a pretty good barometer of what’s hot in the space. At the inaugural Consensus conference in 2015, bitcoin t-shirts dominated the audience. In 2016, business suits dominated as bankers discovered the space. In 2017, the dominant attire swung back to t-shirts, but this time for ethereum and ICOs. In 2018, I predict it will be “back to the suits” as enterprise blockchain accomplishments will again dominate the sector’s headlines, late-followers will scramble to catch up, and corporate treasurers will attend en masse.

The first institutional bond offering will be issued on a blockchain in the U.S. in 2018. Bond markets, not stock markets, will see the first U.S. institutional-level securities issued on a blockchain. Because the regulatory requirement to issue securities in “depository-eligible” (indirect) form does not apply to bond markets, the first institutional securities issued on a blockchain will be bonds – something I’ve predicted for years. In 2018, I believe it will finally happen. Yet, the coming clash between the federal securities laws that govern equities (which contemplate indirect ownership via the DTCC’s Cede & Co.) and state corporate laws (which contemplate that shares are owned directly by shareholders) will not happen yet in 2018.

No new blockchain consortiums will be formed in 2018. If 2017 were the year of forming new consortiums, 2018 will be the year of bilateral projects. Blockchains are networks and therefore suffer from the proverbial chicken and egg problem – consortium first and then project, or project first and then consortium? Consortiums now exist across a wide variety of industries, but – at least for now – more action is happening outside of consortiums than inside them.

Enterprise blockchain adoption will advance beyond incremental-type uses in production, such as sharing of data, to include transformational uses, such as custody of institutional financial assets that only ever exist on a blockchain. This will shine light on quality differences between platforms — and separate those that are decentralized and offer transformational benefits from those that don’t quite. A big gap will open in 2018 between the “haves” and “have-nots” in enterprise blockchain.

2018 will be a consolidation year as the sector matures. The sector came of age in 2017, as adoption broadened in both bitcoin and blockchain. In 2018, both will strengthen and deepen further. And property owners the world round will rejoice.

Disclosure: Caitlin owns cryptocurrency (bitcoin, almost exclusively) and has equity investments in Symbiont, and Payward, the parent company of Kraken.

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The leader in blockchain news, CoinDesk strives to offer an open platform for dialogue and discussion on all things blockchain by encouraging contributed articles. As such, the opinions expressed in this article are the author’s own and do not necessarily reflect the view of CoinDesk.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Blockchain Advocates in Japan and South Korea Are Joining Forces

Two blockchain advocacy groups from Japan and South Korea are combining their efforts in a bid to advocate for wider use of the technology.

According to the translated announcement, the Korean Blockchain Open Forum (KBOF) and Blockchain Collaborative Consortium (BCCC) of Japan have been in collaborative talks since November. A formal agreement between the two groups was signed during the Blockchain TechBiz Conference, which took place on Dec. 19 in Seoul.

As BCCC noted:

“In the future, we will deepen our cooperation in both events and group activities, and we will share our knowledge accumulated by each group with each other.”

According to the group, over 200 companies have joined the consortium since it launched. BCCC announced in December last year that it had grown its membership to more than 100 companies including Microsoft Japan, Mitsui Sumotomo Insurance, PwC, Bitbank and ConsenSys, among others.

Similarly, the KBOF said in the announcement that the forum has 157 organizations drawn blockchain startups, IT firms, government agencies, academic institutions, and local municipal offices.

The timing comes as regulators in one of the host countries, South Korea, moves to expand regulation around cryptocurrencies, though officials there have also said that they want to avoid creating new burdens for firms working on non-financial applications of blockchain.

As reported previously, following a ban on initial coin offerings in the country, the South Korean government is now also weighing methods to curb speculation around cryptocurrencies.

Editor’s Note: Some of the statements in this report have been translated from Japanese. 

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VR Firm YDreams Global Joins Hyperledger Blockchain Consortium

Virtual reality firm YDreams Global Interactive Technologies has become the latest member of the Linux Foundation-backed blockchain consortium Hyperledger.

With the move, the company joins other other recent additions to the blockchain group, including search giant BaiduTradeshift, Bosch and Oracle, among others.

The announcement comes as the firm also reveals that it is expanding its blockchain, ICO and and cryptocurrency development, according to a press release.

YDreams Global’s CEO, Daniel Japiassu, indicated that the technology company plans to apply these developments towards its virtual reality content and distribution worldwide.

Japiassu said:

“It is important to note the significance of blockchain and cryptocurrencies such as bitcoin and ethereum to the future of the company and the growth of the virtual reality contents created by YDreams.”

Hyperledger, an open-source effort set up to develop cross-industry blockchain technologies, has drawn members from various industries including banking, “internet of things” and supply chain, among others.

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Hyperledger Blockchain Consortium Adds Bosch, Wipro and More as New Members

Linux Foundation-backed blockchain consortium Hyperledger has added five new members to its portfolio.

Following the recent additions of China’s search engine giant Baidu and business networking company Tradeshift, Hyperledger has now opened its doors to general members Robert Bosch GmbH, Indian IT firm Wipro, Beijing Xiaomi Mobile Software, cognitive solutions and cloud platform Cognition Foundry, and Dubai-based holding company Majid Al Futtaim.

Aiming to build a range of applications and platforms based on open-source distributed ledger frameworks, the new additions mean Hyperledger now has more than 170 member organizations from across various industries including finance, banking, Internet of Things (IoT) and more.

According to Donya-Florence Amer, executive vice president at Bosch, her firm recognizes blockchain as a “key” technology in its push to become more IoT-focused.

She said:

“Hyperledger as the blockchain derivate focusing on industrial usage is key for us. Bosch has its strength in the full stack of IoT devices, cloud services for data storage and processing, experience in delivering critical software, and industrial processes with strong partnerships. We are very much looking forward to working with and to contributing to this alliance.”

Brian Behlendorf, executive director of Hyperledger, said the flow of members joining the group indicates Hyperledger is heading in the right direction, and highlights the importance of blockchain in business solutions.

In its announcement, Hyperledger also indicated it is currently developing eight business blockchain technologies including Fabric, Iroha and Sawtooth, among others.

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Swiss City of Zug Backs Blockchain Asset Trade Group

The government of the Canton of Zug is supporting a newly launched trade group that aims to promote the use of blockchain technology in the asset management industry.

Announced during the first annual M-0 blockchain conference in Switzerland’s “Crypto Valley,” the Multichain Asset Management Association (MAMA) comprises of 20 companies at inauguration, including Melonport, ConsenSys uPort, Virtual Capital Ventures, Bitcoin Suisse and Crypto Fund AG, among others.

With the support from Canton of Zug’s Department of Economic Affairs, the group’s establishing members feature asset management firms, financial institutions and service providers in the blockchain industry. According to a press release, MAMA aims to achieve its aims by promoting blockchain security, defining industry standards and advancing industry-wide best practices, among other objectives.

Mona El Isa, co-founder and CEO of Melonport, said in a statement:

“We created MAMA to facilitate a forum for leaders across all industries to discuss, plan and engage with one another to drive innovation and positive change in the asset management industry as we build out this technology together in the coming years.”

The effort highlights blockchain’s growing footprint within Switzerland, both in terms of cryptocurrencies as well as applications of the tech beyond currency.

For example, Zug began accepting cryptocurrency payments for government services back in 2016 – a move followed by the municipality of Chiasso in September.

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