Hope you are enjoying the holiday season! As the New Year is coming soon, I want to share with you 3 trends that I believe will happen in the crypto market over the next year.
1) Bitcoin to lose its throne
During 2017, Bitcoin’s market cap as a percentage of the total value of all cryptocurrencies dropped from over 90% at the beginning of the year to 43% now. This is due to the proliferation of different blockchain projects. We expect this trend to continue as projects with superior technology/features gain more popularity.
We believe in 2018, there is a good chance that Bitcoin’s network value will be overtaken by another cryptocurrency. Bitcoin’s development, particularly in relation to the scaling issues, is too conservative due to political reasons and infighting.
There are generally two camps with different visions of Bitcoin – those who view Bitcoin as a medium of exchange and those who view it as a store of value. The medium of exchange camp is in favor of more aggressive scaling proposals while the store of value camp is more conservative.
If the two camps could work together on SegWit2x, then Bitcoin Cash would have sunk into oblivion already. But they chose not to cooperate due to political reasons, and now Bitcoin Cash is gaining tremendous traction (Coinbase listing, Bitpay integration) while the median transaction fees for Bitcoin is soaring to over $20, making it unusable except for large amount transfers.
With cryptocurrency becoming more mainstream each passing day, we believe the Bitcoin mempool is only going to become bigger and bigger, driving up the transaction fee even higher and generating record profit for the miners.
Many people are anticipating Lightning Network to help alleviate the transaction fees. I believe it is very risky to rely the future of Bitcoin entirely on Lightning Network – a project that started from 2015 and does not yet have a definite timeframe for publicly launching on Bitcoin.
I don’t want to come off as just bashing Bitcoin, but if its scalability does not improve in 2018, it has a real risk of being overtaken by another coin.
2) Decentralized applications (dApps) to gain traction
Currently, there are thousands of different decentralized applications being developed. According to State of the dApps, there are 910 dApps built on Ethereum alone.
Many of the dApps will be live starting from next year. Even if only a small fraction of the projects thrive, we will still see a number of popular dApps.
Some of the use cases include the tokenization of assets, payments & lending, insurance, gambling, and so on. With oracles connecting real world data into smart contracts, the possibilities are endless.
With more and more functioning dApps that investors can choose to put their money in, we believe the market will have a higher bar for ICO projects. Investors will have a choice to back projects at more advanced stages, so ICO projects will need to show further progress in order to compete for funding.
We will soon be able to see what blockchain technology can do aside from making payments. I am very excited to see how we can actually utilize blockchain technology to make our lives better.
3) Scalability will be the central subject
With the explosion of popularity in cryptocurrency, the number of transactions made on the blockchain has grown exponentially over the past year. As a result, there are congestion issues with the more popular blockchains such as Bitcoin and Ethereum.
Ethereum has already shown that it can handle upwards of 1 million transactions per day, but this is not going to be nearly enough when the flood of dApps begin to launch next year.
There are different blockchain protocols aiming to solve the scalability issue. The ones that can solve the issue while maintaining decentralization and security will be able to gain substantial network value.
With the amount of developers working to solve this problem, I am optimistic that blockchain can scale exponentially and eventually be able to support dApps as well as daily payment transactions.