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THE FUTURE OF BLOCKCHAIN

While the values of cryptocurrencies have fluctuated wildly over the last year, blockchain, the underlying technology that powers all of them, could open up new and fantastic opportunities.

In an astonishing statement last month, Canadian billionaire, Calvin Ayre, founder of Bitcoin Cash said the flagship cryptocurrency will become worthless in 2019. In an exclusive interview with Express.co.uk, Mr. Ayre said he believed Bitcoin Cash was being purposely driven into the ground and would almost cease to exist in 2019. “I’m afraid I am predicting it to go to zero value as it has no utility.
It does not do anything, and they are intentionally anti-scaling it.” Last month, Mr. Ayre forced a “hard fork” – splitting one currency into two separate new ones. Bitcoin Cash (BCH), a cryptocurrency he launched in 2017, was divided into Bitcoin ABC and Bitcoin SV (Satoshi Vision). This was widely seen by the markets as a war between existing BCH investors.
The ABC (Adjustable Blocksize Cap) breakaway was led by Roger Ver and Jihan Wu of Bitmain against Mr. Ayre and his British partner, Dr Craig Wright.
The ABC camp were keen to maintain the cryptocurrency’s block size at 32Mb, while Dr Wright and Mr. Ayre wanted to increase it to 128Mb – amove they believe stayed true to the original plans of mysterious bitcoin creator, Satoshi Nakamoto (hence “Satoshi Vision”). The basic idea behind block size is blockchain – the underlying technology of cryptocurrencies.
A higher block size limit should mean the currency attached to it is less likely to struggle under pressure.
In the days following the dramatic split, bitcoin’s year of solid sideways movement collapsed into volatility which continued and left the price of a bitcoin on December 17 at about $3,200. Critics pointed the finger of blame at the hard fork which Mr Ayre and Dr Wright had instigated.
Mr Ayre rejected any suggestion that the hard fork was partially staged to purposely destabilize bitcoin. “The hard fork was a distraction” he said “but the downturn is because the SegWit coin that’s erroneously still called ‘bitcoin’ now follows the old-fashioned financial trends. It’s also because people wrongly focus on market cap when it should be about scalability and actual usability. Bitcoin SV is a currency, not an asset just to be held, and has real utility.

That said, there is no question that the hash dumping that the ABC conspirators did, in violation of the Nakamoto Consensus Rules that run bitcoin, destabilized the markets even more.”
The first quarter of 2019 is set to map out the road ahead for both bitcoin and Bitcoin SV, with the original asset due to be listed by Nasdaq. Analysts will be watching closely to see what momentum Bitcoin SV can attract.
It will also be interesting to see if others begin to turn away from bitcoin.
Amidst the uncertainty surrounding the values of particular cryptocurrencies, the future of the underlying technology that powers all of them is less uncertain.
Blockchain, at its heart, is a distributed-ledger technology that employs cryptography to ensure the integrity of the data it stores.
It is basically an innovative approach to database architecture where control of the data is shared among the parties using it.

Just as the internet has multiple websites, there are multiple blockchains, including the most famous ones, bitcoin and ethereum. While each blockchain is slightly different in design, all “permissionless” blockchains are open to the public, meaning all the data is readable by every participant.
The power of blockchain comes from this shared data, which can include anything from the ownership of a single bitcoin to property titles.
At the same time, because the data is open to the public, care must be taken to ensure its integrity and it is here that the key innovations of blockchain -cryptography and “proof of work” – are used to secure the contents of the shared ledger What makes blockchain so disruptive is that participants of a given blockchainagree to the same set of facts, the ledger.
The shared ledger eliminates the need for intermediaries to establish trust and authenticate identity between two parties who want to transact. As a result, blockchain has the potential to cut out the middleman.
If two parties want to transact using the same blockchain, they can both verify that the other party has title to what they claim without the need for a financial intermediary facilitating the transaction.
It eliminates the clearing function in financial transactions and allows the parties to move almost immediately from execution to settlement. The time required for settlement can collapse from several days to minutes.
According to a recent report by Morgan Stanley, all of this could open up new and fantastic possibilities. Bitcoin, for example, provides the three key functions of a currency – it functions as a store of value, a mechanism of transaction, and a unit of account.
Thus, in countries that have histories of financial instability, bitcoin could prove to be an attractive alternative to local currencies.
It could even potentially play a similar role to the one gold has historically, as a hedge against uncertainty. To put it in context, the bitcoin in circulation today is worth around $125 billion while the value of all gold ever mined is worth around $7.9 trillion. If bitcoin began to function more like gold on the world stage, those valuations could converge. The report identifies three key challenges that blockchain will need to overcome.
First, achieving critical mass. A network effect is a strong competitive advantage but is very difficult to start. It is possible that no blockchain will gain critical mass, which would prevent its advantages over traditional methods from materializing. Second, regulatory uncertainty. Regulatory bodies across the globe have increased their focus on all aspects of blockchain related businesses. For instance, both China and South Korea have banned ICOs (initial coin offerings), a form of raising capital that has been gaining popularity.
New regulations that limit what can be done with blockchain could reduce or even eliminate its attractiveness versus traditional means of conducting financial transactions. Third, high energy and storage demands.
Challenges in scaling blockchains could prove insurmountable. Given that blockchains are distributed ledgers and that all the data stored on the blockchain is available at every node, the storage demands of such a system grow exponentially as more nodes/ users are added to the overall system.
The proof of work calculations needed to confirm bitcoin transactions also require a large amount of electricity.
By some current estimates, about as much electricity is used by the bitcoin proof of work calculations as by the entire country of Denmark.