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A Cambrian Explosion of Blockchain Assets is Imminent

With new forms of blockchain assets entering the market, 2018 will mark the year in which crypto goes mainstream

It is hard to imagine today, but there was a time, some nine years ago, when the only thing living on a blockchain was a new kind of digital cash very few people took seriously. Since then, and around 512,584 blocks later, things couldn’t be more different.

From contracts and fully-fledged applications, to an entirely new form of asset class called Utility Tokens, the blockchain nowadays hosts a whole ecosystem of entities, owing their existence to Distributed Ledger Technology (DLT).

The lion’s share of this development can of course be attributed to the Ethereum project, which introduced turing complete blockchains and smart contracts as we know them today. During the four years of its existence however, a few considerable glass ceilings remained which, Ethereum and its predecessors haven’t been able to overcome.

The untapped potential is of course immeasurable, however two main hurdles immediately come into mind. When overcome, these will likely unleash a Cambrian Explosion of sorts in the blockchain ecosystem, comparable only to what smartphones did to app development.

New technologies, new opportunities

Transaction speed aside, the two main technical obstacles of blockchain technology are scalability and storage, which to some degree are interwoven. Despite what the common phrase “storing X on the blockchain” implies, contemporary blockchains are in fact very bad storage mechanisms.

The only thing blockchains are designed to store adequately are transaction records and their metadata. Anything else “stored on the blockchain” is either not really stored on it, or belongs there like a turtle on a post.

Nonetheless, exploiting blockchain technology as a sort of distributed database is very tempting, giving its immutable and decentralized nature, however this attempt normally results in a giant mess. The common alternative is the combination of a blockchain system with a decentralized storage provider such as IPFS or Storj.

This is an approach with which one can often get away with, however, it’s far from realizing the potential truly decentralized databases could unleash.

A “real” decentralized database would not only allow information to be stored, but provide the same advanced tools centralized databases use to structure information, manipulate it, and extract insights from the connection of items listed on it. As boring as this sounds, this feature is what separates us from real, efficient decentralized computation mechanisms that could change the internet as we know it.

Luckily, there are a few projects already working on this technology. One of them is a Chinese organization called “Cybervein”. Cybervein provides a blockchain network in which parties to a smart contract can share structured data and manipulate it in parallel without losing synchronization.

This essentially means that several computers could be connected through the blockchain and operate together as a giant super computer, pooling their resources and computing unimaginable amounts of data in the same data set.

Among laypersons it is often assumed that that’s what blockchains already do, while in fact the opposite is the case. Using a blockchain to synchronize data manipulation in a secure and immutable way, slows operation down considerably while eliminating all advantages provided by modern database technology.

Cybervein’s proposal would do the opposite in terms of data management. This wouldn’t only be immensely useful for research and Big Data, but could also change the internet as we know it and turn blockchain technology into an integral part of it.

Whether you want to cure cancer, find aliens, or just manage a database with multiple participants without Google or Amazon standing in the middle, Cybervein would be your friend. However, also more mundane tasks such as rendering CGI or running machine learning software, could be distributed among anyone connected to the internet, creating an entire new industry of aggregated computation.

The “Stampede”

Technology aside, the greatest frontier for blockchain utilization to date is compliance. As a technology that mainly deals with the transfer and storage of value, blockchain assets can’t help but bump into disagreeable encounters with regulators and lawmakers. The most obvious example is of course Utility Tokens, especially those used as a funding mechanism for startups.

Economists will probably spend the next decade, trying to classify tokens under one of the existing financial asset classes, regardless of their conclusions, most jurisdictions will probably not much longer tolerate the unregulated exchange of what essentially is an investment vehicle for most purchasers.

Nevertheless, decision makers in both – the blockchain industry as well as in most governments agree: tokenization is a powerful tool that shouldn’t be regulated out of existence.

The industry thought-leader on this subject is without a doubt Polymath – “The security token platform”. Polymath allows companies to issue securities as cryptographic tokens on the blockchain while facilitating full compliance with financial regulations on the basis of an innovative smart-contract approach.

What Polymath essentially does is “hardcoding” Security and Exchange regulations into the smart contracts governing tokens. This way, the token itself becomes its own watchdog, blocking any transaction that would violate regulatory guidelines.

This, once sufficiently established, will result in what Polymath itself dares to call “The Stampede”, meaning the massive migration of financial assets onto the blockchain, populating it with anything from stocks and bonds to futures and derivatives. With this, a clear separation of what a Utility Token and what a Security is would also be established, filling the wings of the industry with a boost of fresh air.

“Stampede” or not – one thing is certain: 2018 is going to be a very interesting year in crypto, resulting in a multitude of developments that will leave the market in a much more diverse, vibrant, and mainstreamed shape.

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