FUTURE OF BLOCKCHAIN AND CRYPTOCURRENCIES
Cryptocurrency has become a global phenomenom in recent years, although much is still to be learned about this evolving technology. There are many concerns and worries swirling around the technology and its capacity to disrupt traditional financial systems.
Cryptocurrency investors were on edge when 2021 rolled in. The price of leading token Bitcoin (CRYPTO:BTC) was up 309%, and Ethereum (CRYPTO:ETH) had climbed 459% over the previous year. But the last massive surge in 2017 was followed by an ice bath in 2018. Was the crypto market headed for another sharp correction in 2021?
As it turns out, the positive market momentum of 2020 carried over into strong gains in 2021. Both Bitcoin and Ethereum shot higher, followed by thousands of altcoins getting their first taste of mainstream success. It’s been a rocky road with lots of speed bumps, but the general market trend has pointed steadily upward.
It’s impossible to say exactly what will happen to the cryptocurrency market in 2022 and beyond. Questions are far more numerous than answers. But by keeping an eye on a few overarching tendencies of crypto, you will be able to make better investing decisions as the market continues to evolve.
Three particularly important details need to be followed:
Regulation in the U.S. and abroad.
Mass-market adoption of cryptocurrency payments.
Exchange-traded funds based on bitcoin and other digital currencies.
As these issues develop and are resolved, the long-term future of the cryptocurrency sector will take shape. A clearer picture should emerge by the end of 2022. Even so, a series of baby steps that started with Bitcoin’s 2009 creation is likely to continue for many more years.
It is good to see the technology coming of age in India too, with the government making a move to set up a national blockchain framework to prepare a centralised ecosystem that will cover as many as 44 sectors including e-governance.
Moreover, the move to leverage the potential of this emerging technology through a policy framework will bring India on a par with countries like China, the UAE, the US, Brazil, Chile, Canada, Singapore and Switzerland which have already made big leaps in the blockchain space.
In one best-case scenario for 2022, regulators around the world will come up with a global framework for crypto regulation. The Biden administration has put together a highly qualified team to steer the cryptocurrency regulation process led by U.S. Treasury Secretary Janet Yellen and the chairman of the U.S. Securities and Exchange Commission, Gary Gensler. Yellen has been tracking this sector for years, although sometimes taking a skeptical view. Gensler taught classes on bitcoin, blockchains, and other cryptocurrency topics at the Massachusetts Institute of Technology in 2018.
With highly knowledgeable people setting the tone for future regulations, there’s real hope that a workable system can be developed for investors, consumers, cryptocurrency businesses, and traditional banks. Informed regulators will understand crucial and meaningful issues such as the differences between a value storage system such as Bitcoin and a sophisticated ledger with smart contracts such as Ethereum.
BUT A brighter future could be delayed in several ways:
Policymakers drag their feet and fail to reach a sensible regulatory framework in 2022.
They could decide that currencies such as Bitcoin and Litecoin only serve illegal activities and bad actors, and none of it belongs on U.S. soil.
Retailers might balk at the unpredictable value of digital currencies and insist on traditional cash or credit card transactions instead.
Under any combination of these circumstances, the digital currency revolution could be delayed by several years. And, assuming it finally does arrive, it might look very different from the Bitcoin-led sea change that gained momentum in 2021. In the very long run, it seems unlikely that any government or group of nations will stop the cryptocurrency idea entirely, but they can slow down the movement and steer the final product in various directions.
These risks might sound hypothetical, but they are very real. In the end, the cryptocurrency community must get along with regulators around the world. Failing to do so can throw massive roadblocks in front of the digital currency sector’s progress.
That’s why you shouldn’t bet the farm on Bitcoin, Ethereum, or crypto in general. The next heart-stopping market move could still be a negative one with echoes of the 2018 crash. Informed investors want to build a diversified portfolio for the long run that is able to withstand dramatic setbacks in any particular sector..
but alongside in India
This technology is going to be the game-changer in the days to come. According to a Gartner report, many new innovative companies will use it and at least one business created using this advanced technology would be worth $10 billion by 2022. By 2030, it could be used as a foundational technology for 30 per cent of the global customer base.
By 2025, blockchain would add a business value that will grow to over $176 billion. This would increase further to $3.1 trillion by 2030. It simply shows the unfolding potential.
One of the finest points of the proposed framework is that the Ministry of Electronics and Information Technology (MeitY) in India has identified 44 key areas, almost every sector from pharma and farming to education and energy.
Among all these, e-governance will get the spur as the government has listed a long list of potential applications for fool-proof delivery of services to the citizens.
Digital certificate management, transfer of land records, pharma supply chain, e-notary services, e-sign solution, duty payments, automated customs enforcement and compliance, agriculture supply chains, e-voting, crypto wallet, health records, cross-border transports, public service delivery, charity donations, smart grid management, and vehicle registrations are just a few of them. As the data in the blockchain technology is near impossible to be tampered with, the trust and accountability of e-governance will be maintained.
More importantly, it can integrate the existing applications like e-Sign, ePramaan, and DigiLocker, apart from the current infrastructure and services.
It means that the isolated attempts by different departments to adopt this technology will now be integrated and we will see a much-needed momentum for IT reforms, with the support of the private sector and enhanced research.
The goals have been laid out clearly and the potential is captured well in the proposed policy initiative. The technology will store data in a decentralised, vigilant, time-stamped, immutable manner, providing an efficient ledger storage mechanism in a distributed environment.
The challenges
But we cannot ignore the many challenges. The biggest concern is the scalability as the current transaction processing rate varies, depending on many factors. The performance and scalability of blockchain networks will be the key focus area now. As with other similar innovations, security will remain another major challenge, though constant efforts would be made to develop new models and products for enhanced security.
Another sore point is the interoperability, which still is in its nascent stage in the country and a lot needs to be done in many key areas. Data localisation is an area that needs focus and research. In order to restrict the data flow and localise data, countries have introduced new laws.
The European Union introduced a data protection law called the GDPR (General Data Protection Regulation).
But, overall, the new initiative is a welcome move from an international perspective as many countries have marched ahead of us. China has a Blockchain-based Service Network for faster deployment of applications while the European Blockchain Partnership is building a trusted European Blockchain Services Infrastructure for interoperability, privacy, and security.
India has the potential to emerge a leader in the blockchain technology just like it has demonstrated its capabilities in other IT innovations.
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