It is pretty hard to understate what 2017 has meant for investors.
The S&P 500 had one of it best years in more than five appreciating
20% to a record near 2700.
The global economy continued to recover from the last vestige
of the 2008 financial crisis.
Everybody has the right to feel financially more secure.
But if you were for fortunate to be a crypto investor,
you have cause to celebrate like never before.
Bitcoin rewarded you with a 1660%+ price appreciation,
Ethereum gained a monster 10,200%+ while Litecoin turned in
a 6,500%+ price increase.
And these are just the majors.
Returns with some of the successful ICOs were even more spectacular.
Of course not every ICO paid off and some fell victim unscrupulous operators.
Nevertheless, 2017 was a golden year.
When prices increase as much as they have it is easy to get fixated solely
on price alone and forget about the underlying forces that represent true value.
So what will be the fundamental forced in 2018?
It is hard to know the future so far out
because it is evolving so quickly, but here are some thoughts on
several very important issues.
The Need For Speed
Turning away from the ton of good things that happened in 2017,
there are the twin issues of slow speed and high transaction fees.
It is a thorny situation.
Each of us can appreciate the need to any system to be
successful has to be capable of scaling.
Appreciating the higher energy consumed can be a bit
more obtuse but it a big deal.
The promise of cryptocurrencies like bitcoin going back to the
beginning was “fast and free”
As the table below illustrates, transaction speeds are stalling
and falling short of the promise.
The high transaction costs for all cryptocurrencies is presently a major
deterrent to broader acceptance.
Depending on how you work the math, performing a transfer in bitcoin
can be more the using a fiat currency and using the traditional
banking system.
Presumably the solution to faster transaction speeds would be less energy
consumed which in turn would allow competition to drive down fees.
At present even 10-15 transactions per second is not nearly enough to
meet projected demand in the future.
Finding a solution is important to everyone from the major currencies like bitcoin,
Ethereum and Litecoin down to companies linked to each.
Some help for Ethereum may be on the way in 2018
when Casper is fully in action.
Casper changes the Ethereum verification process from
“Proof of Work” to “Proof of Stake”.
One of the issues Casper addresses is high-energy consumption.
Part of the issue spills over into security.
In order to maintain adequate security of Ethereum POW protocol involves very high operating costs.
Casper dramatically lowers these costs.
Experts who have deep knowledge of Casper claim that honest miners
will be able to cheaply validate while attackers somehow will still
face extremely high costs.
Casper addresses this problem.
In doing so, Casper puts Ethereum in a much stronger
position to serve the world.
The more users, the more demand for Ether and that, of course means
even more upward Ether price pressure.
And then there is the Ethereum Raiden Network.
This is Ethereum’s version of bitcoins Lightning Network.
The technical definition of Raiden is allowing off-chain scaling solutions for
performing so called ERC20-compliant token transfers
Raiden supposedly enables near-instant, low fee, scalable transactions.
The operative words here are off-chain scaling and privacy preserving.
This is an option to watch closely in 2018 to see if
Raiden can live up to some big promises.
Could Terabyte Blocks Be The Big Solution
It is only a research paper but the founder of Lokad Joannes Vermorel
has come up with a possible answer by creating terabyte size blocks.
His idea has only focused on transactions for bitcoin cash but if it
works there you can bet that adaptations for other currencies will follow.
Joannes argues that terabyte blocks could not only be fast but economical.
He explains how terabyte blocks could scale to far more than the current
1MB blocks size or about 3-4 transactions per second.
According to his research paper a terabyte block could contain around 7 million
transactions per second.
That relates to 50 daily transactions for virtually every human on planet earth.
That promise alone is what makes Vermorel’s idea worth keeping an eye on.
How difficult it will be to translate Joannes idea into a real world application
and then be adapt to cryptocurrencies beyond bitcoin cash is anybody’s guess.
One thing is certain, transaction speed and costs are likely to be hot
topics in the New Year.
Remember, one of the original selling points of bitcoin was that
transactions were fast and free.
At present neither of these two promises are being consistently met.
Even so, the possibilities are so fascinating that it keeps our attention glued to
events that will shape the future.
Whatever 2018 brings we will share our views and hope your
prosperity continues.