What will happen with Bitcoin and other cryptocurrencies? Which will rise, which will fall? What will be the next killer app, what can be expected from regulators? We take a look in a crystal ball and speculate.
1. Bitcoin will be boring
Don’t expect much drama. The network congestion will calm down, when smaller payments leave Bitcoin and when SegWit slowly has an effect. However, a significant increase in capacity will not happen. Bitcoin will not become a P2P e-cash system again, but keep being a digital asset and an exclusive system for large payments. It will appear to be immutable like gold.
If you take a closer look though, you will notice that there is progress under the surface. Lightning will be used for a growing number of minor use cases and enable atomic swaps to other blockchains. Mast and Schnorr signatures will be implemented, and, maybe, confidential transactions will softfork into Bitcoin.
Bitcoin will not get back to the domination it earlier had. But it will pass 2018 as still the biggest, most secure and advanced cryptocurrency.
2. Offchain will be a thing
2018 will be the year of going offchain - but not so much on Bitcoin but on Ethereum. There are dozen of reasons why offchain payment networks, like Lightning, will fire first on Ethereum.
While Lightning on Bitcoin does not enable something fundamental new - monetary transactions are not that surprising - on Ethereum offchain networks create completely new applications. Decentralized marketplaces, complex contracts like crypto kitties, zero knowledge proofs inside a transaction and basically every smart contract you can imagine.
Another difference is: If you just want to scale payments, like Bitcoin, you get quite far with staying onchain. But if you want to create a decentralized world computer, you can't even think about it without going offchain. No blockchain can handle just a fraction of the potential traffic.
A further reason is that Ethereum seems to be better prepared. While in Bitcoin wallets will need to learn the smart contract required for Lightning, the Ethereum wallets are already able to understand a lot of contract code. Last, the network design with its big contracts seems also like a good starting point to build the first hubs of the offchain network.
There are good chances that 2018 will see Ethereum’s Raiden Network (like Lightning) and Plasma (like sidechains) massively in action. If this does not happen, however, Ethereum will face a stagnating and disappointing year.
3. Bitcoin Cash will strive for everyday’s payments
After Bitcoin ceased to be a medium for allday transactions, there is a gap in the market to be filled. The most promising nominee for this mission is Bitcoin Cash. The forkcoin lead to the emergence of an amazing dynamic and seems to have the support of the industry and large investors. Maybe most important, BitPay will enable payments with Bitcoin Cash in early 2018.
However, Bitcoin Cash is not the only applicant for the future payment coin. Litecoin already processes a large number of transactions, and Dash and also Zcash qualify for good payment coins. If it wants to succeed, Bitcoin Cash has to be the best Bitcoin fork you can imagine.
The fight for dominating payments will be an important trend in 2018.
4. IOTA will face a critical year
Make it or break it: 2018 might become a thrilling episode for IOTA. The cryptocurrency designed for the Internet of Things has received some love from German industry titans like Bosch oder Telekom at the end of 2017. However, will it be able to fulfill the high expectations?
Will IOTA succeed in shutting down the centralized coordinator? Will the network become more stable, without the outages typical for late 2017? Will IOTA be able to eliminate Spam, and will the system really become more reliable if traffic volume increases, as predicted by the developers?
Those question will maybe be answered in 2018. If IOTA masters these challenges, chances are high that it will be a good candidate for the currency of the machine economy. In this case IOTA deserves to get a permanent seat in the club of the top cryptocurrencies. If it fails, however, the crash could go deep.
5. Monero will prevail in the Darknet
When it comes to privacy, Monero is clearly the most popular cryptocurrency. Ring Signatures and Confidential Transaction make Monero as close to being anonymous and untraceable as it is possible in cryptocurrency. After seeing some adoption in the darknet, chances are high that in 2018 Monero will replace Bitcoin as the “single currency of cybercrime”, as Europol already wrote in 2015.
With the upcoming hardware wallet, wallets for smartphones and bullet proofs Monero is well prepared for a kick of in 2018. Towever, Monero's success could have a price for the whole crypto markets.
Right now cryptocurrency is in some kind of balance of power between regulators and privacy seekers. Users can have some degree of anonymity and independence, but law enforcement can track a lot of transactions. Monero breaks this balance by making transactions untraceable.
There are reasons to belief that not all regulators and governments will tolerate this. Monero could be prohibited or automatically trigger a placement of its users on some kind of lists. Worse, the rise of Monero could tighten cryptocurrency regulation in general and, speaking more generally: Escalate a looming conflict between crypto and government.
6. Unicorns will get slaughtered
Currently there are more than 40 cryptocurrencies with a market cap of more than one billion dollar. You could call them crypto unicorns. Of those currencies, only a handful are really used (Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Monero, IOTA), and another handful is some kind of functional backup for these coins (Dash, Zcash, Bytecoin, Ethereum Classic). Everything else is pure speculation.
There is no economic activity justifying the existence of 40 crypto unicorns. Likely, the world will never have a demand for 40 cryptocurrencies with this size, even if crypto is really adopted. This makes it highly likely that 2018 will see the death of a lot of crypto unicorns. It is possible that the number will further rise, at first, but sometime there will be a slaughter.
7. ICOs become boring, but settle to compete with shares
The era of wild west ICOs with crazy profits and surreal revenues might be gone. ICOs continue to be an instrument to raise money, but there will be two trends:
First, the unregulated ICOs will become even more dubious and the chance, to become a victim of scammers, will further increase. Add the decreased profitability of most ICO token, and you understand, that the crypto community will find less fun in participating in ICOs.
However, the interest of non crypto companies in ICOs will continue. The wider economy learned that you can use blockchain token to fund projects, and a lot of companies just began to learn how to use this instrument. This and the increasing regulation of ICOs can result in that blockchain tokens will become an alternative to securities, shares, bonds and other financial instruments. Who knows, maybe we will see some major security exchange list or issue ICO token?
8. Non fungible token will be a trend
While most ICOs used fungible token, which means that one is exactly identical with the other, non fungible token are individual. The game CryptoKitties demonstrated in late 2017, that those token work and that there is a market demand for them. The scope of applications is wide, and we will see some come to live in 2018.
You can do a lot with non fungible token. You can use them for games, like CryptoKitties, or for collector’s items. However, you can also use them to represent real estate, artworks or insurances, just to name a view examples. That Ethereum established a standard for creating non fungible token, could speed up the use of blockchain technology in various sectors,, including public administration, lawmakers, notaries or artists.
9. There will be some kind of blacklisting
Regulation has the tendency to never relax but get tighter every year. So it is likely that 2018 will see another push to a stricter regulation of cryptocurrrency. One instrument of regulation that will come is blacklisting.
Blacklisting means that companies will exchange “tainted” addresses, which have some connection to criminal acts. Exchanges and merchants will be not allowed to accept coins connected to those blacklisted addresses. After nearly every exchange in the world has started to verify it’s customer’s identity, and after several companies developed sophisticated blockchain analysis tool, the industry seems ready to start blacklisting.
However, data protection laws should be an obstacle for a global exchange of private user data. Also, to not end in chaos, blacklisting needs to be integrated in private wallets. Users must know, if a coin is tainted, when they receive it. There could be a long way to achieve a complete blacklisting. But chances are high that 2018 will see the first steps in this direction.
10. Tax Authorities will Learn to Love Crypto
The time of tax investigators unknown about cryptocurrency is gone. Today, tax authorities are well aware and want to get their share in the millions many people earned with crypto. Many of those who thought crypto will hide their wealth from the state will learn the hard way that this is not the case. Tax authorities will take a lot of money from crypto millionaires.
Further, tax authorities will extend data sharing with exchanges and investigation on the blockchain. Eventually the officials will realize that Bitcoin is a perfect tool to make the tax debts of their citizens auditable. Instead of calling bank by bank, the authorities just need to check the blockchain. There’s a trend in the making …
11. International Trade will use Crypto Currencies
The last year had some minor indicators, that companies globally start to use Bitcoin for international trades. This trend will continue and intensify in 2018. We will see that whole cargos with resources or good, as well as real estate areas, will be traded against cryptocurrencies. And we will see that this makes international trading cheaper and more reliable.
The recently introduced futures on Bitcoin at the Chicago exchange will be an important instrument to use crypto for international trading. They enable companies to hedge against the volatility typical for crypto. Chances are good, that global operating companies will not just use Bitcoin or other cryptocurrencies for international trading, but also blockchain technology to make global supply chains more transparent.
Both trends together could be a first step of a new era of increased globalization.
12. Markets will further go down the Road of Diversification in Altcoins
Bitcoin is losing market share. Other cryptocurrencies like Ethereum or Ripple are gaining share, however, this is not enough to fill the gap. Thus the share of single currencies on the whole crypto market further decreases, and an ever growing share goes to “other currencies”.
This trend will continue in 2018. Right now, the markets are focused on Bitcoin and Ethereum. But this might change. In the future an overall share of 5 percent could be incredible huge. The crypto markets decentralize, and investors answer this with diversifying their portfolio.
It will become a standard, that every crypt platform or payment provider will accept a large variety of coins. Solo coin maximalists will simply become irrelevant.
13. Decentralized Exchanges and Marketplaces become more important
Last years have seens several attempts to establish decentralized exchanges and marketplaces. Examples are the local softwares Bisq or OpenBazaar, a smart contract on Ethereum like EtherDelta, or independent blockchains like Particle or Syscoin.
As of today, none of those platforms has received the popular attention it deserves. But with the tightening of regulation and the maturation of the software, 2018 could be the year this happens. If so, it would open a new chapter in the history of cryptocurrency, since it expands the decentralization from money to companies and platforms.