Which Industries Are Really Being Affected By Blockchain Technology?
In 2017, the world heard all about blockchain technology courtesy of the meteoric rise of numerous cryptocurrencies, including Bitcoin, Ethereum and Ripple. We heard promises of the way blockchain technology and cryptocurrencies were going to disrupt everything from central banks to social media. Now, with most cryptocurrency values down at least 50 percent in the first quarter of 2018, it’s time to take a look at what’s really going on.
Even while crypto prices were rallying, several sceptics were urging caution. They pointed out that the industry had yet to deliver what was promised five years earlier. Many of the companies that accepted Bitcoin payments in 2017 were already accepting the digital currency back in 2012 – these include Virgin Galactic, Subway and others among them. The list of large companies switching to crypto had not grown very much. So, which industries are actually being changed by blockchain technology?
Really there are only two industries that changed dramatically in 2017. Online gambling is the first. If a customer already holds a cryptocurrency, the cost of transferring money between their wallet and an online gambling site is much lower than it is with traditional currencies like Euros or US Dollars. The owners of online casinos and other gambling sites quickly realized that once a customer had crypto in their customer account, there really wasn’t any need to convert it into a fiat currency – especially when that would cost money. So, they started converting the entire platform to crypto. As an example, the Gamble.io website lists several sites that are entirely dedicated to gambling with Bitcoin.
“Bitcoin, business, tablet, boardroom, ip” (CC BY 2.0) by Whitez
It’s not just online betting sites that are seeing real change. Macau based Dragon Corp recently raised over $400 million selling Dragon Coins, a cryptocurrency for the global gambling industry. Dragon Coin allows gamblers the ability to move their funds around the world cheaply and use them at any of Dragon Corp’s hotels and casinos.
The second industry that’s changing is the venture capital industry. The evolution of ICOs, or Initial Coin Offerings, has ended the monopoly venture capital firms had on investing in tech start-ups. ICOs have allowed start-ups to bypass the venture capital industry and go straight to retail investors. This has forced the venture capital industry to rethink its business model and invest earlier, with less due diligence.
So which industries are likely to be affected next? There are several new industries including IoT (internet of things) and artificial intelligence which are ideally suited to blockchain technology. These industries don’t have legacy business models which will be resistant to change. They are therefore quite likely to evolve as decentralized business models.
The other industry that will probably see change soon is the payments and remittance business. Ever since Satoshi Nakamoto published the original Bitcoin white paper in 2008, cryptocurrencies have been touted as the future of money transfers. The reality is that transferring money using cryptocurrencies is still quite expensive. If one looks at the financial results of companies like Visa, Master Card and PayPal for 2017 it’s quite clear that digital currencies have affected these companies very little, if at all.
Other industries that often mentioned as being ripe for disruption from blockchain tech are the banking, insurance and health industries. While it may be true that these industries could be improved by being deployed to the blockchain, the reality is it will take some time before that happens. These are large industries with legacy technology, rigid regulatory regimes and well-funded vested interests. It will take a long time before we see a meaningful decentralization of these industries.
Over the last 12 months, well over $5 billion dollars has been invested in new blockchain start-ups. Most of these are likely to fail, though some are sure to succeed. Widespread adoption of blockchain tech is more likely to come with the second wave of projects which will be built around these pockets of success. And that means we are still a few years away from widespread disruption of most industries.