How do you see 2019 panning out for cryptocurrencies? Will cryptos gain more traction as a medium of exchange?
The technology seems to be at an inflection point. For cryptocurrencies to be adopted as a medium of value exchange, they would need to compete with cash, credit cards and debit cards, as well as a wide-range of other technologies that aim to simplify transacting. Prior to 2016, cryptocurrencies were only effective at circumventing regulation.
That being said, according to the SEC, EtherDelta – a decentralized exchange, run by a single individual, facilitated the listing of over 1,200 tokens, and 3.6 million transactions over an 18-month period. For context, this took the Alternative Investment Markets, a sub-market of the London Stock Exchange, ten years to achieve.
Looking at these numbers, it’s difficult to deny that the technology heavily simplifies asset exchange in low liquidity markets. The fact that less than a thousand lines of code can achieve the same volume, velocity and reach as an incumbent financial intermediary implies the industry is poised for significant disruption.
Unfortunately, that disruption will take quite some time to materialize. In 2019, we’re likely to see more of the same. A few high-profile successful projects being weighed down by the overwhelming number of opportunistic projects with limited long-term viability.
Regarding overall traction and adoption in 2019, we’re likely to see non-trading based growth across the few existing successful use-cases. Primarily, Cryptocurrency as a safe haven for markets with extreme local currency volatility such as Turkey, Venezuela and Iran, or as a way to circumvent capital controls, as we saw happen in China, Argentina, Indonesia and Brazil.
On the other hand, this growth is likely to be hampered by a contraction in institutional markets using cryptocurrencies as an uncorrelated asset-class. As adoption increases, correlation increases as well. Cryptocurrencies have begun to follow the same cycles traditional asset classes do. While historically, the individuals trading cryptocurrencies and traditional currencies belonged to two distinct groups, we are now begin to see that the same participants trading traditional assets are also trading digital assets. As a result, cryptocurrency prices are beginning to mirror the performance of the global economy.
The vertical that will experience the most growth in 2019 is likely to be the regulated solutions space. Bitcoin ETFs, NYSE’s dedicated cryptocurrency platform, Bakkt, and a few other high-profile institutional led projects are expected to come online in the first half of 2019. So it is definitely a space to watch.
How do you expect the underlying Blockchain technology to develop? Will there be significant advances in 2019? If so, what advances can we expect to see?
While blockchains are still in their infancy, with privacy and scalability issues, even at this stage, there are numerous applications and use-cases. Furthermore, if one casts a wider net and looks at the other cryptographic tools made available through improvements in computational ability, there are even more applications.
We won’t see one blockchain being used all types of applications, for example Ethereum was used for the launch of Crypto-kitties, as well as the first blockchain-based debt transaction. We’ll see a lot more specialized blockchains (especially in Finance)specifically designed to address a problem or perform certain tasks. On-going blockchain implementations have exhausted most of the technologies potential, as this is evident in performance limitations and the limited features/properties offered by prevalent blockchains.
On the subject of Blockchain more generally, what advances and developments do you expect to see in 2019 – will there be more widespread adoption across industries?
What people tend to overlook is the fact that blockchains provide a way to do the things we do today in a more cost effective manner. In their current form, they are not a value creators as much as they are cost eradicators.
Through incorporating blockchain technology in back-office functions, particularly activities involving the verification of data authenticity, Tier 1 financial institutions can save US$ 15-20 billion per annum.
There are several use-cases across industries from electronic medical records, to project management. We expect the biggest development to be around blockchain technology rather than within it.
I think we are likely to see an increase in the number of pragmatic, technically feasible projects, in contrast to the ambitious blue sky initiatives we saw emerge in 2017 and 2018.
Public sector use-cases for blockchain are the most obvious, given that they’re more straightforward to implement and their value uplift more easily quantifiable. Digital identity and blockchain-based asset registries, be it land or automobiles, seem to be the most obvious implementations.
In the UAE, we have a number of Dubai Government entities moving their operations on-chain, in line with Emirates Blockchain Strategy 2021. The strategy led by Sheikh Hamdan is gradually coming into fruition and will likely drive adoption levels across institutions and individuals.
In addition, With ADGM, DIFC and other regional regulators looking into crypto frameworks – ADGM have already issued a framework – we’re likely to see a wide range of legitimate private sector crypto-startups begin to tackle real world problems.
What will be new from Jibrel in 2019 (in terms of expansion and investment plans)?
We’re looking to solve real world problems! Jibrel primarily focuses on putting traditional financial assets in token format, which effectively means using blockchains to track traditional assets. We believe all assets will be tracked and ownership transferred using these mechanisms.
In addition to the operational efficiencies and process simplification, it also simplifies several tertiary application such as simplifying Islamic financing, particularly with the title transfer of the underlying assets and commodities used to facilitate Islamic loans.
Our expansion plans are aligned to the upcoming product releases including a mobile version of our digital asset management solution, the Jibrel Wallet (Jwallet), and Jibrel Search, our blockchain analytics tool, designed by finance professionals, for finance professionals.
Furthermore, we’re part of the DIFC Hive Fintech Accelerator, and are in the Dubai Financial Services Authority Innovation Testing License cohort, so we’ve laid the foundation to build-on and hopefully have a very successful 2019.
On a personal note, I recently moved to Dubai to set-up a Jibrel office, so you’ll be seeing a lot more of us!
