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The Evolution of Blockchain Technology: 2019 & Beyond

At the beginning of 2019 McKinsey & Co published a report about the blockchain industry, noting “that while crypto technology has potential, it has been unable to break away from the early ‘pioneer’ phase with most use cases failing to take off, pointing out that a huge amount of money has been pumped into blockchain projects, adding the view that ‘little of substance has been achieved.’

Blockchain Technology: Outlook and Timing

As with many new technologies, there tend to be challenges to full blown adoption, and blockchain follows suit.  For example, the appropriate legal, tax, and accounting framework is lacking, making establishing systems for financial reporting and compliance challenging.  Nevertheless, McKinsey agrees that blockchain is potentially revolutionary and has the ability to impact some industries.

Gartner estimates blockchain may generate $3.1 trillion in new business value by 2030, with the technology set to be ready for mainstream adoption as early as 2023. Organizations that have laid the groundwork to utilize and implement the technology may be in a better position to differentiate themselves from the competition and provide potential value to their stakeholders.

IBM notes that it also expects the blockchain opportunity for providers of blockchain platforms, services and owners of blockchain networks, to potentially grow five to ten times greater with a portion of this opportunity in the digital token economy through 2021. This may lead to reinvented industries and new digital assets and asset classes may give rise to entirely new primary and secondary markets, adding value via low costs and minimal friction.

Global Adoption and Regional Government Support

In the near future, several events may occur that may [potentially lead to the emergence of state cryptocurrencies. A number of countries have already announced plans for creating their own digital currency.  Currently, a proposal for creation of a national cryptocurrency has already been submitted the Eurogroup. Previously, the IMF and the World Bank created an “educational coin” or “quasi-cryptocurrency” on its own blockchain with limited access. This asset has no monetary value and is not a “real cryptocurrency,” however the insights gained here may help the IMF and the World Bank to understand the principles of the operation of the blockchain and potentially learn how to use cryptocurrencies.

The launch of the national digital currency of China is also a recent topic of discussion. According to the state representative, a prototype of the digital currency issued by the central bank (CBDC) already exists, and the digital money research group has fully developed the blockchain architecture for it. The currency will not be based solely on the blockchain, as this may interfere with its involvement in retail payments. In addition, the People’s Bank of China may provide Alibaba, Tencent, Union Pay, as well as the largest banks in the country, with access to its digital currency. The People’s Bank of China hopes that over time, its digital currency may be used in the United States and other Western countries.

The authorities of another East Asian country, Japan, intend to lead the initiative to potentially create an international network of cryptocurrency payments like the interbank system, SWIFT. Details of the project are unknown, but it has been reported that the FATF (The Financial Action Task Force) will monitor the development of the project, and its organizers intend to attract other countries to participate. FATF is an intergovernmental organization whose objectives include combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.  According to sources, Japan expects to put the initiative into operation within a few years.

Additionally, other countries such as Cuba and Venezuela, are actively developing systems in order to avoid US sanctions through cryptocurrencies. According to President Nicolas Maduro, the new tools of the Ministry of Finance and the Central Bank in the near future may allow citizens to conduct banking operations, including international payments, using cryptocurrencies.  Venezuela’s central bank is preparing to add Bitcoin and Ethereum cryptocurrencies to the country’s international reserves and is currently conducting tests to determine the acceptability of using digital money for such purposes.

Given the international governments activity and interest in blockchain and cryptocurrency worldwide, we believe it is clear that no country wants to be left behind in the blockchain race. The leaders still remain Switzerland, the USA, China, Japan, Australia, UAE, the UK, Estonia, Malta, and Singapore, and may influence the next round of market developments. The market has changed a lot over the past year and may continue to evolve. Though some countries have started to enact regulations to address cryptocurrency and digital assets, there is a steep learning curve as the lifecycles of blockchain and cryptocurrency approach maturity. 

Global Conglomerates and Regional Corporation’s Adoption

Key players in global financial services continue to experiment with internal adoption of blockchain technology.  Global giants such as JP Morgan, Samsung, Walmart, Amazon, are integrating blockchain into their business processes. This is also evident specifically throughout banking.

Companies may need to evaluate how blockchain can be used to increase trust, efficiency and transparency in digital advertising and how blockchain can affect advertising.  For example, McDonald’s, Virgin Media and Nestle are participating in a blockchain pilot program organized by the Joint Industry Committee for Web Standards (JICWEBS), which will allow them to evaluate blockchain’s application.  ISBA, one of JICWEBS’ founding members, is separately conducting a study of the programmatic supply chain in order to understand the distribution of costs across the supply chain. It will provide an overview of some of the major problems the industry is currently facing, while the JICWEBS pilot is evaluating how a DLT technology platform could be a permanent solution to handle these problems. The tests will last until the end of 2019 and this work may help optimize the logistics chains and improve the efficiency of digital advertising.

The Starbucks currently uses Microsoft’s Azure Blockchain service to monitor coffee production. With the help of blockchain, Starbucks representatives want every customer to be able to know the origin and supply chain for every coffee purchase.  Along the lines of supply chain, Carrefour, one of the largest hypermarket retailer chains in the world, started partnering with IBM’s Food Trust blockchain to trace their free-range poultry line. Following that success, Carrefour has expanded the technology to select dairy and produce lines. They have also partnered with Nestle, another IBM Food Trust customer, to enable blockchain traceability for Nestle’s Mousline potato products. According to Carrefour, its sales boosted and shopper trust was increased thanks to usage of blockchain.

Specific to financial services, there has been a lot of positive momentum for blockchain adaptation. By the beginning of 2020, more than 25 thousand outlets of 30 French retailers, including Decatlon and Sephora, plan to start accepting Bitcoin for payment. The new payment system will be launched thanks to the collaboration of Global POS, EasyWallet application and Easy2Play payment platforms.  Also, one of the largest store chains in South Korea, CU, plans start accepting payment in stablecoin secured by the South Korean won. This was made possible thanks to the CHAI payment service, which operates on the basis of the Terra blockchain.  Earlier, one of the largest e-commerce sites in the world and the largest in Japan, Rakuten, announced the launch of its own cryptocurrency exchange, and also released an application for mobile devices. Customers of the new trading platform got the opportunity to conclude deals on the spot market in three coins: Bitcoin, Bitcoin Cash and Ethereum.

There is also the opportunity to buy goods for Bitcoin, Lightcoin and Ethereum on the Amazon online store. Crate & Barrel stores, Nordstrom and Baskin Robbins, Petco, Lowe’s supermarkets, Office Depot and Amazon-owned Whole Foods supermarkets also have plans to accept Bitcoin, Bitcoin Cash, Ethereum and Gemini Dollar. This was made possible thanks to the partnership of the Gemini stock exchange owned by the Winklevoss brothers, with the Flexa payment network.

In aviation, Singapore Airlines announced the launch of a blockchain loyalty program, followed by the Taiwanese airline, FAT Taiwan Inc. (Far Eastern Air), which began accepting cryptocurrency as payment for airline tickets. Following them, Norwegian Air, the second largest airline in Scandinavia, plan to allow its customers to buy tickets with bitcoin. In addition, in August, the company launched the Norwegian Block Exchange (NBX) for limited user testing. The airline believes this shift to digital currencies will cut costs and release it from the stranglehold of financial middlemen.

Blockchain’s application can span across various industries, and it is encouraging to see the various programs and processes that leading global corporations are exploring, which may continue to benefit the technology long term. 

Exchanges, Regulations, & Security

Despite blockchain’s ability to secure data and fend off cyber attacks, investors are apprehensive about adopting this technology if it is not regulated by any law in a specific country. On the contrary, security gaps and lack of proper regulation has helped code developers and fraudsters escape liability from regulators. Generally, blockchain is not a universally accepted technology by every governmental institution of the world, which creates a degree of skepticism. Due to blockchain’s tamper-proof nature, adoption into current legal practices, may be more difficult than expected.  As a general matter, because of the nature of blockchain it may burden compliance with the law, namely it is hard for it to absorb changes required by law (such as a change in token ownership mandated by a court order).  Although it may be impossible to completely ban cryptocurrencies, wider scenarios for its use require a clear legal framework. Unless governments make every effort to provide clarity on cryptocurrency regulation issues, the process of mass adoption of blockchain technologies may slow down.

Lack of legal regulation can influence security issues within blockchain’s framework.  Large-scale cyber attacks can raise concerns among investors and prevent the adoption of this technology by both enterprises and consumers, who trust money to decentralized services even less. Among the recent high-profile stories is a hacker attack on the Japanese cryptocurrency exchange Bitpoint, as a result of which $ 32 million was withdrawn from the trading platform, and the disappearance of the Irish cryptocurrency exchange Bitsane along with funds from almost 250 thousand users. It is estimated that the damage from Bitsane’s actions is measured in hundreds of thousands or even millions of euros.  Also, as a result of a hacker attack, users of the Bitrue’s cryptocurrency exchange lost $ 4.5 million in XRP and Cardano coins.  One of the largest exit scams in cryptocurrency in China, was from the creators of the PlusToken cryptocurrency wallet, disappearing with $ 3 billion of assets. 

Leading Cryptocurrency’s ROI Significantly Positive

Despite a negative return on investment for bitcoin in 2018, bitcoin has regained positive momentum and is up approximately 134% since the beginning of 2019. In general, Bitcoin‘s market capitalization has exceeded 70% of the total cryptocurrency market for the first time since March 2017.  These facts may attract even more investors in the near future. 

Though organizations may not be forthcoming on the internal experimentation or use of blockchain technology, in PwC’s 2018 survey of 600 executives from 15 territories, 84% say their organizations have at least some involvement with blockchain technology.  Furthermore, worldwide spending on blockchain solutions is forecasted to be nearly $15.9 billion by 2023, according to a new update to the Worldwide Semiannual Blockchain Spending Guide from International Data Corporation (IDC).  IDC expects blockchain spending to grow at a robust pace throughout the 2018-2023 forecast period reflecting a compound annual growth rate of 60.2%.  According to IBM, the digital ledger market for blockchain products and services is anticipated to reach $60.7 billion in 2024, up from $708 million in 2017, further demonstrating the importance these organizations place on the future of bitcoin’s technology. 


Though some may be skeptical of the industry as a whole, McKinsey’s report was valid in that blockchain is still in its “pioneer” phase.  However, as various leading industries, companies, governments, and even financial institutions continue to ideate and develop during this pioneer phase, it’s clear that blockchain technology has a promising future with potential to transform the world as we know it today.