Ever since Vitalik Buterin released his white paper in 2013 detailing the concept of Ethereum, the blockchain platform has been rapidly growing. This past year has seen Ethereum face and surmount many challenges, from malicious attacks to unintentional consensus issues. Ethereum has been working through its growing pains but should see real progress made in several areas.
While timeframes are pretty loose, as they generally are when it comes to software development, 2017 should see some big improvements made to Ethereum as it moves from the Homestead release into Metropolis. A noteworthy upgrade will be to Ethereum’s user interface, which will help facilitate widespread adoption by those who don’t know how to use the current command-line format. There’s even the possibility of an Ethereum Dapp store, though it may be pushed to the backburner as more pressing matters may take priority.
Over the coming year, we should see Ethereum begin its transition from a Proof-of-Work consensus mechanism to a Proof-of-Stake system. This is the Casper protocol that the Ethereum Foundation has been diligently developing. While the network isn’t guaranteed to switch to PoS in 2017, the mining difficulty bomb (or in other words, the increasing difficulty of mining over time) should start to noticeably slow block times around midyear, thus making the changeover crucial.
As the Ethereum Foundation works on a more energy efficient way of reaching consensus (through PoS), other exciting pieces of the Ethereum puzzle will slowly fall into place. The much anticipated Mist browser could potentially be released, which would serve as both a crypto wallet and a full browser that’s able to interact with the blockchain and run Dapps directly. Swarm, the distributed file hosting protocol that runs on top of Ethereum, will also continue to develop and upgrade throughout the year. This will allow Ethereum to host large files without bloating the blockchain. Another exciting innovation that may be implemented in the near future is zk-SNARKs, which would allow for anonymous transactions across Ethereum’s public network.
We can also expect to see significant changes taking place in the Ethereum ecosystem as well. The Raiden Network will likely reach major milestones in 2017, as they focus on addressing Ethereum’s scalability issues and utilizing payment channels to allow for nearly instantaneous off-chain transactions. We can also look forward to oracles which are protocols that allow data to be fed to and retrieved from the blockchain. They would primarily facilitate the interaction of smart contracts with the real world. This is important for integrating the blockchain with the Internet of Things (IoT), so don’t be surprised if some great oracles are integrated into Ethereum next year.
On top of the Dapps
With 2016 looking like the year of ideas and plans and how to implement them, 2017 should hopefully see more concrete progress on the execution of the ideas, and the release of some great Dapps. iEx.ec and Golem are two companies looking into decentralized cloud computing and are both making real headway. iEx.ec recently released a whitepaper describing their objectives and plans to build a blockchain-based distributed cloud. Golem is focusing more on economically-incentivized, distributed supercomputing. After Golem’s wildly successful crowdfunding campaign (they raised over $8M in half an hour), they should hopefully achieve more forward momentum in 2017.
Two additional Dapps that will conceivably see improvements next year are the two major prediction markets Augur and Gnosis. Both are actively running, though they’re both still in beta. Prediction markets are a great use case for Ethereum, but also a great example of Dapps in need of a quality oracle to function properly.
In the realm of music, a startup called Ujo is looking to help artists control and get paid for their works. Not only would artists receive all of the royalties for their music, they would be able to distribute their songs without the need for a record label. Ujo aims to create a microeconomy for musicians and their fans by providing artists with homepages that are owned and operated by the artists themselves. Built on Ethereum’s backbone, and due to it being an easy to understand concept, Ujo could see serious advances throughout 2017.
Another great use case for blockchain technology is in manufacturing. Genesis of Things is a startup that wants to combine 3D printing and the blockchain to allow an individual item’s exact specifications and manufacturing process to be anchored onto the blockchain. Through a custom binary serial number, counterfeiting is mitigated and it becomes possible to order identical replacement parts with assurance.
An important area of development for blockchain tech is interoperability. With so many competing blockchains, especially private, permissioned and hybrid, creating a way for them all to interact is integral to a robust ecosystem. Luckily, Parity is working on Polkadot, which allows “diverse kinds of blockchains to interoperate within the same consensus network.” They will allow smart contracts on Ethereum to interact directly with any chain that becomes part of the Polkadot network. Even though Polkadot is slated to take up to 24 months to complete, the project will begin in 2017.
Companies to Watch
Outside of Ethereum-related startups, there are several entities worth watching in the coming year. The Chamber of Digital Commerce (CoDC) can be expected to continue working on promoting blockchain technology and its many benefits. The CoDC is also showing particular interest in Ethereum’s revolutionary concept of smart contracts. The more attractive smart contracts are to industry incumbents, the more likely it is that they will adopt Ethereum.
Another company that will continue pushing blockchain technologies forward in 2017 is Microsoft. Through their Azure platform, they offer blockchain-as-a-service (BaaS), which allows anyone to launch their own private Ethereum network with the click of a button on an Azure Quickstart Template. While that isn’t the same as using Ethereum’s public ledger, Microsoft’s platform will spread general knowledge of Ethereum’s existence, and promote confidence in its underlying technology.
There are two industries outside of finance that look like prime candidates for disruption in 2017: the healthcare and energy industries. Healthcare could be revolutionized and greatly simplified, by putting patient medical records on the blockchain. That would allow patients to retain total control of their own information. Additionally, clinical trials could track ‘patient consent’ on the blockchain, and store trial data on the blockchain (via a protocol like Swarm) and share it with relevant parties. Encouraging interoperability between medical institutions could increase efficiency and, in turn, could save lives. As far as the energy markets are concerned, they could see an increase in microgrids being controlled via Ethereum-based technology. Whether Ethereum is used for token creation, the trading of renewable energy certificates, or the tracking of payments and renewable energy production, this industry could benefit from Ethereum’s implications. As increased integration of microgrids into current system becomes more possible, the safer our entire energy supply will become, especially in times of natural disasters.
While Ethereum and its surrounding technologies are poised to overhaul the way things are done in several major industries, it still faces regulatory issues that will hopefully be addressed by the Securities and Exchange Commission (SEC). Although they have taken a hands-off approach regarding Initial Coin Offerings (ICOs) and the potential regulatory issues involved, SEC officials have recently begun to ask themselves if tokens should be considered as securities. So, while they’re not planning on rolling out regulations in 2017 per se, they may use this year to gather information before inevitably throwing their hat into the ring.
The SEC isn’t the only governmental entity beginning to test the blockchain waters. The IRS recently subpoenaed the virtual currency exchange, Coinbase, in an attempt to gather troves of private information regarding bitcoin transactions. It’s possible that the IRS could release a regulatory framework for the taxation of virtual currencies next year, as its current guidelines aren’t entirely clear.
Regulatory issues are among one of the biggest unanswered questions in the blockchain ecosystem. The U.S. Federal Reserve recently released a paper that focused on distributed ledger technology and concluded that further analysis would still need to be done to determine whether new laws and regulations are required to accommodate this rapidly developing technology.
Even the Uniform Law Commission (ULC) drafted a Virtual Currency Business Act to assist in the creation of virtual currency regulations. They are attempting to simplify regulation in an area of conflicting legal precedents and individual state licensing requirements. The ULC exists to draft uniform acts that help establish the same laws across jurisdictions, but it would remain the prerogative of state legislatures to consider and enact ULC regulations.
The New Year
2017 will definitely be the year to watch how regulators will react to the rapid growth of blockchain technology. The U.S. House of Representatives passed House Resolution 835 on September 12, 2016, which expresses the country’s need for adopting a national policy regarding blockchain technology. While the ecosystem has been decent at self-regulating, as far as weeding out scam ICOs and other shady business dealings, legislators are becoming aware of the growing necessity for fintech regulation. Because most startups have been legitimate operations, government intervention was unnecessary. Yet, 2017 will certainly be the year that regulators begin to take this revolutionary technology seriously. The blockchain isn’t going away, and this coming year will see developments evidencing this fact.