Cryptocurrencies: One revolution may hide another
Cryptocurrencies: One revolution may hide another
Bitcoin, the tip of the iceberg
Bitcoin remains the most widely covered cryptocurrency and the largest in market value, with more than €200 billion in capitalisation. However, there are currently around 1,500 virtual currencies, and dozens more are created every week, at a pace that is raising questions among many experts.
With a growth of 1,318% in 2017, the most famous cryptocurrency did not even rank among the top 10 best-performing assets of that year. The top spot actually went to Ripple, a more discreet cryptocurrency that nonetheless recorded 36,000% growth in 2017 and surpassed €100 billion in market capitalisation at the beginning of the year[2].
In 2015, Chris Larsen, co-founder of Ripple Labs, the company behind Ripple, came to Luxembourg to present its international payment facilitation and acceleration platform—then virtually unknown—at the ICT Spring Europe conference. At the beginning of this year, his entirely virtual fortune briefly made him the fifth richest person in the world, overtaking Facebook founder Mark Zuckerberg[3].
Around forty virtual currencies have now crossed the €1 billion market capitalisation threshold, whereas there were only seven six months earlier. Some, such as Cardano, already represent €15 billion in value, despite only starting to be traded last October.
The real revolution behind cryptocurrencies
Even though virtual currencies offer certain advantages compared to fiat currencies, most analysts doubt they will ever become a mainstream means of exchange. They consider that the strong fluctuations in cryptocurrency valuations over recent months are nothing more than the expression of a speculative bubble.
Critics of cryptocurrencies are, however, much more enthusiastic about Blockchain, the technology underpinning Bitcoin, and stress that virtual currencies must be carefully separated from the technology that enabled their emergence.
A Blockchain is a database containing the history of all exchanges carried out between its users since its creation. This database is secure and distributed: it is shared among its users without intermediaries, allowing everyone to verify the validity of the chain. It can be seen as a large public, anonymous, and tamper-proof ledger, to which new pages—digital containers called “blocks”—are regularly added, recording the latest transactions.
Every public Blockchain necessarily operates with a currency or programmable token, with Bitcoin being the most widely known example. Transactions between network users are grouped into blocks. Each block is validated by network nodes called “miners,” using methods that depend on the type of Blockchain.
Blockchain technology appears to hold significant disruptive potential, with the ability to profoundly impact economic activity across finance, industry, healthcare, and public services. Some estimate that within 10 years, Blockchain could inject between $300 and $400 billion annually into the global economy.
Investing in Blockchain today is somewhat like investing in the Internet in the mid-1990s: it could also trigger major disruptions over the next decade, even though many uncertainties still remain. Just as the Internet dramatically expanded information sharing and transfer, Blockchain could, in the coming years, enable hundreds of millions of people to share and transfer value.
New perspectives
Regardless of one’s view on Bitcoin, its emergence has undeniably demonstrated that Blockchain makes it relatively easy to create a decentralised peer-to-peer economic environment, opening up new opportunities for any online activity based on a community strategy—from e-commerce to social networks.
Blockchain also has the potential to transform how high-value goods are transferred and controlled. Its decentralised nature makes fraud virtually impossible, which could prove valuable for tracking luxury items such as diamonds, works of art, luxury goods, and even certain organic foods. The first real-world applications are expected within 3 to 5 years.
Smart contracts are one of the most promising uses of Blockchain. Despite their name, these “smart contracts” are not legally binding authorities. They are autonomous programs that, once launched, automatically execute predefined conditions recorded on the Blockchain. For example, smart contracts could help structure how variable, weather-dependent energy sources—such as solar and wind power—are shared, distributed, and adjusted to demand.
For governments and large companies, Blockchain applications in identity, traceability, and decentralised transactions will soon become tangible. In addition, Blockchain protocols linked to IoT are expected to play a crucial role in debates on data ownership over the next 3 to 5 years. A new ecosystem for data negotiation, transaction, and ownership is therefore entirely conceivable within a reasonable timeframe.
If there is one key takeaway from Blockchain technology, it is that among its many possible applications, it enables the existence of decentralised distributed applications. These decentralised applications (“DApps”) provide services that often already exist, but without requiring a central intermediary. This is where Blockchain’s true disruptive potential lies.
With Ripple, Proximus NXT facilitates cross-border transactions
Proximus NXT is a cloud and telecom integrator and operator, as well as a provider of digital solutions for the financial industry (Digital Finance Solution provider). In this dual context, Proximus NXT decided in July 2017 to join Ripple’s XRP Ledger ecosystem by operating a Ripple Validator node in its own cloud. Proximus NXT thus contributes to the consensus process enabling real-time settlement of transactions between financial institutions on the Ripple network.
[1] Satoshi Nakamoto est le pseudonyme du fondateur inconnu (individu ou groupe de personnes) du Bitcoin et de la première Blockchain.
[2] Source : Forbes, "Crypto-Monnaies : Le Ripple, mieux que le Bitcoin".
[3] Source : The New York Times, "Rise of Bitcoin Competitor Ripple Create Wealth to Rival Zuckerberg".
