Bitcoin: Blockchain hype and a mature ecosystem

Many investors are still suffering from the price drop and consolidation of Bitcoin in 2015, but under the bonnet hides a huge potential and an engine that is starting to roar.

The Bitcoin code was quite cautious

With a limited rise in speculative interest and more than 3,600 freshly unified Bitcoin code available to the market every day, the price was quite cautious throughout 2015. Many major investors sold shares of their Bitcoin assets out of necessity rather than personal interest like this Thus many of these Bitcoins were placed in the hands of new interested parties and investors and were thus scattered among the people.

Many startups, driven by inexperienced businessmen, did not make it through 2015 and had to close their doors. The risk capital invested in 2014 will not last a lifetime, especially not if one does not manage to generate sufficient sales on one’s own. This was the case for many companies in 2015 and the wheat gradually separated from the chaff. To get an idea of what a serious situation some Bitcoin companies were in, I talked to a manager who wanted to partner with a Bitcoin company.

At some point the managing director of the Bitcoin code company admitted

“You know, we are at a stage where we are seriously considering whether we should continue our Bitcoin code business”. Meanwhile, many private hobby miners are throwing in the towel in favour of the large mining farms because the difficulty is too great and the revenues can no longer cover the costs. Mining farms often have a geographical advantage with a cooler climate for chip cooling or pay many times less for electricity. Due to a newer generation of mining chips, the hashrate increased from 300 to more than 600 petahashes.

The currently low price also has a positive feature – mass acceptance has increased steadily in 2015 and the transaction volume is currently around 3 transactions per second (the network can currently process a maximum of 5-7 transactions). In the summer, due to the natural transaction limitation, a hot debate was sparked that lasted until the Hong Kong Scaling Conference in December. Here the appearance of a consensus arose, if perhaps only in part: “This is not about Bitcoin, it’s about the blockchain.”

The idea that Bitcoin may be too volatile and too radical for the financial world is increasingly calling for more institutions to create private and malleable blockchains with their own tokens.

Nine banks, including Goldman Sachs and Barclays, have already announced a “blockchain partnership”. IBM has already started to develop a blockchain without Bitcoin applications and supports several blockchain projects: Ethereum (USD 15 million), Chain (USD 30 million) and Ripple Labs (USD 32 million).

On June 9, a company called Blockstream released the first open source code for “sidechains”, a technology that allows Bitcoins to be transferred from the blockchain to a sidechain from where they can be equipped with new features such as high-speed transactions, smart contracts or for issuing shares.

The technology gained more and more attention in the press and the price per BTC finally broke through the resistance at 300 US dollars on 27 October. As a result, media interest was further fuelled by the alleged identification of the Bitcoin founder and the price rally continued beyond the 400 dollar mark.

What is the potential of 2016?
Here is my assessment for the year 2016:

1. the Bitcoin network will scale up
After months of discussions, there will be a decision in 2016 for the future scaling of Bitcoin.

There are already prudent and effective proposals on the table, such as Pieter Wuille’s Segregated Witness and Adam Back’s BIP248.

I think some proposed solutions will be implemented by summer.

2. Bitcoin will shine as a safe asset
I again expect high volatility in the global marketplaces and as a result I think there will be unexpected liquidity problems.

As a result, investors will be looking for low counterparty risk assets. I think Bitcoin Bitcoin will be one of those assets, even more than in previous years.

3. sidechains will prove to be a technical breakthrough
Just as Bitcoin had to defend itself against the accusations of a snowball system, the sidechains of scepticism