Is Cryptocurrency holding back Blockchain technology?

Little by little companies are starting to embrace the benefits of Blockchain technology but adoption is slow and that is surprising if you look at all the possibilities that that the tech offers.

My assumption is that it is not the Blockchain technology itself that that keeps companies from using the tech but rather the fear of cryptocurrency.

Bitcoin was the first and is still the standard for all other blockchains. The idea was to create a decentralized network with shared databases and incorporate a mechanism that would allow all parties to trust the transactions on the network.

Here is where the mining comes into play, the miners verify the transactions, get to place the next block on the blockchain and receive the reward: Bitcoin. Because all the transactions are verified by miners you get a network that is trusted by all participating partners. And even more the result of this mechanism is that there is a digital asset that has value. This asset is used to reward the miners (if there is no incentive to verify transactions there wouldn’t be a network at all) and can also be used as a payment method between participants.

It is safe to say that Bitcoin has turned out to be a major success, the price of Bitcoin has reached heights of $20,000 and is the most used cryptocurrency. But there are some downsides to the success. Authorities and Banks in particular are not happy with the alternative currency. The decentralized peer to peer payment system makes it easy for those who want to transfer illegal funds to do so without anyone being the wiser. Bitcoin has often been named in connection with money laundering, tax evasion and other criminal activities.

It is headlines and images like these that make people weary of cryptocurrency

The success of Bitcoin has also spawned numerous other Blockchain projects. All of these project claim to use the Blockchain technology to solve some technological problem or innovate services. Ethereum is probably the most well-known project of Blockchain technology besides Bitcoin.

But there are some differences, the biggest difference is that with Bitcoin, the use of the cryptocurrency is a necessity. With some of the newer Blockchain project though it is not always clear what the added value of the cryptocurrency really is.

Except as a crowdfunding tool for startups

The monetary aspect of cryptocurrency becomes very clear when we look at the current trend of ICOs. An ICO is when the cryptocurrency is made available to the public. Participants can buy the cryptocurrency even before the project has even done anything worth noting.
The ICO has developed into a form of crowdfunding where the public invests in the project by way of buying their crypto coins. The investors hope that their initial buy in will be worth much more in the future like it did with the Bitcoin.

In fact I bet that everyone investing in Crypto is hoping to catch the next-Bitcoin crypto and earn millions in return.

It has become very important for any project or company using Blockchain technology to have something of a cryptocurrency. There are many benefits (besides the technological ones).

- Monetary

If you release a crypto coin, you can earn a lot of start up money, you can do this with a Pre-ICO and/or Public Sale (ICO). This way instead of dealing with a bank for a loan or investment company you can launch your startup on your own terms.

- Hype/Exposure

Launching your Blockchain project can cause quite the hype. Even unknown companies and teams with a (sometimes) decent idea can create quite the buzz. I dare to say that for example Bee (from Bee Token) would not have had the same exposure if they had launched their platform without the Bee Token. Yes, they have some great names in their team but it was the combination of that team, the project and the possible price increase of the Bee Token that made every crypto investor eager. Take away the Bee Token and it is just another Airbnb competitor. Include the cryptocurrency however and suddenly everyone is yelling “To the moon”.

- Credibility

It may sound odd, but let’s face it...a lot of things in crypto don’t make sense. Let’s say for example that Ethereum would not have released a cryptocurrency ( I don’t really know if it is possible from a technical point of view but bear with me) I don’t think that it would be as popular as it is now. I bet that most people would not even take it seriously. Hodlers would be like “C’mon a Blockchain without cryptocurrency, that’s a joke. What were they thinking?”. Having a cryptocurrency for a Blockchain is the standard whether it has any technical added value or not and anyone not abiding to that standard will not be taken very seriously.

Unless of course they are called Google or Bank of America for example!

Google and Blockchain tech, will those two ever meet?

So we have a interesting situation where on the one hand traditional/conservative companies and institutions are very weary of cryptocurrencies and what they represent. And on the other hand we have a crypto community who rather have a crypto coin released with every crypto project whether it makes sense or not.

The truth is that not every implementation of Blockchain technology needs a crypto coin that has a monetary value and needs to be traded on Binance or Bittrex. But because this is all that companies see, it is understandable that traditional established companies are cautious when it comes to implementing or even investigating the possibilities of Blockchain tech.

It makes perfect sense that companies will not implement decentralized networks for their core business. Companies tend be control freaks when it comes to their information management. Even Cloud solutions and Open Source are still things that make CEO’s and CIO’s very nervous. The thought of unknown people validating their transactions would probably give them a heart attack.

Cryptocurrency is used (among other things) for rewarding miners who validate the transactions. So if a company decides to built its own centralized private Blockchain, it doesn’t need to pay miners and it is safe to assume that the company can “trust” their own nodes. Even if the private Blockchain needs crypto for technical applications, this crypto would not have any monetary value outside the company.

Mostly it is the “bad boy” reputation of cryptocurrencies like Bitcoin that are keeping traditional companies from implementing Blockchain tech. However it is just a matter of time before big companies like Google and Microsoft actively start using the tech. When this happens and other companies can take note of the advantages, the Blockchain technology will get a broad adoption.

On the flip side I am convinced that when Blockchain technology becomes mainstream, this will have a big impact on the crypto landscape as we know it. I have no idea yet what will happen but something like the dot-com bubble may be upon us.