Despite a rough start to the year for cryptocurrency, 2018 has improvements in store so that digital coin can resolve common issues like high fees and long wait times.
Four developments in particular promise an improved user experience for cryptocurrency investors.
1. Off-blockchain channels
Off-blockchain payment channels are just that; a way for blockchain-based transactions to avoid using the blockchain entirely. Though the idea harkens back to 2015, it may finally be implemented this year and is most often associated with Bitcoin’s Lightning Network.
Off-blockchain payment channels would allow users of a particular cryptocurrency to mutually transfer small payments without settling to the blockchain (and thereby incurring its high fees and slow transaction times) until necessary.
Off-blockchain channels are gaining traction across cryptocurrency platforms including Ethereum and Bitcoin. The developers behind Bitcoin’s Lightning Network have announced the technology is almost ready and has successfully passed tests. Meanwhile, Ethereum developers have also announced successful tests for their Raiden Network. An even more ambitious project, Plasma, is also in the works.
2. Real-live cryptocurrency staking
The electricity required to sustain cryptocurrency is notable and best defined as an energy-intensive process. As a result, many have brought up concerns about the ultimate environmental impact of mining cryptocurrency.
Since 2011, the proof-of-stake, or “consensus by vote,” has been implemented to observe these impacts by Ethereum. It’s long-awaited Casper project is under development and likely to end up in blockchain news later this year.
In a testnet released on New Year’s Eve, one variation of Casper seemed to be functional. Karl Floersch, a Casper developer, told CoinDesk that the code is working with “no hiccups.” Ethereum creator Vitalik Buterin said he expects the technology will be tested alongside proof-of-work sometime in the near future.
3. Cryptocurrency privacy advancements
Privacy of cryptocurrency user data hopes to be improved this year thanks to the zero-knowledge proofs. Buterin has called these “the single most under-hyped thing in cryptography right now,” and they are only getting cheaper and easier to implement.
Zero knowledge proofs create a form of cryptography that obscures data without risking validity. It’s already been incorporated to a small degree into Ethereum and could be used by startups experimenting with private smart contracts.
In a white paper published earlier this month, a system for achieving zero-knowledge without compromising trust was released and could have exciting consequences.
Already privacy-centric cryptocurrencies like Monero and zcash are also due for improvements. Zcash has been steadily reinforcing its security in preparation for an upcoming update. Meanwhile, Monero will soon implement the “bulletproofs” feature that promises to cut fees by 80 percent.
4. Decentralized cryptocurrency exchanges
As the cryptocurrency industry’s largest exchanges struggle to cope with the influx of new users, an increasing number of projects are working on a solution by developing a decentralized exchange.
A decentralized exchange is more than just a new browser-based exchange; it is instead a type of software one can use to swap one cryptocurrency for another without relying on a central entity.
2017 already produced a wealth of new decentralized exchange projects including ShapeShift’s Prism, 0x, OmiseGo, and Kyber Network to name just a few. But, you can expect to see greater use and development of decentralized exchanges.
Already popular hardware wallet Ledger integrated with decentralized exchange Radar Relay in order to allow users to freely exchange Ethereum based tokens. Though its functionality is limited because it’s only supported by a single wallet using only Ethereum-based tokens, many in the industry predict decentralized exchanges will soon have greater impact in the cryptocurrency and blockchain worlds.
The potential of blockchain seems endless given its security and sophistication.
While no one can accurately predict the future, and certainly not that of volatile cryptocurrency stocks and markets of emerging technologies, these four developments will work independently and in conjunction with one another to shape cryptocurrency. With more and more of our lives now occurring digitally, why wouldn’t our finances be next?
(To learn more about the future about development in blockchain, read How Blockchain Could Reach Beyond Cryptocurrency Into Everyday Life.)