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Last month, bitcoin celebrated its seventh birthday. Since its creation, it has gone from a niche novelty to the forefront of fintech innovation. Financial giants have seen the potential in bitcoin and, to a greater extent, the blockchain, and have the hit the ground running, eager to craft new uses for the latter. However, this is likely only the tip of the iceberg as far as what awaits us in 2016.
In July 2016, the reward for bitcoin mining will be cut in half. This will reduce the incentive for mining and ultimately the number of bitcoins in circulation. As a result, the value of bitcoin will certainly rise, if not skyrocket. In an article on founders grid, several bitcoin CEOs gave their predictions for bitcoin prices in 2016, with some arguing for a value of $1,000 per bitcoin and others going as high as $50,000.
This year, we might see a gold rush as speculators snatch up bitcoin. With numbers like these, it's hard to argue against adding bitcoin to your portfolio.
If bitcoin is a lightsaber, then the blockchain is the Force. "What the Internet did to communication, cryptotechnology will do to legal and financial transactions," said Vitus Ammann, CMO of Monetas. We have already seen a variety of new tech come out of the blockchain, from identity management to trading on the stock market.
While large organizations might dismiss bitcoin, they cannot dismiss the blockchain, which presents a paradigm shift in money transfer, privacy and efficiency. We will see much more blockchain innovation at a faster rate this year.
When a Netflix executive talks about the possibility of accepting bitcoin for global payments, we ought to take notice. Completely apart from the blockchain's star status among banks, bitcoin is now gaining attention from celebrities and other business people who are discussing and accepting the currency. For example, Mike Tyson recently lent his name to a bitcoin ATM and bitcoin wallet.
On the technology front, companies are beginning to develop solutions to enable easier bitcoin payments, such as Plutus. This recently rolled out app uses the Ethereum blockchain platform to place bitcoin owners' currency on a virtual debit card that can be used at any retail point-of-sale terminal with NFC functionality. According to the company, this will facilitate payment via bitcoin at more than 32 million merchants.
Big banks are investing vast sums of money into blockchain experimentation and development, in many cases teaming with startups familiar with the platform. At the same time, bitcoin companies are becoming nervous that big banks will ruin the decentralized nature of the blockchain.
In addition, some banks are aggressively attacking bitcoin companies. For example, Westpac Banking Corp. and the Commonwealth Bank of Australia, which have been experimenting with the blockchain, recently shut down the bank accounts of several bitcoin companies without explanation, later citing money-laundering and regulatory concerns.
As banks continue to develop their blockchain technology, we can expect to see more of these types of action.