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Blockchain 2016 Year in Review

2016 was another year of blockchain hype with not much tangible progress to say for it. Sure there were some advancements with companies continue to experiment with distributed ledger technology, but not much that can be implemented in the near future.

From hacks to cotton traded over the blockchain, here’s what happened in blockchain during 2016.

Betting big on blockchain

We all know blockchain is at an early stage in terms of development. Though institutions have been testing distributed ledger technology (more on that in a bit), it’s been the sweet spot for angel and venture capital investment. There was a total of $290 million in VC investment into blockchain companies in the first half of 2016. Though total investment petered off in the second half of the year, the amount invested showed VC companies are betting on blockchain to be a big factor down the road.

Testing Testing!

You couldn’t go a few days in 2016 without seeing another name brand company announcing it’s testing blockchain. JP Morgan and Wells Fargo. Visa and MasterCard. IBM and Google. The list goes on and on. Banks, and even countries, have discussed coining their own cryptocurrency, while skeptics are still unsure how blockchain changes anything in banking.

Trade finance and tracking

The easiest way to test a blockchain deal is through a trade finance agreement. Just get a few parties together, create a blockchain, and voila, you have a blockchain transaction. Commonwealth Bank and Wells Fargo showed how easy trade finance over blockchain could be, as they coordinated payment on a blockchain for a shipment of cotton on its voyage from the U.S. to China on a blockchain. Other companies, like Walmart, have experimented using blockchain to track the origin of food to certify the source and keep high quality control standards.

Bitcoin price movement

Bitcoin started the year $434.46 a BTC and is currently almost at $800 a coin, giving eCoin prospectors a pretty, pretty, pretty good ROI. But bitcoin’s price movement this year has been volatile to say the least. Bitcoin stayed in the mid $400s until May, when it jumped up to $768 in less than a month. Six days later it was down to $602, eventually bottoming out at $552 in early August. Since then, Bitcoin has been on a steady growth surge to where it is today.

Hacks and hacks and hacks!

One big reason for big dips in Bitcoin price are hacks, and this year had its fair share of bitcoins getting stolen. Most notably was the Bitfinix hack in  August when $65 million worth of Bitcoin was stolen from online wallets. Ethereum was also subject to a massive DDoS attack, slowing down servers and forcing a second hard fork in as many months (more on that in a bit). Hackers also stole two types of cryptocurrencies from Fenbushi Capital founder Bo Shen in early December.

Though cryptocurrencies have come a long way, security concerns still limit scalability for the mainstream market.

The DAO

You didn’t think we were going to talk about cryptocurrency hacks without addressing the DAO, did you? The month long rise and fall of the utopian investment fund run showed the world that there are always wolves looking to exploit loopholes. After finding a crack in the smart contracts controlling the funds of the DAO, a hacker siphoned off $50 million in ether, the cryptocurrency on the Ethereum blockchain, leading to a hard fork.

Though the DAO was pretty much a disaster, it should be seen as growing pains for future organizations built off the Ethereum blockchain, and don’t be surprised if we see more DAOs crash and burn before the first successful DAO is created.

Crazy stories

Since blockchain technology is so young, you get some ridiculous stories about blockchain. The legal standing of blockchain is in a state of flux, as there’s still disagreement if Bitcoin is technically money. A judge in Florida ruled that Bitcoin isn’t money, while a federal judge thinks it is. Glad we cleared that up.

Accenture expressed interest in creating an editable distributed ledger this year, undermining the historical accuracy of blockchain transactions. There are now Bitcoin ATMs available all over the world.

But no story made me chuckle more than a company buying space on a satellite in space for secure bitcoin wallets. You know things are a little in trouble when companies send technology to space on a satellite to increase security.

ZCash

Speaking of crazy, the first day of new cryptocurrency Zcash trading was absolutely bonkers as the stock traded from $2 to a high of over $2 million a coin. Usually the debut of cryptocurrencies aren’t notable, but Zcash is special since governmental ministers were calling for its ban before it was even released. Zcash is special in that the transaction is fully encrypted, thereby hiding the buyer, seller, and amount transferred. There are concerns that a fully encrypted cryptocurrency that can’t be traced can, theoretically, fund terrorism. Sounds like a normal day at the office for cryptocurrencies to me.

R3 in flux

Speaking of trouble, the highly touted R3 blockchain consortium took a few hits in December. After asking member banks to pony up $200 million to be a part of the consortium, incumbents have been steadily leaving. Three institutions have already left, with a reported four more opting out.

Though a consortium model may be the best for real changes in blockchain, the problems R3 is facing show how hard it is to get big players to work together and put significant funds into a consortium-led product.

Most people who aren’t chugging the blockchain kool-aid knew that not much tangible progress would be made in 2016. Though testing of the technology has increased, we’re a ways off from banks adopting blockchain, and even further from it becoming a retail product. In 2017, look for more of the same regarding testing — lots of smoke without much fire. Security growing pains will continue, and don’t be shocked if there aren’t more major hacks this year. We’ll also (hopefully) see more DAOs and innovation with regard to Ethereum.

The Fed should start to get more involved with regulation of cryptocurrencies, and we should get a better understanding of how cryptocurrencies should be regulated. Don’t be surprised if this leads to some currency exchanges getting shut down though.

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2016 mobile payments year in review

It’s been an up and down year for mobile payments. Mobile commerce continued to grow, while mobile POS sales plateaued. Consortia were formed and disbanded, and former enemies made nice and came together on new partnerships. P2P payments gained traction and developing companies released mobile payment apps.

All that plus ANT Financial taking over the world in the mobile payments year in review.

2016: The year mobile POS didn’t happen

When 2016 rolled around, people were looking for an nice bump in mobile wallet transactions at the POS. Those hopes were quashed when Accenture released a report that mobile wallet POS transactions had seen zero percent growth in 2016.

Black Friday telling of the gap between mobile payments and mobile commerce

We’ve written a lot about how mobile POS payments and commerce originating from a mobile phone are two separate things. When grouped together, reports make it seem like mobile POS payments are taking over.

2016’s Black Friday showed us how different mobile payments and mobile commerce are right now. Adobe estimated that shoppers made $1.2 billion in purchases from mobile devices on Black Friday. On the other hand, reports from payment processor Cayan revealed only 0.6% of all POS transactions of Black Friday were made using a mobile wallet.

AliPay

ANT Financial’s payment arm continues to grow. AliPay is now looking to service Chinese tourists all over the world, including payment capabilities at international duty free shops.

EMV transition happening slowly

Merchants have been slow to respond to new regulations requiring them to use EMV and chip technology for in-store transactions. Fintech companies like Square and CardFlight have created cheap and versatile solutions for merchants, but the process of moving over to new hardware has been arduous.

MCX goes down

The Merchant Consumer Exchange was some of the biggest U.S. retailers’ answer to high interchange fees. Merchants tried to circumvent credit card fees and third party mobile wallets like Apple Pay by creating a single mobile wallet that worked at various retailers.

Unfortunately for merchants, things didn’t work out  Some would argue that the MCX and its mobile payment app CurrentC was doomed from the start. Trying to have a single app cater to multiple conglomerates in various sectors is a near impossible task. There are those who feel the whole matter was a stunt to try and combat merchant exchange fees from credit card companies, but regardless, the app still hasn’t been released and is seen as a big flop. Walmart, CVS, and Kohls are only a few of the companies that left the MCX to create their own mobile apps.

PayPal, MasterCard, Visa ménage à trois

Paypal had been on credit card companies’ naughty list because of its practice of pushing users to fund accounts via ACH versus using a credit card. But the three payment powerhouses kissed and made up earlier this year. The new partnership gives PayPal a leg into POS transactions with new integrations into MasterPass and Visa Checkout. In exchange, PayPal agreed to not discourage customers to fund their accounts with credit cards. I guess they forgot that Visa’s CEO at the time Charles Scharf called PayPal a “foe”, pledging to go after them “in ways that people have never seen before”.

Venmo grows, but sees increased competition

Venmo continued to grow this year, as more millennials signed up for the p2p payment provider. After seeing 25 percent growth from Q1 to Q2 of 2016, some predicted that Venmo will soon be the bigger than any P2P payment service, banks included. But P2P payment growth means more competition. In November, Facebook launched a P2P payments feature in Messenger. With the amount of users that Facebook already has, the social media platform may be a daunting opponent for P2P payment providers.

Early Warning

Speaking of P2P payments, Early Warning has been aggressively pushing its p2p payment system to banks. Rebranded as Zelle at Money 20/20, the app is the incumbents’ answer to Venmo. Although monetization does look better at Zelle, the company still needs the buzz and higher customer acquisition numbers to truly compete with Venmo and Facebook.

Mobile wallet war: Apple vs Samsung vs Android

Though mobile wallet transactions at the POS haven’t grown, that doesn’t mean companies haven’t started jostling for position and market share. The big three of mobile wallets have been vying for early adopters, trying to position themselves for the day in the (not so near) future that mobile payments take off. Apple moved to mobile commerce to help assuage users, while malfunctioning Samsung phones put a damper on its market share and hopes.

India and developing countries emerging

India has emerged as a hotbed for mobile payments, with powerhouse Paytm at the lead. South American and African countries have also seen mobile payment growth as cheaper technology goes global.

Starbucks revamps rewards system

It’s pretty tough to find a more successful mobile payment app than the Starbucks app. But the coffee company went against common sense and fixed something that wasn’t broke, altering the rewards system. Although there was a huge backlash from consumers, people are still fans, loading $1.2 billion onto the Starbucks mobile app and cards, which is more than many banks have in deposits.

Overall, there were some highs and lows this year for mobile payments. Though POS mobile transactions haven’t done well, mobile commerce is on fire entering into 2017. It doesn’t seem like any leaps will be made in mobile payments in the next 12 months, but look for continued momentum for mobile commerce, more P2P payment companies, and a global push to move transactions onto mobile devices.