A Year in Cryptocurrency and Blockchain: Q4 2018

The final quarter of 2018 has proven to be a volatile period for the cryptocurrency and blockchain industries, with numerous new partnerships, controversies, and developments unfolding. Disappointingly, however, the cryptocurrency market dropped significantly towards the end of November.

Notably, the crash took place after the market moved sideways for an almost unprecedented two month period. Bitcoin dropped nearly 40 percent to the low-$3000 territory, while ether dropped below $100 for the first time since May last year.

Discussions regarding price aside, however, here are some of the most noteworthy events that took place in the final stretch of 2018.

Zcash Sapling Upgrade

Privacy coin Zcash underwent a massive network upgrade on October 28, 2018. Dubbed Sapling, the update introduced a new shielded address scheme for improved privacy and promised a significant increase in transactional efficiency. Apart from that, the time taken for constructing new transactions was reduced by around 90 percent, with memory utilization also dropping by a whopping 97 percent.

Up until the Sapling update, most cryptocurrency exchanges and services chose to offer only unshielded ZEC addresses. The increased memory requirements and loss in performance when using shielded addresses made them economically infeasible to support. As a result, most transacting parties did not take advantage of Zcash’s key feature, privacy.

Roughly two months after the Sapling upgrade, The Zcash Foundation published a blog post stating that the use of shielded addresses was on the rise. The cryptocurrency’s community manager wrote:

“Services like mining pools are beginning to offer shielded address payouts to customers. Further, the number of third-party desktop wallets supporting shielded addresses is also rising. Looking ahead, shielded address light client support will promote even wider adoption. This is just the beginning for Zcash’s mission toward a shielded ecosystem.”

Tether Loses its Peg

Tether, a stablecoin that claims to be completely backed by fiat currency reserves, found itself amidst increasing tension in October 2018, when it lost its 1:1 peg against the U.S. dollar. Bitfinex, known to have a close relationship with Tether, had also suspended deposits in dollars, euros, sterling, and Japanese yen at the time, further fueling speculation.

The token’s chief compliance officer told CNBC, “We would like to reiterate that although markets have shown temporary fluctuations in price, all USDT in circulation are sufficiently backed by U.S. dollars (USD) and that assets have always exceeded liabilities.”

The uncertainty was intensified by the fact that Tether and Bitfinex were in the midst of switching banking partners. Given Tether’s lack of transparency, the two companies faced some backlash in the U.S. and Puerto Rican regions. Their former banking partner, Noble Bank, reportedly went out of business shortly after the switch and was looking to be sold at a meager $5 billion.

The controversy surrounding Tether originally unfolded late last year, when the token’s market capitalization ballooned beyond $1 billion. While many in the cryptocurrency community called for an audit of the company’s financials, Tether refused to give in. The company eventually hired third-party firm Friedman LLP to conduct an audit, only to dissolve the relationship a month later.

Bitcoin Cash Hard Fork Drama

Bitcoin Cash underwent a contentious hard fork on November 15, 2018, which saw two organizations propose competing roadmaps for the future development of the cryptocurrency. The first group, led by the Bitcoin ABC client, pushed for the addition of new features that would allow the cryptocurrency to support scripting and implement other indirect scalability improvements in the future. Contesting this change was the controversial cryptocurrency figure Craig Wright and his company, nChain.

Wright argued that the cryptocurrency’s primary use-case was that of currency and supporting non-cash related transactions did not align with that outlook. As a result, his version of the upgrade included an increased block size limit to 128MB and nothing else.

While cryptocurrency mining pool and hardware manufacturer Bitmain sided with Bitcoin ABC, another large pool CoinGeek pledged support for Craig Wright’s vision. Given that Bitmain produces most blocks on the Bitcoin Cash blockchain, however, it is perhaps no surprise that the ABC implementation won out in the end.

A month later, most exchanges have chosen to list Bitcoin ABC under the usual BCH ticker. Bitcoin SV, on the other hand, is also tradable on some exchanges, albeit with a significantly lower valuation and under the BCHSV ticker. That said, it is still the ninth most valuable cryptocurrency by market capitalization, only a few places behind Bitcoin ABC.

Coinbase Valued at $8 Billion

In spite of the cryptocurrency market’s poor performance throughout 2018, American cryptocurrency exchange Coinbase revealed that its projected revenue for the year 2018 would nearly top $1.3 billion. According to a report by Bloomberg published on October 30, the company said that it expects to earn $456 million in profit, up from last year’s $380 million figure. That is not to say that Coinbase is immune to the market’s performance though.

After all, the majority of the company’s revenue comes from the trading commission and gains on held digital tokens.

Coinbase also announced that it had secured a whopping $300 million investment in its Series E funding round late October. While the round was led by Tiger Global Management, investment also came from “Y Combinator Continuity, Wellington Management, Andreessen Horowitz, Polychain and others.” With a valuation of over $8 billion, Coinbase is not only one of the most valuable cryptocurrency companies, but also among the best performing technology startups of this decade. Bloomberg noted that the company’s valuation has multiplied by over five times since last year.

In a blog post published October 30, Coinbase explained that its latest cash influx would go towards global expansion, increasing the number of available crypto assets for trading, discovering utility based applications for cryptocurrencies, and bringing financial institutions on board with its Custody offering.

Steve Wozniak Makes Blockchain Debut

Apple co-founder Steve Wozniak made his blockchain debut this quarter when he announced his involvement with blockchain venture capital fund EQUI Global. A press release published on October 15, 2018, further revealed that Wozniak would be joining as a co-founder of the year-old startup. Explaining Wozniak’s involvement, the release continued:

“As co-founder of EQUI Global Steve Wozniak will head up technology investments and help find the tech stars of tomorrow. Woz will then bring them to the table and the board of serial entrepreneurs will mentor and coach them with world class expertise and guidance.”

Notably, Wozniak has been a cryptocurrency investor and proponent for several years now. In a 2017 interview with CNBC, he said, “I remember getting interested in bitcoin some time ago. It was $70 for a bitcoin, man and I went online and you had to have a special bank account at a special bank and I couldn’t buy any bitcoin so I gave up. Eventually, I got some of them at the $700 stage.” While he went on to liquidate most of his holdings in early 2018, he expressed interest in using cryptocurrency as a payment method in the near future.

In August 2018, Wozniak spoke at the ChainXchange blockchain conference in Las Vegas. In an interview with a reputed blockchain publication, he also hinted at collaborating with a blockchain startup in the near future.