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In 2018, the cryptocurrency market came down from its 2017 market high after it failed to deliver on the short-term expectations of blockchain technology. Nevertheless, the blockchain industry is not faltering. Quite the opposite: it is undergoing growing pains as it is facing technical, economic and governance challenges. Two core issues have emerged: scalability and regulation. By now, most governments have issued warnings about the pitfalls of investing in cryptocurrencies and are setting up some type of regulatory framework. Still, these regulatory frameworks need a lot of work. In addition, cryptocurrencies are facing the challenge of improving the scalability of their transaction density, while at the same time maintaining acceptable levels of security and decentralization. Already, Bitcoin and other cryptocurrencies are testing several solutions to scale, but all of these solutions have their caveats. In the meantime, new blockchain applications are coming online that are stress testing the network. Solving the scalability issues and creating regulatory frameworks will take several years, potentially even decades, but at least the process has started.
Europe’s pivot to China
Last month, Italy and Luxemburg were added to the growing list of European countries joining China’s Belt and Road Initiative, with Italy being the first G7 nation and large E.U. economy to join. As part of China’s flagship infrastructure project, Chinese companies will invest in the Italian ports of Genoa and Trieste, which China considers important hubs to gain access to the European internal market. The agreements come at a crucial moment. In its strategic outlook on China, the European Commission officially recognized China as a “strategic competitor” and “systemic rival”. Consistent with this view, France and Germany, Europe’s core powers, are collaborating to hamper Chinese commercial influence in Europe. On the one hand, by blocking Chinese investments through more stringent regulation on the screening of foreign investments and conditions for foreign ownership. On the other hand, by supporting the creation of “European champions” that can stand up against the dominance of Chinese (and American) companies. As China’s BRI seeks new inroads in Europe, a European strategic pivot to China is emerging as well.
Growing the cloud game
Recent weeks saw a growing number of game publishers, hardware makers and cloud providers exploring the possibilities of cloud gaming. Most recently, Google announced Stadia, a cloud video game service that will run exclusively on streaming technology. Instead of a physical console, Stadia only requires a Chrome browser to deliver games seamlessly to players. According to IHS, the market for cloud-gaming content subscriptions could grow from $238m in 2018 to $1.5b by 2023. Moreover, as part of the $128b games content and services market, cloud gaming could become a driving force of both the gaming and the cloud market, hence the interest of cloud giants Microsoft, Amazon, Google and Tencent. They join services already available from Nvidia (GeForce), Valve (Steam Link) and Sony. All of them hope to become the “Netflix of games”, but to achieve this they will need a broad library of game content and a robust infrastructure to run games without lag. The providers who get it right could create new markets for game content, hardware and cloud infrastructure.