Christopher Pallotta and Vincent Molinari are the co-founders of Templum, an alternative trading system designed for cryptographic assets.

The following article is an exclusive contribution to CoinDesk's 2017 in Review.

As we enter 2018, it appears that blockchain's contribution to capital formation has only begun.

An unfortunate influx of both naive and bad actors begs for regulatory scrutiny, obscuring the intentions of ethical market participants anxious to operate within an informed set of dynamic guidelines and eventual laws.

In this environment, many anticipate increased regulatory action and enforcement by the SEC against issuers in 2018, and we will. But I don't expect the actions to stop there.

We will also likely see enforcement actions against certain "exchanges," which transacted in coins that are definitely securities. We will likely see FINRA jumping in with the SEC bringing actions against individuals who acted as placement agents and finders in taking compensation for ICO sales. Unlicensed investment banks or unauthorized entities will be regulatory targets, having conducted securities business for their ICO activities.

Of major importance for everyone involved during this time will be the need for quality education, alleviating confusion surrounding how blockchain's facilitation of financial transactions differs from cryptocurrencies.

As a capital formation tool, blockchain is likely to increase the reach of both small- and large-scale fundings, adding a tangible new layer of transparency for issuers and regulators alike, while confirming KYC (know your customer) suitability compliance and providing investor protection, straight through processing.

We will see increased collaboration between the blockchain or crypto community and currently regulated entities, as a movement toward asset quality and rigorous due diligence begins to dominate the marketplace.

The result will be increased activity and investment by institutional investors and venture capitalists.

As for what that transition will look like in practice, those who are familiar with current practices in the token economy should expect cosmetic changes.

The entry of new market participants will greatly expand pools of capital, but the vast majority of ICOs will embrace issuance as securities, given the clear guidance from the SEC. In response, there will be very few "true" utility token issuances in 2018. The SAFT framework will rapidly decline as an issuing structure.

In response, I expect that a new second-generation acronym (such as tokenized asset offering or "TAO") will replace ICO. Increasing bad press, regulatory enforcement and class action lawsuits (concerning coins issued before the infamous DAO) may dominate headlines, and ultimately, tarnish the monicker.

But this new model won't just be the same idea with a new coat of paint. Expect the SEC, CFTC and FINRA to collaborate on industry guidelines that merge the priorities of each, very similarly to how the SEC and NASSA cooperated for Reg A+ during the JOBS Act.

A regulatory oversight consortium would propose multi-agency rules for tokens, addressing their dual role in capital raising and eventual transactions as a secondary instrument.

This could create a pathway for perhaps an integrated hybrid token, one which is not only a security but also maintains a derivative utility function and or an alternate currency status, which may settle the utility vs. security vs. commodity debate.

That's not to say some things won't be lost.

The early days of ICOs will be credited with introducing and accelerating the use of smart contracts for aggregating capital. Heralded as the catalyst for major Wall Street disruption, tokenized securities will lead to a second generation of market participants, scaling global capital formation upward.

2018 will see the acceptance and rapid growth of TAO-style instruments, as the next wave dwarfs 2017's ICO issuance. An amnesty program for pre-DAO participants is also in order, for those inclined to view their tokens as securities, deserving of a regulatory framework.

The market will update functionality and build out new infrastructure for the sector. Securities trade clearance, settlement, transfer, depository and custody methods will evolve alongside modernized securities laws, lending greater transparency to regulators and comfort to participants. Standardized and immutable smart contract audit trails and archiving invite large institutions and venture capitalists to use this new tool to drive changes in the democratized access to capital, secondary liquidity and wealth creation that blockchain brings.

Traditional large financial service institutions will enter the space by acquiring early-stage market participants, while others build theirs out organically or by poaching teams. Bulge bracket firms will eventually wake up to market share erosion and realize that tradable TAO assets could become a significant trading desk product, which features monetizable profit margin, volumes and volatility.

The future of smart contracts as an essential tool in finance is solidified and irreversible.

But, we don't think it will just be money flows that benefit. The acceptance of blockchain and arrival of smart contracts is likely to have far-reaching benefits.

Social media will democratize tokenized securities promotion by expanding the issuer's reach beyond established funding channels. Updated capital formation, compounded by stronger investor education, can level the commercial playing field for women, affinity groups, fan bases and diaspora communities that also benefit from impact investing's many constructive side effects.

Channeling capital toward the underutilized global female brain trust could empower a mass of resource-deprived entrepreneurs, business leaders and innovators. This intersection of democratized capital, tech advances and social media may even begin a tectonic paradigm shift that accelerates gender equality.

In this way, we expect blockchain crowdfunding to ensure greater financial independence for women, a result which will confirm that United Nations Sustainable Development Goal number five (gender equality).

Thanks to blockchain, 2018 will be a year of change and volatility, but we hope, inclusion as well.

Zen garden image via Shutterstock