Decentralization. Immediate payments or settlements. Little to no fraud. If you’ve heard about cryptocurrencies, you’ve probably know one or more of those benefits of digital currencies. And they’re not limited to those three, there are several others.
Maybe you’re still skeptical. After all, like they say, “if it’s too good to be true, it likely is.” To worsen matters, some folks (most I’ve encountered) try to sell you on just the benefits of cryptocurrencies without mentioning the limitations. Ironically, some of those problems are part of the reason why cryptocurrencies are nowhere near replacing conventional currencies or credit cards. At least not yet.
Let’s consider some of these factors affecting mass adoption of cryptocurrencies:
You can also call this a lack of education about cryptocurrencies. This is a significant reason why digital currencies are not commonly used yet. In a 2015 PWC Consumer Cryptocurrency Survey, 83 percent of respondents said they’re slightly familiar or not at all familiar with cryptocurrencies.
Granted, that was some three years ago, but you’d be hard pressed to disagree with the survey even now. Some folks who have heard about digital currencies like Bitcoin do not trust it enough. Still, some people do not realize that Bitcoin is just one type of cryptocurrency and not the only one. Admittedly, the former group are worse off than the latter, but you’ll agree it’s an endless, repetitive cycle of ignorance about cryptocurrencies out there.
In the words of Travis Keith
“Though they may have heard about Bitcoin, and even use it, they might not necessarily understand how it works, much less what else the technology is capable of doing. It’s not surprising though, as people use currencies regularly throughout their lives but are largely not exposed to backend systems, which Blockchain essentially is, though quite a revolutionary one.”
That says it all. To be truly educated or knowledgeable about cryptocurrency, you need to know:
- What cryptocurrencies are
- What cryptocurrency can be used for (spoiler alert: almost everything traditional currencies can be used for)
- The benefits and disadvantages of cryptocurrency
Some sources are trying to solve this problem by allowing you to see which digital currencies are doing well.
Ideally, greater awareness and education about cryptocurrency will enhance adoption and reduce situations where, like Keith says, people use it but don’t even know how it works or what it is.
Bitcoin started 2017 worth less than $1,000 but by mid-December, it was worth over $16,000. After all the frenzy, the price now hovers around $9,000+. Other cryptocurrencies may not have swung wildly in the open market, but they’re still volatile.
In 2010, Laszlo Hanyecz bought two pizzas for 10,000 Bitcoin. At the time of this writing, that means he spent the equivalent of $9.5 million on two pizzas! With such exponential fluctuations, it’s evident why many cryptocurrency-literate people do not use Bitcoins for everyday transactions.
Some are keeping their coins in hopes that the prices will rise soon in the open market or you can just say they’re just not using it because they’re trying to avoid Hanyecz’s fate. Nevertheless, the truth is that conventional currencies need to be stable before they’re trusted as a means of exchange. Contrast that with Bitcoin, which dropped 70% or more on five different occasions in 2017 alone.
Experts believe uncertain demand and fixed total supply is the main cause of the price shifts. It remains to be seen how this is curbed due to the decentralized nature of cryptocurrencies.
3. Global events
In November 2017, the State Bank of Vietnam banned the use of digital currencies for payments of goods and services. For China, the Wall Street Journal reports that they’re actively shutting down Bitcoin exchanges, following a “comprehensive ban” on marketplaces trading virtual currencies in September 2017.
Certainly, you’ll agree that Vietnam and China are extreme cases. But what you may not realize is that China is home to the largest community of Bitcoin miners.
Also, some countries are making giant strides in the adoption of cryptocurrencies by approving them.
In August 2017, the Canadian Central Bank gave approval to Impak coin as the first Canadian-approved cryptocurrency. Reportedly, several other coins are undergoing testing and development there too.
The Japanese government has also set a framework through the Payment Services Act (PSA) which makes using cryptocurrencies for payments legal. Several cryptocurrency exchange platforms have also been approved by the government and they are exploring their own cryptocurrency called the J-coin.
Do some research and you’ll see that other countries like Germany, Holland, Sweden, and Russia are support adoption of cryptocurrency activities and some are trying to build their own national cryptocurrency. So it’s not all doom and gloom for cryptocurrencies.
However, for many other countries who are not bitterly opposed like China and Vietnam are, banks and governments will still need to make regulations to suit adoption of cryptocurrencies if they are to become valid legal tender. And while that hasn’t happened yet and may not happen in the nearest future, in the interim, virtual currencies are here to stay.