Can cryptocurrency scale and scare old money?
IF cryptocurrencies are ever going to enter the mainstream, they are going to have to speed up.
While the PayPal infrastructure processes around 200 transactions each second, and nearly 1700 transactions pass via Visa per second, Bitcoin averages just seven transactions per second. And the more widely-owned Ethereum manages around 20.
Clearly, there are issues here that need addressing if (and it is a big ‘if’) Bitcoin et al are to be more widely used. Like any system that has no overarching regulatory control, opinions vary, even on the issue of whether scalability is desirable!
Some in the cryptocurrency community would rather that the currencies (especially the original, Bitcoin) remain as almost ‘special occasion’ currencies, not used in general for everyday transactions. Others have proposed measures (see below) to make the currencies scalable.
APMs include cryptocurrencies but largely comprise of so-called e-wallet transactions, such as AliPay, TenPay, PayPal, Qiwi and Yandex.Money.
While crypto transaction rates remain at less than one percent of this total, the similarities between ‘traditional’ APM use and cryptocurrencies’ use are unmistakable.
Both utilize apps on smartphones. Users can download a cryptocurrency wallet as easily as they might AliPay. Cryptocurrency wallets can be used wirelessly in stores (if accepted) and can be used as person-to-person payment methods.
In fact, person-to-person payments are — in the underlying schema of cryptocurrency — are exactly the same as consumer-to-business transactions. The egalitarian nature of Bitcoin, Ethereum and so forth ensures this.
Cryprocurreny’s additional strength — its lack of a central, controlling body — is also its main weakness, but here in the sense of its PR and marketing power. That is, getting it accepted across the globe as a medium of exchange.
With no one voice promoting its merits and (in time) convenience, Bitcoin and Ethereum (to name two) will struggle to gain traction down traditional channels. But social media and the Internet are, like cryptocurrencies, egalitarian platforms, and so any groundswell of opinion may well gain its own momentum.
This may already be happening — a report in the Japan Times recently stated that China’s authorities are considering relaxing their ban on Bitcoin trading in the country.
The Chinese position has and will continue to have, a notable effect on the value of Bitcoin, among others. The recent fluctuations in the Bitcoin exchange price have been put down to Chinese (and latterly, Japanese) moves.
Some users of cryptocurrencies believe that forking is not necessarily a bad thing. But until a system can be implemented that in some way unifies forked, or split, cryptocurrencies into one usable whole (a wallet app “to rule them all”), then widespread use will not be viable.
Bitcoin was proposed shortly after the global banking collapse of 2008, the effects of which most people continue to feel. While the two events were not necessarily linked, the serendipity of cryptocurrency’s emergence could be seen as a possible sign that a similar banking crisis might be avoidable in the future.
While no global banking concerns would be able to devastate the world’s economy if cryptocurrencies became standard exchange media, Bitcoin et al bring their own issues.
Public trust in cryptocurrencies may take time to develop. In the meantime, if they can scale, competition with Tenpay, PayPal, Alipay and the rest is going to heat up.