Decentralisation, lower fees, and immediate settlements — you might have come across one or more of these benefits of cryptocurrencies. However, cryptocurrencies continue to face skepticism by most people. You hear horror stories of hacking incidents, cyber theft, illicit usage of cryptocurrencies funding drugs or worse. Small wonder your average Joe would hesitate to explore further into cryptocurrencies, much less use them.
Cryptocurrency enthusiasts, however, maintain that the risks are not as great as using or investing in traditional financial instruments. They foresee a future where blockchain will permeate every aspect of society, benefiting and disrupting industries, bringing about a new age of civilisation where everyone will use cryptocurrencies for just about everything.
Unfortunately, even though cryptocurrencies have achieved remarkable progress in the last decade, this dream of adoption by the masses has proven to be elusive.
So what went wrong?
Let’s take a look at some of the factors holding back the mass adoption of cryptocurrencies.
1. The volatility factor
In 2017 alone, Bitcoin dropped to 70% or more on five different occasions.
The crypto markets are known for their massive price swings. You might hold a cryptocurrency that can skyrocket in price overnight, and just as quickly plunge down to the abyss, wiping out your investment with it. Savvy traders love this volatility, but it’s not hard to see why a newcomer to cryptocurrencies might not enjoy the wild ride.
Stablecoins, cryptocurrencies pegged to the price of a traditional fiat currency, can be a useful solution that can help keep the volatility in check, to allow new traders the option to hedge in a safer alternative.
2. Awareness and Media
News plays a great role to influence the masses and their perception towards cryptocurrencies. In 2017, when Chinese authorities banned ICOs, the resultant panic led to a spectacular bitcoin price crash from $5000 to $3000. Adoption of cryptocurrencies will only grow when there is constant, sustained, positive media coverage and education on the benefits of cryptocurrencies.
3. Blockchain’s scalability is still under progress
According to Brian Armstrong, CEO of the major US-based cryptocurrency exchange- Coinbase, mainstream adoption of cryptocurrencies depends on three factors: volatility, usability, and scalability. Cryptocurrency transactions still lack the ability to handle transaction volume similar to popular systems like Paypal and Visa. Projects like Plasma, Lightning Network, etc. are working on the scalability solutions. These solutions aim to increase the speed from 500 to 5000 transactions per second to fulfill the ideal requirement.
4. Global picture and lack of regulation
It’s not all doom and gloom for cryptocurrencies as far as the global perspective is concerned.. Countries like Germany, Russia, and Sweden are in support of cryptocurrency activities and some are putting endeavors to build their own national cryptocurrencies.
If banks and governments desire to make crypto a legal tender, they would need to make regulations. Now the problem here is who will decide the amount of control that the government will have in the governance of that particular cryptocurrency.
5. Security problems
System breakdowns and hacker attacks are difficult to track and nearly impossible to predict. Take for example Mt Gox. Once the leading cryptocurrency trading platform, accounting for 70% of Bitcoin’s trading volume, Mt Gox suspended trading in 2014 and filed for bankruptcy protection. It was later announced that approximately 850,000 bitcoins were stolen. This led to drastic consequences for the cryptocurrency trading scene, with the markets collapsing by 80%.
Fast forward to 2019, and today there are thousands of exchanges. Funds might be more spread out over these exchanges, but who knows when the next Mt Gox will surface.
6. Internal competition
Bitcoin is no longer the only player in today’s rapidly expanding crypto-landscape. Litecoin, DASH, Nano, Zcash — these are projects that are encroaching on Bitcoin’s use case as a store of value currency. One of them might be the one that finally knocks Bitcoin off it’s lofty throne. Or another project with better, faster or more efficient technologies might emerge.
What does this mean for the man in the street? For someone looking into using cryptocurrencies to pay for goods or services, the sheer amount of choices available to them just contributes to their confusion and uncertainty. They will simply take the easier choice: walk away and use fiat options.
7. Unavailability of a one-stop solution
Keeping aside professional traders and savvy investors in the cryptocurrency space, what is probably truly affecting the mass adoption of crypto at the most basic level is the lack of a crypto one-stop solution. Several products exist in the vast market that enable the buying of assets — but what after that? Solutions that will enable and cover the entire journey of a regular user new to this space are much needed. The vision and its execution are equally important.
Factors like instability, lack of awareness, technological loopholes, absence of proper regulations stand as a barrier in the mass adoption of cryptocurrencies. Retail stores and some small to medium size businesses have started accepting crypto payments. This may lead to some digital currencies to be used as traditional currencies instead of just speculative profits but it doesn’t seem to happen so easily. The present influx of advancement may soon slide the mass market into the crypto-world with an eminent assertion.