Digital Currency Myths & Gamification in Finance
The cryptocurrency world is still in its infancy. If you were to compare its life’s journey to that of human history, it is still clinking rocks together in a dark and gloomy cave, waiting for that spark to ignite an unfathomable future of progress and innovation. And much like the early days of man, the early days of crypto are shrouded in myths.
The first great myth of crypto that you often times hear when people speak about the topic is that Bitcoin and cryptocurrency mean the same thing and that all cryptocurrencies are equal.
This is completely false. Bitcoin may have come first, and even in 2013, there may have been only seven cryptocurrencies. But today there are over 20,000 active cryptocurrencies which collectively hold close to $1 trillion USD in value.
The term cryptocurrency, sometimes only called crypto, describes a digital or virtual currency that is secured by cryptography and uses a decentralized system to record transactions and issue new units. Cryptocurrency is a blockchain-technology-based peer-to-peer system that can enable anyone anywhere to send and receive payments and doesn’t rely on banks to verify transactions.
Bitcoin was and still is the trailblazer and its impressive rise has set its place firmly in history. For many, the only glimpse of the crypto world they had so far is experienced vicariously through stories of Bitcoin or a friend of a friend who made it extremely wealthy. But for those well-versed in the field, it is only one of many exciting projects.
Another great myth, or more of a common misconception of the crypto world and the reason most of today’s crypto users participate in the space is that if you invest in digital currencies, you can expect high financial returns quickly. While there are stories such as cases of people who invested the price of pizza in the early days of Bitcoin and now can retire happily in Barbados, unfortunately, for everyone reading this, this is not the norm. In fact, according to studies by the Bank for International Settlements (BIS), which looked at the retail use of crypto exchange apps in 95 countries in a seven-year period between 2015 to 2022, 81 per cent of users would have lost money if they had invested in $100 USD in Bitcoin at the time they had downloaded the app.
The reality is that crypto isn’t some magic sack of beans that is going to triple your wealth in a week and change your entire world.
When entering the cryptocurrency market, it is important to diversify your portfolio to ensure you are making educated investments, based on research and to never invest more than you are willing to lose. There is a lot of money to be made in the space, but just throwing cash at whatever is hot at the time isn’t the way to do it.
However, these myths are soon to be cast into the shadows and forgotten as mass adoption of crypto, Web3, and all that comes with them is on the horizon.
Blockchain Gaming & Gamification in finance
One of the most exciting areas in which blockchain technology and cryptocurrencies are entering is gaming. Far more people are interested in gaming than in finance. According to Statista, the global gaming market will amount to 268.8 billion USD a year by 2025. Crypto will be a combination of lifestyle, entertainment and technology and gaming offers a way for users to get acquainted with digital currencies in an exciting and engaging way.
We will see more gaming applications include financial mechanisms whilst finance applications incorporate will include more methods of gamification to incentivise recurring positive financial behaviours.
Gamification has grown in the fintech sector by incentivizing customers to participate in financial activities. It has been around much longer than blockchain technology. The most popular savings scheme in the United Kingdom is a gamified governmental bond called “Premium Bonds”, which was introduced in 1956. These bonds have over $120bn invested capital with around 1/3 of people in the UK having premium bonds and are familiar with the method of prize-linked savings.
Prize-linked savings products are known globally under various different names and are promoted to motivate customers to save money, while gamification in the form of loyalty programs, rewards, and points has been used to encourage customers to use money management apps and invest in products. Gamification can furthermore be used to make the financial services experience more interactive, creating a stronger connection between customers and their financial services.
One reason why gamification works was explained by Ian Robertson of Trinity College in Dublin, who argues in his book, “The Winner Effect”, that the reason it’s so much fun to win is largely chemical. “Winning increases testosterone, which in turn increases the chemical messenger dopamine, and that dopamine hits the reward network in the brain, which makes us feel better.”
The utilisation of gamification for a financial application can provide many benefits, such as increased user engagement, improved user retention, enhanced user experience, and increased user loyalty. Gamification can also help to drive user behaviour by providing rewards for completing tasks and encouraging users to reach their goals and helping users understand challenging financial concepts in a fun and joyful way. Finally, the social aspect of gamification can be used to create a sense of competition among users, motivating them to engage more with the application to reach their financial goals and build a healthy financial lifestyle by sharing knowledge and experiences.
Future outlook
Operating in the space, seeing all the talented builders and blockchain enthusiasts on the one side, but also the strong adoption of the technology among institutional players and all the government efforts towards the regulation to support market integrity and financial stability, one thing is certain: Mass adoption of cryptocurrencies is a matter of when not if. Over the next five years, there will be a large migration of thought, and as with the internet boom, those who adapt early will have a leg up in the new future.
According to figures from Chainalysis, global adoption of crypto grew by over 2300 per cent between Q3 2019 and Q2 2021. Given that the first decentralized cryptocurrency, Bitcoin, was born in 2009, it shows that the crypto’s uptake has come gradually, for a time, with a sudden burst.
Despite this, Finder’s Cryptocurrency Adoption Index shows that the percentage of Americans who own cryptocurrency has not even reached 10 per cent. Keeping that figure in mind, research by Hannah Ritchie and Max Roser on Technology Adoption shows that throughout history, adoption of technology occurs very gradually, until about 8 to 10 per cent, then skyrockets — meaning crypto’s greatest rate of emergence is likely yet to come.
Digital assets are becoming more popular as technology advances and digital payments become more widely accepted. Digital assets are also more secure and transparent than traditional assets, allowing users to have greater control over their investments. Additionally, digital assets allow users to access a wider range of investment opportunities, making it easier to diversify their portfolios. Finally, digital assets are more cost-effective than traditional assets, making them an attractive option for investors.
To summarise, cryptocurrencies, NFTs, and blockchain technology are here to stay. In today’s terms, it is a small segment of life. But with increased trust, transparency, safety, and usability, its adoption will become widespread. Its many uses and tools will immensely benefit all aspects of society. And, one day, much like the internet, it will be hard to imagine a time when we lived without it.
