The evolution of the cryptocurrency market and digital assets. Waiting for the Big Bang.

By Ksenia Beloglazova on The Capital

Ksenia Beloglazova
Feb 20, 2020 · 9 min read

Most of the cryptocurrency market players are waiting for “mass adoption of cryptocurrencies.” That means that in the near future, almost every owner of a smartphone will have a cryptocurrency wallet. Using this wallet, he could pay everywhere with cryptocurrency as well as to invest in any digital asset. After that, the cost of all cryptocurrencies will skyrocket, and all the crypto market enthusiasts will become fabulously rich. I am also waiting for this, but unfortunately, I think that the situation is not so rosy, and it is still a long way to the mass adoption of cryptocurrencies.

There are a lot of articles claiming that Bitcoin is money. This point of view is actively promoted in the crypto community. But, in my opinion, the situation today is different. Bitcoin is still not money, as there are technological barriers and barriers to understanding crypto ownership. Everyone who thinks about buying cryptocurrencies has his doubts. Is it going to be mine for sure? Fiat money is protected by the state and its laws. However, the same state uses fiat money as its tool and creates many problems for citizens. And who is protecting Bitcoin? Most people do not have a clear answer to this question. We can explain about algorithms, about hash function, and so on. Still, how many people will understand all this? In addition, the reputation of Bitcoin was damaged by the falls of other tokens. Indeed, a lot of ICO and IEO investors ended up with very serious losses. Moreover, there are issues concerning theft, hackers, and fraud. Most people do not understand this, they can not protect themselves from this and therefore prefer not to get involved.

In my opinion, mass adoption of cryptocurrencies will begin as soon as they become money. To understand how far this magical moment is from us today, we have to answer a question: “Who uses cryptocurrencies in regular operations today and why?“

Firstly, these are technologically advanced crypto enthusiasts. It all started with them. They like the beauty of blockchain technology, they develop it, creating new applications and features. There are very few of them, and in this case, it is simply ridiculous to talk about mass adoption. But it is precisely this group that over time will prepare the technology for the engagement of billions of people in operations with cryptocurrencies.

Secondly, these are financial speculators and investors, including institutional ones. Those who believe in the future of cryptocurrencies and digital assets have invested their money in them and expect a significant increase in the investment value. There are also relatively few of them, and they cannot provide for any significant volume. However, they and their money made this market visible, today they enable the growth of the cryptocurrency market, and step by step create a positive reputation for it.

Thirdly, these are startups and issuers of all types of tokens: from utility to security, which need money. This group is again relatively small in number when compared to the total population.

Fourth, these are consumers of specific services that require anonymity, access to which is given by cryptocurrencies. Namely, we talk about scammers, extortionists of all types and darknet ‘s buyers/sellers. And this group is also relatively small.

You can also mention those who regularly use cryptocurrencies to make cross-border payments, but this is a really insignificant group.

So what is our conclusion? In reality, a very small percentage of the world’s population uses cryptocurrencies for regular operations. Why is that? Why are cryptocurrencies not used by ordinary people?

The answer is obvious:

● Because cryptocurrencies are not accepted universally as money. To pay for a purchase with cryptocurrency, it must first be converted to fiat. This is an extra operation, which is simply not redundant.

● Because cryptocurrencies are technologically complicated. The user has to have a wide knowledge on different subjects in order to guarantee a secure and effective use of cryptocurrencies when performing regular operations.

● Because there is no understanding of technology, and there is no trust in technology. People are afraid of losing their money due to the actions of scammers and because of their own mistakes. Transactions on the blockchain are irreversible, and the Internet is full of heartbreaking stories about how someone lost their money due to theft or their own negligence. How many people understand the technology behind the bank cards? Not a lot. How much money is stolen annually from bank cards? Lots of. But people believe that the money stolen from the cards will be returned to them, because banks guarantee this, and the government stands behind these guarantees. Therefore, they use plastic cards and will continue to do so.

A short summary:

● Most people do not use cryptocurrency, because it is difficult, because usually, they cannot pay directly with cryptocurrency, because they are afraid of losing their money due to fraud or their own mistakes. Moreover, they usually do not see the global advantages that cryptocurrencies have brought into the world since these subjects are not easily understandable.

● Most people use bank cards because they are used to it, because it is very simple to pay with a card, because people are not afraid of fraud, and they don’t see the global disadvantages and risks that fiat currencies have brought into our world, since it is too complicated for understanding.

Nevertheless, the cryptocurrency market has been active for more than 10 years and is about hundreds of billions of dollars. If cryptocurrencies were just a speculative asset, if it were a simple bubble, it would have burst long ago, and the cryptocurrency market itself would not have cost so much for such a long time. Who are the people who support this market? Why are they buying cryptocurrencies? How do they actually use them?

I have an answer to this question: residents of all countries (both developing and developed) actively use cryptocurrencies to protect their savings from inflation and depreciation of local fiat currencies. I wrote about this in detail in my previous articles, so I will not repeat it. There are many cryptocurrency users, but still not enough to ensure the massive adoption of cryptocurrencies. Why is that? Because cryptocurrencies have not yet become a means of payment. What must happen so that they become real money, and why do I think this will inevitably happen?

I see three scenarios. Each one of them will lead to mass cryptocurrency (primarily Bitcoin) adoption as money.

● the emergence of one of the largest central bank’s cryptocurrency

● the appearance one of the global ecosystem’s cryptocurrency

● the wide adoption of investment instruments on blockchain

I deliberately do not consider the option of local bankruptcy of the financial system in third world countries, since their influence on world finances and the world cryptocurrency market is negligible, and cannot lead to significant changes. As an example, I can cite Venezuela or Argentina.

So, we will consider each of the main options. In each case, cryptocurrencies become money, which leads to their mass adoption around the world :

One the Central Banks issues a cryptocurrency.

I understand why the governments of the largest states want their Central Banks to release their own cryptocurrencies. Of course, these will not be quite cryptocurrencies. Actually, the digital fiat currency of the Central Bank is not a cryptocurrency at all. Indeed, the blockchain is absolutely transparent and let the government totally control all financial operations of the population. At the same time, the Central Bank would keep its control over financial emission and manipulation. Governments do not see this as a risk, because nothing can replace fiat money. Indeed, the issuing state actually guarantees demand for its currency by collecting taxes in its own fiat currency. Moreover, it often prohibits any retail transactions in any other currency on its territory. So we see that the fiat currency of the state can be in a paper form or digital form, it even can have some blockchain elements. In any case, there is still an issuer (the Central Bank) and everyone who uses this currency is, to one degree or another, under state control. Therefore, the banking system that provides this whole fiat currency process will exist as long as the states exist. Most likely, banking systems are going to transform under the influence of new technologies, but hey, this is only natural: after all, banks today are also very different from banks 100 years ago.

Still, as you may have noticed, despite loud statements by a number of central banks about their own cryptocurrencies, not one of them has released its digital currency on the blockchain. That’s because there is one huge BUT: the issue of digital currency on the blockchain by any large central bank will remove the technological barrier among the population that prevents the adoption of real cryptocurrencies, especially Bitcoin.

I am sure that sooner or later, one of the largest central banks will be forced to take this step. I will discuss it deeper in one of my following articles. But the main reason is global competition. Once technological barriers are lifted, and people begin to use the digital currency of the central bank for the daily operations, they are very quick to take the next step and move to Bitcoin. Indeed, Bitcoin is actually a much more stable cryptocurrency, it is not subject to uncontrolled emission, manipulation, confiscation, and all other problematic facets of fiat currencies.

The emergence of its own cryptocurrency in one of the global ecosystems.

I always thought that it was Facebook and Telegram that would issue their tokens. This is only logical — billions of users, huge ecosystems. An ideal space for trade. Any cryptocurrency in such an ecosystem would be a huge success. But, maybe I was wrong? Perhaps they simply will not be allowed to run their private money in their ecosystems? In this case, nothing will change, private money will still appear.

Indeed, if a large ecosystem cannot issue its tokens, then nothing prevents a successful token issuer from becoming a large ecosystem. There are already candidates, for example, Binance Coin, Houby Token, TRON. Pretty soon Binance, Huobi, TRON, or anyone else will become large ecosystems with their own social networks, instant messengers, and hundreds of millions of users. Today, there is already private money with a capitalization of billions of dollars. So the construction of ecosystems around these money will follow. I predict that the whole process (issuing own cryptocurrencies by global ecosystems or building ecosystems around existing private money) will take a maximum of 3 years. It’s so fast that it’s almost tomorrow!

Once this is done, it will break the technological barrier that impedes the massive adoption of real cryptocurrencies, and Bitcoin, which is solid in every sense, will conquer the global financial markets.

Mass adoption of investment tools on the blockchain .

The number of quality assets (reliable and liquid) transferred to the blockchain is growing daily. I wrote about this in detail in my article “Assets on the blockchain — creating new markets”, so I won’t repeat it. Why is it so important for a massive adaptation of cryptocurrencies as money around the world? Liquid, insured, with reliable security — tokens have become an excellent alternative to bank deposits, real estate investments and other traditional methods of investing money. The issue of securities on blockchain provides billions of the world’s inhabitants with access to quality investments with a low entry threshold. This process is growing exponentially. On the one hand, reliable platforms are being created to guarantee the safety of their users, on the other hand, more and more people are overcoming the technological barrier that I wrote about above and becoming cryptocurrency users On the third hand, this entire market is already crypto-friendly — you can buy any security token not only for fiat money but also for cryptocurrency. And this process cannot be stopped. Sooner or later the number of owners of cryptocurrencies will reach a critical mass, and cryptocurrencies will be accepted as money in the vast majority of cases.

To summarize, I want to say that mass adoption of cryptocurrencies is inevitable. I believe in the explosive growth of cryptocurrencies adaptation in the next three years.

I often hear the question: “ What can we do for bitcoin? “In the sense of what we need to do to increase the price of bitcoin to the US dollar? Or what needs to be done to make bitcoin money? These are two fundamentally different things. Most people think in fiat currencies — someone in dollars or euros, someone in yuan. Bitcoin’s price and its growth are also determined in dollars. We have already stopped counting in gold, and have not yet begun to count in Bitcoins. But everything will change as soon as cryptocurrencies become real money. Bitcoin with its transparency hypothetically much more solid and reliable than all modern fiat currency. We can do nothing for Bitcoin, but Bitcoin can do a lot for us, returning us faith in real hard money.

Today we can develop technologies related to the blockchain, launch popular and profitable services on the cryptocurrency market. We can do all these things that are useful to our customers and beneficial to us. I do just that, and that is what I advise you to do. If Bitcoin is potentially the best money in world history, then it will become world money. Mass adoption is inevitable; progress cannot be stopped.

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