Why cryptocurrencies haven’t taken flight – and how to fix it?
The crypto market has slowly but steadily grown over the last decade. In this period under review, many of its most passionate proponents envisioned a world where all main currencies are crypto. Many see this as a utopia: it looked like a possible future a few years ago, but today it couldn’t be further from the truth.
Cryptocurrency support is still low, particularly for non-internet related operations. Even online, very few retailers take crypto as opposed to fiat. However, since cryptocurrencies are here to stay, we should ponder: Why isn’t crypto taking flight?
1: Bitcoin exchange rates
The best-known cryptocurrency in the world is Bitcoin. It is also the most volatile of all, its value going up or down by thousands in hours depending on market whims. This means any transaction using the crypto asset might become worthless or much more expensive within hours. The implicit risk, for both buyers and sellers, makes it too hot to handle for many. As a result, Bitcoin market penetration has shrunk rather than grown in the last year. This is also true for other currencies, but BTC remains the one standpoint for what happens to another crypto.
2: Crypto exchange platforms and operations delays
Crypto exchange platforms don’t make the process of exchanging one’s assets from crypto to fiat easy. Even performing operations using crypto can be difficult, as some cryptocurrencies, particularly Bitcoin, have long processing times. Bitcoin exchanges take about an hour, which for a volatile currency can make a huge difference.
However, this depends on network load, and in some cases, transactions take up to sixteen hours. Such a long delay is seen as unacceptable in today’s world. Newer cryptocurrencies don’t suffer from this and account for the view that Bitcoin’s reign won’t last. But for now, this seemingly small issue is holding back the whole crypto market.
3: Mining and energy usage
The Bitcoin exchange rates and other problems aside, there’s another issue: Energy usage.
Many current-day cryptocurrencies eschew mining when introducing their tokens. However, Bitcoin, and other crypto assets, still require mining. The mining process is problematic because the energy required to mine 1BTC is huge. This makes mining only profitable in a few parts of the world. And then, there are still worries about how green the whole thing is.
This isn’t a worry for all crypto assets, but public knowledge generally ties to Bitcoin. Most people assume that these problems exist across the board.
4: Uncertainty about their legality
Although cryptocurrencies have existed for over a decade, they’re still a new addition to the economy. This is in part because the worldwide economy as a whole move slowly and in part, because crypto assets didn’t become a part of the mainstream until very recently. As a result, lawmakers have lagged when it comes to creating proper ways to control these assets, thus causing uncertainty in many markets.
Two of the biggest drops in Bitcoin prices this year have responded directly to regulations from China and Korea. Just as well, US and European lawmakers are still struggling to find proper ways to categorize crypto assets, and each time a country discusses how to categorize or tax them the crypto market is hit. As more countries debate these issues and an international consensus is reached this will get better, but it might yet take years to arrive there.
One of the issues lawmakers face is whether cryptocurrencies should be considered currencies or proper assets. This is partly because of the peculiar market for the main cryptocurrencies today and due to the different types of tokens issued by ICOs. On the market, a tiny minority hoards a vast majority of Bitcoin to sell when the price rises. ICO tokens, on the other hand, can be currencies or assets depending on their details.
Cryptocurrencies and assets should eventually be divided into both types. Then, as better currencies rise, the market will settle and we’ll see widespread use of crypto. However, for now, legality is a huge issue keeping many would-be users on the fence.
5: Slow adoption outside of internet transactions
Even then, you can’t perform most transactions with crypto. Can you name a single physical store that takes cryptocurrencies? Most people can’t. Even on the internet, most stores won’t take them, and the ones that do only take specific currencies.
The result is a world where there are far too many currencies and too few ways to spend them. Even where you can spend them, most of the time these operations are in-house. This makes the market difficult to adopt because spending your crypto can be difficult, if not impossible, unless you have your savings using one of the bigger (and more expensive, and often less optimal) currencies.
This should get better, as crypto and hybrid banks start taking over and facilitating currency exchange. Soon we should be able to trade in BTC or ETH in the same way we can make transactions in Euro using our bank accounts in USD or GBP. But for now, crypto owners depend on crypto exchange platforms for their transactions, encumbering the whole process.
6: Complex trading schemes and terms
One of the reasons for keeping people on the fence is the amount of technical jargon that goes into making something as simple as buying crypto. While veterans use these easily, any newcomers will quickly find themselves wondering what an ICO is, what a crypto asset is (is it the same as a currency?), what a security token is, what the blockchain exactly is, and so on.
Most terms involved in the cryptocurrency market are extremely technical and meaningless to the average user. At the same time, it’s necessary to understand them in order to navigate the said market. Perhaps as banks adapt to the technology these terms will make it into the mainstream, or we’ll find systems that simplify them. For now, understanding the cryptocurrency market requires an amount of research your average user just isn’t willing to conduct.
About Stevan Mcgrath,
Stevan, is a Bitcoin and cryptocurrency enthusiast, passionate about the potential these tools and blockchain technology bring to the world and writes consistently for CoinReview. He has been following the development of blockchain for several years. To know his work and more details you can follow him on twitter, Linkedin, facebook.