Is your mortgage lender accepting payment via Bitcoin? Have you used a local ATM to exchange your cryptocurrency savings to cash? If not, you’re not alone
Cryptocurrency awareness may be high among users due to the recent media hype. For instance, 88% of survey respondents in Japan said that they know what bitcoin is, but only 4.7% of them have purchased the coin. In India, the awareness is even higher — 97% of respondents across different industries were aware of the bitcoin, but didn’t own any cryptocurrency. In fact, Bloomberg estimated that around 1,000 users own 40% of all bitcoins currently in circulation.
Despite all the hype, cryptocurrencies have not become mainstream, in fact, not even close. Here are the reasons why.
1. Volatile Prices Are Scaring People Away
Imagine the value of the money in wallet increasing or decreasing five fold within a 24 hour period. Now, imagine that isn’t a fluke, but the just the regular state of things. How much would you count on that currency when it comes to spending on regular or expenses or saving? It is this volatile pricing that is associated with bitcoin and other cryptocurrencies that is keeping the average consumer away.
In truth, much of this volatility is by design. It is intentionally susceptible to market manipulation because it is intended to be attractive to speculators and investors who hope to buy and sell at the right time. There’s also no inherent backing value. There are no products or services being sold to create value.
2. High Transaction Fees Make Using Cryptocurrencies Cost Prohibitive
Bitcoin transaction fees can be as high as 20-50 US dollars per transaction. The cost of these fees has fluctuated greatly since prior to 2010. However, even at their lowest rates, it is going to be difficult to convince people to make normal purchases using cryptocurrencies. Nobody is going to willingly pay ten dollars for privilege of purchasing gas using Ethereum, for example.
3. A Lack of Local Exchanges Erodes Trust
While there are some cryptocurrency ATMs, the majority of of transactions using bitcoin and other currencies occur online. These transactions are often done between people who don’t know each other with use of intermediaries being very common. These transactions also happen quickly and can involve huge amounts of coin.
Until there are more places to exchange cryptocurrencies face to face, locally, there is going to be an inherent lack of trust among many people. As of now, these places simply do not exist.
4. Cryptocurrencies Don’t Communicate With One Another
While Ethereum and Bitcoin might be the most popular, there are dozens of cryptocurrencies. Each serves a slightly different purpose. That’s not an issue. However, the fact that each cryptocurrency exists in its own isolated world is a problem.
Imagine someone in the United States purchasing goods from an ecommerce store based in Tokyo. They go to make payment, select USD as their preferred currency, and any complexities related to converting from USD to JPY happens behind the scenes. Unfortunately, those mechanisms aren’t in place for the various cryptocurrencies. However, that could be changing. Fusion is implementing smart contracts in a way that will facilitate transactions between various blockchains. The platform developed a number of APIs to process different crypto-currencies and blockchain-based tokens and consolidate them into one public blockchain. This enables better interoperability among different cryptos and also allows users to create multi-token smart contracts.
TenX has been working on a similar solution, though the startup mainly focuses on enabling better spending options for all blockchain-based assets. Users can use this payment method to spend crypto-currencies with any merchants or exchange them to fiat currency and withdraw as local currency from an ATM.
5. People Simply Don’t Understand How it Works
The current method of exchanging money for goods and products has been in place for quite some time. Any deviations from that take a significant amount of time to adopt. Whether it was people refusing to place their money into savings or checkings accounts because they couldn’t trust banks at the turn of the 20th century or the slow adoption of mobile payments more recently change is accepted reluctantly. Taking cryptocurrencies mainstream requires educating people as well as getting them to think of financial transactions in an entirely new way. This may happen eventually, but it is going to take quite a bit of time.
Mainstream adoption of cryptocurrencies isn’t happening right now, and it may not happen in the near future. There is too much unpredictability. Further, not enough has been done in the areas of building trust or consumer education. There are admirable efforts being made to change these things, however for the time being it doesn’t appear as if most people will be using cryptocurrencies regularly any time soon.
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