Most people in the world have probably heard of cryptocurrency in conversation with friends and colleagues or online in the last couple of years. If it wasn’t the soaring value of Bitcoin reported on in headlines, the risks of not investing in bitcoin, or people talking about and memeing the almost fantastical sounding Dogecoin. And yet, many people remain wary of the risks and suspicious of this new form of currency that seems to be taking the world by storm. So, which is it? Is cryptocurrency the future of money or an overhyped fad, soon to be forgotten?
Benefits of Cryptocurrency
Before answering the question of why people have doubts about cryptocurrencies, perhaps the better question to ask is why people should adopt cryptocurrencies in the first place. Onne of the main benefits of cryptocurrencies is that they are more convenient than conventional payment methods. With so many people working remotely and advertising their services online, cryptocurrencies offer a complementary way to pay someone digitally, securely, and quickly. By removing barriers and frictions inherent to conventional payment methods, cryptocurrencies allow consumers to pay vendors easily and immediately, while employers that pay their workers in cryptocurrency may be able to scale their businesses more quickly. Beyond that, cryptocurrency is also a safe alternative form of payment for people without access to bank accounts. In many countries, vendors, for example, are still paid in cash and therefore susceptible to physical risks like theft or damage. By switching from cash payments to cryptocurrency transfers, these risks can be avoided as your money can easily be transferred from your wallet to someone else’s in a safer location. Lastly, by using cryptocurrencies and safeguarding these in self-custodial wallets, people have more independence from exchanges and government regulations on who are allowed to transfer money to. While the government might forbid transfers to certain individuals or groups, through self-custodial wallets enable people to move money regardless of such restrictions. And if people are unsatisfied with their current self-custodial wallet, they can easily change that provider. Recently, Ukraine has made a strong case for the use of cryptocurrency. Since Russia invaded, Ukraine’s conventional financial structures have been under attack, so the country has not been able to raise money for its defense through traditional financial structures. Instead, Ukraine safely and quickly raised $100 million in cryptocurrencies.
Risk and barriers to use
So, if cryptocurrencies are so great, how come people are still wary or the risks and suspicious about cryptocurrency utility? One of the biggest reasons that cryptocurrencies like Bitcoin and Dogecoin are not more widely used, is that they are considered speculative and even volatile. This is because at the moment, cryptocurrencies are mostly bought by speculators who invest in the currencies to sell them for profit rather than to use them as a payment method in everyday life. The problem, then, is that cryptocurrencies currently do not have mainstream utility and are therefore unattractive to most consumers. Secondly, another major hurdle to the mainstream adoption of cryptocurrencies is the educational barrier most people, especially those in emerging markets, encounter with cryptocurrency technologies. Most people still do not have a working understanding of how cryptocurrencies work; especially not with the concept of cryptocurrencies not being backed up by anything physical. So, a big obstacle for mainstream usage is the newness of cryptocurrencies and people’s lack of education and knowledge on how they work. This phenomenon is rather like how people used to criticize and fear cars and the internet as people are often critical of change. Furthermore, cryptocurrencies also still have a way to go in becoming fully secure. Security technology needs to be improved to the point that people’s money remains safe even when their phone is stolen.
Next steps?
Finally, what needs to be done for people to reap the benefits of cryptocurrencies while also avoiding its risks? Firstly, cryptocurrencies need to become easier to get into. The barriers to entry and almost exclusive speculative use of cryptocurrency discourages many people from buying into it. With the rise of more and more cryptocurrency wallets that make purchasing and safekeeping cryptocurrency easier, people will become more familiar with this form of payment and feel safer using it. Next, security on cryptocurrencies needs to be improved. For mainstream use, people need to know that their money will remain safe and also easy to access even when one’s phone is stolen or someone sees their portfolio. Finally, cryptocurrencies must move out of the realm of speculation and into mainstream use. As long as cryptocurrency markets remain as volatile as they are now, mainstream adoption is not likely as not everyone wants to or can afford to speculate with their money.