Although cryptocurrency existed as far back as 2009, it still faces several challenges in 2021 on its road to becoming a widely accepted form of currency. While it’s true that cryptocurrency is something investors no longer shy away from, the general public has yet to fully trust it as a replacement for credit cards and cash. If cryptocurrency is to win the support of everyday people, here are four major issues that need to be overcome.
1. Volatility and Liquidity
While Bitcoin is continuing to rise in value along with other types of cryptocurrency, this is not necessarily good news for everyone. The rise in prices is great for investors, but stability is needed to see cryptocurrency gain widespread acceptance. Stability will allow cryptocurrency to become a reliable store of value. Rapid increases and decreases in price, on the other hand, will erode cryptocurrency’s ability to be widely used.
While Bitcoin, at least, seems to be becoming less volatile than before as it matures, the same cannot be said for all types of cryptocurrency. The sheer number of existing, disappearing, and new types of cryptocurrency going live is also affecting the overall stability of cryptocurrency. Regulation, then, will be needed in order to control the volatility of the category overall.
However, regulation is not hailed by all as a viable solution. Many note that the fact that cryptocurrency is deregulated has many advantages. This is especially true when it comes to providing a way for those who are underbanked to access funds. Furthermore, it allows many vendors to reach a global market while avoiding having to work with traditional banks and credit card companies.
Having said that, it is increasingly becoming clear that allowing cryptocurrency to be completely unregulated is preventing cryptocurrency from achieving stability. Without a centralized governing body, many factors can cause the price of cryptocurrency to change at a moment’s notice. A balanced, well-thought-out plan will be needed to merge the advantages of stability and deregulation together.
The volatility of cryptocurrency is also affecting its ability to be liquid. In turn, this makes it more difficult in its current incarnation, to be used as a medium of exchange. While cryptocurrency can be turned into fiat money through third-party crypto exchanges, leaving your money with a third party can make your money vulnerable to theft.
Some companies are trying to work around this issue. Some platforms will allow buyers to spend cryptocurrency for a good or service, while allowing the vendor to directly accept the payment in a fiat currency of their choice. There are even some extreme cases where cryptocurrency has replaced fiat money altogether in countries with especially volatile currency. These case studies and examples show the future possibilities of stable cryptocurrencies.
2. Educating the Public
The lack of education around cryptocurrency is one of the main barriers of entry for the general population to begin using cryptocurrency. While those who are used to technology, especially in the younger generation, are increasingly buying into the idea of cryptocurrency, the education surrounding cryptocurrency must target people of all ages and technological experience to truly see widespread use.
3. Dealing with Regulation and Speculators
Cryptocurrency is also currently struggling with a negative public image. It is no secret that cryptocurrency has a history of being a part of money laundering schemes and other forms of illegal activity. This has made the idea of adopting cryptocurrency an unsavory and unsafe idea to members of the general public.
Some countries, like the U.S., have taken steps to regulate cryptocurrency, but not without pushback. Critics point out that regulations are changing at much too rapid of a pace, further adding to the instability of cryptocurrency. Cryptocurrency needs to become reliable, both in terms of price and in terms of regulation. Without knowing what to expect when it comes to laws and regulations, it is difficult for the general public to put their trust in cryptocurrency.
To further compound the issue, the anonymity of the internet makes it easy for those with ill intent to sway the price of cryptocurrency. Unidentified users can move large amounts of cryptocurrency into private wallets, causing a supply shortage. These “crypto whales,” as they are called, can therefore have significant influence over the value of cryptocurrency. Without regulation and monitoring, these crypto whales can be difficult to stop.
A related issue is speculative trading. Many see cryptocurrency as a “get-quick-rich scheme,” not as a new form of currency. This created the Bitcoin bubble that burst back in 2017, wiping out many people’s savings. This points to a need for a shift in how cryptocurrency is viewed: not as a way to make fast cash, but as a stable form of currency.
4. Technology and Ease of Use
Using cryptocurrency can be difficult, especially for those who may not be tech-savvy. Buying and selling with cryptocurrency does not have the same ease of use as a credit card or even traditional paper money. Cryptocurrency needs to work towards being user-friendly before it can see widespread use.
The aforementioned problem also makes scalability an issue. For cryptocurrency to be scalable, cryptocurrency needs to be compatible with all types of software. At the moment, cryptocurrency lacks interoperability, meaning quick and easy transactions are difficult to achieve on a worldwide, global scale. To begin solving this issue, one of the first steps that need to be taken would be to ensure the interoperability of blockchain technology.
The Future of Cryptocurrency
Cryptocurrency is clearly here to stay, but it has a long way to go before it becomes widely accepted as a form of currency. While many companies are making the first steps towards accepting cryptocurrency, it faces several challenges that need to be addressed.
Cryptocurrency needs to become less volatile, thus increasing its ability to be liquid. There needs to be more education surrounding cryptocurrency, and it must reach a wider audience. Regulations and speculative trading need to be addressed, and cryptocurrency technology needs to be usable on a global scale. For cryptocurrency to truly take off, these issues must be overcome.