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Adoption as Currency

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Estimated reading time: 3 min

Overview

Innovation takes time and requires patience. The intent behind Bitcoin was to employ a peer-to-peer network backed by unbreakable math to verify transactions and remove the need for centralized institutions to pass on costs that make small casual transactions impractical. Bitcoin is actively being developed and not yet ready to function as a microtransaction currency by modern digital infrastructure standards.

Ten years after creation, Bitcoin has a number of obstacles to overcome before mass adoption can or should occur. Again, development of the infrastructure needed to scale, while underway, will take time. Additionally, the general public must have a much broader understanding of digital currency before mass adoption could occur. While those involved in cryptocurrency understand the innovation and possibilities, the public as a whole needs further education. The current method for which money is exchanged for goods and services did not happen overnight, and neither will a transition to using cryptocurrencies. Premature adoption is not desired.

Compared to gold, Bitcoin has many of the attributes common to traditional commodities. Aside from being accepted as a mode of exchange, it has little in common with traditional currency and may, over time, resemble more of a traditional commodity-based asset.

What is Mass Adoption?

Simply put, blockchain mass adoption is the widespread use of bitcoin and other cryptocurrencies by ordinary people as a form of payment. Currently, cryptocurrency is seen as an investment opportunity. Many became interested in bitcoin as an asset only when the price started rising, and that interest is what pushed it to reach all-time-highs. Once things calmed down, many turned away and some lost money buying into unnatural growth that peaked and eventually corrected to a logical level. While the 2017 ATH did bring more notice to cryptocurrencies, it also accentuated the reality that bitcoin’s technology is immature and more time is needed before it will be trusted as a payment option adopted by the masses.

Adoption Barriers

Regulation executed properly will be beneficial for Bitcoin. The same uncertainty over regulation that has pushed bitcoin prices lower in the past can work in its favor in the future. Higher consumer confidence, market stability, and investor protection will be required before institutional investment* occurs. Insightful regulation will add legitimacy to cryptocurrency for those investors seeking sufficient yield without high risk. Regulations that clear confusion related to cryptocurrency assets may lend more mainstream legitimacy.

Volatility and instability of price compared to fiat currencies must end before bitcoin will be certified a legitimate payment option. As government regulators try to come to grips with this new phenomenon, the landscape is constantly changing and the price is extremely volatile. The combination reduces confidence in the market by consumers while fostering new innovations and solutions within the crypto community. While it makes for a good investment opportunity currently, if the investor understands the variables, stability is a requirement if cryptocurrency is to be used to purchase goods, pay salaries, etc.

Currency or Store of Value is a question often asked. A store of value is worth what people will pay for it. Paper fiat currency replaced gold for everyday use because it was simply less cumbersome. Gold remains a store of value not because of any inherent value, but because of its limited supply and a long history of being valuable. Gold has value, is an asset, but is not money. Bitcoin started as a peer-to-peer payment system, changing into digital cash, then morphing into a high demand speculative asset. So the challenge to restore usefulness as a utility, while retaining value is a current barrier.

Security with traditional financial systems is ensured by third parties when a transaction is conducted. Those third parties are responsible for recovering funds if a transaction goes wrong. With cryptocurrency, the user is 100% responsible for ensuring data associated with a transaction is correct, as it is irreversible and there is no recourse for recovery. If a user’s private keys are compromised and crypto-coins are stolen, there is no recourse for recovery. It is unlikely the masses will be willing to take responsibility for their own actions when errors are certain to result in loss of their money.

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