Its coming and since April last year, cryptocurrency has taken of markedly despite the boom and bust of December and January. However, there is still such a long way before this becomes mainstream and fully integrated into society. So, what are the barriers to adoption at the moment?
1. Not enough clarity
You don’t need an example, so many articles and media discuss blockchain as immutable, then a rival article the next day will say the opposite. Is Bitcoin is anonymous or not? Credibility is lost and confusion for the average person sets in. There’s a lack of clarity from the cryptocurrency community.
Could you tell the difference between a utility token, security token, and equity token? We probably would struggle. Even industry “experts” would struggle and then on from that, how do you convey it in a simple, straightforward way?
There is an educational push with countries like Malta are launching programs to educate the general public, particularly the people who will use blockchain tech on a daily basis, such as government employees. Ireland and Australia, are working to create Ph.D.s and other university courses in blockchain technology. They’re also going into schools at an early age to encourage children to spark an interest in programming and coding to form core skills needed for crypto. Companies are taking responsibility too with ConsenSys are offering crossover courses in the Ethereum blockchain to developers, mathematicians, computer scientists and enthusiasts from other disciplines who want to explore this new technology.
There are courses online, including free podcasts, and YouTube tutorials. Maybe there is too much too soon, or not enough? People are always naïve to new tech and markets but in order for it to become mainstream, clarity is king.
2. Too many cryptocurrencies
At the time of writing, Coinmarketcap lists 1,890 currencies. Many of them show extraordinary promise and rock-solid theories, use cases, and community support but there are plenty more companies launching tokens purely to raise funds or just are out and out scams.
Over time, the weak, poorly executed or fraudulent cryptocurrencies will die and never resurface which is a good thing but how do people with little experience know which ones to buy and understand?
Moreover, if the point of cryptocurrency was to allow for borderless, frictionless, peer-to-peer payments, why do we need so many? There are only 180 government-issued currencies, surely this can be narrowed down into a more concentrated pool of quality, secure coins.
I’ve personally discussed this before about how a cryptocurrency needs to have a decent application, but you also need to make your product or service easy for a customer to buy. Platforms sign up, compliance, depositing and withdrawing funds along with wallets and keys are making the usability of cryptocurrency quite difficult. Most of the crypto community may not mind the complexities of entering in 42-character addresses or securing private keys. However, with an aging population with so much fast tech, most do. The reason the cybercrime industry is so prolific is that we continually opt for convenience over security. Making cryptocurrency transactions smoother and account creation simpler remains a barrier to mass cryptocurrency adoption. We want and need stricter and more comprehensive KYC/AML requirements and that is happening but until is quick, efficient and easier to replicate in to the real world then usability will continue to be a hurdle.
Scalability is an issue for many businesses and industries. Its labour intensive and expensive. For example, the Ethereum network can still only support around 15 transactions per second. Bitcoin’s maximum transaction processing capacity is somewhere between 3-7 per second. While other blockchains such as NEO or non-blockchains like the DAG are offering new solutions, they don’t come without their own challenges, a continual frustration for developers. We can’t support mass adoption of cryptocurrencies when it takes 10 minutes or more for a transaction to clear. Although relative to pre-ripple technology this is still quick good. Scaling to onboard more users is one of the greatest challenges there is.
Patience is also key and if you step back and put it in to the context in the real world, we’re still waiting to connect the rest of the world to the energy grid, 2 billion people around the globe are still waiting for an internet connection and most don’t have simple, digital banking accounts. We are a few steps behind on integrating the core infrastructure of the basics before we even get to cryptocurrency adoption. The technology needs time to mature and figure out solutions to its many problems first.
5. Scams & hacks
The main cause of a market price crash is when the media is filled with stories of cryptocurrency exchanges being hacked and/or investors losing their funds. There is no insurance policy (due to lack of regulation) on most exchanges your money could be there one day and gone the next. Think Mt. Gox, Bitfinex, or The DAO. We covered these issues in hacks that shook the world which you can read here.
OneCoin is marquee scam that will be remembered as one of the most sophisticated Ponzi schemes ever invented and exit scams are rife. The SEC is trying to educate people in the US on these types of problems through initiatives such as the HoweyCoin scam. This is to show investors the possible red flags to watch for when backing an ICO. Tighter regulation will weed out more fake ICOs.
You may be a fan of Bitcoin, Ethereum, Litecoin, or Cardano. But you have to admit, none of them come close to being effective as a means of everyday currency. On a bad day by the time you’ve ordered a coffee and sorted out the payment, it could be 10-20% more or less expensive. The issue is when Brexit occurred and pound (£) devalued by 20% prices of products and services remained the same but when purchasing with crypto, its fluctuates according to the value of the coin at that time. If we’re to use cryptocurrency as a currency and not an investment vehicle, we need to lose the volatility or not may it a form of payment.
7. Criminal association
Silk Road got notoriety selling drugs, weapons, and even hitmen online but with the use and payment of Bitcoin to facilitate the transaction. Thanks to money laundering, terrorist financing, and other criminal activity, Bitcoin earned a sketchy reputation and in truth, has clung on to it ever since. In many ways, rightly so.
In fact, Bitcoin was also the most popular payment method for cybercriminals in Ransomware attacks in 2017. And now cryptojacking is the biggest cyber threat this year, growing 8,500% in Q4 of 2017.
Regulation, or rather, lack of regulation is still preventing adoption. In some ways, it is good for the industry but more sanctions and banning from the likes of China causes drops in the value of the market. We’ve seen some major moves this year from ICOs to STOs, and new legislation from smaller countries like Malta, but there is still too much ambiguity. This paired with no synergy between jurisdictions. While setting a global standard in regulation may not be possible (or even desirable), at least a basic agreement on KYC/AML practices that can be implemented could prevent further crime and encourage more people to enter the space with trust.
9. The environment
Research has shown 3 in 4 millennials would pay extra for sustainable goods. There’s never been a generation as conscious about the environment as millennials. But while reports of Bitcoin mining’s disastrous effects on the environment and draining natural resources. The electricity to power mining is unbelievable and the air conditioning to cool the computers is again, more resource hence why many operations are moving to Iceland and out parts of the USA due to the cold weather and “natural” air con.
While countries like Canada and Iceland allow for cryptocurrency mining using sustainable energy resources, we need to do a better job of reducing the amount of computational power that blockchains need to run.
Featured image: © Tierney – stock.adobe.com