The decentralized and anonymous nature of cryptocurrency challenged the traditional finance institutes and economic system. With the aim to fully resolve the flaws in our paper and coin based economy, the crypto industry is working hard on solving the challenges from within and outside. Regardless of the current flaws, people have huge expectation from crypto currency for its potentials and the market is growing.
Today, there are more than 1,600 unique cryptocurrencies. And as of June, 2019, the first and most famous crypto, Bitcoin, is worth nearly $7, 940 per coin. The top second one, Ethereum, is valued at $248. The top third, Ripple, is worth $0.39.
Cryptocurrencies are becoming more popular with more companies and organizations. Many organizations including Microsoft, Wikipedia and Playboy are beginning to embrace cryptocurrencies means of transaction. Recently, Facebook has officially announced that its new cryptocurrency will be launched by July, 2019. JP Morgan, America’s biggest bank, has also launched its own ‘JPM Coin’ to work toward a crypto and blockchain friendly future. Coinbase, a popular platform for trading crypto’s, recently launched Coinbase Card as a debit card allowing citizens of UK to spend their crypto’s over any outlet that allow Visa card payments.
Dr. Byung Gun Kim, global co-CEO of Bitcoin Exchange Alliance, a tech-finance institute helping compliance and regulation reach cryptocurrencies, recently said, “We aren’t fighting fiat. We realize that the crypto movement has a lot to gain if it partners strategically with the fiat-powered system.” Similarly, cryptocurrency narratives in 2019 are increasingly emphasizing on how crypto’s were meant to uplift our economy and not debase it. Another major trend is the increasing stress laid on awareness and education about core crypto concepts.
Also, blockchain is being welcomed all around the world by an increasing number of tech enthusiasts, businessmen, entrepreneurs and even students. The University of British Columbia, Canada’s leading research universities, is launching a blockchain program for Master’s and PhD students.
The Major Challenges for Crypto Market: Volatility, Scalability and Security
Even after 10 years since Satoshi Nakamoto gifted us Bitcoin, it’s still struggling to achieve mainstream adoption. Arguably, the biggest issue is scalability. The Bitcoin network supports only up to 7 transactions per second but for mainstream adoption, the network should be able to go beyond if not match Visa’s speed of 2,000 transactions per second. Another big obstacle is its volatility—the value of every cryptocurrency except ‘stablecoins’ such as Tether is not constant by nature. If cryptocurrencies can achieve more stability in its value, they will face much lesser resistance to be legally accepted worldwide.
Because of the anonymous nature of crypto’s, there is a huge potential for theft and criminal activity. Although extremely strict security measures underpin them, there have been many such instances so far. CypherTrace, an intelligence organization helping insights from the crypto market reach governments, recently reported that crypto’s worth about $1.7 billion were stolen in 2018. Dave Jevans, the CEO, said that this was orchestrated by highly sophisticated and organized hackers using a variety of complex techniques.
Even though crypto’s are in their infancy, its lack of market surveillance and online storage concerns makes the market susceptible to fraud, theft and manipulation.
Cryptocurrencies and the Governments
There is no international regulator for cryptocurrencies today. In the majority of countries around the world, there is little to none regulations and recommendations from authorities to adopt crypto’s. Some countries do accept crypto’s as legal tender such as USA, UK and Japan. But, most governments are largely divided on how to move ahead as each country has different standards. Many governments are issuing notices and information to help the public understand cryptocurrencies. And this is a good sign.
Governments of countries such as Spain and Luxemburg are developing crypto-friendly regimes as a way to attract investors and foreign investments. And some jurisdictions such as the Marshall Islands and Venezuela are developing their own system of cryptocurrencies. And generally, a prominent challenge from a legal and governance perspective is categorizing crypto’s and formulating the grounds for taxation. Overall, the interest by government is a good sign for the future success of cryptocurrencies.
The Future of Cryptocurrencies
It is hard to predict when cryptocurrency will be globally adopted as a legal tender. Great movements and successes have always taken time. However, Crypto’s are fundamentally different from today’s fiat currency. Unlike fiat or physical assets, they are more vulnerable to collapse because they can only be used in transactions. And there are also no existing support systems such as insurance, any law or government supported recourse.
With time, its limitations may be overcome with improved technologies and they may gain wider acceptance among consumers. So far, its complex nature largely only resonates with the technologically adept. In order to become a fully ‘legal’ part of the mainstream finance system, crypto’s must meet some crucial requirements. It needs to evolve in terms of greater security, easier accessibility and achieve stability without being a means for illegal activities.