Cryptocurrencies like Bitcoin and Bitcoin Cash have the potential of changing global economies by offering consumers a new, fast, and more secure way for paying for things electronically. That was the premise for establishing Bitcoin more than a decade ago. Unfortunately, the adoption of crypto as a mainline monetary system has been slow. You might even say it has been fleeting.
If you are a regular reader of our articles, then you are familiar with the fact that growing numbers of online casinos are accepting cryptocurrency payments. Nearly everyone that does accepts Bitcoin at minimum. Many also support Bitcoin Cash, Litecoin, Ethereum, and others.
So why are some other industries not adopting cryptocurrency as quickly as online gambling? That is a question that experts have been trying to answer for some time now. From our perspective, it boils down to five big things. Overcome these five things and worldwide adoption of cryptocurrency seems inevitable.
1. Consumer ignorance
Topping the list of things inhibiting the adoption of cryptocurrency is consumer ignorance. That ignorance is underscored by the natural human tendency to stick with what is familiar. And what are we familiar with? Fiat. We have all grown up on it - whether that means carrying cash in the pocket or using a debit card or smartphone to pay for things. Fiat is comfortable. Fiat is a known entity. Cryptocurrency is neither.
To the vast majority of consumers, cryptocurrency is either a hobby or a risky investment opportunity. Few people see it as a monetary system because they know nothing about it. They do not understand the 'nuts and bolts' of how it works, how it can be used to pay for things just like fiat.
A big part of that ignorance lies in the fact that cryptocurrencies do not exist as physical bills and coins. Coins are nothing more than digital tokens stored on a global network and in individual digital wallets. Without something physically tangible to hold, people don't trust that cryptocurrency really has any intrinsic value.
Ignorance of fiat
We also cannot forget that people are ignorant about fiat as well. Many people shy away from cryptocurrency because they do not believe it has any value. Little do they realize that the fiat they carry in their pockets also has no real value above and beyond what government says those bills and coins possess.
It used to be that fiat was backed by something like gold or silver. Back then, owning a bill meant that you owned a share of the gold behind the bill. To our knowledge, no fiat on the market today is backed by anything other than a government's word.
Take the U.S. dollar, for example. It has not been backed by gold for decades. It only retains its value because people around the world agree that it has value. If every global citizen and business agreed to no longer accept U.S. dollars as payment, it would be worthless instantly.
We say all that to say that fiat is no different than crypto in this regard. Fiat has value because consumers agree to it. The same is true of crypto. It has value as long as people want it and can use it.
2. Price volatility
Consumer ignorance would be reduced significantly if more merchants and corporations were willing to accept Bitcoin, Bitcoin Cash, etc. Yet people in the business of making money are reluctant to get into crypto payments. Their biggest fear is price volatility. It is a natural fear and one that is not unexpected.
Imagine owning a business and accepting USD $10,000 in fiat payments on a single business day. What if you were to accept that same amount in Bitcoin? Overnight trading could see the value of your bitcoins jumped by 5%. But it could also fall by 5%. The fact of the matter is that the price of Bitcoin changes on an hourly basis. Merchants never know what their accounts are going to look like from one day to the next when they accept crypto payments.
Platforms like Bitcoin could go a long way toward worldwide adoption by figuring out a way to bring more stability to prices. Merchants would be more willing to accept crypto payments if they knew there was very little risk of losing their shirts due to a sudden, enormous price drop.
3. Transaction capacity
No one knows for sure what the true transaction capacity of Bitcoin really is. However, the highest number of transactions to have ever been recorded on the Bitcoin network in a single day is about 490,000. Break that down by the hour and it works out 20,000. Compare that to Visa. Their network is capable of processing 65,000 transactions every second.
Visa's capacity allows them to complete 5.6 billion transactions per day. Bitcoin's capacity is less than 1% of Visa's. That is a big problem for future worldwide adoption. It is not deal killer right now in that Bitcoin transactions still clear rather quickly. But if the entire world were to use Bitcoin instead of fiat, its network could not keep up.
Experts say that the new Lightning Network should be able to increase cryptocurrency capacity significantly. But given the amount of work coin miners have to do just to verify transactions and build blocks, it doesn't seem likely that we currently have the technology capable of making Bitcoin as fast as Visa, MasterCard, Discover, etc.
4. Required resources
Next up are the resources required to run a cryptocurrency network. Saying that crypto processing is resource hungry is like saying the Alps are hills. Mining coins requires a tremendous amount of raw computing power. That computing power requires a tremendous amount of electricity. That is not good in the era of green energy. We do not have enough green energy resources to meet daily needs right now, let alone support cryptocurrency networks.
For purposes of illustration, consider a recent article that appeared on the Cryptonews website. The article cited PwC researcher Alex de Vries' calculations of how much power the Bitcoin network would consume if it ever reached the capacity of 150 million transactions per day. That many transactions would consume nearly 27,000 TWh of electricity. The entire world consumed nearly 200 TWh less in 2018.
If Bitcoin and its competitors are to become mainstream in the future, we either have to find new and better ways to produce green energy or be willing to accept greater expansion of fossil fuel and nuclear options. The latter does not seem likely, but the former is still way out of reach. Until the power problem is solved, cryptocurrency will remain the hobby and investment opportunity so many people believe it is.
5. Government reservations
Finally, reservations among government leaders and regulators continue to inhibit worldwide adoption of cryptocurrencies. The fact is that governments have a vested interest in making sure that fiat remains the most used payment system in the world. Fiat gives regulators and central bank officials control over national economies.
In its purest form, cryptocurrency is completely decentralized. That means neither government regulators nor central banks exert any control or influence over a digital coin and the transactions it facilitates. That sounds great for the consumer and business owner like. But it is not good for regulators and central banks.
Governments derive their power from the people they serve. They maintain their power by carefully managing the world around them in order to protect citizens. Get rid of fiat and you suddenly take economics out of the hands of government and place it in the hands of people. Once people understand they are in complete control over their own economics, they suddenly realize they do not need government assistance anymore.
The unfortunate truth is that government uses economics as a means of controlling people and maintaining power. That's why elections often come down to economics. When the economy is strong, incumbents tend to do well. A weak economy tends to create political turnover. It is the nature of the world.
Government-issued digital currencies
Despite government reservations over cryptocurrency, growing numbers of world leaders are recognizing the value of digital currencies in the marketplace. Some national governments are now actively pursuing their own digital tokens that may someday replace paper bills and coins. These digital currencies are known as stablecoins.
A stablecoin works a lot like a traditional crypto in terms of its mechanics. What makes it different is that it is backed by something of known value. A government stable coin would be backed by the full faith and credit of the government in the same way fiat is backed already.
Note that such stablecoins are not true cryptocurrencies in their purest form. They would not be decentralized, and they probably would not be limited in terms of coin volume either. So they would take the best aspects of crypto and combine them with some of the traditional concepts of fiat to create a hybrid.
Worldwide adoption has been the holy grail of cryptocurrency since Bitcoin was first launched. While we are inching ever closer to that goal, it is still a long way off. It is a goal that may never be reached. And now you know why.