Will Cryptocurrency Ever Become Mainstream?

In 2021, Elon Musk added #bitcoin to his Twitter bio and created a stir in the market. Cryptocurrency prices soared by about 20%, further accelerated due to his tweets. When the richest man on Earth supports cryptocurrency for transactions and investments, it surely makes a huge statement.

The global cryptocurrency market evaluation summed up to $1.49 billion in 2020 and is expected to grow at 12.8% CAGR to reach $4.94 billion by 2030. As of 2021, India has the most crypto owners in the world, with more than 100 million crypto users. Thinking of the future of finance and the economy, the statistics in favor of cryptocurrency are exciting.

But now, an important question looms up! Will cryptocurrency ever become mainstream?

The compounding growth of cryptocurrency

We have had our share of past success stories from crypto investments, but if that was not motivating enough, Goldman Sachs also announced over-the-counter crypto trading in March 2022.

Currently, there are over 18,000 cryptocurrencies in circulation with a total market cap of $1.54 trillion. With more than 300 million crypto users worldwide and thousands of businesses accepting cryptocurrency payments, its reach is continuously expanding.

After the breakthrough of cryptocurrency in 2021, most young investors are focusing on it as a major investment opportunity. Even the big guns like PayPal and VISA are coming on board with facilitating crypto trading and offering debit cards for crypto (in partnership with Coinbase).

Another factor driving the demand for Bitcoin, a major cryptocurrency, is the limitation of supply. Only 21 million Bitcoins can exist, in total. Out of this, 18.5 million are already in circulation and only 8 million are available for public investment. This lack of supply is further increasing the demand, which is only going to make it more valuable in the future.

There are several advantages to owning cryptocurrency, like:

• Accessibility to all
• Low ecological impact
• Simpler and cheaper international transfers
• Peer-to-peer transactions without third-party involvement
• Faster international exchange in comparison to traditional transaction

The role of financial services companies

Currently, financial services companies like banks are completely disassociated from cryptocurrency. Crypto operates on a ‘decentralized’ model, which means that it is beyond any regulatory body and can be developed freely. However, this leaves a gap in terms of security and protection of assets. This is why regulations are important for the long-term success of cryptocurrency.

On the other hand, if the major population shifts towards cryptocurrency, banks will also lose a large part of their revenue. By enabling digital currencies, banks are taking the first step towards faster monetary policy changes. They need to make attempts to introduce digital wallets and further branch out into crypto investments.

Today, the lines are also blurring between financial institutions, as JPMorgan is issuing digital coins and investing in blockchain and Walmart is engaging in mortgages. All these companies are identifying the potential in crypto, further increasing its chances to be mainstream.

Is crypto safe?

Fundamentally, it is not right to call crypto unsafe. The technology behind cryptocurrency is far more stable than regular portals and assures against getting hacked. However, as crypto is still a fairly new and evolving technology, skepticism follows it.

Impending barriers to overcome

Unarguably, there are several concerns associated with cryptocurrency that come in the way of its becoming mainstream. Here are some major challenges with regular usage of cryptocurrency:

• Inconvenience: For people who are used to taking cash out of their wallets or scanning a QR code to make payments, cryptocurrency seems to be a bit of an inconvenience. The rate of adoption of cryptocurrency will increase if it gets easier to spend it. Right now, many people refrain from owning cryptocurrency as it is not readily available for an urgent expense.
• Security Concerns: As cryptocurrency is entirely stored virtually, the security concern automatically comes up. Many people in India and other countries are still wary of using even digital payment systems. In this situation, security concerns grow further, as there is a lack of rules and regulations around cryptocurrency in many countries of the world.
• Volatility: The volatile nature of cryptocurrency is one of the biggest hurdles on its path to becoming mainstream. The valuation continuously fluctuates, making profit margins difficult to calculate. If you own $1000-worth of bitcoins, you cannot be sure that the value of bitcoins worth $1000 will stay the same, the next day. Most vendors are skeptical of this volatility, and it impacts the trust in cryptocurrency.
• Scalability: Probably the greatest challenge for cryptocurrency is its scalability. Currently, Bitcoin is the most common cryptocurrency in circulation, and it allows only 7 transactions per second. As the number of global users increases, this limit will be quite limiting. One block is mined on the bitcoin network every 10 minutes and is about 1 MB in size. If the block size is increased to 2 MB, the number of transactions will increase from 7 to 14. But it cannot make the blockchain scalable. A workaround for this is through the lightning network, but it requires adding more code, thus making it further vulnerable.

Summing up

Cryptocurrency is money. Businesses across the world are slowly wrapping their heads around it. Cryptocurrency is bound to get an equivalent status as money. With groundbreaking innovations happening all around us, it is a matter of little time before crypto overcomes major challenges like scalability or convenience of expense.

This is how it has always been with technology – placing internet calls for free, creating a global presence with social media, digital education for all – everything seemed far-fetched or decades away, even in the 80s, till the mid-90s. Technology turned out to be faster.

But at the end of the day, the timeline of cryptocurrency getting mainstream stays cloudy. In the meantime, businesses need to prepare for any upcoming changes by staying up-to-date on all crypto trends and keep discussing their prospects in cryptocurrency with professionals.