Contrary to reasonably realistic expectations, cryptocurrency’s mass adoption is still a dream today after a long wait. The popularity of some of the most traded digital currencies, such as Bitcoin and Tether, significantly surged in 2020.
The trend has continued up to the time of writing this article. The two virtual coins have hit more than 100 billion US dollars in early 2021, raising more questions on why crypto is yet to realize mass adoption.
Here are some of the reasons why the world is yet to experience the much anticipated widespread cryptocurrency adoption.
Most early crypto products like Bitcoin are causing confusion among beginners. Bitcoin traders have been touting the popular digital asset as the perfect solution against privacy invasion for a while. This practice was prevalent during the early days of Bitcoin.
Many people think that blockchain, which is the technology on which the digital currency is based, guarantees them anonymity and security due to the misinformation. However, the evidence that a centralized authority can trace Bitcoin transactions makes it difficult for beginners to understand the concepts that inspired this asset’s invention.
At a more technical level, beginners struggle to understand complicated concepts such as how private and public keys work, which is critical for successfully adopting the currency. Moreover, they struggle to go through multiple steps to get the coin and then leverage it.
So, Bitcoin and other cryptocurrencies are still deemed user-unfriendly, limiting their potential to enjoy widespread acceptance.
The fact that some criminals use digital currencies to finance their illegal activities gives cryptocurrency a negative image. Even though fiat currency often faces the same risks, many people have stigmatized crypto given that it is relatively new and do not understand it well.
The complicated regulatory environment surrounding cryptocurrencies also gives cryptocurrency a negative public image. Jurisdictions typically take different approaches to regulate the mining or staking and use of the assets.
Users understand that by transacting with Bitcoin or other digital currencies in jurisdictions where the authorities deem them illegal products, they could have difficulty in court trying to secure their freedom.
CoinMarket lists over 5,700 cryptocurrencies. The main digital assets include the following:
Other digital currencies emerged a few months ago. Some of these are:
At the same time, there are plenty of altcoins like Namecoin, Litecoin, Mastercoin, Ripple, and more. Some of them are Bitcoin forks, meaning they may have features of Bitcoin. New coins are emerging almost every day.
Trying to make sense of all the thousands of cryptocurrencies is a complicated task. Some of them are unbearably volatile. They also undermine the value of the original coin, making the market more uncertain. Thousands of assets have failed to live up to the expectation of users. So, beginners fear making costly decisions, and many of them eventually quit the crypto market.
These days, there are coins designed for almost everything. Some of them are specifically used for manufacturing and agriculture, music distribution, power and energy, and more. So, the learning curve is even steeper, and this scares many would-be investors.
Price volatility is the major challenge for cryptocurrency, and that directly hinders its widespread adoption.
The assets are decentralized, putting them at the mercy of the forces of supply and demand. Whenever the supply of digital currencies is more than the demand, their value can drop significantly without prior warning. The same can happen due to speculation or whenever the market senses any negative stimuli.
Traders or investors who want a decentralized platform that benefits the user first see this as a great advantage. They can take advantage of the price fluctuations to make huge profits.
However, this is often only true, theoretically. In practice, these traders invest a small amount that they can afford to lose, showing that the digital assets are not designed to serve all traders’ needs.
In other words, volatility undermines cryptocurrencies’ ability to function as a medium of exchange and store of value as fiat currencies do. Users understand that by using these digital assets, they expose themselves to the risk of losing a significant value of their money.
The digital divide is another factor blocking the mass adoption of cryptocurrency that cannot be ignored. This phrase refers to the gap between individuals with access to the required technological tools and skills and those who lack them. In the 21st century, there are millions of people who cannot use the Internet.
On the other hand, some can use different technological tools to trade with or invest in Bitcoin and other digital assets.
Developing countries are the most disadvantaged. Many of them cannot provide digital accessibility or adequate infrastructure.
UNICEF estimates that over 300 million young people between the age of 15 and 24 in different countries lack access to Internet connectivity. They also lack access to many vital pieces of information that many people in the developed world take for granted.
UNICEF understands the negative of the disparity in resource distribution across the world. They have launched Project Connect to map all schools using satellite imagery, data science, blockchain, and machine learning. However, it is essential to note that this is a long-term project. The lack of a quick solution means the digital gap may continue to block the widespread adoption of cryptocurrency in many parts of the world for a little longer unless a remedy is found quickly.
Cryptocurrency is yet to gain much traction among the masses for the reasons we have seen here. The difficulty that beginners face when they attempt to understand the complex Bitcoin and cryptocurrency terms, its association with illegal activities and the high volatility are some of the factors that must be fully addressed. Once that is done, the crypto industry will achieve the much-anticipated mass adoption.