Will People Accept Bitcoin As a Trusted Currency?

By Prashant Jha

A decade back when the mysterious Satoshi Nakamoto released the Bitcoin (BTC) whitepaper in the wake of the 2008 financial crisis, it emerged as a beacon of hope for people disillusioned with the world’s existing financial system. One had to scrape the barrel to find vestiges of a trust that is so instrumental to sustaining a currency. Since then, Bitcoin has moved forward by leaps and bounds but has it come far enough to be accepted by the people as legitimate currency?

The answer, while tilting towards the negative, cannot be a definite one. As many commentators believe, the answer to this million-dollar question will forever have to be answered in support of fiat currencies such as the proverbial dollar. Even as the virtual currency saw a significant heightening of its popularity, adoption and growth; technical and legal barriers have continued to impede its mass adoption. How many roads must a coin walk down before you call it currency? The answer doesn’t seem to be blowing in the wind.

A strong sense of disquiet about the fledgling world economy in 2008 had been somewhat dispelled and the market slightly reassured by the entry of Bitcoin which used distributed ledger technology (DLT) to make peer-to-peer payments possible across country borders. As the market crash chipped away at the public’s trust in traditional financial institutions, Bitcoin appeared to be the Messiah that would make a revival possible.

Now, ten years down the line, the traditional financial institutions are back on their feet and the investment and banking sectors are at the pink of their health. In such a scenario, one wonders if there’s a possibility for the public to embrace bitcoin as an acceptable currency anytime soon. There are many challenges that make it a distant possibility. Even sans the competition from the traditional finance sector, the technicalities of cryptocurrency meant it would hardly be viable for laymen users to use on a daily basis. Even a basic level of adoption was achieved after continued attempts at innovations and after the prices had risen significantly. As founder-chairman of blockchain consultant Vanbex Group Lisa Cheng said, that even though 22 million e-wallets in America hold BTC and almost 20% of people are aware of what it is, bitcoin’s potency to replace fiat currency and plastic money seems doubtful at best.

Using any kind of cryptocurrency, despite the increasing degrees of convenience, isn’t easy at all. It takes a little time, a certain degree of technological literacy and a great degree of practice. Handling private and public keys of a cryptographic nature also prove to be a barrier for most ordinary users. Even when wallets introduce features for simplification, the security aspect is called to question and breaches cost the user rather heavily. For mass adoption, widespread industry adoption is a prerequisite for users need to be able to pay for goods and services using Bitcoins. When it comes to BTC particularly, the blockchain usually works rather slowly, generating just 1MB block worth of fresh transactions in ten long minutes. The fact it can process just 7 transactions each second compares poorly with popular payment networks like Visa that can process thousands of them in a second. The high rates of transaction fees may be scalable for large transactions but they prove to be entirely untenable for small, day-to-day exchanges or payments. Even though the introduction of Bitcoin Cash (BCH) and the Lightning Network (LN) have had some positive impact on the speed and efficiency of BTC, it still isn’t enough to encourage mass adoption.

Perhaps the most important factor that prevents the general public from trusting Bitcoin is the volatility of its price point. Although volatility has been low in the recent days, it is still far from attaining the level of stability fiat currencies usually enjoy. While a high volatility may be beneficial from the investment perspective, it really doesn’t bode too well for everyday usage. Moreover, Bitcoin is still likely to be a subject or pump and dump scenarios that don’t usually affect the fiat currencies. Naturally, such scenarios diminish the trust quotient and prevent possibilities of adoption.

Moreover, Bitcoin and other cryptocurrencies face legal hurdles that are quite difficult to scale as governments are understandably unwilling to allow free rein to currencies they do not mint or control. The US SEC’s recent rejection of Bitcoin ETF proposals have been in the news for a while now and similar coldness from many governments have proved to be an impediment for law-abiding citizens to adopt crypto on a large enough scale to transpire to daily usage.

With all these hurdles piled up high, is it truly impossible for Bitcoin to one day replace the dollar or the rupee? Only time will tell, but with developments like the BCH and LN gathering momentum, a small glimmer of hope may still be shining through.