Cryptocurrency has come a long way over the last decade, from being a little-known idea in niche circles on the internet to global visibility and becoming more profitable than ever before. The last year, in particular, has been an interesting one, with cryptocurrency surviving the effects of the COVID-19 pandemic and major crypto-assets like Bitcoin and Dogecoin seeing amazing bull runs in late 2020 and early 2021.
In terms of institutional support, cryptocurrency is in a better place than ever before, with platforms like PayPal and CashApp throwing their weight behind the industry. But all this success means that the industry is at a very delicate point in its history; the mainstream use it has been seeking is well within reach but even as that happens, it is worth considering what steps the industry as a whole needs to take.
As cryptocurrency is about to dominate the world, its purpose needs to be properly defined; is it an investment tool or a currency? Currently, the industry seems to be split into both with many entering it not to use cryptocurrency for their everyday purchases and payments but in anticipation of the next bull run of Bitcoin or Dogecoin.
Many new options have sprung up to allow for the use of cryptocurrency for payments, including crypto-backed debit cards and more payment processors facilitating cryptocurrency transactions. In the same vein, more options for investing in cryptocurrency have simultaneously popped up, including token swaps, staking, and a hotly pursued Bitcoin ETF in the United States.
All this means that consumers are being marketed cryptocurrency as both an investment tool and a currency to spend at the same time and moving forward, the industry will need to harmonize the two.
In the era of going green and everyone trying to reduce their carbon emissions, cryptocurrency has come under scrutiny for its energy usage. Bitcoin has been credited with using as much energy as entire countries to power its mining operations and this has drawn concerns from environmentalists and the corporate world alike.
Earlier this year, Tesla even cancelled plans to accept bitcoin as payment for its cars and sustainability issues were cited by CEO Elon Musk as a reason. Around the same time, the Ethereum Foundation announced a move from a proof-of-work system to a proof-of-stake one to cut down on the blockchain’s energy use by over 90%
Needless to say, if cryptocurrency is going to have the dominance and staying power that it needs, its current energy issues will need to be addressed soon.
For as long as the crypto industry has existed, it has had to battle issues with regulators, from suspicions of crypto being used for crime to concern about it being a threat to economic sovereignty.
A good part of the last decade has been spent trying to get more pro-crypto laws passed by regulators around the world, whether it be a Bitcoin ETF or trying to ensure that crypto firms can have access to banking services. Despite the progress that the industry has made since then, the issues with regulators have not come to an end moving forward, even more lobbying and negotiation needs to take place.
Scalability, security, & accommodating the new entrants
One of the biggest effects of the cryptocurrency industry’s success is that there has been a sharp influx of new market entrants. In January 2021 alone, the industry saw its global usage rise to 200 million people.
With this new influx, existing blockchains have to adapt and improve, especially in terms of scalability and security. After all, how will crypto see global dominance if blockchains are not built to accommodate the millions of people it seeks to attract?
Raja Zuberi, who has worked for a number of blockchain projects in the past and also founded ProgramOnChain, a blockchain integrated repository management platform that aims to provide a blockchain-based alternative to Github and other similar repository managers using BSV chain, says that, “I believe that a lot has changed in this industry within the last couple of years due to the entrance of Tesla and Microstrategy. We are now much more correlated with NASDAQ and other stocks. Moreover, since the first lockdown in the US, due to stimuli and zero interest rates, almost all of these risky investments have been experiencing a bubble-like situation. In my opinion, the real test will begin once the Fed announces tapering and hike the interest rate. Overall, I believe we are definitely in a bubble, not only in this industry but also across stocks and other high-risk investments, but the intensity of bubble is probably a lot more in crypto, because of Tether’s shady inpouring of USDT and Binance’s allowability of high leverage levels”.
There has never quite been a time like this before for the crypto industry; its financial dominance is impossible to ignore but it still has a ways to go and several intra-industry issues to sort out. But should these be properly addressed, the industry can grow well beyond this level and finally reach the level of global acceptance that it seeks.