Nowadays, we have some very important tools to optimize the cryptocurrency ecosystem. In this article, I seek to clarify possibilities. So I talked more about the future of cryptocurrencies and their major challenges.
The Evolution of Money
We can go back a little in time, in the mid-70s or 80s, when many believed that the creation of digital currencies was unreal, others said that it was impossible for money to strengthen to where we witnessed that something digital could have more value as a physical paper currency note.
Clearly, we can see in this century that we are experiencing the evolution of money and digital currencies that started effectively after the creation of Bitcoin (in 2009), and since then its adoption has been substantial, and it has driven the first steps of the creation of Central Bank Digital Currencies (CBDC's), such as the digital yuan and stablecoins.
Therefore, I intend to clarify the fundamental challenges about the future of cryptocurrencies and to clarify why the digitization of money is almost inevitable. In this way, we will discuss various issues and taboos that may be impediments to disruptive technologies being adopted massively, political and sociocultural challenges and changes that can be positive or negative in certain situations.
Will the money be fully digital soon?
Obviously, we cannot say whether our money will be fully digital in a quick time, but we can see that large banks, institutional investors and governments are studying the technology of cryptocurrencies. But, we have identified a huge market interest in accumulating more Bitcoin fractions and companies from various segments experience a practical application of blockchain technology in business.
So, scholars and enthusiasts of technology and cryptocurrencies are emerging all over the world, statistics warn us that the fundamentals are increasingly solid and positive opportunities in the long term. For example, we can conclude that the cryptocurrency Bitcoin enabled earnings 12 times greater than JPMorgan in a two-year period (Bitcoin generates a return of + 81% and JPMorgan of + 6.3%, according to data from Statista).
Consequently, cryptocurrencies become a positive opportunity for developing countries and those with economic problems like Brazil, Venezuela, Argentina, Sudan, Angola and Zambia for example. After all, digital assets enable financial returns for their buyers and increase the purchasing power of people who can use decentralized and global money.
We can clearly conclude of the great interest in digital payment technologies, growth opportunities and popularity of cryptocurrencies around the world. In China, for example, digital payments are a reality. The acceptance of the population in the face of disruptive technologies has increased exponentially.
Anyway, we see that the use of payment applications and the advancement of digital currencies (centralized and decentralized) allows us to visualize the future of increasingly digital money. After all, even if some countries do not yet have clear regulations on the use of cryptocurrencies and digital assets, we see a very promising future for payment methods based on technology, disruption and the demand for more sophisticated levels of privacy and information security.
We understand that the evolution of studies on the future of money is constantly on the rise, but we still cannot say how long our money will be completely digital. Through some information, data from the finance/payments market we know we are heading towards a true revolution in the global monetary system that remains silent and agile.
The dilemma, fear, and misinformation!
Actually, we can see that it made the internet up for several good and bad contents. Thus, erroneous information is transmitted by criminal companies about bitcoin or other crypto. The misinformation ignores the concept of blockchain technology, its reliability and the decentralization of the main cryptography. Therefore, they are not controlled by any company or state agent.
There are many serious companies, regulated and operating according to the legislation of each country. Unfortunately, companies that promise exorbitant returns and use persuasive ideas to steal newbies end up causing people fear about the technology and how it should really be used, your top good personal security practices and emotional intelligence to deal with volatility.
Therefore, knowledge about how it works, how to use it, how to store, transfer or pay with cryptocurrencies needs to be transparent and simple. After all, wisdom and responsibility towards finances and better conditions of prosperity begin with the application of rational and individual information.
What is the difference between centralized and decentralized cryptocurrencies?
Digital currencies, tokens or digital payment systems serve the purpose of a valuable asset that has characteristics, rules, freedom and technical differences. But even if there are divergences between centralization and decentralization, the market continues to grow exponentially.
The centralized side always seeks to comply with regulators and to work in collaboration with the existing financial system. You have cryptography from decentralized entities in the world, which are not subject to the rules of the centralized universe.
We can see that changes occur in various systems for exchanging, selling or distributing an asset, even when we consume a song. The tendency is for everything to become more digital in our lives: technology is very useful in exchanging digital assets and / or files between peers.
At the present time, we live in a historic moment in the global monetary system and its evolution in view of all the technology we have. The traditional is that a few control the money, the state entities establish the currency and its distribution in the country.
Decentralized cryptocurrencies return control and power to people equally. After all, cryptocurrencies come into play at the right time to change the money we know. In the decentralized world, money is free and controlled by everyone in the ecosystem according to the law of supply and demand.
Clearly, we have some challenges, and we need to overcome them so that everyone can act in the market and be part of this ecosystem in an ethical, complete and intelligent way. So, you can view some main guidelines behind the complexity and innovation characteristics of something as recent as cryptocurrencies.
Challenge 1 ~ Technological and Financial Education
Globally, financial education still needs to be applied more carefully, especially in developing countries. People are approaching knowledge about finance, digital assets, portfolio and custody, for example. But there is a difficulty that requires a substantial change in people's minds about the importance of financial freedom, control of spending and risks.
Anyway, with enough discipline it is possible that something so disruptive will continue to progress exponentially. Getting people closer to the crypto market will only be a matter of time, and so that we can see a big change. A study by the University of Cambridge shows that over 101 million Bitcoin wallets were registered in 2020 alone (Source: Global Crypto Asset Benchmarking Study).
This means that people are increasingly interested in cryptocurrencies, but some studies by Cane Island Digital Research (CIDR) reported that since 2010, about 4% of BTC in circulation has been lost annually, due to lack of knowledge, errors in shipping, death of the holder or other unknown causes.
Challenge 2 ~ Accessibility and Social Inclusion
Currently, statistics tell us that access to the internet is gradually becoming more accessible, but many countries still do not have as many people connected. According to global data from Statista (July 2020), approximately 4.57 billion people were active Internet users in July 2020, covering 59% of the global population. The cell phone has now become the most important Internet access channel in the world, as mobile Internet users represent 91% of total Internet users.
Therefore, we can conclude that 41% of the world population still does not have access to the internet, this reflects social and class differences: many places around the world still have very precarious conditions. Thus, we need to think deeply about solutions that can contribute and generate technological inclusion and bring more people to the internet, a fundamental pillar in modern society, and thus reach the most deficient strata in sociocultural and economic aspects.
According to scientific studies by the World Bank, globally, losing wealth in human capital due only to gender inequality is estimated at $160.2 trillion. People of African descent continue to experience significantly higher levels of poverty (2.5 times more in Latin America) and 90% of children with disabilities in developing countries do not go to school.
Thus, we see it is essential to generate more social inclusion and visibility for projects that allow and seek to expand ways of obtaining better conditions of prosperity for everyone around the world. Currently, we can see open platform projects like Celo.Org, in order to unite tools and independent organizations involved in the same purpose of creating technologies that are accessible to everyone with a smartphone.
That way, everyone will know how much cryptocurrencies have changed the way we can relate to money. Thus, paradigms need to be constantly broken and with the help of the internet, payment mechanisms based on trust and security such as digital banks, fintechs and cryptocurrencies may embrace an even larger share of the market.
Challenge 3 ~ Usability and Regulations
In 2020, the main cryptocurrency brokers in the world reported a growth of between 15% and 30% in registrations compared to the monthly average registered in 2019. Clearly, new users signing up with digital currency brokers do not mean more active customers. Anyway, in Brazil, for example, the Brazilian company Cointrader Monitor collected data from exchanges in the country and they declared to have handled 395,209.48 BTC in the period from 1 April 2019 and 31/03/2020.
See in the image some differences between fiat currencies and cryptocurrencies:
Bitcoin: a cryptocurrency created to be decentralized, distributed computing. The transactions only involve two parties, it does not require intermediaries. A majority rule (network consensus governs cryptocurrency). Depending on the speed of the network, the transaction takes place in minutes. It is not possible to have a chargeback after it has made the transaction.
Fiat currency: the currency is issued by governments and controlled by central banks, an institution such as a bank, it needs a means of payment or intermediary to make a financial transaction. It is possible to get chargeback or reversal of payments that have already been made. Local and international transactions can take several days.
In addition, many scholars on digital payment methods have already realized the efficiency, security and quality of cryptocurrency technology and decentralized finance. So we can have statistics that show that paper money is doomed to failure. Periodic studies are positive!
Challenge 4 ~ Credibility, Trust, and Privacy
Throughout the history of Bitcoin, there have been many cases of money laundering, use for buying drugs on the dark web, among other negative use cases for the reputation of cryptocurrencies. For this reason, some people still have a distorted view of digital currencies, but crimes and cases of corruption occur frequently with fiat currencies.
Fortunately, cryptocurrencies are gaining a lot of confidence and credibility over time. After all, many serious projects have won the battle, joined the regulators and work honestly and transparently, something essential for such a new market. Glassnode, a company specializing in the crypto industry, could account for the number of wallets that have at least 0.1 BTC. After the calculations, the study concluded that, today, there are 3,054,282 portfolios that fulfill this requirement. According to Coinmetrics, Bitcoin has already exceeded 30.45 million registered wallets on blockchain in 2020.
Volume of Bitcoin trades in each state currency. Source: Research Gate.
Challenge 5 ~ Innovative Business Visibility
This is a challenge that requires more efforts from the ecosystem, a lot of professionalism, high-level information and better quality of existing projects, in order to solve the actual problems of society. In this way, alternative points of view and intimate relationships with major players in the traditional sector also generate more visibility to the cryptocurrency market, and thus, companies that create simple systems for usability and reliability, and of course, which are constantly optimized, win people's curiosity. And clearly, projects that value decentralized information have attracted attention and attracted the interest of society.
Despite all the threats, there are incredible opportunities for innovative businesses that know how to act rationally and respect their customers. There are many associations, startup accelerators and venture capital programs for innovative businesses in the world, and we can see that the valuation of such businesses is growing immensely. This is an important sign: innovative businesses in the cryptocurrency sector receive more notoriety and respect, the market grows and more people are becoming interested in the advantages provided by decentralized finance.
Conclusion
Cryptocurrencies, tokens, decentralized systems and the entire blockchain ecosystem have technological properties and characteristics that are far superior to the fiduciary system. As a result, they are increasingly popular and their mass adoption is closer than we can imagine.
In conclusion, an open source and decentralized community allows anyone with the right knowledge to collaborate so that complex systems are always better, safe and accessible. Welcome to the Blockchain!
Do you know any more challenges that cryptos face?
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