By Mary Ann Callahan on July 21, 2020
There’s one big misconception about cryptocurrency and specifically, Bitcoin. Many believe that the world needs to change to the extent where Bitcoin can be adopted and used as a major currency. The harsh reality, however, is that Bitcoin needs to change, and frankly, in many respects — from the BTC price to the speed of transactions. Bitcoin needs a massive overhaul in order to be adopted in the real world.
It is best to describe this with an example.
You are out shopping with your friends. You find a nice new pair of shoes and want to buy it. You pick the shoes off the shelf and make your way to the checkout where you pay. In a matter of seconds (faster than handing over cash), you have completed your transaction and you are back shopping looking for your next purchase.
For a cryptocurrency to be adopted it must be able to function in exactly this way. Instead of tapping your credit or debit card, you could check out with your crypto wallet. Adoption is being able to use cryptocurrency instead of the currency that you would ordinarily use for everyday purchases.
So, with that in mind, how does Bitcoin stack up?
There are three things that make it very hard for Bitcoin to be adopted as a real-world currency. These are quite significant things. But, with that said, this article has a rather surprising conclusion so make sure you read to the end!
Anyone who is familiar even with the basics of cryptocurrency knows that Bitcoin is very slow when it comes to transacting. The block time is still around 10 minutes despite numerous attempts to fix this over the years. Unfortunately, the speed of transactions hasn’t been improved since Bitcoin was first launched in 2009.
The fact that it hasn’t improved in over 10 years makes it unlikely that anything will change soon. The chances are that it can’t be changed at all. Apparently, the speed is inherent to the Bitcoin blockchain itself and without starting over it can’t be altered.
Another common criticism of Bitcoin is that it has scalability issues. When people transact with Bitcoin it requires computational power on the blockchain for those transactions to be processed. When the network gets busy it creates a bottleneck and transactions get delayed substantially. This means that the transaction speed can range from anywhere between 10 minutes and hours. Before we proceed to the last big problem with Bitcoin it is important to defer back to the earlier example in the context of cryptocurrency adoption. No one wants to wait ten minutes at a checkout to purchase goods, and that is if Bitcoin works well. If the network is busy, someone could be waiting for hours to buy a pair of shoes and this means Bitcoin is just not functional in the real-world marketplace.
In the early days of Bitcoin, the idea was that it would function as a currency, and the more value it gained, the more legitimate its place would become in the real world. If something has value then it is able to be transacted with. A big problem occurred when the value of a single Bitcoin became too high.
Instead of being a currency that was accessible to all, it is fast becoming a commodity that is accessible to only the rich. Of course, you could argue that one Satoshi (a divisible unit of Bitcoin) is still inexpensive. But over time, the price of Satoshi will be increasing in line with the price of Bitcoin. There could well be a point when even the smallest unit on the Bitcoin blockchain is worth a lot of money.
All of this spells disaster for Bitcoin working as a real-world currency as the idea of currency is that everyone has access to it. Factor in the fact that there is no central bank with Bitcoin to manage economic policy.
The verdict on whether Bitcoin will become a real-world currency is going to be that it is highly unlikely. With the amount of time that the Bitcoin Foundation has had to work on the project, it is surprising how extraordinarily little progress has been made in this exact area.
Will things change over the next 10 years? It is possible but doubtful.
The great news is that there are two cryptocurrencies that can function as real-world currencies as of today. They just need to be publicized. Both XRP and Dash are cryptocurrencies that would be able to function in the example given at the beginning of the article.
They are fast, so you wouldn’t notice the difference between paying with your debit card and paying with your crypto. Both of them are scalable as well. Moreover, at Ripple, they understand the need to govern their XRP currency.
While both XRP and Dash have shortcomings of their own, they are definitely much more capable of becoming mass-adopted cryptocurrencies, especially when compared to Bitcoin.
The big Bitcoin advantage is that many people have heard of it. And although XRP has had some coverage in mainstream media, Dash is pretty much unheard of. It is up to crypto enthusiasts to celebrate these coins and make sure that one day, we will all be able to use crypto in shops to buy shoes.
Mary Ann Callahan