People may have heard of Bitcoin, but many feel uncertain about what it really is. Add in the concept of cryptocurrency and many feel out of their depth.
A lack of knowledge leads to a lack of trust. Yet, this does not have to be a bad thing. The distrust of cryptocurrency paves the way for alternative and more transparent, user-friendly systems. With the rise of faster and more convenient ways of accessing cash in the digital world, did pioneers Bitcoin miss the boat?
Cryptocurrency is an electronic cash system that relies on peer-to-peer transactions. The lure of cryptocurrency is that it operates outside of the banking and federal world. The currency only exists online and there is usually a set amount, meaning that the currency cannot expand.
For example, there are only 21 million Bitcoins in the world. More cannot and will not be generated, which makes it impossible for banks to make projections on inflation and adjust rates accordingly. Because it uses a peer-to-peer system, the money cannot be controlled or regulated by the government. Instead, it is moderated by everyone who uses the system.
The peer-to-peer system removes the threat of double spending, which is when you spend the same money twice. Because cryptocurrency exists online, there is always the possibility of being hacked or exploited. Someone could theoretically create a code that generates more cryptocurrency, introduce it into the market, and no one would be any wiser.
List of all transactions
The peer-to-peer system provides a chain of every unit of cryptocurrency ever used, a list of every transaction. And since there is a set number of specific cryptocurrencies, no more can be introduced. This means that every transaction is monitored to ensure that no one spends the same money twice.
A currency that operates outside of federal law, is immune to inflation, and prevents double spending, sounds too good to be true. And indeed, it is.
This strictly defined system also means that there is no such thing as a refund. Once you send cryptocurrency, you have sent it. There are no take-backs. This means that those easily fooled by frauds and scams should be especially vigilant.
Black market popularity
Because it is not federally regulated and can be bought and spent anonymously, cryptocurrencies have become a major source of currency among the black market. People can spend cryptocurrency on drugs and other illegal goods and services outside of the monitoring of banks and other federal systems. There is much less of a digital trail. Yes, there is a list of the transaction occurring, but due to being completely online, many users buy and sell through anonymous usernames or pseudonyms. This means that while the currency is very transparent, those buying and selling it are not.
Cryptocurrency is also somewhat difficult to understand. Average consumers do not seem to want to understand, perhaps feeling it is not relevant to them. Or, possibly they do not care to understand an online currency and its pros and cons. It is hard for those born outside of a technological age to grasp cryptocurrency’s purpose and security. This makes cryptocurrency somewhat niche.
Multiple articles discuss cryptocurrency’s profits and possibilities. Not many explain its purpose. This leaves the uninformed behind, as others explore a technology that is becoming increasingly easy to use, for financial means.
Who uses cryptocurrency?
At present, there are not many users. Bitcoin remains the largest and most popular cryptocurrency available. While anonymity makes it difficult to know for certain, an estimated 20 million people use Bitcoin. That is fewer people than the population of Beijing, China.
Cryptocurrency is a hot topic for investors, but their core market, consumers, are nowhere to be found. In the United States, the top 20% of all of the nation’s wealth holds more than 93% of the stock.
Normally this system still works, as the companies with the stock provide goods or services to everyday consumers. However, cryptocurrency is its own stock. People are not buying stock in the companies, but in the currency, hoping to have the biggest hand when demand is on the rise.
Bitcoin's fluctuating value
The majority of Americans have little to no interest in Bitcoin or other cryptocurrencies. And with Bitcoin’s ever-compelling fluctuations of value, most investors are eager to hold on to what they have.
In order for Bitcoin and other cryptocurrencies to be viable, they must be available. They need to be used for purchases. But because they are sitting in investor’s wallets, the overall purpose of the cryptocurrency is stagnant.
Because Bitcoin is still a relative unknown in the world of consumerism, it is often difficult to make legal transactions with. Where the black market may turn a blind eye, legitimate businesses are far more careful. Many companies do not accept Bitcoin or other cryptocurrencies as legal tender. When Bitcoin is accepted, there is often a long waiting process. So far, it would seem that Bitcoin’s main purpose, as a currency, is not being utilised.
The only people who seem to care are those looking to make a profit. Consumers make the demand. If there are no consumers of this currency, then what is the point?
Online Banking on the Rise
As the world becomes more and more digitised, businesses are scrambling to keep up. Credit cards are accepted in even the smallest coffee shops and banks that do not have online banking may as well be obsolete.
Credit card information can be stored online, and purchases can now be made with one or two clicks of a button. Users can check their account information, switch funds around, and even send money digitally to a friend or family member. It sounds like everything Bitcoin intended to be, but the cryptocurrency has had little success on this scale.
It is said that Sweden could become a cashless society as early as 2030. Almost everyone uses cards or some form of online banking to pay for their transactions. They also have Swish, a mobile payment system that connects multiple banks. This means that two people from different banking services can seamlessly send money back and forth to each other almost instantly.
Many businesses do accept Swish, which has now become the major replacement for cash in Sweden. There are even talks of Sweden creating its own cryptocurrency. One involved with banks and used as an intermediary between cashless and online.
In the U.S.
The United States has always been notoriously behind Europe in terms of financial technology, but even that seems to be changing. The Square credit card processing device allows small business owners to accept credit cards using a money application. And Zelle, a company very similar to Swish, is on the rise.
While banks and regulations have their own pros and cons, they are established within the world. They have fraud detection systems, user forgiveness, paper trails. These are all assets that cryptocurrencies do not use by default. Such assets likely make the average consumer feel safer about using an established bank, amid the rapid changes of technology.
Banks and federal governments are making leaps and bounds to keep up with consumer demand, whilst advocates of cryptocurrency seem to be sitting on their money and waiting. Waiting for people to realise that cryptocurrency is the future, when in fact, its time may have already passed.
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