Cryptocurrencies, like Bitcoin (BTC), are ready for mass adoption as a payment solution within the next decade having fulfilled at least one of the three primary criteria of traditional fiat money, according to a joint study by Imperial College London and social trading network eToro.
"Perhaps the thing that will ultimately tip cryptocurrencies into the mainstream is the issue of cross-border payments. These remain difficult and expensive in many cases. Cryptos are cross-border by design, enabling wealth to be transferred far more easily. The potential for this to be a leading use case looks very strong.", eToro UK Managing Director Iqbal V. Gandham said.
In their study titled Cryptocurrencies: Overcoming Barriers to Trust and Adoption, Professor William Knottenbelt from Imperial College London and Dr Zeynep Gurguc from Imperial College Business School, pointed out that digital currencies now offer a viable “next step” for fiat because they now have the capability to ‘act as a store of value,’ one of the three criteria for money. The other two criteria are medium of exchange and unit of account.
"These decentralized technologies have the potential to upend everything we thought we knew about the nature of financial systems and financial assets.” Professor William Knottenbelt from Imperial said adding that "In this context, we wanted to get back to basics: clarifying the nature of cryptocurrencies as a new kind of asset class, contrasting them with traditional forms of wealth, and classifying the main challenges that need to be overcome in order to drive their success forward.”
The main challenges outlined in the study concerning digital assets are:
Scalability: many cryptocurrencies are built on blockchains that are not designed to facilitate high volumes of transactions.
Usability: at present cryptocurrencies can be complex and require specialist understanding.
Regulation: currently the sector lacks a standardized global approach with different countries pursuing different regulatory routes.
Volatility: the high volatility of cryptocurrencies hinders their capacity to be a store of value.
Incentives: any new financial ecosystem needs safety breaks to avoid manipulation of its reward system.
Privacy: while blockchains provide a transparent single source of truth, different levels of privacy available to different users is often attractive.
The research provides a strong backing for cryptocurrencies and contradicts criticisms that digital assets are incapable of becoming an alternative mass payment systems that are offered by established financial institutions, like MasterCard and Visa.
Gandham pointed out that the history of money is also a history of evolution. He noted the first email was sent in 1971, but it took more than three decades before the technology was widely adopted by the public when a user-friendly interface was introduced in the form of Hotmail.
“The first ever Bitcoin transaction took place a little over eight years ago and today we are already seeing it begin to meet the requirements of everyday money. Given the speed of adoption, we believe that we could see Bitcoin and other cryptocurrencies on the high street within the decade. There are of course barriers to mainstream adoption, but they are far from insurmountable.”, Gandham said