No doubt, virtual currency is taking over the world, rising by 2,000% in price in a 12 month period last year. From January 2017 to December 2017, the price of Bitcoin (BTC) grew by that awesome margin. At one point, the price went from $953 USD to $20,089 USD.
Such a price change is unprecedented. Today, the market capitalization of BTC is over $120B USD. Truly, the interesting thing about blockchain technology is how it can transform our world.
Essential Crypto Features
Certainly, blockchain technology plays a vital role in our world for a number of reasons. Needless to say, its decentralized structure is the most important feature. Yes, there’s no third party required to validate transactions. Instead, a process known as consensus mechanism is used.
Moreover, its decentralized structure is leading to reduced overhead costs. Even more, some cryptocurrency transactions are completely free of charge. This can never happen with fiat currency as the intermediaries demand transaction fees. Digital currency also offers a high level of security. All the transactions are secured, making them difficult to hack.
Common Setbacks to Bitcoin Entering the Mainstream
Despite the numerous benefits of cryptocurrency, there are some barriers inherent in Internet money. In truth, these drawbacks prevent it from attaining mass adoption. Here is a breakdown of these challenges:
Price Volatility
Over time, virtual currency prices have changed. Sometimes, they can lose up to 50% in a matter of days. Truly, this is very worrisome, given that investors hope to see their crypto-asset investment grow and not crash a few hours after acquisition.
For instance, in 2014, cross-border payment service provider PayPal approved of virtual currency. However, the CFO and EVP of Global Customer Operations at PayPal, John Rainey, had a reservation. Rainey says that its immense volatility is the major challenge that discourages merchants from using it.
Security Issues
As the number of virtual currencies has increased, so has the number of hackers. To forestall this, many exchanges have increased their security precautions significantly. Predictably, this has a downside on the customers.
The customers get kicked out of their accounts too easily. Blockchain tracking firm Chainalaysis estimates that over three million users have been stolen from so far. What this means is that 14% of the BTC already mined is stolen.
Legal Uncertainties
Also, increased public interest in cryptocurrency has kept the governments on their toes. The good part is that many countries have created legislation to properly regulate cryptocurrency. Nevertheless, many investors are scared of investing in cryptocurrency because they fear regulations can change anytime. This is often the case due to a lack of central control.
Continued in Part II
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