28 July 2021
Cryptocurrency has become one of the most controversial topics in the global economic forums. And why not? According to TripleA, a Cryptocurrency and Blockchain technology startup, there are now more than 300 million cryptocurrency users worldwide. The average country's Crypto ownership percentage is about 3.9%, and over 18,000 businesses worldwide already accept Cryptocurrency payments. On the other hand, as per CoinMarketCap, the total Cryptocurrency market capitalization is over 2 trillion as of 17th July 2021. All these aforementioned statistics reflect the significant growth, potential and opportunities that Cryptocurrency offers. It has gained strong community momentum over the years, wherein the other trend follows with Crypto enthusiasts.
Cryptocurrency is now depicted as a major threat to the current financial system, promising to reduce corporate red tape, expand financial inclusion, and build a more just and transparent economy. Even if all the above is true, the Crypto world isn’t always rainbows and unicorns. Cryptocurrency indeed has many challenges to address and overcome inorder to find stronger roots in the mainstream.
Here, we have highlighted 5 major challenges that are impeding the Crypto revolution to its next stage.
1. Subject Complexity
Cryptocurrency and Blockchain technology are still new to many people due to their complexity. This leads many individuals to confuse Bitcoin and Cryptocurrency as synonyms or Cryptocurrency and Blockchain as one. This magnitude of hindrance challenges the adoption and acceptance of Cryptocurrency amongst the masses.
Learning Cryptocurrency, in the beginning, may feel overwhelming, but gradually it gets easier. In simple terms, Cryptocurrency is a digital currency that runs on Blockchain technology. Bitcoin is the first Cryptocurrency which is followed by thousands of other Cryptocurrencies like Ethereum, Dogecoin, Ripple, Cardano, Uniswap, and so on.
2. Government Regulations
Cryptocurrency is based on the Blockchain, which is a decentralized technology. As a result, the regulations behind digital currency are unprecedented, including countries having different outlooks towards it. Therefore, Crypto investors and speculators are keeping a close eye on worldwide events and developments since Governments respond to Cryptocurrencies in various ways.
Christine Lagarde, the head of the International Monetary Fund, recently stated that international regulatory action on Cryptocurrencies is "inevitable”. He further added, "We are actively engaging in anti-money laundering and countering the financing of terrorism. And that reinforces our determination to work on those two directions."
According to a report by CoinDesk, world leaders gathered in late January for the Davos World Economic Forum, with several of them sharing the same perspective. It included French President Emmanuel Macron, UK Prime Minister Theresa May, and US Treasury Secretary Steven Mnuchin.
The concerns involve a lack of legislation, legal obstacles, and, most importantly, the part where Crypto is not a legal tender, unlike fiat currency. Thus, it’s evident why Cryptocurrency has taken more than a decade to adapt to an economy where they've had to deal with issues at the very core of our economy and society’s operations.
3. Cryptocurrency Features
Cryptocurrency also has obstacles beyond external factors. Its inherent features also draw a sketchy reputation in the eyes of potential investors. One of the major challenges faced by Crypto traders and investors is market volatility. Since the technology is still in its infancy stage, it faces issues like scalability, interoperability, liquidity, usability, transactional breakdowns, price manipulations, data rights, security, conversion issues, and so forth. The other concern involves decentralization, advanced technology, immutability, and traceability. As much as these features act as a boon, they are also a cause for wrongful activities.
Also Read, How One Can Inherit Bitcoin To Its Family?
4. Security Concerns
Cryptocurrency is unregulated in nature, which raises concerns over the lack of security. In addition, since Crypto exchanges are digital, they are vulnerable to cyber attacks, system failures, data leaks, financial breaches, hacks, malware, and various other malicious and illicit activities. Thus, hackers can have access to thousands of accounts and digital wallets through Cryptocurrency exchanges.
One of the largest and most infamous Bitcoin heists was the Mt. Gox hacking event in 2014. The Tokyo-based Crypto exchange once accounted for over 70% of Bitcoin transactions. The incident resulted in bankruptcy, and the closure of the Japanese exchange after millions of dollars in Bitcoin were stolen.
One cannot access the digital wallet without the key and knowing the addresses. So if a Crypto holder dies and hasn’t shared the information with anyone, leading to the loss of private keys to the wallet, the Cryptos will remain inaccessible unless the prerequisites are met. In simple terms, they will be essentially lost forever.
To conclude, many development companies are working on Cryptocurrency advancements. There is no denying that the stakes are high, but when we look back a decade ago, Cryptocurrency has gained gradual traction in the Finance and Technology industry. It would not be an overstatement to say that Cryptocurrencies have an unpredictable but promising future.
Disclaimer: The author’s views and opinions are for informational purposes only and do not constitute financial, investment, or other advice.