Almost a decade in the making since the inception of Bitcoin and with a current market-cap hovering around half a trillion dollars USD, Bitcoin, cryptocurrency and blockchain have become common to the tech savvy, but face several challenges in becoming mainstream processes in the payments sphere. Below Alex Mihaljcic, VP of Product Development for Eterbank.com, talks Finance Monthly through the challenges and solutions ahead.
While most people don’t understand how they work, Bitcoin and cryptocurrency are not only hot topic buzzwords, but they’ve created thousands of multi-millionaires. Even so, the vast majority of people in the mainstream have no interest or intent to embrace Bitcoin and, as such, it still has veritably no bearing on everyday life as one still can’t even pay for a cup of coffee with any cryptocurrency.
In the last year alone, the cryptocurrency market cap has grown over ten-fold, and even taking into consideration “bubble-effects” of hype speculation, the fact remains that, since the inception of Bitcoin, the cryptocurrency market cap is following an exponential growth curve. Today this amounts today to over $150Bn, and various expert opinions estimate its future growth in the next 5-10 years to be in the trillions of dollars. With these kinds of numbers, it begs the question: With over $150 billon of cryptocurrency already in circulation, why can’t we yet pay for coffee or a slice pizza with crypto?
Not only this, but why is cryptocurrency languishing in a tech world of its own, far removed from adoption by the regular consumer or average business? And why does it exist only in a digital space, largely accessible only to the tech-wise cryptocurrency investors? Perhaps the most fundamental question that everyone is asking—from economic pundits to families around the kitchen table—is will crypto will ever become common currency to be used by the average person to pay for their groceries, bills or the hair dresser? Or are Bitcoin and Altcoins just a fad, doomed to remain ensconced in a cult-like tech realm?
While it’s clear that the only way for cryptocurrency to avoid falling into oblivion is by enabling its widespread adoption and acceptance as a “real” payment method, the reality is that the infrastructure and protocols have not been in place to foster this. In fact, there have been seemingly insurmountable obstacles faced by merchants across the board preventing them from accepting cryptocurrency as a viable form of payment.
Four of those key reasons include the following:
1. High volatility promotes fiscal vulnerability
Businesses are not cryptocurrency investors and, as such, they cannot be expected to accept risky payments that may lead to serious financial losses. Every business operates with supply costs, margins, etc. Therefore it would make little business sense to take on a risk of such magnitude by accepting crypto as payment for their goods and services. What if the local mechanic accepted Bitcoin for several large jobs and then Bitcoin value dropped 20%? This leaves these sort of business owners, whom have fixed overhead costs, in a vulnerable space where they take payments that fluctuate.
2. Technical know-how
Generally speaking, retail operators and cashiers cannot be expected to possess the technical expertise needed in order to safely process a cryptocurrency transaction. This is clearly one of the largest problems preventing mainstream adoption, since dealing with cryptocurrency transactions does require a determined level of technical expertise for which it would be absurd to expect a critical mass of front-line service staff to possess. The fact is that any new person coming across even a simple Bitcoin address can be overwhelmed by its perceived complexity.
3. Brand Confusion
The very word “crypto” suggests cryptic. Mix that in with all of the other various terms that are used including virtual currency, digital currency, alt coins, and Bitcoin, and it all creates confusion. It will be paramount for industry insiders to adopt consistent language to be consistently utilized in the mass market.
4. Uncertain regulatory environment
Regulations regarding cryptocurrencies are still not even close to being set in stone. As concerning, these same regulations actually discourage the use of such currencies in a B2C environment, regarding them as an “unnecessary risk” that may lead to legal problems for any business down the road.
Collectively, these four points above paint an ominous picture for the future of cryptocurrency. Not only relating to its progress and adoption, but also for its very survival in a very real scenario where an innovative payment technology fails to fulfil its potential. In fact, this isn’t the first technology to be introduced with the aim of creating a major cultural shift. Twenty-five years ago, fax communication was far more common and even preferred over email messages.
The Innovation Life Cycle Must Ensue
In all forms of innovation, there is always a lag between the advent of the actual innovation and the time that the average intended user starts to adopt and employ the technology. As the “technology adoption life cycle” has well established, in order for people to adopt and use a new innovation, technological abstraction layers are needed to hide all of the complexity of the core product and make it unequivocally user friendly. Of course, this takes time and innovation of its own until all the layers have been developed and refined around the core product, which is the main reason why there is always a lag between innovation and mass adoption.
The Game Changer: Crypto-to-Fiat Point-of Sale Solution
The tremendous amount of complexity associated with using Bitcoin and other cryptocurrencies in the real world financial marketplace, as exemplified by the four problems detailed above, has ushered in a new breed of leading-edge technology aimed at wholly solving the glut of mass market limitations. Emerging Point-of-Sale (POS) applications are finally permitting cryptocurrencies to be transacted as easy as a credit card payment, allowing small and large businesses alike to accept and instantly translate crypto into U.S. dollars, thus eradicating any risk and uncertainty. With this advancement, technical or crypto-specific know-how on the part of the consumer or the merchant is rendered unnecessary and businesses can readily convert crypto to real cash. Not only will this Point-of-Sale development quickly shift brand perceptions, but the regulatory environment will also eventually temper given the reduced volatility this POS technology proffers.
Once this business-friendly solution is adopted as a viable transaction method, enabling consumers to very easily spend their crypto currency and retailers to charge and settle crypto payments in the business’ preferred currency—whether dollars, euros or other, technical proficiency will no longer be barrier and volatility will subside since businesses will continue to deal strictly in Fiat currency (government-issued legal tender), resolving any possible crypto-specific regulatory issues that are rendered a non-concern.
Given its extrapolated impact, a POS innovation of this nature would be poised to unlock the full potential of the cryptocurrency industry and its utility in the real-world. A Crypto-to-Fiat business tailored POS solution will effectively allow for cryptocurrencies to penetrate the consumer market and truly disrupt day-to-day payments as we know them. The first business with a minimum viable product (MVP) will be to cryptocurrency transactions what AOL was to email.
Retailers today are accustomed to using Point-of-Sale terminals for processing credit card payments, and are increasingly adopting new solutions in the space such as Square’s retail POS smartphone app, replacing bulky hardware with Android and iOS devices. In order for merchants to accept and adopt a Crypto-to-Fiat POS solution, it must be tailored in a manner that seamlessly accommodates the retailers current understanding and knowledge base, with a near zero effort or learning curve required to adopt the new solution. At the same time, the innovation must demonstrate its ability to drive new value, new customers and, ultimately, new profits by expanding its ability to process transactions—and at a fraction of standard costs.
Such an end-to-end solution can truly catalyze cryptocurrency adoption, finally bringing Bitcoins and Altcoins to “Main Street” and crossing that crucial milestone for blockchain technology—and technology as a whole—to usher cryptocurrency into the modern world is a genuine, viable and enduring way.