It’s been over a decade since the anonymous inventor(s), commonly known as Satoshi Nakamoto, proposed the use of digital currencies to solve issues like double spending and high transaction costs in the existing payment systems. Bitcoin was created as an alternative peer-to-peer, decentralised payment method and caught the world’s imagination quickly.
With the powerful and versatile underlying technology, called blockchain, the Bitcoin protocol was truly revolutionary. Over the years, better blockchain protocols have been introduced, yet Bitcoin still remains the largest cryptocurrency in the market; both in terms of market cap and price.
But, for any currency system to survive and flourish there has to be government approval and mass adoption.
Has Bitcoin been able to reach the global population? Does it have what it takes to replace conventional fiat currencies? Are there opportunities for entrepreneurs and technologists in Bitcoin and the whole emerging field of cryptocurrencies?
After a meteoric rise in late 2017, Bitcoin price saw a period of decline since early 2018. It opened 2018 with a bang at $13,290, losing approximately 71% of its value by the time 2018 came to a close.
All crypto coins saw a bearish market in 2018. Despite that, the global adoption of Bitcoin increased 700% over the past 6 years, according to a survey conducted by leading cyber-security firm, Kaspersky Labs. Till February 2019, there were 14,346 venues globally that were accepting BTC as a mode of payment, while 6 years back ago, there were only 1,789 merchants allowing cryptocurrency-based payments.
Diverse industries have shown an inclination towards Bitcoin since late 2013. In 2014, Overstock.com, a leading Utah-based online retailer, started accepting BTC payments. Since then, big names like Microsoft, Amazon, Shopify and Dish Network have joined the bandwagon. In early 2018, Canadian KFC launched the “Bitcoin Bucket,” becoming the newest addition to the list of companies in the food industry that accept crypto payments. Travel companies like Expedia and CheapAir accept Bitcoin payments too.
Even at the grass-roots level, Bitcoin has seen favourable adoption growth. A recent report by Bloomberg talked about New York-based hedge fund manager, Roy Niederhoffer, selling his property in exchange for Bitcoin.
Bitcoin ATM start-up Coinme’s recent collaboration with Coinstar brings forth tremendous potential for the mass adoption of BTC. It is expected that 90% of Americans would have access to BTC in exchange for cash, within 5 miles of their location, as a result of the cash-operated kiosks installed as a part of the project.
Bitcoin has been a saviour not just for its commercial applications, but also for countries with unstable political environment and volatile economies. The Wall Street Journal stated that people in countries like Kenya, Sudan and Brazil have resorted to using Bitcoin in a huge way. In Sudan particularly, the last 30 years of financial sanctions by USA has resulted in declining cash flow and blacklisting by major Western banks. Through Bitcoin, a good number of Sudanese people have been able to conduct financial transactions without any restrictions and escape the nation’s massive hyper-inflation.
An average of around 350,000 Bitcoin transactions occur each day, with over 15k transactions taking place globally per hour. Recently, the cryptocurrency saw its 400 millionth transaction since its launch in 2009. In March 2019, the amount of transactions per block hit an all-time high, at over 2,700. An increase in transactions is a positive sign for traders, who will likely be able to gather more confidence in Bitcoin’s ability to hold on to higher valuations in 2019.
Transaction volumes are also likely to be positively impacted by the launch of the alpha-version of a new feature of Bitcoin’s Lightning Network in March 2019. Lightning Loop, as the update is called, will counter the current problems in the Bitcoin network associated with capacity limits. Users will be able to “Loop out and Loop in” Bitcoin from their Lightning Channel, to be able to free up maximum capacity levels for receiving additional payments in Bitcoin. The Lightning Network shows huge promise in resolving Bitcoin’s scalability issues.
Financial experts maintain that adoption levels for Bitcoin are more important than the price of the crypto. If we have seen anything in recent years, it is that Bitcoin price is not a good indicator of its future value. The massive surge in its price in late 2017 was on account of bullish sentiment, but soon traders felt that this price decline was not backed by any substantial reason.
Being a permissionless currency, it is clearly a safe haven for countries like Venezuela and Sudan. Bitcoin is interestingly less volatile than the Bolívar Soberano, which is making a large number of Venezuelans resort to it as a medium of exchange and store of value.
Global remittances grew 10% in 2018 in developing nations, according to the World Bank. For price-sensitive families in these nations, transaction fees and speed are of great value. In this regard, Bitcoin’s transaction fees might be a huge positive.
Despite unfavourable legislations and falling prices, Bitcoin has been able to bring value to people. But will the currency have mainstream appeal? Scalability has always been an issue for conventional service providers. Right now, its 7 transactions per second speed is considered too low and expensive by big banks. But when it comes to restrictions on payments, Visa, MasterCard and other such government-backed payment processors will score low against the robust Bitcoin network, especially in volatile and developing countries. Plus, with advancements in Lightning Network, one could pay for anything in mere seconds.
At the 2019 MIT Bitcoin Expo, experts talked about people having mental barriers to the use of the crypto, considering it highly speculative, rather than useful. This is a greater deterrent than any other technical issue. Hopefully, with the approval of Bitcoin ETF and positive regulatory approvals in the future, such hurdles can be tackled. The Token Taxonomy Act in recent times indicates that the US regulatory system is increasingly trying to take a positive stance on Bitcoin payments.
Then, there is the huge possibility of a recession in major nations like the US and UK in the coming years. Fiat currencies around the world will be impacted, and central banks will resort to more money printing, leading to hyper-inflation. In times like these, Bitcoin and other cryptocurrencies will likely prove to be safe havens for the masses.