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When Bitcoin was launched in January 2009, everyone thought that cryptocurrencies would become the currency units of the future.
People thought that cryptocurrencies would replace traditional currencies and traditional banking systems since they offered many advantages over traditional currencies like security, accuracy, no convenience charge for online transactions, privacy in online transactions as they’re carried out anonymously, and versatility.
Despite all these advantages that cryptocurrencies offer over traditional currencies and traditional banking systems, they are only employed in a few countries today like the USA, Europe, UK, Israel, and Australia.
This is because they have some serious operational flaws that were discovered only recently (in 2015) and which we’ll see in detail now. There were concerns about How CryptoCurrency works.
Operational drawbacks of cryptocurrencies
The major operational drawbacks of cryptocurrencies that prevent them from being implemented globally are:
Scalability
Blockchain networks are still in the nascent stage. With the current network infrastructure, cryptocurrencies can process only a few transactions per minute. That is nothing compared to the hundreds of transactions per minute that take place via VISA or Master Cards.
Cryptocurrencies must become more popular for them to be implemented on a global scale i.e., to the level of VISA or Master Cards.
Security issues
While cryptocurrencies may be highly secure, ICO platforms are not as secure. Multiple ICO platforms had been hacked in 2018. One such example is the KICKICO, which was hacked on July 27th 2018. 70 million KICKs (cryptocurrency) worth US $7.7 million were hacked, causing a massive loss to KICK’s investors.
Lack of use
People these days do not use cryptocurrencies as an alternative to traditional currencies. They mainly view it as a tradable commodity (like scripts) that they can invest in now and reap profits by selling them off in the near future.
This limits the usage of cryptocurrencies and causes volatility in their values. An example of this is when the value of one Bitcoin fell by oven 50% during June 2014. The incident raised serious concerns about the future of cryptocurrencies.
Lack of regulations
Even if all the technical problems in cryptocurrencies are fixed, if the technology is not adapted by governments around the world and regulated (both cryptocurrencies and ICO platforms), there will be an increased risk of investing in this technology. They could be abolished one fine day.
Practical difficulties
To use cryptocurrencies, one needs to have a stable internet connection. According to a survey conducted in 2017, only 60% (average) of the world’s population has access to the internet.
One also needs to register on a cryptocurrency exchange website to buy, sell, transact in, and trade cryptocurrencies. This requires a certain degree of education. According to a survey conducted in 2018, only 43.74% of the world’s population is presently educated.
If you have started your own cryptocurrency, you must certainly create your own Cryptocurrency Exchange Development.
The common man’s problem
Most of the popular cryptocurrencies in the world have around 10 sub tokens (like cents). It is very difficult for the common man to correlate the value of all the sub tokens of a cryptocurrency to traditional currencies and transact accordingly. This makes cryptocurrencies difficult to implement on a global scale.
Fierce competition
One of the advantages of cryptocurrencies that was stated initially was that they are not restricted by national borders unlike traditional currencies when in fact, they are! As evermore cryptocurrencies are launched, they become fragmented in their use.
For example, even if cryptocurrencies completely replace traditional currencies, some cryptocurrencies may be in use in some countries while others may be in use in different countries due to popularity and government regulation reasons.
So, if one travels from one country to another, one may still need to exchange one’s cryptocurrencies either via cryptocurrency exchange websites or via possible cryptocurrency exchange counters. So, cryptocurrencies are still restricted by national borders.
Conclusion
While cryptocurrencies offer several advantages over traditional currencies and traditional banking systems and while cryptocurrency technology is still evolving, addressing implementation problems as it does, cryptocurrencies are far from replacing traditional currencies and traditional banking systems.
Insufficient internet penetration around the world, insufficient education around the world, and lack of government regulations on and adoption of cryptocurrencies are the major hurdles to the global implementation of cryptocurrencies.
Cryptocurrencies and ICOs must become more secure (to prevent hacking attacks), more regulated, and more adopted by governments around the world to become global currencies and a replacement to traditional currencies and banking systems.
FAQs
How does a cryptocurrency derive its value?
The value of a cryptocurrency is directly proportional to its demand and use. The more a cryptocurrency is mined and used, the more its value will become. Government regulations on a cryptocurrency also play a significant role in determining its value and usage.
What can cryptocurrencies be used for?
Technically speaking, cryptocurrencies were created to be used as an alternative to traditional money but these days, they are used mainly as a tradable commodity.
Can Bitcoins be sold in Auction?
Yes, they can be sold in Auction but only by the US Marshals Service, which is a law enforcement agency within the Department of Justice. The US Marshals Service has auctioned US $1 billion worth of Bitcoins so far.
How much time does it take to mine one Bitcoin?
Bitcoin servers can mine one Bitcoin in ten minutes. The reason it takes so long is because a very complex algorithm has to be followed and a lot of network protocols have to be observed before mining a Bitcoin.
