In 2008, Bitcoin entered the post-financial crisis market with a gleaming promise of revolutionizing the finance world as we knew it. Built on the desire to modernize conventional banking institutions and change the economics of the internet, it rose to success and eventually ran on a 17-fold price increase throughout 2017. At its peak, a single bitcoin was just shy of $20,000. Despite these seemingly hopeful numbers, it has yet to tap into mainstream markets. And as cryptocurrency becomes more and more popular, the challenges that lie underneath are beginning to burst at the seams. The main culprits keeping this cryptocurrency from reaching its full potential are scalability, transactions, and regulations.
There is plenty of skepticism surrounding cryptocurrencies and their practicality in everyday payment systems. Bitcoin might be touted as “the simplest way to exchange money at very low cost,” but the current rate of $15 per processing says otherwise. It pales in comparison to other currencies that charge little to no fees. And with parties involved and transaction data piling up, the system may be suffering under its own weight. At this point, scalability is becoming a cause for concern. As it stands, transaction times for Bitcoin can stretch to a whooping 16 hours. Even Ethereum has been struggling with network congestion, while major industry players like Stripe and Valve have since dropped Bitcoin payments from their platforms. These are just some of the scalability issues that Bitcoin has been facing, which can be traced back to the current network’s capacity for transactions. It is simply not equipped to handle the high volume of users, that even its block sizes have reached its maximum points.
Thankfully for those invested in Bitcoin’s success, solutions are underway. Vitalik Buterin has announced its plans for Ethereum to start testing different sharding techniques to address scaling issues, but it will take a lot of time. Clearly, a more solid foundation is called for if transactions are expected to increase from here.
In addition, Bitcoin prices seemed to have taken a slow dive in recent months, with other cryptocurrencies like Ethereum and Ripple are dipping by as much as 40%. Experts are quick to point their fingers at regulation as one of the most important factors affecting its volatility. Because of last year’s crypto boom, governments scrambled to crack the whip and regulate the industry, for the betterment of investors and collection of tax revenues. Countries like China went ahead and took on a more aggressive approach, immediately going into a banning spree that outlawed crypto exchanges and ICOs. On the other hand, the US regulatory agencies have been struggling just to classify these cryptocurrencies. The CFTC, for example, sees Bitcoin as a commodity, which is opposite to the IRS treating it as property. Unsurprisingly, the industry has taken a hit from this unreliability, shaving billions off the market.
For consumers to put their trust in Bitcoin, a common standard for international regulation must be established for these currencies to abide by. Without it, the market remains susceptible to the slightest bit of change, never arriving at a stable price point. Unless it can overtake these hurdles, mass adoption is inevitably off the table. Should these problems be addressed, however, then a wealth of positive uses and applications for Bitcoin awaits.
At the moment, it is already accepted as a method of payment by over 100,000 merchants across various industries globally — including Microsoft, Expedia, REEDS Jewelers, and Golden Gates Hotel & Casino. Glossy notes that cryptocurrencies’ high value has been a huge driver of adoption among high-end jewelers. That’s because expensive purchases are more efficiently facilitated in Bitcoin, which works via the blockchain, than with fiat money, which will need wire transfers. With regard to the cryptocurrency’s usage in the world of gaming, meanwhile, Coinwire highlights advantages like security, accountability, and anonymity. If executed properly, these actors allow Bitcoin lower fraud risk and better protection for buyers — which are just a few of its possible benefits. Even behemoth retailer Amazon is rumored to soon hop on the Bitcoin train, which could only mean good news for the crypto industry.