Cryptocurrency has grown exponentially in popularity over the past few years. But his growth journey has been a roller coaster ride. At times, cryptocurrencies, like Bitcoin and Ethereum, have shown an incredible appetite for success, but there have been times when their will to grow has been lacking. The extreme volatility and sudden price swings that occur at regular intervals undermine the attractiveness of the emerging sector. These are just some of the reasons that make cryptocurrencies less suitable for becoming a default mode of payment. However, the underlying blockchain technology is promising.
Although in some countries businesses have started accepting payments in certain cryptocurrencies, the recent market crash has caused them to re-evaluate their decision. Let’s take another example: El Salvador. The Central American country legalized Bitcoin in September last year and began building a cryptocurrency war chest. The country’s president, Nayib Bukele, promised that Bitcoin would help rebuild the economy. But his government is said to have lost around $40 million in the stock market crash since buying the Bitcoins. Already, financial experts are worried about Salvador’s Bitcoin bet.
There are other key (practical) reasons why Bitcoin or other crypto coins cannot become a default payment option, at least in the near future, without a technology upgrade. Bitcoin transactions take around 10-15 minutes to process. The technology is designed in such a way that when a crypto user makes a transaction, the transaction must be validated by the miners. This process delays the real-time charm we otherwise get from transacting through the current banking system. Another factor is that the fees miners charge for their service must be paid by users. Although this is not significant, it is still more than what we currently pay to our banks.
Moreover, extreme volatility makes it less secure and less reliable. If you have Bitcoin worth Rs 10 lakh, you can buy things for that amount today. But there is no guarantee that the value of Bitcoin will remain stable; it could swing back and forth with a huge margin.
Despite these shortcomings, the underlying blockchain technology is inspiring and there is a real possibility that it can be improved in the future to meet the challenges.