What We Need for a True Crypto Revolution
Cryptocurrencies are undoubtedly the most prominent of the existing blockchain-based technologies, which can bring both the greatest harm and benefit, and therefore deserve the most attention.
Components of the Crypto Revolution
Whether you’re a fan of cryptocurrencies and digital assets or not, at least you can agree that we’re on the cusp of what appears to be a blockchain revolution. Cryptocurrencies are undoubtedly the most visible of the existing technologies, and can bring both the greatest harm and benefit, and therefore deserve the most attention.
The renewed interest in cryptocurrencies in retail, business, and institutions may be a harbinger of something big, but what will it take for a real crypto revolution to actually happen?
- More reliable security
One of the most serious limiting factors when it comes to the widespread adoption and use of cryptocurrency is the security of the exchange. A series of high-profile breaches over the past few years, where thieves have absconded with coins worth up to $ 150 million at a time, make it difficult for investors to trust. Moreover, these losses are not insured like cash savings and investments such as stocks and bonds. What is lost is lost forever.
Exchanges can be hacked using phishing, malware, and traditional hacking techniques, and while there are a number of things that can be done to mitigate your risks, including using two-factor authentication when entering login details, using hardware wallets, and always using a VPN while trading, cryptocurrency’s appeal to cybercriminals persists even after taking the necessary precautions. The lack of tracking, intermediaries, and the decentralized nature of cryptocurrencies – all the features that make them revolutionary-are also most useful for committing and laundering the proceeds of crime.
Another obstacle to widespread adoption and legitimacy is the lack of regulation that currently governs cryptocurrency markets and trading. This is the main dilemma of cryptocurrencies, because their strength lies in the fact that they are in many ways free from state power. States can ban the use and trade of digital currencies, as Algeria, Vietnam, Saudi Arabia, Qatar, Bolivia, Bangladesh and some others have already done, but the blockchain is essentially immune to government intervention.
The downside of being able to own an asset that does not require intermediaries, which is not subject to confiscation, is essentially anarchy. This is not conducive to a stable market in which the asset, and certainly the mode of exchange, must function widely and properly.
- Increased liquidity
Liquidity is fundamental to any market, and currently most cryptocurrencies suffer from unstable liquidity at best. The fact that trading many coins can take from hours to days is a major drawback of crypto assets. Bitcoin is by far the most sustainably liquid of all coins, and the growing acceptance as a payment method by mainstream stores, online, and increased institutional interest all bode well for its sustained liquidity.
- Combating illegal use
Despite all the talk about cryptocurrencies like Bitcoin, they continue to be exploited and contribute to crime. When criminals hack into private and public companies and institutions, running away with huge amounts of data that they then put up for sale, the preferred payment method is usually cryptocurrency. When drugs, stolen art, jewelry, and even people are sold online, again, the preferred payment method in 2021 will usually be cryptocurrency.
It will be difficult for governments to find a balance between maintaining the positive revolutionary aspects of cryptocurrency that attract investors, and taking tough measures against those people who use digital assets, making the world a worse place. Both criminals and utopian investors like the idea of a world without intermediaries, in which people can interact and trade with each other without paying someone to facilitate the transaction, and are free from the vigilant gaze of the state.
It is unclear how regulators and governments will be able to separate the nefarious from the legitimate use of cryptocurrencies without imposing an outright ban on trading (as has been done in the aforementioned countries).
Crypto enthusiasts of both the new and old school believe that human society and its financial systems are already at a new stage of development. Whether cryptocurrencies will become fully realized, liberating means of exchange, depends on several changes that have not yet occurred, and on the way to solve problems, the answers to which seem to be not yet clear.