Crypto functions much like traditional fiat money, offering an easy way to pay for goods and services and compensate workers for their labor. What’s even more promising is that crypto offers a number of benefits over fiat, with its decentralized nature eliminating the need for centralized intermediaries. Depending on the blockchain, transactions can be processed much more quickly than traditional payments are.
These added benefits have attracted the eye of a growing number of institutional figures and prominent politicians who acknowledge the economic advantages of crypto. In the last few years, the adoption of crypto has soared, and Bitcoin has even been made legal tender in countries such as El Salvador and the Central African Republic. But crypto still has a long way to go before it can claim that mainstream adoption is a reality. In fact, there are still a number of significant hurdles that prevent it from happening.
More people are beginning to show an interest in crypto and trying to understand how it all works. Respected educational institutions such as Stanford University and New York University now offer graduate college courses in crypto, and many European establishments are going the same route. Of course, while these courses will help create a new generation of crypto innovators, they won’t do much to educate our existing legislative leaders, who simply have to be convinced of crypto’s benefits to succeed in mainstream adoption.
Still, there are encouraging signs here too. In 2021, six members of the U.S. Congress admitted they regularly bought and sold crypto. Politicians in other countries have also made favorable statements regarding crypto. For instance, the U.K.’s Prime Minister, Rishi Sunak, was a vocal advocate of crypto and blockchain technology during his stint as that country’s finance minister.
Although some countries have made positive moves in the right direction, the reality is that crypto regulation is still incredibly ambiguous and open to interpretation in most parts of the world. Governments must perform a careful balancing act, establishing clear regulatory frameworks that protect investors and consumers from fraud and criminal activity without becoming so overbearing that they stifle innovation.
The good news is that quite a bit of progress is being made in forward-thinking territories such as Dubai and Hong Kong. Dubai notably set up its Virtual Assets Regulatory Authority (VARA) to regulate the use of digital assets in its economy, and it has been perceived by crypto startups there as a green light to go ahead and integrate cryptocurrencies into everyday life. Crypto exchange platforms in the UAE have been particularly emboldened, with Bybit announcing last month that it had secured a Minimum Viable Product (MVP) Preparatory License from VARA, a key step in its plans to commence legal operations in that city.
The introduction of these regulatory frameworks is essential for creating a stable environment that allows startups and investors to embrace the crypto ecosystem with confidence.
One of the major drawbacks of most blockchains is their inability to talk to one another. If the world’s economy is to run on blockchains, there must be a simple and reliable way for digital assets to be exchanged freely. In other words, interoperability is essential for the widespread adoption of crypto.
Some interoperable blockchain networks, such as Polkadot and Cosmos, have made significant strides in enabling inter-chain communication and there are other promising projects too, such as Gear Protocol, Namada and Anoma. Once full blockchain interoperability is established, developers will be able to create much more powerful dApps and services. Integration is key, as it will enable more industries to integrate blockchain into their daily operations, which is absolutely necessary for mass adoption.
There’s a good reason why cars took several decades to surpass horses as the most common mode of transportation. Cars became a lot more affordable thanks to the production line innovations of entrepreneurs like Henry Ford, but the lack of infrastructure (namely roads) meant that there were few places where cars could be driven. When road networks became more developed, cars finally came to dominate transportation.
The same can be said for crypto. If adoption is to scale, crypto needs the same kind of dependable, scalable infrastructure as the Internet so it can be used for everyday transactions. At present, it suffers from serious challenges around scalability, with lengthy processing times and high costs causing a backlog of transactions. Until this is solved, mass adoption cannot happen. Developers are, at least, actively working on solutions to these issues, with Layer-2 platforms, such as Polygon, introducing concepts around scaling to enable many thousands of transactions to be processed each second.
Similar to volatility, a lot of people remain very wary of the potential security risks of handling cryptocurrency, which requires users to manage their funds themselves. Investors need to take care of everything themselves, creating strong passwords, setting up two-factor authentication and storing their seed phrases somewhere safe in case they lose access to their wallets. Events at exchanges such as FTX have shown that centralized wallet providers have some vulnerabilities, and so the crypto industry has to prioritize strengthening its security while also trying to simplify the user experience.
The hurdles listed above must all be overcome before we can convince the rest of the world to embrace the possibilities of cryptocurrency and decentralization. They are tough challenges to overcome, but at the same time, none of them are insurmountable. Mainstream crypto adoption will require an enormous effort, and it’s still likely to be several years away. With the ongoing collaboration we’re seeing between developers, businesses, institutions and governments on thousands of crypto projects across the world, there’s good reason to be optimistic about a breakthrough soon.
Tomer Warschauer Nuni is CBDO @Pink Moon Studios, a serial entrepreneur, advisor, and angel investor focused on Blockchain & Web3.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.