Cryptocurrency and retail — is there a chance for the future?
Over the past year, the US dollar has been rapidly devaluing, and therefore its purchasing power has fallen. While many American citizens are grateful to their government for the financial support it has provided, officials have been widely criticized for printing trillions of dollars and thus deliberately lowering the value of the dollar.
Retail and cryptocurrency today
Goldman analysts predict that due to this monetary policy of the United States, in the next few years, dollar will lose up to 20% of its price.
While the Federal Reserve’s money printer “went mad,” Bitcoin was very strong. The rapid growth after the halving exceeded all expectations: we have seen a 10-fold increase since March 2020, and a 3-fold increase since November. Although no one knows what will happen to Bitcoin next, there is a strong anti-inflationary pattern built into its code: there will never be more than 21 million coins. No one will ever be able to print a single Satoshi in excess of the current amount of working capital.
This is the factor why many are so enthusiastic about Bitcoin. They believe that it will never have a reason for a significant drop in value (market adjustments do not count). However, this suggests more that Bitcoin is now seen more as a means of saving, rather than as a means of payment for everyday use.
Will cryptocurrency ever replace fiat currency for purposes such as buying pizza? Let’s see how well digital coins are doing in retail today, whether users around the world can freely buy Bitcoin, and what prospects they have in this regard.
The number of merchants accepting Bitcoin as payment is still relatively small. Microsoft, Tesla and Overstock.com these are some of the largest places where you can buy something with Bitcoin. Unfortunately, you still can’t buy a single thing with Bitcoin on Amazon.
Not so long ago, PayPal allowed payments in cryptocurrency for its 360 million users around the world. This news has stimulated the growth of Bitcoin and may be the first important step towards cryptocurrency sales, an abundance of Bitcoin trading sites and cryptocurrency stores.
For many companies unfamiliar with cryptocurrency, the new surge in market activity may seem a little disorienting. People need to be more familiar with the technology to understand all the benefits that cryptocurrency brings and accept Bitcoin for business. The more simple and clear crypto payment solutions are developed for the retail market, the more it benefits, and the more businesses accept crypto payments.
Legal restrictions for mass adoption of cryptocurrency
According to the Fidelity Survey, more than a third of all financial institutions have ever invested in cryptocurrency. However, politicians in the retail segment are much more skeptical about blockchain in retail banking. Although cryptocurrencies are legal in many countries, only a very few have recognized Bitcoin as legal tender. For example, in France, you can buy some goods with Bitcoins, because there are several retail companies that accept them.
The authorities claim that digital coins are too unstable for the daily use of cryptocurrency. They also point to the involvement of the cryptocurrency in fraud, and all other types of illegal activities.
Three examples: the United States, China, and India.
In the US, Bitcoin is legal, but it is considered a commodity, not a currency. Cryptocurrency regulation is divided between two bodies: the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). Since the ICO era of 2017, they have been quite tough on custodial cryptocurrency exchanges, although in some respects the rules are still not too clear for crypto businesses. Bitcoin and other currencies are rarely accepted in offline stores.
In China, bitcoin is also a virtual commodity, but this does not allow it to be legally stored and especially traded, since all crypto exchanges in the country are prohibited, and most of the crypto infrastructure is inaccessible. Although Bitcoin mining is booming in China, no one can even think of cryptocurrency as a means of payment in retail. However, one digital currency will soon be available for everyday use in China — the digital yuan issued by the Bank of China.
Another tough example of regulating the crypto space is India. Last year, we witnessed a whole saga of “ban-cancel ban, and ban again”, which led to the bankruptcy of many services related to cryptocurrency.
All of these countries seem to be trying to find a way to deal with the volatile and “tricky” nature of cryptocurrency. Some find ways to accept it at least to some extent, while others prefer to ban it. This, of course, doesn`t look like favorable conditions for the mass introduction of cryptocurrency in retail, but you need to understand that this should be given more time. People need this to get used to drastic changes, such as blockchain and cryptocurrency.
This has not yet been said about the COVID-19 pandemic.
Another reason for acceptance
If you are a close observer, you may have noticed that over the past year, since about the middle of March last year, the world has become somewhat different. We spend some time locked up at home when the lockdowns come and we need to wear masks outside. Every time we touch something, we are ordered to immediately cover our hands with “water-alcohol gel”, crowds and mass gatherings are prohibited, and we have no choice but to respect the “social distance” with people, keeping, if possible, at least a couple of meters away from any other person.
It seems that all these scenes are torn out of the head of the most perverted Hollywood screenwriter, but this is the absolute truth, and the only thing we can do is adapt to this new environment.
One way to get used to this “new normality” is to minimize any contact with all kinds of objects during quarantine. Buying any product or paying for a service becomes a problem because banknotes and coins, and even credit or debit bank cards, suddenly become dangerous.
And in this delicate situation, it is cryptocurrencies that come to the rescue, becoming the most secure payment system in the time of COVID.
What will help solve the issue of mass adoption?
Although, as you may have noticed, we are very enthusiastic about cryptocurrency, we can’t ignore some obvious issues that are hindering its adoption.
There are 4 challenges that we need to overcome in order to make the cryptocurrency as large-scale as we want.
Here they are:
Crypto-skeptics are certainly right when they say that the cryptocurrency is too volatile to conveniently set prices in it. Even the most volatile national fiat currencies barely show daily 10–20% fluctuations, which is not news for Bitcoin or Ethereum.
Stablecoins are a possible solution to this problem. Let’s say the price of Tether is always $1 — this seems familiar and easy to measure. Setting prices in stablecoins will make more sense for both sellers and buyers, especially if we are talking about a really broad audience.
When new tools appear in the crypto space, there will always be people who are ready to use them for other purposes. This is what happened with the ICO in 2018, and the same story, but on a smaller scale, was repeated with the DeFi smart contracts in 2020. The lack of regulation and the lack of mandatory security standards have made it possible for hackers and fraudsters to increase their activity.
However, the cryptocurrency market is in some ways a self-regulating environment: the main platforms that value their reputation take additional security measures to ensure that they are never compromised. Thus, crypto exchanges began storing their users ‘ funds in cold wallets with keys with multiple signatures, and taught their customers to use two-factor authentication and keywords to protect against phishing. Stores that accept Bitcoin online are also taking steps to improve their security.
For many people who are far from IT and fintech, it is difficult to understand the very concepts of cryptography and blockchain. And when it comes to using crypto services, things get even more complicated: many of these services don’t have an intuitive interface, but more importantly, they also have narrow use cases that are only interesting to those who are already engaged in cryptocurrency. If you happen to read the descriptions of several crypto services, you will most likely find that they offer solutions for something related to cryptocurrency, rather than being tied to the “real world”.
In addition, if we are talking about mass adoption, the throughput of crypto platforms should be significantly improved. While VISA offers 7,200 transactions per second, Bitcoinc is only able to respond with 7.
In short, you probably won’t be able to shop for cryptocurrency at your favorite store in 5 years. Maybe in 10, and it’s still unknown if it will be Bitcoin.
Events are developing quite unpredictably, and perhaps right around the corner we are waiting for some event of unimaginable form, such as the global adoption of cryptocurrencies. Whatever happens, there is something we can do ourselves right now — train our friends in cryptocurrency, use good crypto services, and report bad ones, and soon we will find ourselves in a world where cryptocurrency is a full-fledged part of everyday life.