Sequel to El Salvador’s historics, Ukraine has made moves to legalize bitcoin. DeFi protocols are penetrating mainstream finance as content creators worldwide continue hopping on the NFT trend. Gamers are plying their trade on GameFi platforms and play-to-earn is riding the waves. Popular soccer clubs are issuing fan tokens and creating utilities for cryptocurrencies backed by their brand. Simply put, the world is embracing cryptocurrency!
Just about five years ago, this was hardly the case. 2017 saw flashes of this, but it never happened; rather, an infamous crash followed. Years following this crash represents one of the most productive era for blockchain technology and cryptocurrency. Silent developments behind an unstable and crumbling market, national bans and stern regulations. Cryptocurrency’s future was as blurry as ever. Most people saw a need for blockchain technology, but not cryptocurrency…they seemed right!
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These years of building have materialized into what we are experiencing today. Efficient platforms, excellent products, bold developers and influencers, jaw-dropping gains and most importantly global acceptance. Individual motives surely exist; but on the average, cryptocurrency appeals to more people than it ever did. The bears still lurk, but away from price, cryptocurrency is taking giant strands. Currently, it is making more waves than blockchain technology…the reverse used to be the case.
What’s your portfolio looking like? You probably bought a few cryptocurrencies looking to sell them off when their value rises; but look around, there are a whole lot more you can use them for; staking, lending and borrowing, providing liquidity, booking flights and hotels and even buying event tickets! In El Salvador, you can make your purchases at every restaurant with bitcoin.
These breakthroughs are results of years of hard work and persistency. In the light of this prominence lies tough tests which cryptocurrencies must pass to continue the quest of global dominance.
Cryptocurrency’s technology flaunts generality and portability. You simply need a light weight application to manage your financial activities all by yourself. While this is convenient in the normal sense, it is not without certain shortcomings. Regardless, this shifts the power to the users in contrast to current system where the ‘managers’ in custody of your assets hold the upper hand. Decentralization and ‘personalization’ put you in charge, a concept growing in acceptance in our contemporary world. In this case, cryptocurrencies offer what the current generation long for. These features sound interesting, but maintaining them is a tough task. Even light speed blockchains and cross-chains slow down when the pressure builds up. Ethereum’s high fees and sluggishness is as a result of an enormous and growing pressure from the high number of users. Cryptocurrency’s first and major test is developing and maintaining an efficient technology, one which breaks down less often than the traditional system.
Volatility? It’s obvious that cryptocurrencies have a very huge work to do as regards this. Volatility is a huge turnoff if cryptocurrency or a similar technological solution will make it to the top of the global financial system. Despite an over 97% loss in value since its inception, the dollar has remained ‘relatively’ stable on a short term. Yes, compared to cryptocurrencies the annual variation of the dollar’s valuation has remained minimal. Exceptions to this are special periods like wars, pandemics and related global or national situations. In contrast, cryptocurrencies lose significantly when Elon Musk tweets, lol…jokes apart!
Regulations? The current crypto space is filled with irregularities and the need for some amendments and regulations cannot be overemphasized. Regulations are more than important, especially at this stage where a lot of mainstream institutions are taking a look at what used to be a 'side topic'. Reality is that a completely decentralized payment solution will never sit well with a centralized government, so, if cryptocurrencies are ever going to appeal to a centralized system, many activities must be regulated.
To gain legal support, cryptocurrencies are bound to lose their anonymity feature (to an extent). Cryptocurrencies’ Blockchain-level anonymity is one of the drawbacks of mass adoption. Centralized exchanges breach this anonymity through customer identification programs and are almost completely centralized. This hints at what is bound to happen with mass adoption. Cryptocurrency faces an uphill task here and a dilemma. Sacrifice anonymity and adopt some level of centralization? Huge decision here, one which must be made if we are going to see more adoption of proper cryptocurrencies, else, CBDCs and stable coins might take the lead.