What are the top 5 challenges that cryptocurrencies need to overcome in order for mass adoption?
Internal Conflicts Within Crypto Community
From Roger Ver making destructive statements on Bitcoin while promoting Bitcoin Cash as the number one coin, to Justin Sun talking about how Tron is much better than Ethereum, internal conflicts are seen all over the cryptocurrency community.
Constructive feedback is good for the space, of course, but the manner in which many so-called “crypto experts” are doing this is often disrespectful, bashful and often times childish. Go on twitter and you’ll see many experts saying negative things about other coins in order to make their coin sound better.
These are just a few examples from the twitter community that illustrates how unnecessary this type of behavior is. These internal conflicts make the community look bad to outside investors and discourages non-investors from entering the space.
Scalability vs. Decentralization vs. Consistency Tradeoffs
Back in 2016 Trent McConaghy, CEO of Ocean Protocol, published “The DCS Triangle” (illustrated below). He laid out in clear terms the tradeoffs each blockchain protocol makes when developing their projects. The conclusion: blockchains by nature tend to capture two of the corners but no projects today has successfully optimized for all three.
Currently, Bitcoin and Ethereum are the two largest cryptocurrencies by market cap. Both are consistent, in that all nodes see the same data at the same time and both are fully decentralized since no one entity controls the network.
However, neither Bitcoin nor Ethereum has captured a planetary scale. The Bitcoin network has a theoretical maximum of 7 transactions per second (tx/s), and even lower in practice. Post-Segwit this will be 1.4x higher, but nowhere near 100K tx/s. The Lightning Network aims to speed up the transactions substantially by making a series of value transfers between two actors happen instantaneously. However, the Lightning Network does not fully solve planetary scale issues because it gives up other major advantages of blockchains, namely transparency, auditability and storage. Ethereum is roughly 10x better for each characteristic, but that’s still far short of planetary scale. For perspective, Visa handles on average 1,700 tx/s and rumored to handle even more.
Lack of Talent in Blockchain
Very few individuals have the necessary skills, talent, and experience required to work in and contribute to the blockchain space. There are several factors behind this:
- Blockchain is a difficult concept to learn
- The blockchain space is quite new
- Lack of resources that teach basic blockchain knowledge
According to Upwork, Blockchain is the fastest growing skill in the US freelance job market. Between Q2 2017 and Q2 2018, profiles with blockchain-related skills have enjoyed “more than 3500 percent year-over-year growth.”
Despite fantastic growth experienced by Upwork, the cryptocurrency market is far from clear of talent-related issues. Up until August of this year, ICOs have raised $6.3 billion which is 118% more than 2017’s total of $5.3 billion. This influx of capital is applying great pressure on projects to over-deliver. In order to do so, projects must hire the best blockchain developers in the world. Upwork may have some great beginner developers that can help you create your first coin on the Ethereum or NEO platform. However, the best developers usually are not on Upwork. As a result, many projects are expected to fail due to a lack of talent which may lead to a major decline in investors’ confidence or, even worse, a market collapse.
User-Friendly Application Issues
How can projects and crypto exchanges have a simple user interface that is good enough for beginners to dip their toes in and start using cryptocurrencies, but robust enough to allow for all functionalities that the blockchain offers? If the interface can educate beginner users that private keys should never be shared and can encourage users to store cryptocurrencies in hard-wallets, that would be the next stage of a good user interface.
Even further, how can we create a user-friendly application that stores the users’ private keys (so that the user doesn’t even have to worry about ever losing it) without compromising decentralization?
Many crypto sceptics will point to this as the major flaw that no company or project has been able to solve. Currently, if someone finds your private keys lying around your home, they can steal all your cryptocurrencies. This is not the case with traditional banks. Even if someone finds your debit card and knows your pin, they cannot empty your entire bank account easily. They will need you to personally go to the bank, show your ID (and other supporting documents), before they can empty your bank account.
Education about Blockchain and Importance of Decentralization
The mass will not care about cryptocurrencies, let alone buy any, if they don’t understand the need for decentralization in their daily lives. Whether it’s for businesses-purposes or for everyday consumer use, decentralization and cryptocurrencies can benefit everyone. Especially those who are living in remote areas with limited or no access to banks or financial institutions.
Here are just a few benefits of decentralized currencies:
- A bank-less currency is free of national monetary policies. For residents of countries that have destabilized fiat currencies, a decentralized currency can serve as a stabilizing agent and an alternative.
- A decentralized currency insulates customers from bank failures and collapses, as well as exuberant bank fees and aggressive bank policies.
- Payments are borderless, allowing for seamless and cheap international payments despite current limits on transnational fiat payments.
- Decentralized currencies are immune to inflation or deflation.
- The only requirement for using decentralized currencies is the ability to obtain and use a wallet, which is great for the underbanked/unbanked populations.
- Decentralized currencies are not subject to geographically-based exchange rates, meaning that goods and services bought with decentralized currency will not be devalued due to tariffs or unfavorable changes in national monetary values.
Many people around the world don’t understand the use-cases for cryptocurrency, particularly people living in the Western World where banks are everywhere, and currencies are safe and stable.
However, we need to constantly remind ourselves that times are constantly changing. What was once a peaceful democratic place can suddenly be overrun by a dictatorship. Cryptocurrencies offer those who are not living in the globalized world a chance to participate and, for everyone else in the world, cryptocurrencies offer protection from currency failures, bank failures, and even country failures.
“B2B reporter – Content Manager – Contributor – Fintech – Blockchain – Cryptocurrency”
Simon Chou is a B2B reporter and content manager specializing in technology and finance. He has worked with many clients in the fintech and blockchain space. He holds investment positions in bitcoin and other large-cap cryptocurrencies, and has been reporting on cryptocurrency since 2017. Currently, Simon is the content manager for a major cryptocurrency exchange @HybridBlockHQ.