Factors Holding Bitcoin Back From Massive Adoption

Ever since Satoshi Nakamoto released the Bitcoin whitepaper, devs, mathematicians and tech geeks have been finding ways to bring Bitcoin to the world but there has been some pretty big hurdles to overcome for mainstream mass adoption… until recently.

Facebook has been prevalent in the news with the announcement of Libra stablecoin. With their reach of approximately 2.5 billion users, they’ve put the cryptocurrency conversation in the mainstream. This action has benefited Bitcoin and other altcoins. Now, while Facebook’s Libra has elicited strong criticism from regulators and government institutions worldwide, it prompted a Bitcoin rally in June 2019 where BTC prices crossed the $10K threshold for the first time since the historic bullrun of 2017, which was followed by a fairly long crypto winter.

Previously Bitcoin rallied along with risky assets, however, in the past few months, it has been acting similar to a safe haven, though admittedly, it hasn’t arrived there yet. The current state of Bitcoin, with all its decentralization and transparency, is similar to the Stock Market in its initial days. In this article, we will discuss the biggest factors holding Bitcoin down from mass adoption.

2018, the year following Bitcoin’s historic bullrun didn’t usher in mass adoption. But this was the year of niche blockchain products, services, and trading. ING’s Amsterdam based economist, Teunis Brosens, put together a seven-page report for clients interested in learning more about Bitcoin. Global citizens feel like they are missing out or like they have missed the biggest hype cycle in the history of Bitcoin. When Bitcoin was launched, 10000 Bitcoins were used to buy a Pizza and today 1 Bitcoin is trading at $10138. A few weeks ago the price crossed $12000 and Bitcoin’s volatility makes it harder to predict its price in 2020.

Here’s a list of the top 5 hurdles for mass Bitcoin adoption

Regulation

The most important factor for driving adoption is regulation. Positive and clear regulation can encourage blockchain developers and Bitcoin traders to stay active in the crypto community. For Bitcoin to be mature, it needs to be at the center of regulations in most economies. Cryptocurrency exchanges and Bitcoin service providers need to conduct proper know-your-customer checks and implement other compliance functions, greatly reducing the supposed privacy advantages of using Bitcoin. This would make it conducive for government authorities to regulate the digital asset.

Wallets, Exchanges, and Intermediaries

Wallet services, cryptocurrency exchanges and other intermediaries like brokers and escrows can drive Bitcoin’s adoption by making it more accessible and easier to exchange and transact in. Most crypto wallets have nominal security infrastructure and this makes them prone to attacks from hackers. The masses have no rights, recourse or guarantees on digital assets and that makes it difficult for on-boarding them to the crypto ecosystem. Bitcoin needs reputable custodians to hold the currency for the investors.

Scalability

Bitcoin is able to process transactions in 10 minutes or sometimes in 1 day. For Bitcoin to play a meaningful role as a payment system, the transaction speed needs to be at least 1,000 times faster. Delays in Bitcoin transactions can reach several hours. But, leading crypto startups are working on solutions that will process cryptocurrency transactions faster and at lower fees.

Price Volatility

For Bitcoin to be adopted globally as a means of payment, the asset needs to be more stable. In 2019, a payment of 1 Bitcoin made in June 2019 worth $10K may be equivalent to $14K in July 2019 or $8K in the future. No other currency moves this way. The problem is real for institutions who plan payments ahead and cannot bear a change of 20-30% in the payment settlement process. Though Bitcoin has a fixed supply there is no central authority regulating the inflation and price volatility.

High Power Consumption

Bitcoin transactions require ‘mining equipment’ and consume high amounts of electricity. This makes it expensive and impractical for most individual miners and makes the asset more centralized by enabling very few mining pools that have all the resources, to mine faster than others. Bitcoin mining farms consume as much electricity as a small country and this has made it unsustainable and detrimental to the environment. This could also lead to governments ring-fencing the mining process and shutting down mining farms or drive up the price of electricity.

These challenges are being tackled and solutions are being developed by new startups in the crypto space. It goes without saying that development can take a considerable amount of time and resources to be accepted and incorporated by the dev community. Taking into account a few of these, leading cryptocurrency Ethereum is moving from PoW to PoS, cutting down mining costs and making the asset less volatile. This may be the only way forward for Bitcoin’s mass adoption.