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Cryptocurrency in 2019: What Needs to Happen for Mass Adoption?
Cryptocurrency in 2019: What Needs to Happen for Mass Adoption?
Blockchain and cryptocurrency were relatively niche concepts before 2017, but that year their popularity and value exploded, as exemplified by bitcoin’s boom. A token of the original mainstream cryptocurrency, launched in 2009, cost $900 (£695) in January 2017. In December that year, at the peak of the market, one bitcoin was worth $19,500 (£15,000) – a 1,850 per cent increase.
The bull run of 2017 generated global awareness of cryptos, enriched early adopters, and in turn propelled the initial coin offering (ICO) mania – whereby tokens of a new protocol are sold to investors – that has since subsided. It also precipitated a pull back in the markets the next year, with many dismissing the new asset class as an archetypal economic bubble.
However, blockchain – the secure, distributed database underpinning bitcoin, and countless other cryptos – is a transformational innovation that numerous experts believe has the potential to be more revolutionary as the internet. As such, cryptos – the first use case of blockchain technology – will not, despite the 2018 crash, be going anywhere, any time soon.
If cryptos are to achieve significant growth in the near future, and gain mass adoption, as many predict, a handful of things should – and could – happen in 2019.
Fiat and Crypto Compatibility
Blockchain was created as a decentralised system for the exchange and storage of a new form of digital currency, bitcoin, with the vision of challenging the status quo of centralised banking systems and fiat money.
Indeed, in October 2008 – only weeks after the collapse of Lehman Brothers, then the fourth largest investment bank in America – Satoshi Nakamoto, the mysterious and still-unmasked figurehead of the bitcoin movement, proposed “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution”.
There are a number of ways to exchange fiat currency for cryptocurrency, though there are much fewer options available for currency conversion between crypto and fiat in developing-world regions that have large “unbanked” populations.
Some organisations seeking to take advantage of the untapped wealth that these economies possess. For instance Electroneum has been partnering with businesses around the world and lobbying for the acceptance of cryptocurrency to empower the unbanked and give their lives purpose.
Regulation of cryptocurrencies – that are, by definition, decentralised and extranational – has always been a contentious issue. Since the ICO boom, during which many investors were scammed, the reins have been tightened by the community. The cryptocurrency space is no long the “Wild West” many detractors label it, though admittedly bitcoin’s association with Silk Road and other Dark Web websites frequented by criminals does not help the case for mass adoption.
Additionally, some regulators struggle with the technological literacy required to fully comprehend cryptos and the potential of blockchain, and some countries have banned them outright (not least in China). In this digital age of exponential change, where science fiction is becoming science fact, they are yanking up the handbrake on progress.
In 2018, there was a groundswell of movement within the crypto ecosystem to better collaborate and encourage more self-regulation, while cooperating with authorities and independent bodies to construct standardised regulatory frameworks. The strengthening of bonds, and greater education about cryptos, is helping to foster healthier relationships between innovators and those in authority.
This bodes well for mass adoption of cryptos. One such institution already actively seeking to achieve this vision is the Global Blockchain Association (GBA).
The aforementioned ICOs were the most prominent form of cryptocurrency fundraising in 2017, and grew faster than they had in any previous year. They have since come under fire from critics over the lack of security that they offer investors.
The backlash against ICOs began in 2018, and the new big fundraising vehicle in the crypto world is security token offerings (STOs). STOs combine the best attributes of traditional security offerings – namely investor protection – with the increased efficiency, speed and future liquidity of blockchain-based tokenisation.
In 2019, expect to see the rise of STOs, alongside other innovative methods, to support blockchain companies, so backers can be more confident of the safety of their investment.
Furthermore, cryptocurrency exchanges and trading platforms must continue to bolster their cybersecurity defences to combat hackers, providing peace of mind for investors of all levels.
Stable Coins vs Price Volatility
The faster a bubble expands, the bigger it bursts, which is exactly what happened in early 2018 when the value and market capitalisation of almost all cryptocurrencies plunged almost as quickly as it has risen.
Stablecoins were invented as a means of securing token-holders against such volatility, as well acting as an intermediary trading token. Towards the end of 2018 there was a rapid rise of stablecoins.
At the start of 2019 there were reckoned to be about 50 stablecoins. The verdict is still inconclusive as to which of these new stablecoins is the most reliable, though soon enough a leader will emerge.
Next Killer App
Many blockchain enthusiasts have been either collaborating or competing to develop the next “killer app” solution, in the midst of dwindling public interest in cryptos and slowing adoption rates.
It is likely that the next great application will take the form of a future-proof “middleware” solution that helps complete the convergence of blockchain and traditional technology.
One of the greatest obstacles facing mainstream adoption of cryptocurrencies is the fact that there aren’t many ways that people can use it like Visa, Mastercard or PayPal. Any solution that can overcome this barrier would certainly be considered a “killer app”, and could pave the way for mass crypto adoption.