Cryptocurrencies offer incredible benefits to society. Whether securing payment, expanding privacy, or ensuring autonomy, these digital currencies are paving the way for a brighter future.
But the technology is still in its infancy, and as more and more people look at adapting cryptos into their everyday life, they’re experiencing some of the flaws inherent in cryptos. Before cryptocurrencies are widely accepted, they will need to overcome these obstacles.
Weak Security on Cryptocurrency Exchanges
It seems like every day there’s another story about a hack from an exchange. Central exchanges are going to have to work harder to protect their customers’ assets to encourage people to buy cryptocurrencies. From an outsider’s perspective, seeing news titles describing thefts in the 10s and 100s of millions is a deterrent.
There’s the concern about 51 percent attacks as well. While Bitcoin, Ethereum, and other large altcoin projects would be complicated and depending who you ask, financially prohibitive, to perform a 51 percent hack, smaller cryptocurrencies are vulnerable to these types of attacks.
Verge has experienced three 51 percent attacks so far, and that’s disconcerting. These attacks allow hackers to double spend, effectively steal, a substantial amount of crypto before anyone realizes the attack happened.
Excessive Energy Consumption from Mining
Mining bitcoin is not energy efficient. Proof-of-work requires energy to fuel the process. With bitcoin, the costs can be exceptional. Bitcoin currently uses 7.67 gigawatts per year for mining or the equivalent power consumption of Ireland. Environmentalists see mining the crypto as socially irresponsible.
Mining rigs have to run continuously to verify the blockchain with costs reaching over $1000 per year in energy alone depending on the price of electricity where mining occurs. As the world looks to more and more renewable practices, eyes will continue to gaze critically on cryptos burn through electricity to achieve consensus.
Blockchain and cryptos are still relatively new technologies. This means that many interfaces aren’t user-friendly yet. Writing down a private key and keeping it stored in a separate location or having a hard wallet on hand only creates more work for people.
For mainstream culture to integrate cryptos, they need a way to regularly store and use crypto without excessive, additional steps. The saying, “explain it to me like you would your grandmother” helps put usage into perspective. If it’s too complex, people will shy away.
This technology is impressive, but it is also complicated, and bridging that complexity is essential to mainstream adoption.
While initially, markets were coming around to accepting bitcoin and other cryptos, the volatility in the market made many vendors stop. When Bitcoin’s value can sway $100 or even $500 in a single day, the cost of a cup of coffee becomes difficult to gage.
Granted, most people do not use bitcoin for transactions, the value of bitcoin does affect the value of other cryptocurrencies. Stability will make vendors more comfortable integrating cryptos into their business models as a form of payment.
Scalability is a significant issue to overcome on the quest to make cryptos mainstream. We live in a society that expects instant gratification. We walk into a grocery store, pick up our food and swipe a card, then watch as the transaction get approved before going on our way. Whether it’s buying groceries, ordering a latte, or paying for an Uber, our payments happen instantly.
Current systems are much faster than cryptocurrencies. VISA, for instance, has a speed between 20-40K transactions per second. When compared to Bitcoin’s seven transactions per second or Ethereum’s 20, it’s easy to see the problem.
With some much traffic occurring at the same, time, transaction fees rise, and the service slows down. If mainstream parents are going to adopt cryptocurrencies, they need to be able to cope with those speeds. Otherwise, people will remain with the services that can provide it.
Blockchain bloat is another problem with making cryptocurrencies more approachable for everyday people. Usage increases with popularity. This increases the size of the blockchain. Remember that a blockchain is merely a ledger of all the previous transactions. This ledger has to be verified with each transaction.
As more and more people gravitate towards cryptos, the system will inevitably slow down, and transaction fees will increase. Attempts to cure blockchain bloat are currently underway with concepts like sharding could considerably help with the problem, but the tech is still under development.
Government Regulation Gray Areas
There’s a lot up in the air about whether or not governments will fully approve the use of cryptocurrencies. Currently, the atmosphere for crypto regulation seems positive in most countries, with only some interference in a handful of countries.
However, just because many countries haven’t made transacting or mining cryptos illegal doesn’t mean that they’ve approved them either. Governments stepping in to regulate exchanges would allow the public to see overall how safe it will be to use cryptos.
Lack of Use Cases
People more often than not are reactionary. It’s excellent for investing to slip in before a project takes off, but for the majority of people, they need to see it working before they stand behind it. Right now, there are a lot of projects on the horizon, but most of the spotlight falls on the transactional value of cryptocurrencies.
The more people can see not only a cryptocurrency used for transactions but one that surpasses the usability of fiat currency, the more people will jump on board. Some people believe a “killer app” will make the difference. Either way, a benefit that cryptos can provide over other platforms will help guide more people towards using cryptocurrencies.
Obstacles Arise from Growing Use
Far from spreading FUD or nitpicking, knowing the shortcomings of a developing technology can help you prepare as an investor, supporter, or crypto skeptic. All technology has problems at its beginning. Think back to dial-up modems and expensive computers when the internet was in its infancy. Increase use forced the development of innovations to overcome those obstacles.
Cryptocurrencies have similar obstacles to overcome on the way to success. But with the talent and interest pouring into this field, it’s only a matter of time before they become part of the framework of people’s everyday lives.