The number of consumers, business owners and technology enthusiasts using the blockchain technology is increasing with time. With its tremendous success and versatile functionality, blockchain has much potential to solve major problems from a business standpoint. However, the reality is a bit different.
There are some difficulties for the mainstream adoption of cryptocurrency trading as some of the components are too complex to use. Scalability and extreme volatility are seen as major issues. Let us now see which factors stand in the way for blockchain to become a global success:
Four Areas That Need Improvement
Even as we say that blockchain technology is user-friendly and anyone can manage it, there are 4 glaring issues that need major improvements.
The biggest issue that blockchain has to overcome is scalability. The important features of this ecosystem have to be scalable to reach total decentralization. Although blockchain has the potential to disrupt the financial industry, the following 3 scale challenges have to be solved:
- Liquidity – This is the major hurdle for scalability. When compared to the global market worth of $294 trillion, the total cryptocurrency market share is only $1 trillion. Moreover, financial services do not allow the users to move stocks, Roth IRA’s, hedge funds and others to the crypto markets. One reason for this is high volatility.
To take a positive step towards fiat-crypto liquidity, one of the following must happen:
- Developments have to be made in backend applications. For example, debit card transactions can happen in front-end and conversions to digital or fiat assets in the backend of blockchain applications.
- Institutional usage has to be encouraged. For example, an increase of government acceptance for tax purposes and others, usage of crypto assets in global trade, etc. can boost the confidence of the consumers of the blockchain. Having said that, this is not possible for stablecoins as they are pegged at fiat currencies or central bank digital currencies.
- Stablecoins must be recognised by banks for fiat-to-crypto and vice-versa conversions. Startups should look for ways to build stablecoin frameworks and increase cryptocurrency trading.
- Speed Of Transactions- Though blockchain based crypto transactions are quicker, they pale in comparison with some traditional banking methods. Ethereum network, which is faster than top cryptocurrency Bitcoin, has the transactional speed of around 15 TPS , whereas Visa can process 65,0000 TPS. This makes it clear that there is room for grander changes.
- Global Boundaries- Blockchain uses nodes located all over the world, which means it can cross jurisdictional boundaries. Complex issues related to contractual relationships will arise, as laws are different for different countries. These need to be handled very carefully, but it is difficult since decentralized applications don’t have a clear set of rules.
Blockchain platforms are simple, yet highly confusing for non-technical users. Even while logging onto the top cryptocurrency interfaces, users find it too volatile. This is where traditional systems of transactions seem appealing. Mainstream adoption also gets hampered when the tools need the users to have essential technical knowledge.
To solve this, the exchanges must sport frictionless interfaces which are similar to the traditional financial tools which the users are familiar with. The apps and tools have to allow for secure management of users’ private keys.
There should be a seamless exchange system for the cryptocurrency market so that the users can adopt crypto-fiat conversions. Most exchange tokens are rendered as obsolete stores of value if they still use poor designs. Digital reserve management needs innovative ways to increase their functionality.
For global adoption of the blockchain, there has to be a native currency asset which people trust. To make people place the dollar value in a crypto asset with high price fluctuations is difficult. This is where stablecoins can be reliable. But, even as stablecoins maintain a price-stable store of value, they do little to foster economic growth. Platforms have to develop new schemes to allow the user to take loans and use stablecoins as transactional currencies.
The future iterations of the crypto industry will bring forth hybrid and scalable solutions, along with usable tools and functional stablecoins. Widespread adoption of blockchain is possible by addressing these issues and creating actionable solutions.