June 18, 2020 |James Messi
In this article, we will determine the current state of cryptocurrencies by comparing certain aspects of the technology to its characteristics from preceding years. This will indicate the degree to which certain facets of blockchain technology and cryptocurrency have been progressing or falling behind. Our goal is to derive an accurate picture of where crypto has been successful and where the industry has fallen short up to this point. In order to do this, we need to analyze and consider how easy crypto is to use for the average person, how secure are funds held in self-custodied wallets, and how fast are crypto transactions today? Keep reading to answer these questions for yourself.
Can the average person use crypto with confidence?
Ease of use is one of the biggest obstacles in the way of cryptocurrency reaching mass adoption. Overall, cryptocurrencies, and more specifically, the user interfaces associated with using cryptocurrency, have a long way to go before the average person can use them with confidence. That being said, there have certainly been some improvements in recent years. Applications like the Cash App and MetalPay offer the easiest gateways into the world of cryptocurrency. MetalPay, for example, functions very similarly to Venmo which is used widely and is simple enough for the masses to understand. The primary pain point as it relates to improving user experiences stems from the way wallet addresses for digital assets work. The general population is now accustomed to sending money in a peer-to-peer fashion. But they are used to seeing the name of a person or entity that they are transacting with. Displaying a wallet address as a random string of alphanumeric characters doesn’t seem like an issue to anyone that has experience with cryptocurrency but it can be quite baffling and offputting to someone who has never seen it before. This is the key issue related to usability that blockchain companies should look to solve in the coming years. Currently, there is evidence to point to that suggests the usability of cryptocurrency has improved over the last several years but it is not yet where it needs to be to facilitate mass adoption.
How safely can the crypto be stored?
For a newcomer, understanding how to secure your digital asset holdings can seem complicated but several companies have developed products in recent years that have made this process much easier for the masses to grasp. Gone are the days where you must keep an entire private key safe to ensure your funds are secure. With new-aged hardware wallets like the Ledger Nano S and Trezor, anyone holding cryptocurrency is able to safely store and easily access their digital assets. The key achievement of these products was distilling a raw private key down to a seed phrase and then distilling it further to a simple four-digit pin. This means that you can access your hardware wallet with an easy-to-remember four-digit code, whereas hackers or other nefarious actors would still need to know your entire seed phrase in order to gain access to your wallet. The odds of guessing a seed phrase make it virtually impossible so as long as this phrase is never stored where someone else can access it, your funds will remain secure. Currently, cryptocurrency security solutions are sufficient and are not standing in the way of the masses taking to cryptocurrency. Looking forward, the last bastion of cryptocurrency wallet security is the ultimate form of security, insurance. In the coming years, we expect to see insurers provide affordable policies to back up funds held in digital asset wallets.
Are crypto payments fast enough yet?
There is an area where cryptocurrency development has been lacking in recent years. There is no evidence one can reference to prove that cryptocurrency transactions are any faster now than they were in the past. There are a few new protocols that tout hundreds of thousands or even millions of transactions per seconds but these are hollow statements more often than they are a genuine technical achievement. From one perspective, projects like EOS and NANO that claim a very high rate of transaction throughput are simply not used enough for the rate to materialize and without having to process millions of transactions per day there is no way to know for sure that these blockchains can actually handle that level of transaction throughput. From another perspective, second-layer solutions such as the Lightning Network seem promising but the development of such networks has continued on at a painfully slow pace. As this time, cryptocurrency transactions are not fast relative to other payment methods like a credit card, Venmo, or Paypal. The good news is that virtually every blockchain developer is aware of these issues and transaction speed improvement remains to be their top priority.
We have determined that the state of crypto is as such: cryptocurrency is marginally easier to use than in recent years, security solutions have improved significantly, and transaction speeds have barely improved at all. To put one word on the state of cryptocurrency, it would be unsatisfactory. As it relates to usability and transaction speed these are very challenging problems to solve from a technical standpoint so it is understandable that these areas are still lacking. There is a massive market opportunity for the first company that solves these issues and that is precisely the reason that we see thousands of cryptocurrency projects vying to be the first to do it. As this competition increases, we can logically conclude that it is only a matter of time before usability and transaction speeds are on par with mass-adopted payment systems such as credit card providers, Venmo, or Paypal.