A lot of people are in possession of cryptocurrencies, especially Bitcoin. Also the blockchain technology gives a lot of opportunities. So one thinks about that cryptocurrencies like Bitcoin can used as a normal medium of exchange. But how realistic is that? How can that be made? And what needs to be changed that crypto can be a common medium of exchange?
Technically, it is possible that cryptocurrencies will become a payment method which is suitable for daily use. On Bitcoin (BTC) there is a layer called Bitcoin Lightning Network. This network makes it possible to implement transactions with the popular cryptocurrency BTC. This is a faithful way. But the problem here is that the approval of the transaction would take relatively long. The Ethereum-Blockchain takes about 10-15 seconds, the Bitcoin-Blockchain even ten minutes. So the time of approval is fairly long in comparison to Apple Pay and the like. With these the time of transaction only takes one to three seconds. The device just has to be placed near the payment terminal.
Although it is technically possible, the issue of bitcoin or other cryptocurrencies to be suitable for daily use exists in the missing convenience. There are point of sale solutions with which it can be paid with Bitcoin. Therefore, a QR code is used. But this is elaborate because you have to get your smartphone, open your crypto wallet, scan the QR code and confirm the transaction and have to wait for the approval. This means the whole process takes a very long time. It is everything but effective, fast and convenient. So this form of transaction may be suitable for buying a coffee once, but is no reasonable option for grocery shopping when the queue is long and you do not have time.
This needs to be changed
Therewith cryptocurrency can be suitable for daily use, first the convenience problem has to be solved. The process needs to be as short as the process of using Apple Pay and similar payment methods. But this is not everything. It is also needed a persuasive reason that crypto payment should be used and not other payment methods. Namely, when using crypto like bitcoin as medium of exchange the own muss has to be converted into bitcoin and then the recipient needs to convert the bitcoin into real money again. The only scenario this would make sense is a situation where the currency of the state crashes. This happened for example in El Salvador. In this country, bitcoin is the currency of the state and the only payment method.
Conclusion: Possible but not yet realistic
All in all, good arguments are needed to convince the mass that a cryptocurrency like Bitcoin is a good option for a payment method. Not everyone is in possession of cryptocurrencies. Also, these are more likely seen as an investment. The investors normally do not intend on using Bitcoin and the like for their daily purchases. So crypto won’t be suitable for daily use in the near future. It can only work as a back-up-solution if other payment methods of the state fail. In such a situation, crypto payment is a good possibility because the blockchain is a decentralized system. That means that no state is needed and that the people can be sure that they will receive their appertained money. But overall, Bitcoin or Ethereum as a usual medium of exchange is unrealistic as long as there is an easier and faster system.
Author: Maximilian Schmidt is CEO of the CPI Technologies GmbH. The company is specialized in software development in the areas artificial intelligence, blockchain and digital product development. https://cpitech.io/de/