By Dan Itkis, Co-founder of Graft Network for FinTech Ranking
Views will always differ when it comes to the reasons why Bitcoin and other cryptocurrencies, for all the success (mostly in pricing) they’ve collectively enjoyed, are yet to see mainstream adoption. Many industry experts, as well as experts from the traditional financial space, are likely to point at the instability in the values of cryptocurrencies, or digital currencies, as the main reason people are not embracing cryptocurrency en masse. You’re likely to get the same answer if you ask long-term investors why they shy away from investing in cryptocurrency.
And they would all be correct. After all, who wants to keep their wealth locked in a digital, arguably intangible, asset that could significantly change in value from minute to minute?
However, if we would carefully trace it, we would find that the problem of instability is partly a result of poor accessibility of cryptocurrencies. Let’s take a moment to examine this.
If we say instability is the biggest hindrance to the mass adoption of cryptocurrencies, the question we would be asking is: how do we make cryptocurrencies stable? That question would, inherently, lead us to another question: why are cryptocurrencies unstable in the first place?
The simple and popular answer to the latter question would be one word: Speculation. While speculation, indeed, causes cryptocurrencies to be unstable, at the core of the problem is the demand and supply spectrum of these digital currencies. Most cryptocurrencies have a fixed total supply. Bitcoin, for instance, has a fixed total supply of 21 million. This inherently means that only the demand side of the demand and supply spectrum decides the value of Bitcoin and just about every other cryptocurrency. Consequently, a high demand will make Bitcoin or any other cryptocurrency increase in value — and vice versa. Intuitively, it’s also true that the more unstable demand of bitcoin is, the more unstable its price would be. Going by this logic, the charts have proven that the reason that Bitcoin and other cryptocurrencies are unstable is that their demand spectrum is unstable. An easy way to see this is in the trading volume of Bitcoin.
The volume chart shows how greatly Bitcoin trading volume can fluctuate from week to week.
Inductively, stabilizing the demand spectrum of each cryptocurrency would stabilize their respective values. And since the end aim of cryptocurrencies is to make them a medium of exchange, the most effective way to stabilize their demand spectra is to ensure that everyone — or at least most people —uses them. Put simply, the only way to make sure cryptocurrencies are adopted en masse is to make them more accessible. This leads us to the next question: how do we make cryptocurrencies more accessible?
The answer to this question lies in the history of how money evolved to where we are today. In early the days, goods and services were only acquired by bartering with someone else who needed the goods or services you could offer. As economies grew, this system became inefficient because there had to be a coincidence of want for bartering to occur. The problem was that access to a medium of exchange was needed to accommodate the economic growth at the time. This led to the development of the earliest forms of a medium of exchange that were only identified and usable in the locality where it was issued. China first used bronze-casted miniature versions of weapons as money. What this did was to make a medium of exchange accessible — accessible being the keyword.
As international trade grew, there was a need for access to a medium of exchange that would be identified globally, which was quite the beginning of the journey that led to the fiat currency we have today. As the world started going digital, a new need arose for access to a way to spend our money — or bank account balances — digitally. This gave birth to the debit and credit cards, which power a majority of our online transactions today.
The essence of this brief history of money is to emphasize why accessibility is important to the adoption of any medium of exchange. The next question is: do we now create a new way for people to have easy access to cryptocurrencies? To be fair, creating a fresh medium of accessing cryptocurrencies would be counter-productive because, if a new technology is introduced to ease access to cryptocurrencies, it means that consumers, most of whom do not currently understand the essence of cryptocurrencies, will have an additional new technology to understand. That would be discouraging. Since the use of debit and credit cards already work for the digital world and customers know how to use it, the most productive way to ease access to cryptocurrencies would be to have them easily accessible in debit and credit cards. In addition, the crypto funds that are available in the cards will need to be usable anywhere even if the merchants there do not accept cryptocurrency payments. This sort of solution will make cryptocurrencies attractive to consumers since they will be able to spend them easily. This is a chain reaction that will ultimately lead to the stability of cryptocurrencies — the investor magnet.
The Graft project is one of the projects trying to make cryptocurrencies more stable by making them easily accessible. Graft employs payment processing protocols and flows similar to how traditional electronic payment systems — such as credit, debit, and prepaid cards — are processed, which are already familiar to and trusted by millions of users and merchants around the world.
In summary, the question of how to make investors more interested in cryptocurrencies finds its answer in the stability of the value of cryptocurrencies, which is only possible if the demand is stable.