Beyond a shadow of a doubt, cryptocurrency has affected the world’s financial system in very pronounced ways. However, one thing remains vague; the future of cryptocurrency which is why people doubt if cryptocurrency can replace Established Currencies. Bitcoin, as well as other cryptocurrencies, were invented to meet the financial needs of people that do not trust the systems of central banks. Now, although having financial transactions that do not involve the central bank of a country might seem impossible to some people, Bitcoin was invented to function in exactly this way. While it’s true that Bitcoin has not gained worldwide acceptance, it has gained quite some level of prominence in certain countries with failed currencies.
Such countries include Zimbabwe and Venezuela. Although this might seem a break from the norm, it is possible because Bitcoins appear to be more reliable than the national currencies of these countries.
These happenings might be exciting to cryptocurrency enthusiasts. However, when looked at critically, it can be concluded that cryptocurrency can’t replace established currencies.
Now here’s why Bitcoin cannot replace established currencies;
It can handle only Meager Transactions a Minute
Unlike VISA’s credit card network which comes with the ability to support 65,000 transactions in just a second, Bitcoin can handle only seven transactions in one second. While Bitcoin’s inability to handle a lot of transactions at once is already a major issue, this particular implementation flaw of Bitcoin and other cryptocurrencies is becoming worse as the days goes by. There have been real-life situations of transactions that remained pending for days. In fact, if you register on the LocalBitcoins exchange, there is a message telling you that Bitcoin (BTC) transaction can even take weeks.
Now, the truth remains that Bitcoin’s inability to support large numbers of transactions at the same time might not have gotten to critical levels yet. Although , notwithstanding, it might not be getting any better. If Bitcoin is unable to process more than seven transactions a second in a world where its use is still not generally accepted, then the chances of it living up to expectations when being used as an effective medium of exchange are very slim. Notably, a cryptocurrency analysis report published by Bloomberg noted that cryptos are not yet a reliable way to pay salaries and other everyday expenses.
Cryptocurrency can’t Replace Established Currencies because of Privacy Issues
As regards privacy, Bitcoin is still a bit of puzzle to many. It gives both infinitesimal privacy and also excessive privacy. By providing too much privacy, criminal activities can be carried out through the use of Bitcoin, almost without obstruction. There are arguments, though, sound arguments, that the traditional financial system can and is used to orchestrate far more illicit activities that cryptos ever have or possibly could. However, due to the increasing regulatory oversight on digital currencies, this has actually hurt more than helped. It is giving rise to other illegal ways to deal in cryptocurrencies. Also, as a currency that does not give enough privacy, transactions that are carried out through the use of Bitcoins are trackable by a pseudonym.
The Value of Cryptocurrency Fluctuates Excessively
Established Currencies are known to have values that are fixed by central banks. As a result of this, they do not always fluctuate. On the other hand, cryptocurrencies, unlike regular currencies fluctuate excessively. The reason for this excessive fluctuation is: just like stocks, the value of cryptocurrencies is majorly affected by speculations regarding what they are worth. The excessive fluctuation of cryptocurrencies make them a great means for storing value but a very poor means for the exchange of value.
Talking about cryptocurrency being a bad means of exchange of value, a Bitcoin which is the most accepted cryptocurrency could be worth a house in the evening and a piece of cake in the morning. Well, maybe not that extreme, but more realistically if you make a $100 BTC payment, then that amount could very well go down to $70 or even go up to $130. But for people who just want to be paid what they were owed, this can and is problematic. However, unlike cryptocurrencies, if one dollar is worth a shirt in the morning, there is a likelihood that it would be worth a shirt in a year’s time.