The first cryptocurrency, Bitcoin, was created in 2009 by "Satoshi Nakamoto". The most curious ones immediately spotted the opportunities, while others have expressed their hesitation. Most of the global financial institutions and governments are cautious about virtual currencies, usually because they are difficult to regulate. What makes people stay away from cryptocurrencies? We found 4 main reasons.
1. Lack of understanding
When it comes to cryptocurrencies, there are a lot of subjective interpretations. This can be frustrating for people who are trying to learn more and get involved in a new area.
Some common misconceptions about cryptocurrencies:
- Cryptocurrencies are just electronic money. While it's true that many cryptocurrencies do function as electronic money, this isn't their only function. At their core, cryptocurrencies are systems to verify transactions on a blockchain network. They can also be used to store value (a digital asset), to track ownership of an asset or property, as collateral for loans, and more.
- There's only one cryptocurrency available at any given time. This is not true, as the cryptocurrency market is incredibly diverse. There are thousands of different cryptos available today, and there will likely be many more in the future, too.
- Only tech-savvy people can understand how cryptocurrencies work. This isn't true either, as anyone with an internet connection can learn from a wide range of reliable sources.
Everyone willing to better understand the crypto world can do it. Even universities or other accredited educational institutions offer various courses depending on your knowledge and learning goals. So with a little bit of effort, the lack of understanding can be easily overcome.
2. Legal uncertainties
Cryptocurrencies are a relatively new phenomenon, and it's understandable that the concept is confusing.
In short, cryptocurrencies are not issued by any central bank. Instead, they are decentralized smart contracts. This is what makes them so appealing to many people—they don't rely on a centralized institution to verify transactions or track ownership of assets; instead, the entire process is automated by algorithms.
But this decentralized nature prevents cryptocurrencies from being recognized as legal tenders in most jurisdictions around the world. In fact, some governments have even banned cryptocurrencies entirely (China). Others have taken steps toward stricter regulation.
In general, the legality of cryptocurrencies raises red flags for governments. Some worry that if this system fails, it could bring down the entire economy. Others are convinced that cryptocurrencies are used only for fraud, money laundering, or tax evasion.
These legal uncertainties will soon be a thing of the past, as more effort is put to regulate cryptocurrencies on a national and international level. One of the examples is MiCA, The Markets in Crypto-Assets Regulation, initiated by the EU and covering key areas like transparency, disclosure, authorisation, and supervision of transactions.
Some people consider cryptocurrencies to be a good investment due to their volatility. On the other hand, some people are afraid to invest in cryptocurrencies because of the same volatility reason. Cryptocurrency market is highly unpredictable, but so is the stock market.
Investors who choose cryptocurrencies, should consider if they understand what high-risk high-reward opportunities bring. Especially, would they be tolerant to losing everything.
Before investing in cryptocurrencies, it is very important to do your own research. This blog post explains in detail how to DYOR.
4. Security issues
Once in a while we hear about security breaches, hacked crypto wallets and funds stolen. It’s almost impossible to get your stolen cryptocurrency back, and it’s your duty to protect it.
The least you can do to keep your funds safe:
- Keep the private key from your wallet to yourself.
- Use a "cold" wallet instead of storing your cryptocurrencies online.
- Use reputable exchanges to buy/sell cryptocurrencies.
- Use strong passwords and change them often.
- Use two-factor authentication when available.
- Keep your computer updated with the latest original software.
- Never click on suspicious links or download attachments from emails or texts sent by unknown people.
Some of the security concerns are covered in this blog post about crypto scams.
Will we see the crypto mass adoption?
Despite all the hesitations covered above, it looks like cryptocurrencies are here to stay. Established financial institutions, venture capital firms, even governments like El Salvador are exploring the future opportunities. E-commerce businesses start accepting cryptos, there are Bitcoin ATMs, also crypto credit and debit cards. No one can predict how and when cryptocurrencies will be used in our everyday lives, but no doubt it will be an interesting journey.