This topic is going to dive into some of the current problems blockchain and crypto are still facing that keep it from going mainstream and saving people billions of dollars annually on fee-less transfers.
Nothing should be considered investment or financial advice. Enjoy the ride.
Crypto is Not Fee-Less
While this might be controversial to discuss in the crypto community, cryptocurrencys have not solved market specific problems like transaction fees. The potential to change the landscape of financial institutions and international transfers is there, but the adoption has not quite reached operational levels where using crypto is feasible.
Yes, you can currently send Bitcoin or Ethereum across the globe to anyone you want with minimal fees through a digital transaction. Coins like IOTA and XRP will do this faster then Bitcoin for even lower fees or even fee-less transactions.
This is astounding, but the problem lies the in use-cases and liquidation processes of converting crypto back to fiat. Currently, a majority of crypto users in America will use Coinbase or a similar custodian for holding their crypto investments. Easily, I can send a friend crypto in a matter of seconds. The problems lies in spending and converting crypto into USD.
Converting Crypto Into Fiat
Until the world starts utilizing the benefits of digital currencies in everyday life, we still have to turn our precious digital assets into spendable currency, fiat. Through this process, most people will lose 1-3% per transaction or per conversion. For instance, if you want to quickly put $100 into Bitcoin, send it to someone in Europe (assuming you’re in the U.S) and then they convert it to the Euro, you will be charged in total:
- 1-3% on initial conversion from fiat to crypto
- Small mining fee for the transaction
- 1-3% on final conversion from crypto to fiat
Simply, that $100 can quickly turn into $94. Now, six dollars does not sound like a lot, but at scale, that is effectively 6% of your initial capital disappearing instantly. On top of this, people have to understand what crypto is, trust it, and be willing to accept and use it. That’s the kicker.
Why would anyone want to adopt a new form of digital currency they are already skeptical about? In addition, there would not be much of a benefit to begin with?
Crypto Conversion Solutions
Clearly, there needs to be more crypto conversion solutions before the digital assets start to be used and become operationally functional as currencies. Some of these solutions can be simple, and some can be complex. Here are a few I thought of:
- The simplest solution would be crypto adoption. There needs to be an updated Point of Sale (POS) system which implements pulling a wallet address through an API structured with Coinbase or a similar custodial wallet system. Bitpay could also develop something like this for POS to work seamlessly with phones or digital loaded credit cards.
- Another solution is for governments or countries to independently open up crypto banks similar to what the E.U is trying. This would allow people and businesses not only to transact in crypto but send, receive and safely secure their assets.
- Another option would be for a third party system similar to what Starbucks partnered with to enable instant crypto to fiat conversion on payment that is near fee-less. This would allow people to spend crypto. Additionally, the companies would not need to hold any of the digital assets or exchange them.
These are some simple options, but keep the point clear. We need avenues to spend or convert crypto for use in everyday life. Without these venues, crypto is basically an traditional hard investment waiting to be liquidated.