Since their creation in 2009, cryptocurrencies have inspired both great expectations and mistrust. But what seemed at first to be merely an abstract concept, with an uncertain future, has become a reality in markets around the world.
Cryptocurrencies, unlike traditional currencies, are digital assets with no physical counterpart. They use blockchain technology to keep a permanent record of every financial transaction, which cannot be altered or manipulated, since the information is stored in a decentralized manner. In addition to the physical aspect, the most significant difference between cryptocurrencies and traditional ones is that the former are controlled by the market, not by governments.
Although they have been used mainly for investment, the original idea behind cryptocurrencies was that they would become a new way of carrying out financial transactions. But for this to happen, they need to achieve much greater acceptance and use than what they currently enjoy. For the general public, the fact that the currency is digital makes it too intangible and abstract. In fact, more mature and widely implemented digital technologies, such as online payment, still haven’t been adopted by a significant segment of the population.
What’s more, increasing investment over the past few years has created a series of problems that haven’t helped to expand acceptance, such as cryptocurrencies launched onto the market without sufficient liquidity, fraudulent cryptocurrencies, and currencies that have been hacked or used for criminal activity.
Still, the main handicaps remain concerns about security, identity verification and the regulation of these new digital currencies.
In a study performed by Mitek on 26 cryptocurrencies, three variables were analyzed: account activation and opening, security and identity verification, and user perception and experience.
The overall average for these three parameters was 12.4 on a scale of 20. Most cryptocurrencies cluster around the mean, with the exception of Indacoin, with a score of 4, and Luna, Coinbase and Gemini, with a score of 16. Curiously, the highest scores are attributable to the identity verification and security parameter, with scores of 8 and 9 on a scale of 10.
Clearly, confidence is the key to the future of cryptocurrencies. But for this to happen, it will be necessary, on the one hand, for the technology to be perceived as sufficiently safe, and on the other hand it will have to be regulated, either by governments or by the industry itself, in order to protect the use of these currencies. Without these two factors, large-scale adoption in the long term doesn’t seem viable.
The current state of affairs needs to undergo further change. For example, the onboarding processes of the different cryptocurrency companies are very different; some work very well while others don’t work at all. And let’s not forget: a slow, complex onboarding system lacking transparency has a negative impact on the user and on the perception of the service.
Nevertheless, the study shows that the processes that scored high in terms of speed and simplicity of registration and activation scored very low in terms of security and identification.
The challenge for cryptocurrencies is the same one that online payment methods once had to confront: striking a balance between security and user experience. Fortunately, the first can take advantage of the development that has taken place in existing technologies for digital onboarding processes and user verification and identification, allowing them to gain significant ground.
Once the technological challenge has been overcome and advances have been made in the regulatory area, it is quite possible that cryptocurrencies could gain enough acceptance to allow us to envision a future without physical money.