Bitcoin was designed almost ten years ago as an alternative to currencies. Bitcoin was made right after the 2008 financial crisis. However, until today, many investors are still struggling to use cryptocurrencies for daily transactions. Bitcoin network suffered from slow transactions and high transaction fees.
However, according to the academics of Imperial College London, they see cryptocurrencies such as Bitcoin as the “next natural step” for the global economy.
The study was made by Professor William Knottenbelt and Dr. Zeynep Gurguc. According to the researchers, Bitcoin and Ethereum passed one of the fundamental tests in order to become a legit currency and that is acting as a store of value.
According to the researchers, there are three main criteria in order to be considered a currency. One, it needs to be able to act as store of value. Secondly, it should be a medium of exchange. And thirdly, it needs to make it easier for the users to exchange goods and services not to mention it should be used as a unit of account.
Overcoming Regulations and Scalability
According to the research, there are two challenges that Bitcoin and other cryptocurrencies need to overcome in order to become a legitimate currency. Cryptocurrencies need to be able to address both scalability and regulations.
According to Knottenbelt, “The word of cryptocurrency is evolving as rapidly as the considerable collection of confusing terminology that accompanies it. These decentralized technologies have the potential to upend everything we thought we knew about the natural financial systems and financial assets”. Knottenbelt also added that “There’s a lot of skepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street. In this research, we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment”.
For Dr. Gurguc, “New payment systems- or asset classes- do not emerge overnight but it is worth noting that the concept of money has evolved- even in our lifetime- from cash to digital or contactless payments. The wider use of cryptocurrencies and crypto-assets is the next natural step if they successfully overcome the six challenges (scalability, usability, regulation, volatility, incentives, and privacy) we set out in our report”.
There are regulatory changes that were made in the crypto market. In fact, recently, US Securities and Exchange Commission considered Bitcoin and Ethereum as commodities. This means that both of these cryptocurrencies are not subject to laws that are applied to stocks. However, this isn’t the case for other altcoins.
For instance, you have Ripple that is dealing with a number of lawsuits with a claim that XRP is actually a security.
There are also some institutions that are careful when it comes to dealing with cryptocurrencies. The Bank of England has warned financial bosses that it is possible to for financial bosses to risk their reputation and even encounter fraud if they choose to deal with cryptocurrencies.
Knottenbelt thinks that “cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment”.