Bitcoin technology has been waiting patiently in the wings for a long time. However, after years of speculation and hype, it looks as if the digital currency’s moment has finally arrived. This May, the value of bitcoin went up by a whopping 65 per cent. In fact, last week it was revealed that one bitcoin is now equal to $2,000. . . a number which is only expected to grow.
Kay Van-Petersen, the analyst who predicted the $2,000 benchmark, has stated that bitcoin could reach a value of $10,000 per coin in the next 10 years. It’s no wonder, then, that so many companies are jumping on the bitcoin bandwagon and developing their very own cryptocurrencies. But how are they doing this, and how will it disrupt finance?
Taking finance to the next level
The surge in cryptocurrencies has been hotly anticipated by bitcoin enthusiasts worldwide. The ‘bitcoin boom’ is the result of numerous possible factors, including the growing demand for digital currencies, greater acceptance in Asian markets, and good old fashioned hype. Businesses are now looking to capitalise on digital currency support by creating their own.
Messaging service Kik, for instance, has raised $120 million for its own cryptocurrency to support a community of developers. Startups like online payment gateway Omise are pursuing this strategy, too. The four year old company is aiming to raise $19 million to create Omise Go, also known as OMG. Now that businesses are working towards ICOs (initial consumer offerings), even more people will begin to use digital payment methods. This means that issues with existing financial infrastructures will become far more apparent. Even Coinbase, the world’s most funded bitcoin exchange, is struggling to handle the number of transactions taking place. In a recent blackout, both the website and mobile app were unavailable for hours. Processing a higher volume of transactions has presented an ironic barrier to bitcoin adoption, because the more popular it becomes, the more serious the problem. A potential solution is to enlarge the capacity of blocks. It would also be easier to handle exchanges if cryptocurrencies could be unified, but with so many different variations this would be very difficult. Until these changes are made, bitcoin is unlikely to realise its true potential. Even so, the technology has already disrupted finance, trade and energy. . . so what’s next?
How disruptive are cryptocurrencies?
By now, it’s clear that bitcoin is a highly disruptive financial innovation, transforming the way that people think about money and finding answers to real world problems. It’s encouraging accountability in all aspects of finance, restoring trust in trade, improving data storage and revolutionising energy exchange. The expansion of bitcoin inspired currencies could help to increase positive changes in legacy industries, especially traditional banking. As well as this, it will foster healthy competition between providers. Unfortunately, the sudden multiplicity of cryptocurrencies could also be damaging. If giant bitcoin exchanges can’t deal with current transaction volume, will they be able to cope with additional users?
There’s a distinct CRM angle here, too. As more and more companies adopt their own currencies, things could get very confusing for consumers. The rise of chatbots, for example, has been hindered by irrelevant, underdeveloped services. It’s possible that we could see a similar situation unfold with digital currencies if they fail to live up to the hype. Cryptocurrencies need to be well refined before companies even consider an ICO. In short, bitcoin is no longer an exclusive payment method for the tech savvy. But if developers and enthusiasts don’t work together to find a solution to the cryptocurrency conundrum, then the digital tender will be back to square one as users become disenchanted with subpar service.
There can be no doubt that cryptocurrencies are the next big thing in digital finance. The emerging business trend has the potential to accelerate bitcoin adoption, making it more accessible for everyday users. Belief in bitcoin has led to wider investment, adoption and application, which is clearly positive. Even so, if bitcoin exchanges can’t handle the volume of transactions, an influx of users is a huge problem. The cryptocurrency boom demonstrates that hype is as much a blessing as a curse, especially when expectations exceed reality. This is the challenge now facing companies like Kik and Omise. It’s incredibly important for businesses to experiment with bitcoin and explore the ways in which it could enhance their strategies, but without a solid foundation in place, they may be trying to run before they can walk.
Will digital currencies replace traditional legal tender? Is it possible to unify cryptocurrencies? Will cryptocurrencies have a negative or positive effect on the adoption of bitcoin technology? Share your thoughts and opinions.