Every ICO, cryptocurrency and blockchain-based technology dream of one thing—mass adoption. However, achieving mass adoption of a technology doesn’t come easy peasy lemon squeezy. For one, the alternative technology must surpass the existing paradigm it wishes to replace and this is where it gets tricky. The blockchain protocol, which was initially built for Bitcoin in 2008, is the first and only system to achieve a completely decentralized, secure and immutable public ledger for digital currencies, and this is the very reason why it has become a strong economic contender against the traditional and widely-used fiat money and the systems that come along with it, which have remained unchallenged for a very long time.
Why is Crypto Still not Adopted, Then?
The thought of a fully-digital and nearly foolproof currency seem to be too good to be true, isn’t it?
The promising technology is too good to be true as a matter of fact, that crypto-economy has grown to such a massive size that it’s estimated to grow up to $20 trillion by 2020, eating away most of the world’s economy.
However, despite its overwhelmingly gargantuan size, cryptocurrency doesn’t seem to create a lot of noise in a microeconomic level, in other words, the household.
When you eat at a restaurant, you don’t necessarily bring out a Bitcoin card and pay your bills in Satoshis. Instead, the paradigm still remains. Cash and digital transactions such as Visa and PayPal still remain to be the most-prefered and dominant mode of electronic transaction.
Despite the many flaws of centralized digitized fiat currency, it still remains relevant in both micro- and macroeconomic levels. Why is this so? Let’s look at the figures:
Visa, one of the world’s largest electronic payment network, claims to have the capacity to process 24,000 transactions-per-second, while on the other hand, Bitcoin, the gold standard of the crypto-economy, processes at roughly 3.3 to 7 transactions-per-second.
This comparison on the two throughputs alone explains why people still prefer fiat over crypto. However, there are plenty of factors that the common person fail to see in these figures alone that might make trusting the traditional payment methods regrettable in a larger scale.
Transaction Quantity – Visa “Transactions” aren’t Exactly Transactions
The 24,000 tps of Visa may seem to be mythical at scale, but this number is only theoretical. In reality, Visa processes around 1,700 tps. Although significantly lower than the previous figure, it’s still undeniably higher as compared to Bitcoin’s 7 tps. However, the capacity of transactions processed alone does not dictate the quality of transactions.
For one, Visa and Bitcoin rely on entirely different systems. “Transactions” being processed by Visa aren’t exactly transactions, or at least not just yet. What Visa does is that it tells the merchant that the transaction has been recorded in the ledger, but the payment itself has not yet happened, making the transaction technically incomplete. The merchant still has to wait for the bank to pay him/her and the bank still has to wait for the credit card holder to pay them. And so, despite the whopping 1,700 tps throughput, transactions still takes at least 30 days to be truly complete.
Transaction Quality – Bitcoin’s Public Ledger is Bitcoin Itself
In Bitcoin, as well as all other blockchain-based cryptocurrencies, when a transaction has been successfully added as a block in the blockchain, all the transaction details and everyone involved in it are part of the blockchain forever and cannot be reversed. This ensures that once the transaction has been processed, it is already complete, confirmed and rock-solid. This is because Bitcoin doesn’t technically have a currency unlike fiat. The public ledger is the currency itself, containing all the records of what you have and what you owe. And so once a transaction has been recorded in the ledger, it has been set in stone, and all other ledgers in the consensus contain the same record, ensuring no chance of fraud to take place.
This is the reason behind Bitcoin’s 7 tps throughput. Its decentralization, security and immutability come at the price of scalability, and this is otherwise known as The Scalability Trilemma, as introduced by Etherium’s founder, Vitalik Buterin.
Buying a Carton of Milk with Bitcoin…
The central vision of crypto-economy is the implementation of Smart Economy wherein day-to-day transactions of products and services revolve around blockchain-based technologies, cryptocurrency and smart contracts. However with the Scalability Trilemma, buying a carton of milk with Bitcoin still seems to be impossible in the near future.
Although some cryptos continue to find and introduce new ways of becoming a more scalable payment method than Visa and Paypal by means of integrating sharding technology, semi-decentralization, alternative consensus etc., it is still very apparent that achieving scalability is impossible without forfeiting one or both sides of the triangle.
Even Visa and Paypal are victims to this trilemma as they have given up decentralization and a bit of security in favor of large scalability. As it turns out, we really can’t have it all.
For now, Visa remains the victor for small transactions as you can trust a purchase of a simple small carton of milk to go under a system with a risk of uncertainty.
However, it is an entirely different story when selling a house-and-lot or a luxurious sports car with the same system. You can’t just trust to give up the keys to the buyer without confirming the transaction at least thrice. This time, cryptocurrency wins with its irrefutability.