A recent report published by researchers at Imperial College London, one of the UK’s most prestigious higher education institutes, forecasts that we could be paying for our coffee, newspaper and train tickets with cryptocurrency by as soon as 2030. When Bitcoin was first launched in 2009, it was positioned as an alternative to fiat currency. Bitcoin, and the alternative cryptocurrencies which followed, initially gained traction as an alternative anonymous payment method for online transactions, often of the illegal variety.
As cryptocurrencies gained in popularity, however, it became clear that the early Blockchain technology they were built on had some serious scalability issues. They also became popular as a new class of speculative investment, a development which fuelled a value bubble towards the end of last year.
Not all cryptocurrencies are intended to be used as a cash alternative with many ‘utility tokens’ only designed to be ‘spent’ on their home Blockchain platform. Ether, the second largest crypto after Bitcoin, is an example of this kind of cryptocurrency and is used only to pay for use of the Ethereum smart contracts platforms. However, for those cryptocurrencies which are intended to be used as ‘money’, often slow transaction speeds and volatile price swings mean that, until now, that has not been practically possible. Some major companies such as Microsoft and gaming platform Steam who had started to accept payment in Bitcoin stopped doing so due to impracticality.
The latest technology in the world of cryptocurrencies and Blockchain is developing quickly though and while it may not be Bitcoin, the Imperial College research believes that cryptos will, much sooner than sceptics may think, become common currency. A viable currency needs to act as a store of value, a medium of exchange and a unit of account. At the moment, cryptocurrencies only meet the first of those three criteria. Addressing the other two will require digital currencies to overcome several hurdles – scalability, privacy, regulation, incentives for use, design and volatility.
The Imperial College paper, however, believes that it is only a matter of time before these issues are surmounted by the latest Blockchain technology. The current status is compared to that of early email which existed for years before the usable format of Hotmail triggered mass adoption. There were two decades between the first email being sent in 1971 and mainstream adoption of the technology. The first Bitcoin transaction, which paid for two pizzas, was made in 2010. Of course, there is no rule that suggests technology adoption timescales will mirror each other but the Imperial College research believes that recent developments in the underlying technology and a softening in the position of regulators mean that 2030 is a realistic mainstream target.
However, before you rush to by Bitcoin, the paper also suggests that there is a distinct possibility that the cryptocurrency that does eventually make the mainstream breakthrough may not be any of those that currently exist.