Real-World Adoption of Crypto has been Slow, But is Finally Primed for Take-off

An Uphill Battle

I recently had a conversation with a middle-aged local at a restaurant, and we (somehow) got into the topic of cryptocurrencies (I couldn't help myself). He was clearly interested and wanted to learn more, so I offered to help him install a mobile wallet, which he seemed keen to do at first. However, as soon as we reached the passphrase step he immediately grabbed his phone and said "No no no, there's no way I can do that. It's too risky. If I lose those words, I lose everything." All I wanted to do was demonstrate sending a small amount from my wallet to his, but he was very uncomfortable with the process. I told him that the other option is to setup an exchange account and to buy crypto there.

Explaining the risks of taking either route is no simple task. Yes, you could lose all your crypto if you happen to misplace your phone and the passphrase simultaneously. However, you also risk losing everything to hacking, fraud, or confiscation if you store it on an exchange. Of course, the other option is to avoid crypto entirely and keep your money under a mattress, but then you risk losing the value of it to hyperinflation.

It can feel like swimming against a strong current, or climbing an incredibly steep mountain trying to get people to accept the risks and responsibilities associated with this new form of money, especially when the old system, while standing upon pillars of sand, is still functional.

Training Wheels

Truly owning crypto requires that you be responsible for your own money. You have to be careful not to lose or expose your private keys and backup phrases. While some people love to have this level of control over their money, most people are terrified of it.

For a smooth(er) transition from fiat to crypto I believe we will need custody services for most new users. The majority of people are not going to want to manage their own keys at first - at least not until the exchange they're using gets hacked or defrauds them - at which point they would be more motivated to learn how to properly manage them.

The management of private keys and passphrases has been a major hurdle to the adoption of crypto and several blockchain projects have developed solutions for this. Alien Worlds, a blockchain-based game on WAX has managed to attract over a million players. This is in great part thanks to the WAX Cloud Wallet, which creates a blockchain account for new users based on one of their social media accounts and safeguards the keys for them. And of course we have Leofinance that has made creating a HIVE account a breeze thanks to the Twitter sign up option.

These "training wheels" have worked wonders for attracting new users, but do come with some risks. Hacks can happen in which user's private keys are stolen. It's also possible that a new government regulation could require all users go through KYC in order to gain access to their crypto assets.

Despite the risks, these custody services have opened the flood gates for gamers and finance enthusiasts to enter the crypto world. Even so, the mass adoption of crypto likely won't occur until the people finally realize their wealth and purchasing power, which they've accumulated over decades, is in peril.

The Trigger

All signs are pointing to a looming breakdown of the traditional financial system, but does that mean the masses will all jump on the crypto bandwagon when the bottom drops out of fiat currencies? Until now the majority of people have thought of crypto as a means to increase their position in fiat, and it won't be until the system fails that people will shift their mindsets and see crypto as a means of payment.

Check the Bitcoin Cash Map of Caracas, Venezuela, where there are hundreds of businesses accepting BCH as payment there. This doesn't include DASH or other cryptocurrencies, which probably have even more merchants.

Why? Well, their national currency has been hyperinflating and crypto is the only means of exchange that's retained or increased in value.

It's only when necessity arises that the majority of people will seriously contemplate the jump from "safe" fiat into the "wild west" of crypto. And the data (along with first-hand accounts from shoppers), is pointing to hyperinflation being just around the corner for much of the world.

Some countries are gently nudging their citizens to prepare for the inevitable, such as El Salvador, who's government made Bitcoin legal tender in September and gave each resident $30 worth. It can be said that this goes against the principles of crypto, but it will likely be beneficial to its adoption in the long-run, as any publicity is good publicity. The Salvadorians who HODL their BTC and check a few months from now to find it's worth $60 or $90 will likely be converted into crypto fans.

In Closing

When it comes to technology, the majority of people want things to be simple, and unfortunately handling crypto properly is no a walk in the park for most. The majority of new users will prefer custody services for their crypto holdings, which presents an opportunity for businesses in that area.

And while inflation has been rising steadily, most people can still afford to put food on the table and fill up their gas tank, for now. It will likely be the looming unmanageable inflation that triggers a mass exodus from the old fiat system into the new decentralized financial world.

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