There are some hidden costs involved when paying via cryptocurrencies
Cryptocurrency has grown rapidly in popularity over the past few years. But its journey in terms of growth has been a roller-coaster ride. At times, crypto coins like Bitcoin and Ethereum have shown an incredible appetite for success, but there have been times when the drive for their growth has been lacking. High volatility and sudden price movements at regular intervals are taking away the attractiveness from the emerging sector. These are some of the reasons that make crypto coins less suited to become the default payment mode. However, the underlying blockchain technology is promising.
Although in some countries, companies have started accepting payments in certain crypto coins, the recent crash across the market has made them re-evaluate their decision. Take another example: El Salvador. The Central American country legalized bitcoin in September last year and began building the cryptocurrency’s battle chest. The country’s president, Nayib Bukele, promised that bitcoin would help rebuild the economy. But his government has reportedly lost nearly $40 million in the market crash since buying bitcoin. Already, financial experts are concerned about bitcoin gambling in Salvador.
There are other major (practical) reasons why bitcoin or other crypto coins may not become a default payment option, at least in the near future, without technology upgrades. It takes around 10-15 minutes for a bitcoin transaction to be processed. The technology is built in such a way that when a crypto user makes a transaction, it must be validated by the miners. This process delays the allure of real time that we get in transacting through the current banking system. Another factor is the fee that miners pay for their service by users. While this may not be significant, it is still more than what our banks currently pay.
Also, excessive volatility makes it less confident and trustworthy. If you have 10 lakhs of bitcoins, you can buy things for that amount today. But there is no certainty that the value of bitcoin will remain stable; It can swing either way with a big difference.
Despite these shortcomings, the underlying blockchain technology is persuasive and there is real potential that it can be improved to address the challenges in the future.