As we quickly approach the end of 2017, we are thinking about what’s next, what are the upcoming developments within the payments industry. One type of payments technology that continues to generate buzz and draw more and more attention is blockchain and cryptocurrency.
For a long time, from the first release of Bitcoin in 2009, cryptocurrencies have been linked to questionable transactions. Sometimes, we perceive certain aspects as suspicious or questionable precisely because we do not know too much about them. What we currently see in the market is that cryptocurrencies are growing and reaching a more mature phase, as consumers become increasingly familiar with them. New crypto services are developed and shops and retailers start using them in their trade. In the near future, in about five years from now, cryptocurrencies are very likely to become payment methods.
Main conditions for successful payment methods
Speed, safety, and efficiency.
If all these conditions are met, cryptocurrencies can successfully act as payment methods. Out of the three conditions efficiency, especially, can be greatly improved at the moment. A lot has been written on the fact that mining cryptocurrency is compute-intense and on its high electricity consumption; e.g. a single Bitcoin transaction could power the typical U.S. household for roughly 5.5 days. Therefore, there is a lot of room for improvement in this area.
Why are cryptocurrencies so different than other payment methods?
While different innovations in payments are aimed at applications in existing technologies, cryptocurrencies show an entirely new transaction ecosystem. Such ecosystem facilitates the so-called smart money and smart contract for the exchange of money, content, property, or anything of value, and which runs on the blockchain exactly as programmed without any possibility of censorship, downtime, fraud or third-party interference.
Cryptocurrencies are completely interchangeable with euros, dollars and so on, something that did not exist until now. Therefore, a completely new area has emerged, one that will continue to develop judging by the attention that cryptocurrencies currently receive.
As payment methods have a very slow development, being mainly habit driven, cryptocurrencies will certainly play a far more important role than they do today and will slowly transition towards acting as payment methods. However, consumers will only accept and adopt them when they feel they are safe to use. A good example of this shift in behavior was contactless payments. Nowadays this is a pretty stable trend, but it started shifting about five years ago. Almost probable, the same could happen with the development of cryptocurrencies. It’s very likely that in the future we will have a number of different cryptocurrencies next to euros, which we will use for different kinds of transactions.
As for the most dominant cryptocurrencies, we have bitcoin, with a very safe and strong infrastructure, litecoin, which is easier to process and will play a much bigger role in small transactions, and ethereum – the most flexible of all, which allows the development of potentially thousands of different applications all on one platform, making the process of creating blockchain applications much easier and efficient.
Last, but not least, a trend that I believe will become a basic habit, part of consumers’ daily lives, is using three or four different currencies for different transactions instead of just one. So, together with the other industry players, I’m excited to see the upcoming groundbreaking developments in payments and where this sector takes us.
This interview was first published by the Dutch Television channel, RTL Z.
*photo source: Cryptocoins news