The crypto economy has come a long way since Bitcoin’s launch in 2009. The underlying blockchain technology of Bitcoin was used as a blueprint that ignited the complete technological revamp of several sectors, and unlocked a plethora of opportunities.
The evolution of the crypto economy has seen Bitcoin go from being a topic amongst tech enthusiasts to a household name globally.
What is Bitcoin?
Before we proceed, let’s recap what exactly Bitcoin is. Bitcoin is a decentralized digital currency created in January 2009. It follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto.
The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees compared to traditional online payment mechanisms, and unlike government-issued currencies, it is operated by a decentralized authority.
Bitcoin is known as a type of cryptocurrency because it uses cryptography to keep it secure. There are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access to (although each record is encrypted).
All Bitcoin transactions are verified by a massive amount of computing power via a process known as “mining.” Bitcoin is not issued or backed by any banks or governments, nor is an individual bitcoin valuable as a commodity.
Despite it not being legal tender in most parts of the world, Bitcoin is very popular and has triggered the launch of hundreds of other cryptocurrencies, collectively referred to as altcoins. Bitcoin is commonly abbreviated as BTC when traded.
Growth of Bitcoin
The first retail transaction made with Bitcoin was on May 22, 2010, when 10,000 BTC was exchanged for two pizzas delivered from a local pizza restaurant in Florida.
2011
Just 2 years after Bitcoin’s launch, other cryptocurrencies started making their way to the market in 2011. The Electronic Frontier Foundation, a non-profit group, started accepting bitcoin in January 2011,then stopped accepting them in June 2011, citing concerns about a lack of legal precedent about new currency systems.
The EFF’s decision was reversed on 17 May 2013 when they resumed accepting bitcoin. In June 2011, WikiLeaks and other organizations began to accept bitcoin for donations.
2013
In this time in the evolution of the crypto economy, adoption started picking up, as in February 2013, Coinbase, the bitcoin-based payment processor, reported selling $1 million worth of bitcoin in a single month at just over $22 a bitcoin.
The Internet Archive also announced that it was ready to accept donations in BTC and that it intends to give employees the option to receive portions of their salaries in BTC.
2015
In January 2015 Coinbase raised $75 million as part of a Series C funding round, smashing the previous record for a bitcoin company.
Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about 19,000 bitcoin (equivalent to roughly $5 million at that time) being stolen from their hot wallet.
The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on 9 January after increasing security measures and assuring customers that their account balances would not be impacted.
2017
The number of businesses accepting bitcoin continued to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had increased 4.6 times over the past year.
BitPay CEO Stephen Pair declared the company’s transaction rate tripled from January 2016 to February 2017, and explained that the usage of bitcoin is growing in B2B supply chain payments.
Bitcoin also gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin.
2020
On 2 July 2020, the Indian company 69 Shares started to quote a set of bitcoin exchange-traded products (ETP) on the Xetra trading system of the Deutsche Boerse.
On 1 September 2020, the Wiener Börse listed its first 21 titles denominated in cryptocurrencies like bitcoin, including the services of real-time quotation and securities settlement.
On 3 September 2020, the Frankfurt Stock Exchange admitted in its Regulated Market the quotation of the first bitcoin exchange-traded note (ETN), centrally cleared via Eurex Clearing.
In October 2020, PayPal announced that it would allow its users to buy and sell bitcoin on its platform, although not to deposit or withdraw bitcoin.
2021
On 1 June 2021, El Salvador President, Nayib Bukele announced his plans to adopt bitcoin as legal tender, this would render El Salvador the world’s first country to do so.
On 8 June 2021, at the initiative of the president, pro-government deputies in the Legislative Assembly of El Salvador voted legislation—Ley Bitcoin or the Bitcoin Law—to make Bitcoin legal tender in the country alongside the US Dollar.
The Blockchain Development Phases
Stage 1: Bitcoin and Digital Currencies
While the ideas that would go into the blockchain were swirling around in computer science communities, it was the pseudonymous developer of Bitcoin, Satoshi Nakamoto, who outlined the blockchain as we know it in the white paper for BTC. Nakamoto therefore started the first phase of the evolution of the crypto economy.
In this way, blockchain technology began with the Bitcoin network. While blockchain has since gone on to see use in a huge variety of other areas, in some sense it was designed specially for this digital currency and for advancing the goals of digital currencies more broadly.
In the earliest stages, blockchain set up the basic premise of a shared public ledger that supports a cryptocurrency network. Satoshi’s idea of blockchain makes use of 1 megabyte (MB) blocks of information on bitcoin transactions.
Blocks are linked together through a complex cryptographic verification process, forming an immutable chain. Even in its earliest guises, blockchain technology set up many of the central features of these systems, which remain today. Indeed, bitcoin’s blockchain remains largely unchanged from these earliest efforts.
What Is Bitcoin?
Bitcoin is a cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity, thus removing the need for third-party involvement in financial transactions. It is rewarded to blockchain miners for the work done to verify transactions and can be purchased on several exchanges.
Bitcoin was introduced to the public in 2009 by an anonymous developer or group of developers using the name Satoshi Nakamoto.
It has since become the most well-known cryptocurrency in the world. Its popularity has inspired the development of many other cryptocurrencies. These competitors either attempt to replace it as a payment system or are used as utility or security tokens in other blockchains and emerging financial technologies.
Stage 2: Smart Contracts
Bitcoin’s blueprint was then taken and adapted to initiate the next significant milestone in the evolution of the crypto economy.
As time went on, developers began to believe that a blockchain could do more than simply document transactions. Founders of ethereum, for instance, had the idea that assets and trust agreements could also benefit from blockchain management. In this way, ethereum represents the second-generation of blockchain technology.
The major innovation brought about by ethereum was the advent of smart contracts. Typically, contracts in the mainstream business world are managed between two separate entities, sometimes with other entities assisting in the oversight process. Smart contracts are those that are self-managing on a blockchain.
They are triggered by an event like the passing of an expiration date or the achievement of a particular price goal; in response, the smart contract manages itself, making adjustments as needed and without the input of outside entities.
At this point, we may still be in the process of harnessing the untapped potential of smart contracts. Thus, whether we have truly moved on to the subsequent stage of the development of blockchain is debatable.
What Is Ethereum?
At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether, or ETH.
Ethereum can be used by anyone to create any secured digital technology. It has a token designed for use in the blockchain network, but it can also be used by participants as a method to pay for work done on the blockchain.
Ethereum is designed to be scalable, programmable, secure, and decentralized. It is the blockchain of choice for developers and enterprises that are creating technology based upon it to change the way many industries operate and how we go about our daily lives.
It natively supports smart contracts, the essential tool behind decentralized applications. Many decentralized finance (DeFi) and other applications use smart contracts in conjunction with blockchain technology.
Stage 3: The Future
One of the major issues facing blockchain is scaling. Bitcoin remains troubled by transaction processing times and bottlenecking. Many new digital currencies have attempted to revise their blockchains in order to accommodate these issues, but with varying degrees of success.
As the evolution of the crypto economy continues, one of the most important developments paving the way for blockchain technology going forward will likely have to do with scalability.
Beyond this, new applications of blockchain technology are being discovered and implemented all the time. It’s difficult to say exactly where these developments will lead the technology and the cryptocurrency industry as a whole.
Supporters of blockchain are likely to find this incredibly exciting; from their perspective, we are living in a moment with an epochal technology that is continuing to grow and unfold.
Reasons Why the Adoption Rate of Cryptocurrency Is So Low
It’s New Technology
It’s human nature to fear anything new, especially when it comes to technology. Blockchain and cryptocurrency technology only started making their way to the public domain in 2009. Since then, the blockchain space has been more focused on improving the technology than getting word out of the technology and its benefits.
This unbalanced effort towards improving blockchain and cryptocurrency technology instead of getting word out of the technology and the benefits is a big contributing factor to the slow adoption rate, especially during a time when people do not understand what the technology is.
The majority of the blockchain community’s focus to improve the technology is expected as legacy blockchains such as Ethereum, Litecoin, and Bitcoin were the first iterations of blockchain technology and, as a result, had a few flaws that had to be addressed.
That is why the Lightning Network was added to the Bitcoin blockchain and why Ethereum is currently employing several scaling techniques in Ethereum 2.0.
Also, both blockchains implemented the Proof of Work consensus mechanism, which has been proven to be harmful to the environment once the network reaches a certain size. This is why Ethereum will also be transitioning to Proof of Stake.
With this being said, when will be the right time to shift efforts towards educating people on what technology is and what it has to offer? Perhaps the best strategy that the community can use is to continue trying to create the best possible blockchain network, and let the technology prove itself in times of crisis.
A good example is the current situation in the Ukraine where citizens are turning to cryptocurrency for donations and as a source of income while their local banks are unable to service them.
Not Everyone Is Aware of the Benefits
There are many people around the world that are unaware of the benefits of cryptocurrency and blockchain technology. This is especially the case for people in developed and first-world countries that are part of a financial system which is backed by a leading global fiat currency, such as the dollar or euro.
Understandably, they debate why they should rather use cryptocurrency instead of their powerful fiat currency with the mindset of “if it’s not broken, then don’t fix it”.
On the other hand, it can also be said that most people in the world are unaware of how crippled the leading fiat currencies are. This is likely to change as the governing bodies linked to these currencies keep introducing more of their fiat currency to their currency’s circulation – diluting the circulation and decreasing the buying power of their currencies.
It’s People’s Livelihoods At Stake
Not only are blockchain and cryptocurrency new technologies, they are also technologies that aim to change the way people transact. They also relate directly to people’s money.
This can be considered one of the major contributing factors to why people are hesitant to adopt blockchain and cryptocurrency. People are very cautious when it comes to their personal finances, especially if they’re being asked to transfer their funds to a system that they believe has not proven itself yet.
Older Generations Play An Influential Role In the Adoption
Blockchain and cryptocurrency technology are currently between a rock and a bit of a hard place as younger generations are more keen to adopt the technologies but are not the generations with the most money.
Instead, it’s the older generations that possess the majority of the world’s money, but they are not comfortable with the amount of risk associated with adopting cryptocurrency and blockchain.
It also comes back to the fact that people are hesitant to try something new if they believe that the current systems that they have are working just fine. This is especially true among the older generations.
The People Who Can Benefit From The Technology May Not Have Access To It
Blockchain and cryptocurrency technology has the highest potential to benefit people in under-developed countries because the citizens of these countries can no longer rely on their government-backed fiat currency or national banking system, leaving them no choice but to turn to alternative financial systems.
The problem is, the people that can benefit the most from blockchain and cryptocurrency technology may not have the minimum required means to access the technology. Even though blockchain networks have a significantly lowered barrier to entry than the traditional financial system, there is still a barrier to entry.
In order for someone to enter a blockchain network, they need at least a mobile device with an internet connection. The problem is, the majority of people living in under-developed countries do not have the infrastructure and resources to meet this minimum requirement – unintentionally leaving them unable to access the benefits of blockchain and cryptocurrency technology.
It’s Too Complex
Besides the factors mentioned above, there is still the problem that blockchain and cryptocurrency technology is too complex for some people. The idea of everyone becoming their own bank and taking their financial and other matters into their own hands is an overwhelming thought.
Is Blockchain Technology Ready For Mass Adoption?
Even though there are several factors that play a role in the low adoption rate of blockchain and cryptocurrency technology, there is the debate around whether or not blockchain technology is ready for mass adoption.
This is relatively important to address because it doesn’t make sense to assign resources towards growing blockchain adoption if the technology is not ready to handle the influx of activity that will occur should the masses adopt the technology as a transactional framework.
To Recap
Since Bitcoin’s public introduction in 2009, both Bitcoin and its underlying technology have come a long way. Fast forward more than a decade later, blockchain technology and Bitcoin are widely discussed topics, and blockchain technology is starting to disrupt several industries simultaneously.
The evolution of the crypto economy has seen the adoption rate of Bitcoin and other blockchain-based digital currencies slowly pick up globally.
