Published On: Mon, Jul 9th, 2018

Bitcoin price LIVE: CRYPTO is ‘next natural step’ as currency for ‘man on the street’ | City & Business | Finance


Good morning, and welcome to our rolling coverage of all things cryptocurrency, including price, regulation, innovation and financial crime.

The cryptocurrency community is cautiously optimistic over an extended period of recovery as the price held within $6,700 while ethereum peaked at $498 and ripple hit $0.48.

Further support for crypto heading in the right direction comes from research by Imperial College London who found evidence that digital currencies will become a mainstream payment solution within the next decade. 

In ‘Cryptocurrencies: Overcoming Barriers to Trust and Adoption’ – Professor William Knottenbelt from Imperial College London and Dr Zeynep Gurguc from Imperial College Business School argue cryptocurrencies are already equipped to fulfil one of the three fundamental roles of traditional fiat money: acting as a store of value.

The three criteria are as follows:

+Store of value: allowing individuals to make intemporal choices on when to spend their purchasing power.

+Medium of exchange: facilitating the exchange of goods and services by eliminating the inefficiencies associated with a barter economy.

+Unit of account: acting as a measure of value in the economic system.

With digital coins being shrouded in what the academics describe as a “considerable collection of confusing terminology”, Professor William Knottenbelt from Imperial, said it’s time to go “back to basics”.

He said: “These decentralised technologies have the potential to upend everything we thought we knew about the nature of financial systems and financial assets.

“In this context, we wanted to get back to basics: clarifying the nature of cryptocurrencies as a new kind of asset class, contrasting them with traditional forms of wealth, and classifying the main challenges that need to be overcome in order to drive their success forward.

“There’s a lot of scepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street.

“In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment.”

Imperial, working with eToro, set out six existing challenges that cryptocurrencies will have to address in order to become a mainstream method of payment.

+Scalability – many cryptocurrencies are built on blockchains that aren’t designed to facilitate high volumes of transactions at present. The mining community of individual blockchains needs to prioritise solving scalability issues in order to succeed.

+Usability – like any invention, user-friendly design is at the core of mass adoption. Cryptocurrencies can be complex and require specialist understanding.

+Regulation – this is currently fragmented with different countries pursuing different regulatory routes. Without a standardised global approach to regulation, Bitcoin will struggle to gain mainstream traction.

+Volatility – all fiat currencies fluctuate in value. However, current significant volatility in cryptocurrencies hinders their ability to be considered a store of value. As price movements settle the store of value function can be realised.

+Incentives – any new financial ecosystem requires careful thinking about how its reward system will influence behaviour. If this isn’t built in the right way, then the system will quickly be manipulated by some users to the detriment of others.

+Privacy – while blockchains provide a transparent single source of truth, different levels of privacy available to different users is often attractive. Without this, some people will stay away from cryptocurrencies.

Dr. Zeynep Gurguc from Imperial, said the future of crypto is dependent on overcoming the six challenges above.

He said: “New payment systems (or asset classes) do not emerge overnight but it is worth noting that the concept of money has evolved – even in our lifetime – from cash to digital or contactless payments.

“The wider use of cryptocurrencies and crypto-assets is the next natural step if they successfully overcome the six challenges we set out in our report.”

Got something to add? Send your reaction / thoughts / analysis / price predictions over to @DavidGDawkins. 

Updates below throughout the day….

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