Crypto Acceptance & Mass Adoption

Crypto mass adoption: the future is now

Since their relative obscurity even just five years ago, cryptocurrencies have come a long way. It has been more than 12 years since Satoshi Nakamoto published Bitcoin’s white paper in 2009. Since then, the crypto market has grown to $2 trillion+. This increase has generated global awareness and mass adoption is a hotly discussed topic; however, the original vision has not been realized as penetration into the “real” financial space has been limited.

Before crypto becomes mainstream, several important hurdles must be overcome, including lower entry barriers for regular users, increased real-world utility, and a better understanding of self-custodial assets. The road to mass adoption is underway but much remains to be done. However, recent global events suggest an acceleration in the rate of adoption of digital currencies. Obstacles remain but there are now many examples of positive driving forces. These forces include some governmental acceptance of cryptocurrency as legal tender, increasing user desire for insulation from bank runs and currency devaluations, and legislation in many countries for the creation of their own digital currencies.

We’re still early to crypto

Though many consider 2021 to be the year cryptocurrency became mainstream, it’s still years away from widespread use. Remember when the Today Show discussed the internet in 1994? We are in a similar era now, where just because blockchain is approaching some limited mainstream use, it does not mean that the average consumer knows what it is. With this in mind, it’s safe to argue that, even 13 years after Bitcoin’s genesis, we’re still in the early days of cryptocurrency adoption. Despite valuations of Bitcoin, Ethereum, and thousands of other cryptocurrencies, data indicates that there is still a lot of opportunity for growth. New breakthroughs emerge with each passing year, capturing the imaginations and dollars of people all around the world. For example, NFTs have taken places like the Philippines by storm, and El Salvador’s citizens use the Bitcoin Lightning Network for day-to-day transactions.

What is crypto adoption?

Crypto adoption may be measured by any number of measures, each with its own merits — the market capitalization of the entire crypto market or the number of active wallets participating on blockchains. However, there are several different ways to define crypto mass adoption. For example, we may say it’s the number of nations adopting cryptocurrency as legal tender, or we can look at the cryptocurrency regulatory frameworks adopted by a single sizable economic powerhouse, such as the United States, the United Kingdom, or China which would underpin whether cryptocurrency may (and how) be adopted in each of those economies.

Obstacles to mass adoption

Over the next few years, the key obstacles to mass adaption of digital assets will center on technology and education. As the markets for cryptocurrency and blockchain technology continue to grow, they will provide huge opportunities for technology companies to enter the market and provide consumer-friendly paths to mass adoption. As current crypto natives push for adoption in the “real” economy, they will also need to become educators, helping others along this path.

A paucity of necessary technologies is slowing the adoption of cryptocurrency in mainstream real-world uses. The lack of point-of-sale systems and e-commerce integration causes digital assets to be seen only as investments rather than as a spending alternative to fiat currency. For digital assets to be used to pay for goods and services, payment transactions must be faster and less laborious, not to mention more scalable, in order to act as a direct alternative to cash, debit, or credit cards. Currently, blockchain and cryptocurrency transaction processing is too slow and cumbersome to be used in-store — this remains perhaps the greatest challenge to mass everyday adoption.

Education is also a hurdle to mass adoption. Most people have little understanding of cryptocurrency and very few understand the simplest crypto mechanics, such as setting up a digital wallet. Of course, setting up a digital wallet is just the first step one needs to understand to use this technology. Most importantly, one needs to understand how to protect assets from being lost or stolen since there is no 3rd party custodian, such as a bank, to protect them. With cryptocurrencies, the wallet owner is now 100% in control of his or her assets.

Crypto adoption curve: what is it?

The product adoption curve is depicted below, showing the five various categories of people who want to test or try a new product. This is no different for, say, Bitcoin, which has its own adoption curve.

The curve clearly shows the five stages of adoption, as well as the chasm that adoption must leap to fully enter the mainstream market. Many in the crypto community feel that crypto has already crossed the chasm, infiltrating the Early Majority market. The reasons for this thinking include improved project utility, genuine innovation across the industry, and institutional investment, which is always an indication of long-term viability. However, many observers counter that we are still in the Early Adopters period, since just a small percentage of the population has a unique wallet — that is, there is a limited number of actual users, even if there existed easier means to actually use cryptocurrencies.

Crypto adoption was tremendous in 2021, yet it was still lower than some had predicted. With 300 million users, the global rate of cryptocurrency ownership reached ~4%. On that basis, pursuant to the adoption curve, crypto has just entered the market of Early Adopters.

However, based on crypto price action in 2020/21 and the soaring crypto market size, as well as increased institutional investor acceptance, one may consider that cryptocurrency’s bridging of the gap is approaching rapidly — indeed, assets under management in crypto funds increased by more than $40 billion over the past year alone, implying that widespread crypto investor acceptance is also manifesting itself.

Adoption highlights

Digital assets have gained massive global media attention, requiring government officials to make statements to endorse or denounce digital assets as legal tender. As governments push to make bitcoin and other digital assets a true alternative currency, other governments feel pressured to follow suit.

In 2021 El Salvador became the first country in the world to make bitcoin legal tender. Those advocating for digital assets included El Salvador’s president, Nayib Bukele who stated this would help approximately 70% of all Salvadorans without access to traditional financial services. El Salvador’s government currently holds 550 bitcoin which is equivalent to about $23 million. Ukraine signed a virtual assets bill into law that legalized cryptocurrency in 2022 after rejecting an earlier version in 2021. The bill passed through parliament in February 2022. Consequently, Ukraine has received well over $100 million in crypto donations in support of its defense and to fund humanitarian efforts since the war started. Indira Kempis, a senator representing the Nuevo León state in Mexico, is working on a digital asset bill based on El Salvador’s Bitcoin Law that would make digital assets legal tender. Kempis is confident that bitcoin should be legal tender in Mexico because its adoption can potentially drive global financial inclusion.

Further, traditional financial institutions, technology companies, and consumer stores are now being outbid by crypto and blockchain companies for advertisement space. There is now a string of arenas and stadia named after blockchain and crypto companies. Crypto.com will be an official sponsor of the 2022 FIFA World Cup. Crypto.com now has a 20-year contract for $700 million to rename the home of the LA Lakers. FTX Exchange launched a $20 million ad campaign starring Tom Brady and his supermodel wife Gisele Bundchen in October 2021. FTX bought the naming rights of the Miami Heat’s arena in a 19-year deal for $135 million and became the official crypto partner of the MLB and the first brand to advertise on an umpire patch.

Here are further highlights to consider on the road to crypto mass adoption:

● Crypto Market Reaches New All-Time Highs. Bitcoin (BTC) and other prominent cryptocurrencies achieved new all-time highs in late 2021, indicating increased popularity. On 10 November, the crypto market’s overall capitalization peaked at roughly $2.971 trillion; BTC reached $68,622 and Ethereum (ETH) $4,844.

● Cryptocurrency exchange Crypto.com is forecasting one billion crypto users by the end of 2022. In March, they acquired sponsorship rights for the NHL’s Montreal Canadiens, which was followed by deals with Formula 1, the Ultimate Fighting Championship (UFC), the Italian soccer league Liga Serie A, and the French Paris Saint-Germain Football Club (PSG).

● Celebrities have been getting into NFTs. 2021 was a big year for non-fungible tokens (NFTs) — cryptocurrency tokens that represent ownership of a piece of digital art, real-life object, economic utility, or access to exclusive content and events. NFTs have managed to grow from a novel, poorly-understood concept to an immensely popular, slightly better-understood concept among the general public, which is reflected by how popular they’ve become among both celebrities and large international brands.

● Budweiser, the famous beer manufacturer, introduced 1,936 digital tokens on Nov. 30 that were sold out in under an hour.

● Pepsi announced in December 2021 the release of its collection of almost 1,900 images of microphones adorned with various haircuts, items of clothing, and facial hair, appropriately dubbed the “Pepsi Mic Drop.”

● Nike made its entry into the scene in December by acquiring the NFT-focused RTFKT (pronounced “artefact”) virtual sneaker startup uses the latest in game engines, NFT, blockchain authentication, and augmented reality to create one-of-a-kind sneakers and digital artifacts.

● Former US First Lady, Melania Trump, released an NFT collection dubbed “Melania’s Vision.” Each token comes with a painting of Trump’s “cobalt blue” eyes (!) and an undisclosed portion of the proceeds from the sale will be spent on helping children who are aging out of the U.S. foster care system.

● Rapper and entrepreneur Snoop Dogg revealed himself to be a Twitter NFT whale named Cozomo de’ Medici with almost 240,000 followers.

● Morgan Stanley became the first major United States bank to offer its clients three different funds that enable investment into Bitcoin in 2021.

● Venmo, the dynamic social payments app highly popular in the U.S., introduced the option to buy and sell Bitcoin, Ethereum, Litecoin (LTC), and Bitcoin Cash (BCH) in April 2021. The introduction of cryptocurrency support means that the app’s audience of over 50 million active users is now exposed to digital assets, although as much as a third of Venmo’s customers have reportedly already bought crypto via other means.

● PayPal (who also own Venmo) also introduced crypto to its users in 2020; enabling 26 million merchants that use the service to accept the same four cryptocurrencies as payment for their products. In August 2021, PayPal had extended its crypto services outside of the U.S. by allowing its United Kingdom-based clients to buy, sell and hold a selection of digital assets.

● Major cryptocurrency exchange Coinbase began publicly trading after a listing on NASDAQ in April 2021 — the first purely cryptocurrency-focused company to do so directly and not via being absorbed by an already-public firm. Although they are only the 6th largest exchange in the world, Coinbase is the largest exchange available to customers based in the United States due to the fact that its five larger competitors have so far failed to meet the conditions imposed by American regulatory bodies on crypto businesses.

● Facebook announced its rebranding to Meta in October, as well as the creation of its Metaverse — a 3D virtual reality environment for users to socialize and consume entertainment. While Metaverse is not an explicitly crypto-based platform, the co-founder of Meta’s blockchain-powered payment system Diem said in an interview that stablecoins will be “vital” to the success of any such project.

Moreover, Marcus said that the company is looking into implementing support for NFTs in its digital wallet Novi, which is based on Diem.

● Governments are building their own digital currencies, called CBDCs (Central Bank Digital Currencies). Although cryptocurrencies and CBDCs are likely to work differently, many of the fundamentals may appear to be the same. Independent financial technologies will be built around the CBDC, though a caution is advised in using CDBCs as they are also a form of control over customers’ finances.

● Mastercard filed 15 trademark applications for the Metaverse and NFTs to the United States Patent and Trademark Office in April 2022. The trademarks include the name Mastercard, the slogan Priceless, and its circle logos. This indicates that Mastercard is getting ready for the virtual economy and may have plans for NFTs and marketplaces for digital goods, as well as payment processing in the metaverse.

● Goldman Sachs invested in blockchain security firm Certik’s $88 million funding round on April 11, 2022, which has now brought Certik’s valuation to over $2 billion. Certik uses AI technology to monitor blockchain protocols and provides security audits for smart contracts. This year the firm also launched know your customer (KYC) and fraud investigation services.

Fear drives adoption

When citizens believe the system is broken change occurs, and we are currently seeing this firsthand in Russia. Fear is driving Russian citizens to attempt to withdraw assets from banks, causing a run on the banks. Bank runs have occurred in recent memory — in Venezuela, Zimbabwe, and Argentina but, whilst history tends to repeat itself, what makes this time different is that there is an alternative store of value, cryptocurrency.

Russians are looking at cryptocurrency as a last resort as the Russian government limits bank withdrawals to prevent a bank run. Many Russians are buying USDC a stablecoin pegged to the US dollar along with other crypto assets. Trading volumes for Bitcoin have increased significantly in Russia and Ukraine as the war pushes on. Cryptocurrencies are enabling ordinary citizens to make transactions and maintain value while their sovereign currencies plummet.

Countries with the highest crypto adoption

In most nations, mass adoption has taken off, with many poorer countries benefiting from access to foreign markets, peer-to-peer trade, and DeFi applications.

India has the most cryptocurrency users, owing to its large population and lax regulation in comparison to other populous countries such as China.

It is further noteworthy how much adoption there is in nations where the native currency is somewhat weak. This indicates that consumers are using cryptocurrency as a means of hedging local currency weakness, creating some independence from local currency ebbs and flows, and the drive to maintain, or enhance, purchasing power.

What Is the most adopted crypto?

Because Bitcoin was the first cryptocurrency, it is clear that it is the most widely used cryptocurrency in the world, based on market capitalization. In addition, when compared to other blue-chip cryptocurrencies like Ethereum, Bitcoin has the most unique wallet addresses associated with it.

Due to countries like El Salvador, and others, embracing Bitcoin as legal cash, it is expected to continue its top rank in the immediate future.

Final push to recognize digital assets as legal tender

Crypto is yet another example of a new and efficient technology replacing and consolidating intermediaries. A good comparison is the replacement of traditional taxi services with ridesharing technology companies such as Uber and Lyft. Their advent drove down consumer costs with increased efficiency and convenience — and quality.

The final push for mass adoption occurs when government and regulations adopt their own version of a digital asset. Apart from El Salvador, this is starting to occur in both China and India. A Chinese citizen can download the digital Yuan application from a Chinese app store to be able to use digital Yuan. This is like El Salvador where citizens can download a government application to use their version of digital currency, along with other digital assets such as bitcoin. These countries now have a nonvolatile asset that is fully backed and supported by the government, therefore enabling mainstream use — in theory at the moment, but increasing pathways to mass use are clearly developing.

When will crypto mass adoption occur?

It’s difficult to say when mass adoption will happen; it could happen in two years, ten years, or even longer. The point is that it will happen, and there are objective advantages to studying cryptocurrencies before they become widely adopted. Understanding cryptocurrencies sooner rather than later can help everyone adapt more smoothly. The first wave of cryptocurrency adopters will have an advantage over the second and third waves, just as they did with the internet.

According to a recent analysis by Finder.com, almost 27 million Americans own cryptocurrency, with bitcoin accounting for 44.5% of total assets held by those crypto holders. Although the percentage of Americans owning cryptocurrency has not yet surpassed 10% of the population, it has been steadily increasing since Bitcoin’s birth in 2009. The rate at which bitcoin is adopted is similar to that of every other technology: it grows slowly until about 8–10%, then shoots rapidly to mass adoption from there. The expression “gradually, then suddenly” can be used to describe this typical rate of acceptance.

As an example, consider the internet’s adoption in the 1990s. Only a few governments, colleges, organizations, and individuals used the internet in 1990. By 2000, however, businesses found the need for websites to be absolute. Similarly, when the iPhone was first introduced in 2007, smart phones were scarce, but just 3–4 years later, to possess the internet in their pocket was a fundamental must-have for consumers the world over.

At the end of the day, it is impossible to be sure when mass cryptocurrency adoption will occur, as it could be in a few years, or more than ten. However, the most important fact is that cryptocurrency mass adoption is coming — it’s not a matter of if, but when.