2017 has been the year of the cryptocurrency, but why have they suddenly exploded into the mainstream? The answer is complex, but boils down to one word- faith. Any currency has no inherent value; we ascribe value to the dollar or the pound because we know they are easily transactable, universally recognised, finite and portable. As cryptocurrencies, such as Bitcoin, come into the mainstream they are becoming easier to purchase and to spend. For instance, there are now over 800 Bitcoin ATMs in the US alone. Demand has also been driven by falling faith in traditional banking and in traditional currencies. Since the financial crisis, many have become disillusioned with the unaccountable fiat system and the unprecedented levels of debt build-up this has allowed. Additionally, the pound, euro and dollar have all seen significant turbulence from years of political and economic scares that have weakened faith in the monetary systems of the West. Thus, investors are seeking alternative investments, and in many cases, cryptocurrency fits the bill.
Future growth in the cryptocurrency market is contingent on continuing improvements in familiarity and transactability; but it will also be characterised by the response of policymakers and regulators. So long as vendors become more accepting of crypto, more people become familiar with it, and investors increasingly see it as an investment vehicle, then it will continue to expand its market share. In the digital age, it is easy to see these trends continuing. However, governments will have to open their arms to crypto and accept that, in fact, it is here to stay. Indeed, Japan has pioneered and enshrined Bitcoin as an accepted currency; and the UK and US seem keen to follow suit, wary of falling behind in the FinTech revolution. However, significant challenges remain on the horizon. The anonymity cryptocurrencies provide in transactions could prove a sticking point for governments worried about crime and tax evasion, whereas transaction costs for small payments remain prohibitively high.
However, Scotland’s leading cryptocurrency has structural advantages over Bitcoin, excelling where the traditional cryptocurrencies are struggling. Scotcoin’s move to a private blockchain that complies with Financial Conduct Authority KYC/AML (Know Your Customer/Anti Money Laundering) obligations ensures it is a safer, more secure choice for buyers and sellers alike. The new technology will also provide transaction times and costs that are a mere fraction of those of Bitcoin, Ethereum and others, making Scotcoin a more effective medium of exchange. Whereas the traditional cryptocurrencies face significant challenges in satisfying hesitant policymakers and facilitating everyday use, Scotcoin is ahead of the curve.
Clearly, cryptocurrencies are here to stay. Yet, Scotcoin has specific advantages regarding the challenges that crypto faces. The move to a private blockchain will ensure significantly cheaper and faster transactions when compared to Bitcoin. Its genesis in a country that is historically accepting of new innovations, and already has a booming FinTech sector, places it in the right environment to experience rapid uptake and acceptance. In the next decade, cryptocurrencies like Scotcoin will redefine financial and consumer services.
About the author:
Ruaridh studies Economics at the University of Edinburgh, and has diverse interests in finance including cryptocurrencies.