The Biggest Issues Facing Crypto
Nov 26, 2021
Cryptocurrency is still fairly nascent, but is growing in popularity. Investing in cryptocurrency requires expertise and a fair understanding of the market; and there is no doubt it carries a few risks. In this article, let’s go over some of the glaring issues that crypto technologists are working on overcoming, including us here at MEX Digital!
All of the largest crypto companies in the world have huge legal teams, why? Because they need to stay on the right side of the law. Governments, policymakers and regulators are all immensely reatened by crypto, primarily because they don’t understand it. And why this is an issue is because some of these governments actually place legal restrictions on what users can and can’t do. Like the USA for instance, who exclude numerous projects from being invested in due to SEC regulations. Or China, who have banned all forms of cryptocurrency mining and trading. Here at MEX Digital, we’re actually working as hard as possible, around the clock, with the lawmakers of the jurisdictions within which we operate. So rest assured, you can trade with confidence on MEX Digital.
Arguably the biggest conversation is the scaling of decentralised blockchains. The more users get active on a certain blockchain, the slower that chain becomes, and the higher the transfer costs are. Bitcoin has faced this on numerous occasions, and still has quite a high transaction price - but with Lightning Network, this will hopefully be resolved. Ethereum’s scaling issues are widely known, as users have to spend upwards of $50 to send one transaction. Their solution is to move to a Proof of Stake blockchain, but that is still over a year away from being fully realised.
The problem with “internet money” is that anyone can create a cryptocurrency (because Bitcoin is open sourced) and a fancy website, and unwitting users won’t know the difference. If the website looks good, they may just trust it as another cryptocurrency. There are thousands of operators who perform this kinds of scams, and promise huge returns on investment, but once they reach a certain threshold of invested money, they shut the website down and disappear. These acts give cryptocurrency a bad name, and cause the industry to lose credibility. But the reality is: In the same way the internet is proliferated with scams, it doesn’t change the fact that the internet is one of the most transformative tools ever invented.
Because cryptocurrency is such a new asset class, it is still in what is called “price discovery mode”, meaning that it needs to saturate the global market, and once fully adopted, we will know its true value. Until then, the prices are set to swing high and low because there are so few people investing in them compared to the total global population. At present, the total number of estimated cryptocurrency investors is 400 million. Out of a population of 7.5 billion, that’s a lot of room for growth. So in the meantime, we will see the prices of cryptocurrency shooting high as new users flood in, and drop sharply as the big players take profits. With such small markets, these kinds of volatile swings are normal. We look forward to the day cryptocurrency is an established asset class and is far less volatile.
And so, as you can well see, cryptocurrency has a myriad of challenges it needs to overcome, but there is no doubt they will indeed be surmounted. Technologists faced the same problems back in 2000 when internet companies were riding the Dot Com bubble, but by the mid 2000’s prices had settled and the important companies were making themselves known (like Google, Amazon and Apple).
Cryptocurrency will most certainly surmount all of these challenges, but it will be a process. In the meantime, stay close to MEX Digital so that you stay ahead of the curve and remain up to date with the latest news.
Remember, proper diligence and sound judgement should be used in evaluating the risks associated with these activities. Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material