From QR code payments to mobile banking applications, consumers around the world are increasingly dependent on digital payment solutions, especially as mobile technology becomes more ubiquitous. Government-led efforts to boost cashless economies have been a key factor, with countries like Singapore or the Philippines watching their central banks push the adoption of contactless payments during the height of the COVID-19 pandemic. As a result, usage rates for digital payment platforms have Recorded promising growth, even as high as 5,000% in the Philippines alone.
Related: Digitized Europe: the shift to a cashless world
This unprecedented rise in cashless payments is also paving the way for wider adoption of cryptocurrencies, with the number of cryptocurrency users worldwide. hitting about 106 million in January. While this trademarks an impressive 15% month-over-month growth, it’s still just a drop in the bucket when compared to the 4.7 billion people who have access to the Internet.
But as cryptocurrencies continue to dominate the headlines, what does it take for mass adoption to happen?
A new model of financial accessibility
Today, billions of people around the world cannot access even the most basic financial services through traditional means and therefore cannot save or manage their money safely. In times of economic devastation, such as last year when global economies were reeling from the impact of COVID-19, the vast gap between rich and poor has become very clear. The global pandemic has only perpetuated the absence of an inclusive financial infrastructure, which has He directed to roughly a third of the world’s population who do not have a financial safety net to turn to.
However, with crypto wallets, anyone can transfer their crypto internationally without the need to maintain a minimum balance in their account, as long as they have an internet connection. Since crypto applications are based on decentralized blockchains, transactions are carried out on a peer-to-peer basis in the absence of traditional intermediaries, such as bankers or brokerages. This translates into significant savings in transaction costs, as traditional cross-border remittance fees for small amounts can be as high as 7% after taking into account the intermediary fees of both the sender and the recipient. Meanwhile, the same fees for cryptocurrencies are often less 1 percent, regardless of the amount of the transaction.
Related: Understand the systemic shift from digitization to tokenization of financial services
Furthermore, highly decentralized platforms are permissionless, which means that anyone with a crypto wallet and internet connection can lend, remit or exchange their cryptocurrencies without validation from a central authority or intermediary. Instead, transactions are executed using smart contracts, which automate them as long as pre-coded conditions are met. Beyond cost savings, consider saving time as well. Remittance transactions can take several days to process, while cryptocurrencies can be transferred in a matter of minutes.
However, most crypto platforms still require some form of formal identification as part of their identity verification and Know Your Customer (KYC) process. This can range from a phone number to a photo ID to proof of residential address. Some platforms take a multi-tiered approach in which the more information users provide, the more services they can access. While necessary for KYC and anti-money laundering compliance, this poses barriers for users who do not possess any formal identification documents.
That said, some decentralized exchanges, or DEXs, still respect the principles of anonymity and working without trust by not imposing KYC on their users. The removal of account verification and approval wait time has drawn many towards this type of DEX, such as DeFiChain’s PancakeSwap, Uniswap, and DEX, and has made finance truly accessible and inclusive for everyone.
Beyond simple transactions, recent innovations in the crypto space promise a much more equitable financial system where the unbanked and unbanked can access more means to build wealth. While DeFi products, such as holding tokens and participating in a DEX, may be a bit too advanced for this group of users right now, simplified centralized decentralized finance services (CeDeFi) and improvements in financial literacy over time they will help open the door to these inclusive wealth-building opportunities.
Education is key to cryptocurrency adoption at scale
The widespread adoption of digital payment technologies, such as QR codes and biometrics, is definitely a promising sign that consumers have become more digital-savvy than ever. In Asia Pacific, more than 90% of respondents said they would to consider at least one new payment method within the next year.
In addition to new payment technologies, the proliferation of retail investment has led to a paradigm shift in the investment landscape, with commercial activities. duplication During the past year. User-friendly platforms like Robinhood and their well-known crypto counterparts like Coinbase have made investing much more accessible to non-institutional investors.
Related: Mass adoption of blockchain technology is possible, and education is the key
This historic increase in cashless payments and retail investment caused the public to gain more exposure to different types of assets. However, in the United States, an astonishing 84% of adults are not interested in or have never heard of crypto. While this could be attributed to the seemingly intimidating technicalities involved, we are now in a good place to make a gradual transition to a more crypto-advanced society.
For now, much remains to be done to help mainstream consumers better understand cryptocurrencies. Crypto projects, for example, would do well to invest more resources in creating educational content to close the knowledge gap, either through detailed guides or explainers. Meanwhile, taking a more transparency-focused approach that seeks to debunk misconceptions and ensure that users are aware of the risks associated with cryptocurrencies will allow those users to navigate their entry into the space with greater ease and confidence.
Crypto is the MVP in the cashless drive
As conversations around cryptocurrency evolve, governments are taking notice. While cash will not be phased out anytime soon, up to 86% of central banks around the world are searching in central bank digital currencies in their quest for being out of cash. The world’s first central bank digital currency (CBDC), the sand dollar, was announced by the Central Bank of the Bahamas in 2018 and officially launched in October last year. The technology team behind this project was led by U-Zyn Chua, who later co-founded DeFiChain.
Related: Did CBDCs affect the crypto space in 2020 and what’s next in 2021? Experts respond
Although CBDCs will be regulated by a central authority, their adoption will send a profound message to market participants about the legitimacy of digital currencies. The introduction of CBDC is therefore a much-needed stepping stone to catalyze the adoption of crypto on a large scale.
In the short term, cryptocurrencies will not replace the existing financial system, but will create their own ecosystem that is suitable for a new generation of users with financial and digital knowledge first. While it will take some time for consumers to get used to cryptocurrencies, the nascent technology will prove its worth in due course by offering cheaper, safer and more inclusive financial services for all.
This article does not contain investment advice or recommendations. Every trade and investment move involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Julian Hosp is the CEO and co-founder of Cake DeFi, a platform dedicated to providing access to decentralized financial applications and services. He is also the president of DeFiChain, a DeFi platform built on the Bitcoin network. Julian is an active speaker for the Washington Speakers Bureau and an advisor to EU blockchain groups. Julian graduated from the Medizinische Universitat Innsbruck with a Doctor of Medicine in Human Medicine.