Evolution of Cryptocurrency: Changes in the Use and Consumer Demand for Digital Transaction

The concept of digital currencies had started to float around for many years, even before the world was introduced to “cryptocurrencies” like Bitcoin in 2008. While the underlying perspective was the same as that of cryptocurrencies, digital currencies (not necessarily real tenders) were mainly used in the gaming economy up until 2008. It was during this time that Bitcoin, the first cryptocurrency, so to say, started hitting the news as it was intended to be used as a peer-to-peer payment mechanism that could bypass the layers of traditional finance. As we all know, transacting in cryptocurrencies does not need the intervention of centralized organizations like banks.

In the last decade or so, the overall crypto market has evolved a great deal with much more public confidence in the concept, which eventually resulted in the formation of many other cryptocurrencies like Ether, Bitcoin Cash, XRP by Ripple, etc. Today, there are more than 14 million Bitcoins in circulation and the other cryptocurrencies as mentioned above are also very prevalent in the crypto market, as each of them offers a unique set of utilities and/or securities.

In this blog post, we will look at this evolution of the crypto market from the perspective of how consumers perceive it to be and the way its demand has grown over the years. Here, it is important to approach this topic while considering the five key stakeholder cohorts in the overall cryptocurrency industry – Technology developers who actually utilize blockchain technology to maintain the existence of the crypto market, consumers and merchants who use cryptocurrencies for personal as well as business purposes, investors who generally look at crypto as a trading and investment vehicle, financial institutions, and regulators who are working to instill some kind of compliance mechanisms in the market.

The demand for cryptocurrencies among consumers and merchants for personal and business purposes is driven by the inherent nature of these digital currencies. For them, cryptocurrencies provide a much cheaper and faster peer-to-peer payment option without the need to go through traditional banking layers which demand a lot of personal information. Today, if a business owner plans to pay a freelancer working from some other country, he/she either needs to use a third-party platform like PayPal or use the bank’s SWIFT mechanism to make the transfer. In both cases, a transaction fee is involved and in the second case, the transaction takes more than 5 days to reflect in the recipient’s account. Crypto solves this problem by offering an instant peer-to-peer payment option that requires much less time and involves a very minimum transaction fee as compared to traditional banking solutions.

Another prominent demand driver in this space is the potential benefit that a crypto user sees in the concept of cryptocurrency trading. It is important to note that crypto as an asset is volatile. So, instead of necessarily using it as a payment option to buy goods and services, people are starting to acknowledge its use as a trading currency that can be traded on global markets similar to the stock market. With the emergence of advanced trading tools and global crypto exchanges, crypto trading has become a very prominent use case of cryptocurrencies in general.

It is important to note the entire crypto market is overseen and maintained by the tech developers who actively engage in various activities like mining. This has definitely emerged as a very lucrative avenue for tech developers as activities like mining are highly rewarding. While it is true that such activities are expensive to execute due to the resources required, some tech developers are also going ahead with an entrepreneurial approach building decentralized services, cryptocurrency exchanges, etc. So, moving ahead, the crypto market will continue to expand as more and more techies continue to build relevant platforms where people can make the most out of their crypto assets. Furthermore, as developers keep focusing on raising the security standards and protocols, the market will attract much more confidence.

This is probably the era when investors have been highly optimistic about the integration of technology with finance. As the crypto market continues to be an area of high interest for the general public, it also attracted a lot of interest from investors. So much so that institutional investors like Wells Fargo and Standard Chartered are making humongous investments in this space, particularly because of the underlying value that blockchain technology itself brings in its crypto use-case.

Financial Institutions like banks are gradually starting to acknowledge the potential of cryptocurrencies in triggering a parallel economy of sorts that is completely driven by the digital medium. Hence they are foraying into the ‘concept of cryptocurrency’ as an answer to the consumers’ interest and demand for this space. This is evident as most central banks across the world have publicly announced the work that they are putting in to develop digital currencies for public use. It remains to be seen how these digital currencies issued by banks will actually unfold in the mainstream.

For the longest time, the crypto market has remained highly unregulated. However, that scene is gradually changing as regulatory institutions across the world are actively working towards bringing a structure of compliance and regulation in this space. While these are still not clear enough, we can expect a more regulated crypto market in the next few years.

The overall trajectory of the crypto market has largely remained upwards in the last few years. With constant developments in this space along with very dynamic consumer demands, we can only expect a high degree of innovation in the crypto market. One such recent innovation which has attracted a lot of attention is the development of ModiCoin, DeFi-oriented crypto that aims to optimize the usage of digital assets in terms of savings, investments, trading, and a variety of other activities. With more such innovations and developments happening in the crypto space on a regular basis, we can only expect a much more dynamic and strong cryptocurrency market in the near future.