BITCOIN and other cryptocurrencies will replace traditional currencies within a decade, according to a new report
Bitcoin could replace money in just 10 years according to researchers from Imperial College London.
Along with the trading platform eToro, the researchers assessed the fundamental roles of traditional currency and measured how close cryptocurrency had come to fulfilling those.
They concluded that cryptocurrencies, led by Bitcoin, will be the logical next step for money and are already close to becoming a mainstream form of payment. The three criteria listed are being able to act as a store of value, a medium of exchange and a unit of account.
According to Forbes, the backing of the researchers could boost the price of bitcoin and cryptocurrencies, which many have accused of being less well suited to handling mass payments than the traditional financial system, run by the likes of Visa and MasterCard.
The paper — entitled “Cryptocurrencies: Overcoming Barriers to Trust and Adoption” — acknowledged that millions of people currently use Bitcoin and other major cryptocurrencies as a store of value meaning that they are serving at least one of these roles.
Bitcoin and other cryptocurrencies will need to overcome challenges like scalability and regulation to fulfil the final two criteria, the researchers said.
“The world of cryptocurrency is evolving as rapidly as the considerable collection of confusing terminology that accompanies it. These decentralised technologies have the potential to upend everything we thought we knew about the nature of financial systems and financial assets,” said Professor William Knottenbelt from Imperial. “There’s a lot of scepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street. In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment.”
If cryptocurrencies continue to progress in terms of functionality, Professor Knottenbelt believes they will represent a viable technological update to the way we spend money.
Dr Zeynep Gurguc from Imperial added: “New payment systems – or asset classes – do not emerge overnight but it is worth noting that the concept of money has evolved – even in our lifetime – from cash to digital or contactless payments. The wider use of cryptocurrencies and crypto-assets is the next natural step if they successfully overcome the six challenges [scalability, usability, regulation, volatility, incentives and privacy] we set out in our report.”
Considering each evolutionary iteration of money has made the process of paying for something easier, the research paper concludes that the underlying technology of cryptocurrencies make them the next natural step towards reducing the friction of payments.
One possible way this could happen would be for cross-border payments, which currently involve lengthy and costly transaction times. The decentralised nature of cryptocurrencies mean they are borderless by design, and therefore negate such issues.
“The history of money is a history of evolution, of new technology replacing old to improve the transfer of value from one person to another. Cryptocurrencies represent a next step on this journey,” said Iqbal Gandham, the UK managing director of eToro.
He added: “Given the speed of adoption, we believe that we could see Bitcoin and other cryptocurrencies on the high street within the decade.”