Cryptocurrencies are the next step towards a cashless society

From QR code payments to mobile banking apps, consumers around the world are increasingly relying on digital payment solutions, especially as mobile technologies become increasingly ubiquitous. Government efforts to boost the cashless economy have been a key factor, as countries like Singapore or Philippines saw their central banks push for contactless payments during the height of the COVID-19 pandemic. This results in the usage rates of lDigital payment platforms have seen promising growth, up to 5,000% in the Philippines alone.

This unprecedented increase in cashless payments is also paving the way for greater acceptance of cryptocurrencies. as the number of cryptocurrency users worldwide reached 106 million in January. While this represents an impressive 15% monthly growth, it’s still just a drop in the ocean when compared to the 4.7 billion people who have access to the internet.

But while cryptocurrencies continue to attract media attention, What does it take for mass adoption to take place?

A new model of financial accessibility

Cryptocurrencies are the next step towards a cashless society
Cryptocurrencies are the next step towards a cashless society

Today, billions of people around the world cannot traditionally access even the most basic financial services and therefore cannot safely save or manage their money. In times of economic chaos, like last year, when economies around the world have been teetering from the effects of COVID-19, the vast gap between rich and poor has become clearer. The global pandemic has only perpetuated the lack of an inclusive financial infrastructure, which has resulted in roughly a third of the world’s population lacking a financial safety net to turn to.

With cryptocurrency wallets, however, anyone can transfer their holdings internationally without having to keep a minimum balance in their account, as long as they have access to the Internet. Since cryptocurrency applications are based on decentralized blockchains, transactions are carried out between peers without the need for traditional intermediaries such as banks or brokers. This leads to significant savings in transaction costs, as the traditional rates for cross-border transfers for small amounts can reach 7% after taking into account the commissions of the intermediaries on both the sender and the recipient side. In contrast, the same commissions for cryptocurrencies are typically less than 1% regardless of the size of the transaction.

In addition, highly decentralized platforms do not require any permissions, which means that anyone with a cryptocurrency wallet and an internet connection can lend, forward or trade their cryptocurrencies without validation by a central authority or an intermediary. Instead, transactions are carried out through smart contracts that automate them as long as previously coded conditions are met. In addition to cost savings, you should also save time. Transfer transactions can take several days to complete, while cryptocurrencies can be transferred in a matter of minutes.

However, most cryptocurrency platforms still require some form of formal identification as part of their Know-Your-Customer (KYC) and identity verification process. This can range from a telephone number and photo ID to proof of address. Some platforms take a tiered approach where the more information users provide, the more services they have access to. While this is necessary to meet know your customer and anti-money laundering needs, it creates obstacles for users who do not have formal identification.

However, some decentralized exchanges or DEX keep the principles of anonymity and trustless work alive by not imposing a KYC on their users. The elimination of the waiting time for account verification and approval has led many to this type of DEX (ex Pancake swap, uniswap and the DEX of DeFiChain) and made finance truly accessible and inclusive for everyone.

Beyond simple transactions, recent innovations in the cryptocurrency space promise a much fairer financial system, where people with and without bank accounts can access more funds to create wealth. While DeFi products, like holding tokens and staking on a DEX, can be a bit complex for this group of users today, streamlined Centralized Decentralized Finance (CeDeFi) services and financial literacy improvements over time will help close the door to open these inclusive opportunities for wealth accumulation.

Education is the key to mass adoption of cryptocurrencies

The widespread adoption of digital payment technologies like QR codes and biometrics is certainly a promising sign that consumers have become familiar with digital technology. In the Asia-Pacific region, more than 90% of respondents said they would consider at least one new payment method in the next year.

In addition to new payment technologies, the proliferation of retail investors has led to a paradigm shift in the investment world as trading doubled in the last year. Simple platforms like Robinhood and its well-known crypto counterparts (like Coinbase) have made investing much more accessible to non-institutional investors.

This historic surge in cashless payments and retail investors has left the public exposed to various types of assets. However, in the US, a staggering 84% of adults are either not interested in cryptocurrencies or have never heard of it. While this is due to the seemingly intimidating technical details they bring, now is a good time to make a gradual transition to a more involved society.

At the moment, there is still a long way to go to help more traditional consumers better understand cryptocurrencies. Cryptocurrency projects, for example, would do well to invest more resources in creating educational content to fill the knowledge gap, either through guides or detailed explanations. In the meantime, a more transparency-oriented approach, which seeks to debunk misunderstandings and ensure that users are aware of the risks associated with cryptocurrencies, is enabling these users to make their entry into the space easier and safer.

Cryptocurrencies are taking the lead in this movement

As talks about cryptocurrencies evolve, governments are taking note of this. Although cash is not going to be phased out any time soon, up to 86% of central banks around the world are considering adopting their own digital currencies as a way of phasing out cash. The world’s first digital central bank currency (CBDC) (the sand dollar) was announced by the central bank of the Bahamas in mid-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.

Although CBDCs are regulated by a central authority, their introduction will send a profound message to market participants about the legitimacy of digital currencies. The adoption of CBDCs is therefore a much needed stepping stone to catalyze the mass adoption of cryptocurrencies.

In the short term, cryptocurrencies will not replace the current financial system but will create their own ecosystem suitable for a new generation of users who are familiar with digital and finance. Although it will take consumers some time to get used to cryptocurrencies, in due course this emerging technology will prove itself by offering cheaper, safer, and more complete financial services to all.

This article does not contain investment advice or recommendations. Every investment and trade move involves risk, you need to do your own research when making a decision.

The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.

Julian Hosp is CEO and Co-Founder of Cake DeFi, a platform dedicated to providing access to decentralized financial services and applications. He is also the president of DeFiChain, a DeFi platform built on top of the Bitcoin network. Julian is an active speaker for the Washington Speakers Bureau and an advisor to EU blockchain groups. Julian completed his medical studies at the Medical University of Innsbruck.

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