Cryptocurrencies have been getting increased traction with adoption of digital money growing in many parts of the world. But contrary to the popular opinion that the U.S. is leading the way in terms of crypto uptake, recent data suggests that most Americans still don't have all that much practical or personal experience with these new forms of money.
Indeed, according to Chainalysis' 2021 Global Crypto Adoption Index, less than 10% of U.S. citizens used or owned cryptocurrency that year. In other parts of the world however crypto is catching on far faster with a rising number of people. Vietnam, India, Pakistan, Ukraine, Kenya, Nigeria and Venezuela were all ranked ahead of the U.S. in terms of crypto adoption. Meanwhile the U.S. lost ground, falling from 6th place in the 2020 index to 8th in the most recent edition.
The most telling statistic from Chainalysis's report however is the peer-to-peer exchange trade volume, which measures cryptocurrency transactions between individuals. Here, Kenya ranks first, followed by Togo, Vietnam and Tanzania. The U.S. lags way behind in 109th place, which suggests it is nowhere to be seen in terms of people using it for everyday payments.
Why Is The U.S. Falling Behind?
The adoption of cryptocurrency in developing economies seems to be driven by necessity. In Nigeria, which ranks 6th globally in the Chainalysis Index, there's an argument to be made that crypto is emerging as a serious alternative in what remains a largely cash-based economy. The index shows that 32% of Nigerians reported having or using crypto at least once in 2021, compared to just six percent of Americans who said the same.
Recent research by KuCoin suggests that it's the unique culture and the lack of access to basic monetary services that's driving demand for crypto in Nigeria. The report stated that while Nigeria is considered to be a financial hub in West Africa, those living in rural areas lack access to any kind of proper banking and fiat-based services. In addition, Nigerians are investing in crypto to try and stave off the effects of rising inflation. Nigeria's inflation rate currently stands at 15%, causing many to turn to crypto as an alternative store of value.
It's a similar story in Venezuela, where people have faced crippling hyperinflation that has resulted in serious devaluation of the local currency, the bolivar. As the value of the bolivar has plummeted and bank notes have become scarce, many unbanked Venezuelans have been forced into using U.S. dollars and, more recently, alternatives such as cryptocurrency.
Another economically-challenged nation that's seeing high rates of crypto adoption is Argentina, where decades of distrust in the local banking system have combined with high levels of inflation and limits on how many pesos people can convert into foreign currencies. To try and avoid their savings evaporating, thousands of Argentineans have fled to cryptocurrency.
What's notable of course is that each of these countries lacks a stable and accessible banking system. As a result, they have seen much higher rates of person-to-person transactions than in developed countries like the U.S. In other words, a far greater number of people are using crypto, both for savings and for day-to-day transactions.
Innovation To Accelerate Adoption
Numerous reasons have been cited for the relatively slow rate of crypto adoption in the U.S., including the lack of nationwide regulation, the complexity of setting up and using digital wallets, and low retail acceptance.
While those factors undoubtedly play a role, the rapid rate of crypto adoption in countries with less-developed economies suggests that necessity is the real mother of innovation. And if that's the case, then it will only be through the launch of innovative new solutions with genuine utility that encourage more Americans to start using crypto on a daily basis.
The good news is that there are lots of groundbreaking new projects on the horizon that promise to shake things up and usher in an era of greater crypto acceptance in developed economies.
Improving Crypto Acceptance
One of the biggest issues for advocates of cryptocurrency in the U.S. is that for all of the hype around the industry, there are still very few places where people can actually spend it. Try paying for your weekly grocery shop in Bitcoin and the cashier will most likely greet you with a blank stare and demand payment in good, old-fashioned greenbacks. Retailers just aren't prepared to accept crypto and until that changes, mass adoption is unlikely to ever see the light of day.
A project called Weld Money is trying to get around this by making crypto easier to spend. Rather than rely on stores to set up a BTC or Ethereum wallet, what Weld Money does is give customers a Visa debit card that they can link to their crypto wallet. With it, they can walk into any store that accepts Visa, pick up what they need, then pay for it using their card - the funds will be deducted from their wallet at the point of sale, exchanged into fiat, and transferred to the store.
It's a simple, elegant solution to easing crypto adoption that's likely to have far more legs now that Weld Money is being backed by ZenX Labs, the incubator program of Unizen Exchange. Unizen is one of the leading CeDeFi platforms in the crypto space and it has access to a global network of partners. Through this network, ZenX Labs aims to help Weld Money launch in multiple countries across the world, tackling problems around compliance so it can establish Weld as a much-needed bridge between the worlds of crypto and fiat.
Weld Money's mission to make cryptocurrency more spendable could benefit from working with a new project called T3rn, which is aiming to overcome another key challenge around blockchain. One of the most worrying things for many consumers is the absolute finality of blockchain transactions - once funds have been sent to an address, that transaction is irreversible. There's no way to get your money back, even if the transaction fails to reach its intended destination.
T3rn solves this with a unique feature that enables "reversible interoperability", meaning that any transaction can be reverted if it fails. Each transaction is effectively escrowed, so if it fails for any reason the funds can be returned to the original wallet address. T3rn's platform also solves problems around blockchain interoperability. Its unique Gateway service connects to the most widely used blockchains and provides uniform standards for integrating smart contract execution. The execution is simply broken down into a number of composable steps - execute, revert and commit - uploaded and hosted on its Circuit solution.
As a result, T3rn can not only resolve failed crypto transactions but also enable the transfer of funds between any two chains, making it the perfect platform for cross-border payments and for credit cards to be funded from any crypto wallet.
Building Crypto Economies
Making crypto easier to spend is one thing, but building an entirely new economy around crypto - the ultimate goal for many - is another challenge entirely.
That's not to say that no one is taking on this challenge. PIP is an exciting initiative that's trying to take advantage of existing social media platforms such as Twitter and Facebook, which have established connections between billions of people all over the world. What PIP does is it connects blockchains such as Solana to social media platforms, making it simple for people to transact value to other users without paying a commission.
PIP does this in a unique way, leveraging the existing architecture of web 2.0 social media platforms. By doing this, it believes it can pave the way for the creation of a new peer-to-peer economy. It would be far superior to the existing Creator Economy that exists today. Sure, creators can make money from their content on platforms such as Instagram, but they're charged extortionate commissions for doing so. In addition, social media platforms lack interoperability between one another. PIP, in contrast, is a neutral platform that serves to bridge them all.
"If the information protocol can be combined with the financial protocol (crypto), a new economy would emerge with significant societal value," PIP explains in a post on Medium. "In developing countries, a family can earn much more than the average family income simply by connecting people through social media. With PIP, people from all over the world can send tips or pay for tasks to anyone they're connected to."
Creating Trust In NFTs
Many believe that cryptocurrency adoption will be spurred by the adoption of new technologies such as non-fungible tokens, or NFTs, which provide unique functionality around "tokenization". For instance, NFTs make it possible to tokenize art and keep track of its rightful owner on the blockchain. They can also be used in this regard for intellectual property, music, supply chain management and real estate, among many other use cases.
NFTs certainly have the potential to make crypto use more widespread, but only if they can overcome people's fears. One of the challenges in boosting acceptance of NFTs is the presence of bad actors in the space. NFTs worth hundreds of thousands of dollars have reportedly been stolen from their rightful owners in the past. Meanwhile, there has been a sharp increase in an activity known as "wash trading", which involves artificially inflating the demand for a token so as to boost its perceived price and sell it for more money than what it's really worth.
Luckily, efforts are being made to create more transparency around NFTs and boost their attractiveness. Take the BitsCrunch project for instance, which provides analytics services for NFTs, tracking the price and ownership of these assets so users can make more informed decisions. It also offers services to detect wash trading, scouring the blockchain to track transactions and identify any patterns that might point to manipulation of an asset's price. Other tools enable users to correctly estimate the fair price of a given NFT, and identify forgeries in the space.
Projects such as BitsCrunch are helping to create more transparency and credibility in the NFT space. As a result, users will become more comfortable with using NFT assets and exploring their potential in so many industries, helping boost cryptocurrency adoption along the way. Conclusion
For now, cryptocurrency adoption in the U.S. and other developed economies is lagging far behind that of their third-world counterparts. People who live in countries like Nigeria and Venezuela have real reasons to want to use cryptocurrency. There, the traditional financial services they're offered either remain inaccessible or do not serve them well, leading to genuine demand for crypto as an alternative.
In the U.S., the banking system may not be perfect but it is certainly adequate enough for the vast majority of its citizens. It means Americans are still looking for real reasons to want to adopt crypto, and it's going to require more innovation. With any luck, innovative new projects like Weld Money, T3rn, PIP and BitsCrunch, can soon create that demand by offering new crypto capabilities that the traditional banking system cannot possibly hope to match.
As other countries have shown, once the traditional banking system is unable to meet people's needs, they'll be only too happy to flock to a world of crypto that enables multiple new possibilities.