There has been a lot of talk lately on how an approved Bitcoin backed ETF (exchange traded fund ) by the U.S. Securities and Exchange Commission, would open the floodgates of institutional money into the cryptocurrency world and therefore legitimize cryptocurrency, bringing it into mainstream, everyday use. ETFs are great for investors but what does it do for every day use and the mass adoption of cryptocurrency?

Vitalik Buterin commented on this recently in a tweet saying “I think there’s too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.”

I realized, when sharing my exuberance for the crypto world and trying to explain to someone how to go about getting started, just how complicated it can be. What ensues is an obstacle course of sorts; crypto gymnastics so to speak . What are digital wallets? What payment methods does this exchange take? How long before I’m verified and can buy? How much do I need to buy to get started? How long does it take to get regular dollars (fiat) back out? Where can I buy small amounts? What exchange carries a specific altcoin? In what country do you need to open a bank account in order to get that altcoin? And lastly, where can I spend it?

Where can I spend it? That is THE question that for us in North America is a tough one to answer. While it’s great that crypto is accepted at some retail shops in Asia as well as some online retailers, that does me no good when buying my coffee here in North America.

Cryptocurrencies are becoming more and more mainstream but the simple fact remains that it is still hard to spend it for our every day wants and needs.

Bitcoin Transactions:

Scalability

Scalability or how well a technology can grow while still maintaining efficiency, is one of the biggest issues delaying mass adoption of cryptocurrencies. The growing number of users and increasing daily transaction size inadvertently slows down the networks resulting in slow transaction times.

If cryptocurrencies want to compete with Visa, Paypal, Mastercard, etc they need to speed up transaction times while keeping transaction fees competitive within the payment system landscape.

“Over the next five years we’ll see mass adoption at retail” -Samson Mow, CSO at Blockstream

Off-chain Solutions

An off-chain transaction is a transaction that takes place outside of the blockchain. It is a peer to peer payment channel that allows fast, off-chain payments still secured by the parent blockchain.

The Lightning Network

The Lightning Network works by adding an additional layer to Bitcoin’s blockchain and allows users to create micropayment channels between any two parties on that extra layer. These payment channels exist as long as needed to complete transactions, are peer to peer, allow transactions to occur almost instantly and fees would be low or non-existent.

Blockstream’s Lightning Network is working with other industry leaders to create a Bitcoin micropayment system that supports high volumes of small, instant payments with low fees.

Samson Mow, CSO at Blockstream, announced recently in a tweet the use of the Lightning Network to purchase very cool crypto hats with BTC at http://www.excellion.com

Lightning developer Jack Mallers, who created the free Zap Lightning wallet on top of Lightning Labs’ lnd software, will soon release consumer applications for both mobile and desktop, making it easier for the average person to use Lightning.

The Raiden Network

The Raiden Network, an off-chain scaling solution complementary to the Ethereum blockchain, works with any ERC20 Token, enables near-instant, low-fee, scalable payments.

The goal of Raiden Network, Ethereum’s version of the Lightning Network for Bitcoin, is to provide a scalable global payment system for everyday purchases for users all over the globe.

Other scalability solutions are in development including Sharding and Plasma and it will only be a matter of time to see which scaling solutions will reign supreme.

Major Banks Testing Their Own Crypto

Financial giants understand the advantages of blockchain technology. Mitsubishi UFJ Financial Group, one of the world’s largest financial groups, recently started experimenting with its own coin called the MUFG coin, to explore how “blockchain technology could be applied to the demands of everyday financial needs, like withdrawals, deposits, transactions and micropayments.

The MUFG Coin is designed to offer currency functionality first and foremost in an attempt to confront the issues currently faced by digital currencies by offering a highly useful currency.

Mitsubishi UFJ Financial Group have created a convenience store for employees to use the MUFG coin for micropayments with a QR code displayed on their smartphones. In addition to making payments at the employee convenient store, the coins can be used to exchange money between fellow employees. MUFG anticipates about 100,000 account holders to take part in the large scale trial by 2019.

ETFs

ETFs, exchange traded funds, are similar to mutual funds, in that they are diversified portfolios of stocks or bonds, but trade like stocks — at market price throughout the day whereas mutual fund sales are executed at the end of the trading day at the same price for all investors.

ETFs allows investors to invest in a broadly diversified portfolio without having to buy individual stocks or bonds, typically have higher daily liquidity and generally have lower operating costs than mutual funds.

Many in the industry believe an SEC approved, Bitcoin backed ETF will bring legitimacy to the crypto world by bringing in waves of institutional investors to the bitcoin stage.

One of Bitcoin’s most famous evangelists, Andreas Antonopoulos, disagrees.

“I’m going to burst your bubble. I know a lot of people really want to see an ETF happen because ‘to the moon and lambos!’ But I think it is a terrible idea.” — Andreas Antonopoulos

Antonopoulos believes a Bitcoin backed ETF may open the floodgates to institutional money, however its implementation is likely to undermine the principles that make Bitcoin so compelling by leading to more centralization and possible market manipulation.

It will be exciting and incredibly interesting to see how the future of digital currencies play out. In the mean time my mother no longer wants to hear about any of this crypto nonsense until I can deliver a solid payment option that they accept at Bingo. Clearly, she sides with Vitalik Buterin’s view that micropayments are the path to enlightenment or mass adoption.

Author: Audrey Nesbitt

Visit her BlockDelta Profile here!