Along with a steep decline in the value of the most popular cryptocurrencies like Bitcoin, Litecoin, and ether, the hype surrounding them has died down considerably in recent months. Yet cryptocurrency remains the most innovative and potentially transformative form of digital money. It has the potential to move us towards an entirely cashless existence as consumers in the not-too-distant future.

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But what about the present? To what extent have consumers adopted cryptocurrency as money, not as a speculative investment? What is its value to consumers? And how are the early adopters using it?

The blockchain technology behind cryptocurrency has been widely discussed and explained. So have the various risks associated with owning cryptocurrency. These topics are beyond the scope of this post. Here, I want to specifically consider the influence of cryptocurrency on as of late 2018.

As a form of money, cryptocurrency has notable benefits for consumers

You may have heard news about cryptocurrency theft, like the bitcoins getting stolen from Apple’s founder Steve Wozniak. But there's another side to the story. When compared with other forms of money, cryptocurrency has significant advantages. Because it is entirely digital, using it for making purchases incurs dramatically lower transaction costs, than, say, using a credit card or cash. If and when enough shoppers use cryptocurrency regularly, sellers may save 2%, 3%, or even more, and pass some of those cost savings on. What’s more, when using cryptocurrency, financial institutions are usually disintermediated or bypassed, increasing the user’s accountability and privacy, and reducing the likelihood of theft. Just consider how many customer data breaches have occurred at major retailers like Target and service providers like British Airways within the past five years. The result is a loss of trust, , and considerable inconvenience for those affected. (However, the anonymity afforded by cryptocurrency does make it susceptible to illicit uses such as money laundering). Cryptocurrency can be readily used anywhere in the world, reducing the costs and inconveniences associated with exchanging one national currency to another.

Yet the usefulness of cryptocurrency to the average consumer today is minimal

In the mainstream consumer domain, so far cryptocurrency has almost entirely been used for speculative investment purposes, not as currency. A 2016 study found that less than 1 percent of Americans owned or used any cryptocurrency. More recent estimates put the number of adopters at 5-8 percent. However, almost all of these individuals are trading cryptocurrency, not using it as money.

Why is the adoption of cryptocurrency as digital money so low and so slow?

The first reason is the lack of standards. At present, there are dozens of different cryptocurrencies, each with its own protocols and potential market. These currencies compete with each other, and new currencies continue to be launched every month. Furthermore, because of the possibility of “hard forks” or divergent development, there is always the risk that new variants of even established cryptocurrencies may be formed. No one knows which currency will dominate or if all the currencies that exist currently will survive. Consumer psychology research shows that when a market lacks one standard, consumers are slow to adopt the because of the uncertainty.

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Just as problematic for consumer is the dramatic fluctuation in its value. In the past one year alone, bitcoin has ranged in value from $5,857 to $18,343. Just imagine, if you used bitcoin as money and wanted to spend one BTC to buy a car, you’d have been able to purchase anything from a Honda hatchback to a BMW sports utility vehicle (both used) depending on when you purchased the vehicle. This degree of variability is not desirable for any form of money that serves as a medium of exchange. It is supposed to maintain its value.

The third significant limitation for consumers is that almost no retailers or service providers accept cryptocurrency at present. Among major retailers, Overstock.com is the only one that has consistently accepted bitcoin. And even in its case, things haven’t always gone smoothly. Earlier this year, it confused bitcoin with bitcoin cash, a much cheaper currency, and ended up selling products to some shoppers for steeply discounted prices.

The classic chicken and egg problem is at play here. Until enough shoppers clamor to spend cryptocurrency, companies won’t accept them. And because few companies accept cryptocurrency, consumers won’t really bother with it. For shoppers, cash, credit cards, and mobile payment services like Paypal and Venmo fueled by dollars are good enough for now.

How are consumers using cryptocurrency?

Despite the fact that cryptocurrency hasn’t yet caught on as digital money, there are some niche consumer areas where it has made some headway within the past year. Not surprisingly, one application is sports gambling. Introduced at this past summer’s (2018) FIFA World Cup tournament, Cryptocup is a way of betting on particular sports outcomes using ether. It has since expanded to NFL football.

Cryptocurrency has also been used in a handful of real-estate transactions in Florida and California, either to generate social media buzz because of the novelty, to target the property to successful cryptocurrency traders looking to diversify their wealth or to attract wealthy foreign buyers. A third interesting application is in art where consumers can buy shares in iconic artworks using cryptocurrency or digital tokens from a blockchain themselves become art (in the artist’s blood, no less).

These exceptions underscore the rule. As consumers, we’re still a ways away from using cryptocurrency to pay for an oil change or buy a gallon of milk.