5 Ways the Cryptocurrency Ecosystem Can Learn from its Mistakes and Appeal to the Masses After years of volatility and scandals, it's now time for the cryptocurrency market to start learning from its mistakes.
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur Europe, an international franchise of Entrepreneur Media.
The emergence of cryptocurrency has been so fast-paced it's inevitable that some growing pains would emerge. But after 14 years of wild volatility, high-profile scandals, and mainstream suspicion, it's time for the crypto ecosystem to learn its lessons from the past and work on its appeal.
Given the decentralized nature of crypto, it can be difficult for the entire landscape to evolve at the same pace. Matters of keeping investors protected in the same manner as traditional markets should be essential, but it may be easier said than done.
While it may be understandable that crypto has an immature framework which leaves loopholes in regulation open, the widely reported failures of exchanges ranging from FTX to Mt.Gox have plagued made it more difficult for wary users to buy into cryptocurrency for the first time.
But how can the crypto landscape learn from the past to bolster its own accessibility and mainstream acceptance? Let's explore five ways that cryptocurrency can evolve into a more stable industry:
1. Education must be prioritized.
While cryptocurrency is still certainly exciting and intriguing for those entering the market, it's still widely regarded as mysterious by many. According to a poll conducted in the wake of 2021's crypto bull market, just 2% of American respondents scored a passing grade (of 60% or more) in a basic cryptocurrency survey.
In the United Kingdom, 48% of adults claimed that they don't know how digital assets work, however, 56% stated that they intended to invest in crypto. Crucially, 60% of respondents said that greater levels of information should be made available about crypto from trustworthy sources.
While cryptocurrency exchanges like Coinbase are working to ramp up their educational tutorials and guides relating to cryptocurrencies, it's certainly worth making these tools more visible.
Many platforms even include educational lessons that end with a quiz that rewards users in cryptocurrency for getting a question right.
Although gamification is a great tool to provide more incentivized education, the simple act of embedding links to educational articles before investors click to buy an asset for the first time can represent a significant step in delivering greater education in the industry.
2. Self-regulation is essential.
The high-profile FTX scandal was a timely reminder that even the most established names in the crypto ecosystem can collapse with little warning.
FTX, along with other less famous collapses like that of Celsius, is a timely reminder that nothing is certain when it comes to cryptocurrency, and that investors must be protected.
This poses an issue for the cryptocurrency ecosystem however. Decentralization is regarded as a transformative feature of crypto that offers users greater control and privacy in comparison to more traditional finance. To welcome the scrutiny of regulators is to bring centralized figures into the space.
One of the most appropriate solutions here is for the crypto landscape to build its own regulatory framework that hands out severe sanctions for violations of its rules. This means that there could be independent institutions like banks supervising the framework, as opposed to placing the industry in the hands of regulators.
This could also be a mutually beneficial step, given that many politicians don't know enough about cryptocurrency to deliver effective regulatory measures.
We've even already seen evidence of self-regulation in action. In the wake of 2022's infamous FTX collapse, crypto derivatives exchange, Bitget launched a $300 million protection fund to help the market recover from the impact of FTX's demise.
Having become the only top cryptocurrency exchange that has never been hacked, Bitget's position in the world's top five exchanges in terms of derivatives and copy trading volumes means that the platform's willingness to pay to protect the market is evidence that key players are willing to take matters into their own hands in terms of regulation.
According to Gracy Chen, the managing director at Bitget, the idea of self-regulation is very important for the emerging cryptocurrency market because it can be a powerful instrument to build users' trust, prevent over-regulation and develop the ability to respond quickly to new circumstances. She said:
"Companies that succeed in self-regulation can gain a competitive advantage in the market. I believe that the creation of the digital finance future is impossible without fruitful and healthy cooperation between regulators and crypto exchanges, and it should be based on three pillars: self-regulation, independence, and mutual respect. Any initiative or law must weigh the possible benefit or risk to the user first before being enacted en masse."
3. Improve accessibility.
For millions of prospective users, cryptocurrency is simply too confusing to adopt. This can be particularly true for older users and younger investors who are yet to dip their toes into the market.
In the instances that users embrace crypto, it's typically through more centralized exchanges that fail to truly capture the potential of decentralization.
For the entirety of the cryptocurrency market to feel the benefits of mainstream adoption, a more simplified user experience is essential.
We're already seeing some evidence of decentralized players making more efforts in encouraging more adoption. Recently, platforms like Web3Auth and Project Galaxy have attempted to simplify their interfaces with a range of features, including:
- Social account logins for dApps that follow a similar format to most Web2 logins–paving the way for a more recognizable experience and onboarding.
- Non-custodial public keys to ensure the user is always in control of their ownership and has access to their cryptographic key pair.
- More usability when it comes to identity through a single username that can identify users across Web3 chains.
More needs to be done in improving accessibility for all users, too. This includes users who have vision impairments, and measures can be taken to streamline the number of buttons on hot and cold wallets and introduce voice recognition features.
4. Drastically lower carbon emissions.
The issue of the carbon footprint of some cryptocurrencies have been in the spotlight for many years. Notably, Elon Musk halted the acceptance of Bitcoin payments on the Tesla website in 2021 citing the environmental impact of the world's most famous cryptocurrency, and the impact of mining new coins has been damaging for the environmental credentials of crypto.
While mining is a core component of many cryptocurrencies, switching to renewable energy as a means of minting new coins could be essential as miners seek to continue their operations in a more sustainable manner.
Some cryptocurrency mining firms like Genesis Mining and Aspen Creek Digital Corporation are seeking to move towards more renewable energy-based mining operations, and with the availability of government subsidies for renewable energy, the cost differentials between renewable and fossil fuel mining could be lowered.
5. Seek to change crypto's image.
The cryptocurrency landscape has been plagued by negative connotations since its inception. This is perhaps understandable given the controversies that have followed digital finance over the years.
One of the biggest negative connotations with the world of crypto is its links to the black market, with some would-be investors deterred by cryptocurrencies becoming the preferred currency of criminals, due to the greater anonymity afforded by some tokens.
For cryptocurrency to enter mainstream usage, it's imperative that crypto is viewed by all as the evolution of finance and the cornerstone of Web3. For this to occur, the ecosystem needs to alter perceptions.
"If image is everything, change the visual perception of Bitcoin," said Bryan Edmondson, the founder and creative director of brand reputation agency SEA. "Misunderstanding leads to a natural human instinct, mistrust. We carry physical coins, notes, cards, and now smartphones to enable transactions, however, we trust these simple ideas due to the brands behind them. Trust is key," Edmonson added.
One way to change perceptions of cryptocurrency is to highlight the many good charitable causes that cryptocurrency has aided in recent years. Perhaps most notable is Ukraine receiving $70 million in crypto donations for humanitarian aid and defense in the year following the beginning of their conflict with Russia.
While the cryptocurrency landscape has always been chaotic, we've also seen constant evolution and improvements as the technology supporting blockchain and assets continues to develop. This gives leading platforms and projects ample room to learn from the mistakes of the past and to create an ecosystem that can truly welcome mainstream investment.
In catering to education, regulation, and the environment, it's possible to ensure the long-term sustainability of crypto and create a future of digital finance that can be enjoyed by all.