Bitcoin's Viability: Barriers to Adoption and Potential for Success

This report provides an evaluation of Bitcoin as a form of money, examining its potential and the challenges it faces. The report begins by acknowledging the rising adoption of cryptocurrencies, including Bitcoin, and the associated uncertainties about their future. It explores whether cryptocurrencies can replace traditional currencies, focusing on key factors such as government approval, price elasticity influenced by supply and demand dynamics, regulatory hurdles, and transaction costs. The report highlights the barriers to Bitcoin's widespread adoption, including its limited acceptance as a medium of exchange due to usability issues and its unsuitability as a reliable store of value due to high volatility. The analysis concludes that Bitcoin faces significant obstacles to supplanting central bank currencies, with the current decline in its value suggesting a challenging period for cryptocurrency users. References to relevant sources are also included.

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The adoption of cryptocurrencies has been on the rise in the recent past. The most widely
adopted include Bitcoin, ethereum, litecoin, stellar and ripple. With this increased adoption, there
is growing uncertainty in the future of these currencies (Andrews, 2018). This report evaluates
Bitcoin as a form of money. It explores the currency’s barriers and its possibility of success.
Can Cryptocurrencies replace money?
For cryptocurrencies to supplant central bank currencies, much will have to change.
However currently, there is no likelihood of cryptocurrencies such as Bitcoin replacing money
First, Government approval is a key determinant. There has been a varied opinion on the
use of Bitcoin by various governments around the world. For Bitcoin to be widely adopted
therefore, the public will need to be certain that their involvement and dealings with Bitcoin will
not get them into trouble with the government (Comben,2018).
Price elasticity: Supply and demand. Unlike conventional currencies, Bitcoin has a
predetermined supply which is expected to start declining until a certain known limit is reached.
For this reason Bitcoin is a currency with an inelastic Supply making it a deflationary
currency(Comben,2018). The high volatility associated with Bitcoin is based on the fact that its
change in demand is reflected through a change in price.
Thirdly, Lack of regulation is one of the main reasons why the adoption and use of
Bitcoin have remained on the low. Lack of regulation makes people susceptible to crimes (Briggs,
2017). The fact that it might not be possible to regulate the use of Bitcoin therefore means that
many people are likely to stay away.

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Fourthly, the cost of transaction on Block chain is quite expensive compared to other
currencies. Users are required to use high amounts of fees for each transaction they make. In
addition the transactions may take between 13 and 30 minutes. Its speed is therefore slow
compared to conventional currencies. In addition Bitcoin mining requires significant amounts of
energy which might not be sustainable in the long run (Comben, 2018).
With these factors, Bitcoin will not under whatever circumstance succeed in supplanting
central bank currencies. The adoption challenge is likely to remain a barrier a little longer. The
current decline in the value of Bitcoin points to the rough time ahead for crypto currency users
(Partz,2018).
Barriers of Bitcoin as a form of money
It cannot function effectively as a medium of exchange. As a medium of exchange,
money allows the trade, purchase and sale of goods a service. Functioning as a medium of
exchange requires an instrument to have a standard value accepted by all parties. Bitcoin requires
its users to save public addresses and private keys. Although crypto users may find this a non
issue, it may be a great challenge for the wider public (Visser, 2018). Although these are meant to
enhance the security, the great number of the public prioritizes convenience over security. The
complexities involved in the creation of Bitcoin wallets and making transactions are also part of
usability challenges. With its limited acceptance it cannot function as a medium of exchange
(Comben,2018).
It cannot be used as a reliable store of value. The high volatility of Bitcoin is one of the
aspects that make its success highly uncertain. Since its introduction in the year 2010, its daily
volatility has been estimated to be 15 higher than that of the US Dollar. Extreme volatility makes

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the use of Bitcoin as a store of value and medium of exchange quite risky. This is therefore a
disadvantage to its wide adoption (Comben, 2018).

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References
Andrews, A., 2018. Bitcoin: The Complete Guide to Understanding Bitcoin Cryptocurrency and Bitcoin
Mining.
Briggs, F. (2017). The Three Barriers to Bitcoin Dominance – Hacker Noon. [online] Hacker Noon.
Available at: https://hackernoon.com/the-three-barriers-to-bitcoin-dominance-c221ad8764fd [Accessed 11
Dec. 2018].
Comben, C. (2018). 9 Major Barriers To Widespread Cryptocurrency Adoption. [online] CoinCentral.
Available at: https://coincentral.com/9-barriers-cryptocurrency-adoption/ [Accessed 11 Dec. 2018].
Partz, H. (2018). Bitcoin Dips Below $3,400 as Market Volatility Continues. [online] Cointelegraph.
Available at: https://cointelegraph.com/news/bitcoin-dips-below-3-400-as-market-volatility-continues
[Accessed 11 Dec. 2018].
Visser, J., 2018. What You Need to Think About Before Investing in Bitcoin and Other Cryptocurrencies.