The cryptocurrency world is still in its infancy. If you compare its life’s journey to human history, it is still clinking rocks in a dark and gloomy cave, waiting for that spark to ignite an unfathomable future of progress and innovation. And much like the early days of man, the early days of crypto are shrouded in myths.
The first great myth of crypto you often hear when people speak about the topic is that Bitcoin and cryptocurrency mean the same thing and that all cryptocurrencies are equal.
This is entirely false. Bitcoin may have come first, and even in 2013, there may have been only seven cryptocurrencies. But today, over 20,000 active cryptocurrencies hold nearly US$1 trillion in value.
What is Cryptocurrency?
Cryptocurrency, sometimes only called crypto, describes a digital or virtual currency secured by cryptography and uses a decentralised system to record transactions and issue new units. Cryptocurrency is a blockchain-technology-based peer-to-peer system that can enable anyone anywhere to send and receive payments and doesn’t rely on banks to verify transactions.
Bitcoin was and still is the trailblazer, and its impressive rise has set its place firmly in history. For many, the only glimpse of the crypto world they have so far is experienced vicariously through stories of Bitcoin or a friend of a friend who made it extremely wealthy. But it is only one of many exciting projects for those well-versed in the field.
Common misconceptions about investing in digital currencies
Another great myth, or more of a common misunderstanding of the crypto world and why most of today’s crypto users participate in the space, is that if you invest in digital currencies, you can expect high financial returns quickly.
While there are stories such as cases of people who invested the price of pizza in the early days of Bitcoin and now can retire happily in Barbados, unfortunately, this is not the norm for everyone reading this.
In fact, according to studies by the Bank for International Settlements (BIS), which looked at the retail use of crypto exchange apps in 95 countries in seven years between 2015–22, 81% of users would have lost money if they had invested in $100 in Bitcoin at the time they had downloaded the app.
Warning against blindly investing in hot crypto trends
The reality is that crypto isn’t some magic sack of beans that will triple your wealth in a week and change your entire world.
When entering the cryptocurrency market, it is essential to diversify your portfolio to ensure you are making educated investments based on research and never investing more than you are willing to lose.
There is a lot of money to be made in the space, but throwing cash at whatever is hot at the time isn’t the way to do it.
However, these myths will soon be cast into the shadows and forgotten as mass adoption of crypto, Web3, and all that comes with them is on the horizon.
NFTs and Gaming
During the cause of this decade, many have come across the abbreviation of NFT (Non-fungible tokens), most certainly related to the discussion about overpriced digital images being traded on the blockchain. The trade of art is only one of the areas NFTs are used for. Unfortunately, it is a quickly evolving industry that only gets media attention with scandalous news to people not educated about the space.
How are NFTs different from cryptocurrencies?
NFTs are similar to cryptocurrencies. Still, they are cryptographic assets on a blockchain with unique identification data distinguishing them from each other, compared to cryptocurrency tokens, where one token equals the other.
NFTs show great potential outside the art area and may be used in financial transactions. They could step in and take the place of physical papers when it comes to deeds of houses or land, verify the authenticity of goods and identity, whilst also being utilised as tickets for events such as concerts or sports, to name a few of the potential use cases.
The intersection of gaming and crypto: lifestyle, entertainment, and technology
One of the most exciting areas in which blockchain technology and cryptocurrencies are entering is of gaming. Far more people are interested in gaming than in finance.
According to Statista, the global gaming market will amount to $268.8 billion a year by 2025.
Crypto will be a combination of lifestyle, entertainment and technology, and gaming offers a way for users to get acquainted with digital currencies excitingly and engagingly.
For example, some games have introduced crypto, which users can earn or buy to purchase in-game items, such as skins, items, or characters.
These cryptocurrencies can be stored on a blockchain and traded like other digital assets.
Games like “CryptoKitties” and “Axie Infinity” are examples of blockchain-based games that allow players to earn and trade NFTs as rewards.
We will see more gaming applications include financial mechanisms whilst finance applications incorporate more gamification methods to incentivise recurring positive financial behaviours.
Gamification in finance
Gamification has grown in the fintech sector by incentivising customers to participate in financial activities, and it has been around much longer than blockchain technology.
The most popular savings scheme in the United Kingdom is a gamified governmental bond called “Premium Bonds”, which was introduced in 1956.
These bonds have over $120bn invested capital, with around a third of people in the UK having premium bonds and are familiar with the method of prize-linked savings.
How gamification enhances the customer experience
Prize-linked savings products are known globally under various names and are promoted to motivate customers to save money.
At the same time, gamification in the form of loyalty programs, rewards, and points has been used to encourage customers to use money management apps and invest in products.
Gamification can make the financial services experience more interactive, creating a stronger connection between customers and their financial services.
One reason why gamification works were explained by Ian Robertson of Trinity College in Dublin, who argues in his book, “The Winner Effect”, is that it’s so much fun to win is mainly chemical;
“Winning increases testosterone, which in turn increases the chemical messenger dopamine, and that dopamine hits the reward network in the brain, which makes us feel better.”
Driving user behaviour: Rewards, goal setting, and financial education
Using gamification for a financial application can provide many benefits, such as increased user engagement, improved user retention, enhanced user experience, and increased user loyalty.
Gamification can also help drive user behaviour by providing rewards for completing tasks, encouraging users to reach their goals and assisting users in understanding challenging financial concepts in a fun and joyful way.
Additionally, gamification can be used to provide feedback to users, helping them to understand the value of their actions and the impact they can have on their success.
Finally, gamification’s social aspect can create a sense of competition among users, motivating them to engage more with the application to reach their financial goals and build a healthy financial lifestyle by sharing knowledge and experiences.
Operating in the space, seeing all the talented builders and blockchain enthusiasts on the one side, but also the strong adoption of the technology among institutional players and all the government efforts towards the regulation to support market integrity and financial stability, one thing is sure: Mass adoption of cryptocurrencies is a matter of when not if.
Over the next five years, there will be a large migration of thought, and as with the internet boom, those who adapt early will have a leg up in the new future.
According to figures from Chainalysis, global crypto adoption grew by over 2300 per cent between Q3 2019 and Q2 2021. Given that the first decentralised cryptocurrency, Bitcoin, was born in 2009, it shows crypto’s uptake has come gradually, for a time, with a sudden burst.
Greater control over investments with digital assets
Despite this, Finder’s Cryptocurrency Adoption Index shows that the percentage of Americans owning cryptocurrency has not reached 10%.
Keeping that figure in mind, research by Hannah Ritchie and Max Roser on Technology Adoption shows that throughout history, technology adoption occurs very gradually until about 8 to 10 per cent, then skyrockets – meaning crypto’s most significant rate of emergence is likely yet to come.
Digital assets are becoming more popular as technology advances, and digital payments become more widely accepted. They are also more secure and transparent than traditional assets, allowing users greater investment control.
Additionally, digital assets allow users to access a broader range of investment opportunities, making it easier to diversify their portfolios. Finally, digital assets are more cost-effective than traditional assets, making them an attractive option for investors.
The bottom line
In conclusion, cryptocurrencies, NFTs, and blockchain technology are here to stay.
In today’s terms, it is a small segment of life. But its adoption will become widespread with increased trust, transparency, safety, and usability.
Its many uses and tools will immensely benefit all aspects of society. And, one day, much like the internet, it will be hard to imagine a time when we lived without it.
About the Author: Philip Jonitz is the Co-Founder of Klink Finance.