Compared to the events of 2023, the cryptocurrency sector in 2024 could be considered relatively boring.
U.S. regulators at the start of the year approved bitcoin exchange-traded funds (ETFs), and at least one player in the marketplace has even begun to phase out its “cryptocurrency” moniker for the more staid and presumably respectable “cryptofinance” name.
Meanwhile, Sam Bankman-Fried, a slew of rise-and-fall NFTs, and other bubble-prone scam coins have all been exposed, while crypto prices have recovered. The market valuation of the digital asset industry, for example, has roughly doubled over the past year.
But the crypto sector is still far from being integrated into the broader financial system, and being boring doesn’t translate into being reliable.
“Yesterday’s outage on the Solana network marks the 11th time the blockchain has gone down in the last two years,” Akash Mahendra, head of developer relations at Layer1 blockchain Haven1, said in a statement provided to PYMNTS. “…No other major blockchain network could go down for five hours and brush this off as a non-event.”
“If Solana truly wants to become a blockchain for the masses, it cannot afford to keep experiencing outages, not once a year, not ever,” he added.
PYMNTS reached out to Solana for comment but did not receive an immediate response.
On average, the Solana network has failed at least once every two months. Cryptocurrency’s lack of reliability continues to hamstring the sector’s attempts to integrate itself into the broader financial system.
In the Security and Exchange Commission’s public approval of bitcoin ETFs Jan. 10, Chairman Gary Gensler wrote: “Though we’re merit neutral, I’d note that … bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
Hardly the ringing endorsement that crypto enthusiasts have seen as proof that cryptofinance can be a viable part of the financial ecosystem.
As PYMNTS CEO Karen Webster wrote in 2018, “what’s amazing to me is that we are still, as an industry, talking about it — bitcoin, now crypto, blockchain — as if its potential to revolutionize our global financial system, and the way money moves between parties around the world, is just around the corner.”
“Especially now that we see how little payments innovation they have ignited and how much progress has been made without them,” she added.
Those words could have been written yesterday, or tomorrow, and still hold true.
Despite the original vision of bitcoin to be “electronic cash,” or a way for people to send payments to each other without involving a bank or other third-party intermediary, digital assets have not taken over the world of payments.
There has been some progress, but even in El Salvador where the government has made bitcoin legal tender and required all businesses to accept it, it is not widely used. People prefer traditional payment options for buying coffee and groceries and paying their bills.
Dr. Yan Zhang, co-founder of Web3-native payment aggregator Pelago, told PYMNTS in an interview posted last year, “Traditionally, the biggest hurdle for crypto payments is that customers didn’t consider crypto as money [rather, they viewed it as more of an investment], so merchants were hesitant to accept crypto payments.”
PYMNTS spoke in October with Pat Thelen, vice president of global account management at Ripple, about the way blockchain-led innovations around programmability, immutability and global transaction delivery are advancing the payments industry.
As digital assets move further into their second decade of commercialization, we will have to (continue) to wait and see.
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