- Cryptocurrency total sector market cap $2.5 trillion in October 2021.
- Bitcoin is the leading cryptocurrency with a 46% share of the total cryptocurrencies market.
- Bitcoin must increase its payments capability to be used on a larger scale.
Cryptocurrency networks need to improve their stability and scalability if they want to be adopted as official currency, says GlobalData, a leading data and analytics company.
GlobalData’s latest report, ‘Blockchain in Payments’, notes that a lack of international regulations has allowed the cryptocurrency sector to thrive, reaching a market cap of $2.5 trillion in October 2021. This is largely made up of Bitcoin which represents 46% of the market. However if Bitcoin wants to challenge established payments systems such as Visa and Mastercard, the cryptocurrency must address its scalability issue. Currently Bitcoin can only handle seven transactions per second (TPS), compared to Visa’s 24,000 TPS. However, even with these improvements, market growth can be quickly stifled if trading cryptocurrencies is banned — a move that India is currently considering.
Chris Dinga, Payments Analyst at GlobalData, comments: “While the lack of regulation is driving the growth of cryptocurrencies, their decentralized nature means that growing investment and reliance on cryptocurrency sector could weaken governments control over the economy. This is not a situation that some governments are prepared to tolerate, with India, one of the worlds largest economies already moving to squash cryptocurrencies before they can gain even greater popularity. To survive, the sector needs to quickly become ‘too big to fail’ by overcoming its TPS limitations to continue its rapid growth.”
Although there are more than 1,200 cryptocurrencies currently trading, the majority of the cryptocurrency market cap is made up of only a handful of brands — with Bitcoin being the leading one, with a market cap of $X. Since the launch of Bitcoin, the market has seen the introduction of new blockchain networks such as Ethereum ($458.8 billion), Ripple ($38 billion), Solana ($49.8 billion) and Cardano ($41.9 billion). Those networks were developed to solve some of Bitcoin’s limitations and make cryptocurrencies more applicable to real world needs.
Dinga continues: “Currently limited to 13 TPS, Ethereum is working on upgrading to Ethereum 2.0 (Eth2), which should allow it to handle 100,000 TPS. However, for Eth2 to deliver on this promise, it will need to avoid the sort of instabilities seen by Solana, which claimed to handle more than 700,000 TPS, but experienced network outage in September 2021 when its transaction volume surged to 400,000 TPS.”