Introduction

Mass adoption is a popular topic of discussion among cryptocurrency enthusiasts, who often believe that blockchain technology will replace many “legacy” technologies. As a result, this will cause the price of cryptocurrencies to soar as, to many enthusiasts, the blockchain technology and the rewarded cryptocurrency for producing blocks are inseparable.

Without this reward, there is no secure, decentralized blockchain. While other alternative blockchains exist, such as permissioned blockchains like Hyperledger, these blockchains take away a significant amount of decentralization which is often touted as the single greatest benefit of public, permission-less blockchains like Bitcoin.

Decentralization and Mass Adoption

However, a key question often avoided by most crypto enthusiasts is whether or not decentralization and mass adoption are compatible, so let’s start there. While decentralization offers better control over privacy, data, and often better security, there are some serious downsides as well. Notably, performance will generally become worse for a decentralized system because for it to work, it must reach consensus among all its participants.

This is relatively easy to achieve in a centralized system where any participant will look to a central authority for information related to the state of the system. The downside, of course, is that the central authority is easily corruptible or vulnerable to attack. In a decentralized system, participants rely on a set of rules to achieve consensus on the state of the system: There is no central authority to request this information from.

For Bitcoin, this set of rules is mostly governed by the Proof of Work (PoW) algorithm, the process of creating blocks and the chaining of these blocks (the blockchain). Proof of Work is a way to “fairly” (turns out not to be so fair) distribute out the responsibility of creating blocks for the network based on computing power (hash rate). This is a critical role because these blocks are appended together to create the blockchain, which acts as the end-all, be-all authority for Bitcoin and many other cryptocurrencies.

Technically there are multiple blockchains – when I refer to “the” blockchain, I am referring to the longest one with the most work put into it. This is accepted by all the nodes (computers on the network, or participants) and used by these nodes to understand the current state of the system. You’ll note this process is much more complex than it is for a centralized system as it is important in a decentralized system that all the nodes agree without any of them having authority over another.

There’s an odd analogy that might help in understanding why decentralization is simply less efficient: Imagine two crowds of a thousand people. You have one goal with both of these crowds: Have them all say the same word (can be any word at all) at the same time.

In the first scenario, you have a central coordinator who stands in front of the crowd and he shouts over a microphone the word they should all say: Dog. Unless this crowd is particularly rowdy (we’re going to ignore that possibility), it should be a fairly simple task for the entire crowd to repeat “Dog” and win the challenge.

For the second crowd, there is no central coordinator. Every member in the crowd has a sheet of paper that tells them that they are challenged to say the same word at the same time. So what happens? Well a few people start saying the first word that comes to their head and some neighbors start repeating that word. Naturally a few groups chanting different words will start to form and those groups will face off against one another until one gives up and starts chanting the other word. Eventually a cascade effect will occur and everyone will get on the same page to say the same word. But as you might imagine, this process takes quite a bit more time than it did in the scenario with the central authority.

Now fortunately in the real world, we have a better process than what I explained above for the majority of the time. However, the way blocks are prorogated across the network is actually quite similar to the analogy provided above. The point is, decentralized systems will almost always offer lower performance and throughput than the equivalent centralized counterpart and this is generally not fixable by advances in technology. Instead, technological advances will generally serve to reduce the gap (not remove it), with the hope being that the gap will eventually become small enough to not be noticeable.

The Crux of Decentralization

Lower performance and throughput is a trade-off that enthusiasts might be willing to make, but it becomes a more strenuous trade-off the larger the group of users you’re targeting. When discussing mass adoption, it will become difficult to convince many subsets of users that decentralized blockchain applications will provide them a better experience than the equivalent centralized counterpart.

For the power-user, performance is paramount so they may not mind the sacrifices made in privacy or control. Power-users often include the biggest businesses in the world which significantly limits the commercial potential for decentralized, public blockchains. However, even among more casual users, it might be difficult for them to understand the benefits of decentralized systems while it is much easier to understand the disadvantages as those disadvantages are more tangible: It is easy to perceive a drop in performance, but not easy to perceive an increase in privacy.

This is an unfortunate reality that I suspect decentralized protocols will never be able to overcome: Their benefits are not easily noticeable while their downsides are. The core upside of removing trust in a decentralized system does not become a real concern to many users until their trust is violated by an equivalent centralized system, and even then users are often quick to forgive – it can take many betrayals before one finally is willing to give up more tangible benefits like performance and convenience for a trustless, private environment.

The Double-Edged Sword of “Security”

Another benefit commonly stated is that public blockchains are among the most secure methods for storing data. The reason why is that it is near impossible to change entries to the ledger, a characteristic commonly referred to as immutability, which means manipulating transactions is nearly impossible. Furthermore, all data that is appended to the ledger must follow rules that are set by the system which are validated and verified by a network of nodes as opposed to one central authority.

As a result of immutability, the difficulty of creating false entries and the impossibility of blocking valid entries, public blockchains are often touted among the greatest innovations for storing data purely and securely. This is all true and illustrates how Bitcoin has operated so well for nearly a decade now. However, while this type of security is far beyond that of a centralized system (which can fall apart when compromised, such as the high-profile Equifax hack last year), this powerful security also has downsides too that (again) are more visible to most users than the upsides.

Notably, any careless error on the user’s behalf will result in a loss of funds as transactions on most public blockchains are irreversible (disregarding special events like a hard fork, as Ethereum did). In other words, the ultimate security that blockchain provides can also work to lock you out if you make even the slightest error and there is no central authority that can correct such mistakes (although ironically, again, the second largest cryptocurrency, Ethereum, proved that wrong – for better or for worse).

Then there is the fact that most of cryptocurrency storage is arguably less secure than a bank account. I say arguably because theoretically, a brain wallet is impossible to crack (you know, unless you go the old fashioned route with a crowbar) and other options like hardware wallets and paper wallets are very secure.

However, there are many issues with storing cryptocurrencies that seriously hinder them from ever becoming acceptable for the mainstream if they remain as is. First and foremost, the ultimate security we mentioned earlier (recall that transactions are irreversible and impossible to block if valid) works against you because it means if any malicious individual gains access to your funds through ANY means, those funds are now theirs – period.

Secondly, many individuals are technologically incapable of the current methods available for securely holding cryptocurrencies. For example, it is common for one to have a secure form of storage such as a hardware wallet, then store their mnemonic phrase in hot storage which defeats the purpose of the hardware wallet in the first place. This will likely become better with time, although it is worth noting you can only stupid-proof things so much to PREVENT disasters – at some point, there has to be a way to CORRECT them (for mass adoption at least), which decentralized protocols are generally not well equipped for.

Even with the more secure methods of storing cryptocurrencies, if you have ANY desire to be able to pass that wealth onto anyone in the unfortunate event of your death, you must immediately sacrifice a significant amount of security – to the point where it’s probably considered financially imprudent to hold any amount that is substantial (if that wasn’t already true just based on volatility and the nascence of the asset class).

In other words, the security that so many people talk about when they discuss blockchain is a very, very double-edged sword. You put it in the wrong hands and all you’ll end up with is a seriously injured swordsman (these analogies keep getting better).

The Bitter Truth

The real lesson here is that there is a special type of user required for truly decentralized, public blockchains. This user is:

• Patient
• Values privacy and data control to a level that “normal” people would consider “weird” (conspiracy level “weird”)
• Understands the trade-offs and is willing to accept any losses due to user error

When you consider the number of individuals who truly fit that profile, it’s a rather small crowd in comparison to what you hear from many enthusiasts. The adoption of decentralized blockchains is often compared to the adoption of the internet: Many doubted the internet at first, but it later ended up shaking up both the economy and the world. Will we see the same for Bitcoin and its decentralized peers?

Unfortunately, I heavily doubt it – at least not the way people think it will. For mass adoption to be possible, a certain level of centralization is required (see what happened to the internet) which then begs the question of where on the spectrum should a service or application be? How decentralized do you need to be to reasonably protect the data and privacy of a user while still offering them competitive performance, convenience and support?

For the use-case of money, it should theoretically be as decentralized as possible because a trustless and secure environment should be paramount above all-else for financial transactions, where real value is directly transferred. Yet as discussed above, creating this environment also leads to some serious compromises that many users won’t be willing to make, especially as they have gotten used to being careless due to being hand-held by the likes of credit card companies, the banks and Paypal.

The Wrong Question

Perhaps the question of when there will be mass adoption is the wrong one to ask. Perhaps instead we should be asking the question of when will Bitcoin and other cryptocurrencies be ready for the group of users who fit the characteristics defined above?

This is a difficult question to answer because arguably they are ready now for this subset of users. Cryptocurrency wallets are difficult to secure and the cryptocurrency exchange is risky given the required central custodianship on most exchanges, so one can argue that the advent of better wallets and decentralized exchanges with deep liquidity is when we’ll see crypto ready for adoption. However, most advanced users are aware of these risk factors and are willing to accept them (a key difference from less advanced users) for the benefits discussed previously.

Still, there is no denying that even for the most passionate of Bitcoin users, it is still frustratingly difficult to pay for most goods or services with Bitcoin. Whether it is because of the block times, network congestion, the graphical interface, the number of merchants who accept it, the complexity of returns, the price volatility or the additional fees that come with utilizing Bitcoin, there is no shortage of reasons that many people don’t use the currency today.

When will that all change (assuming, of course, that it will change)? My bet is roughly 20 years – although note that the practice of predicting the future tends to be a futile one. The more important premise is that it will take far longer than what most suspect because:

• Innovation must keep up with centralized solutions, which have far more development resources and are easier to coordinate change (Decentralized systems are difficult to change as consensus among nodes can be difficult to reach for controversial updates while centralized systems can force all nodes to update regardless of their desire – e.g: block size change)
• Businesses require much more time to understand the technology and why they should consider accepting it
• Users require more time to understand the benefits and the downsides of utilizing a decentralized solution
• Crypto storage needs to be improved drastically
• GUI and overall ease-of-use must be improved drastically
• The X factors listed in the next sections of this article will require more time to play-out (although 20 years is a relatively short frame of time for some of these macro trends)

Furthermore, we shouldn’t expect that decentralized solutions are for everyone, as some might lead you to believe when they discuss the idea of blockchain bringing along Web 3.0 (where we move all current applications to the blockchain). Instead, these solutions are best suited for those that are deeply concerned about control over their data and are willing to sacrifice some convenience in exchange for privacy, security (on a macro level) and peace of mind.

The X Factors: Privacy

There are a number of potential reasons why this article could be proven wrong that I’d like to discuss briefly here and which I’ll likely discuss further in future articles. First and foremost, the first world society is becoming increasingly tense over the topic of privacy and data control in a world dominated by internet giants like Facebook (FB), Amazon (AMZN) and Google (GOOG). The recent fiasco with Facebook and Cambridge Analytica, where data stored on 50 million individuals was accessible and used by a political data firm (is this seriously a surprise?) has illustrated just how relevant the topic of privacy is today.

However, both investors and users have a tendency to get over such scandals as time passes. The question is where the tipping point will be, or if perhaps greater regulations will begin to cripple these businesses, such as the General Data Protection Regulation (GDPR). There are websites out there that allow you to lookup your name and you’d be amazed at the amount of information that is publicly available about you. At what point will society feel violated enough to change?

Even then, however, there is no certainty that people will come to decentralized blockchain applications. It would come as no great surprise if people simply moved from one central solution to another (which naturally promises not to follow the same path as its predecessor). Note how we’re already seeing the government start to talk about the use of permissioned blockchains for complete and absolute transparency, the opposite of privacy.

In other words, we already have a movement in the blockchain space where the governments and large corporations are aiming for complete surveillance on all economic activities, big or small. Talk about a “Big Brother” type move. This is very confusing for the public, because there is a massive difference between a permissioned (private) and permissionless (public) blockchain, yet both are simply referred to as “blockchain.”

Furthermore, up until this point we’ve just been assuming that public blockchains have privacy, but this isn’t really true. Bitcoin, for example, is only pseudo-anonymous and can easily be analyzed as the NSA has proven. Even Andreas Antonopoulos, one of the greatest pro-Bitcoin speakers, has discussed time and time again that there is not enough privacy in Bitcoin. The same holds true for many other cryptocurrencies as well.

Privacy will undoubtedly become one of the greatest debates of the 21st century as we enter the age of big data. As storage costs decrease and as machine learning improves, the benefit of storing data will increase as the ability to turn that data into information becomes both easier and faster. Data dredging will no longer be as large of a concern as, through deep learning, computers will be able to identify poor statistical relationships. As a result, there will likely be little disadvantage in collecting the maximum amount of data possible.

This is the “extreme” scenario – the fear scenario. Obviously there are almost always good intentions with the collection of data, such as displaying more accurate advertisements or improving a product for users. Whether or not the privacy debate reaches its pinnacle soon and whether or not decentralized protocols are the place that the public turns to is a complete unknown. However, if it were to occur, we’d likely see adoption far beyond what I speculate on in this video.

The X Factors: The Third World

One of the consistent defenses for Bitcoin, along with other cryptocurrencies, is the ability to bank the third world and also protect them from unstable governments. The first world has financial services that extend far beyond what is available in the third world, which largely contributes to the economic disparity between the two.

Part of the issue in banking the third world is implementing the architecture and figuring out appropriate regulations. Furthermore, it is not too profitable for the banks themselves so there is little incentive to set them up. Bitcoin can help solve this problem because something as simple as a mobile phone is all that is needed. However, this is still happening at a relatively small scale and it is far more likely for regional governments to act against Bitcoin in these circumstances as it poses a far realer threat to third world currencies than it does to first world currencies.

Additionally, the concerns that we’ve outlined for Bitcoin above (particularly the security of holding it and lack of error forgiveness due to irreversible transactions) should likely be solved before trying to introduce it to the third world, where education is a serious problem. I find it difficult to believe that a decentralized protocol will ever be simple enough for the third world to utilize safely, but it is possible and they often have the incentive to figure out how to use such protocols like Bitcoin due to government oppression, economic hardship and capital controls (e.g: Venezuela / Argentina). If the third world were to adopt decentralized, public blockchains as a way to achieve socioeconomic freedom and increased financial services, then naturally adoption would scale far beyond the limitations discussed in this article.

Conclusion

There is other X factors I am leaving out, but the two listed here are the key ones that I wanted to discuss briefly. All-in-all, decentralization is a valuable and rare characteristic that public blockchains offers, but most individuals aren’t fully aware of the trade-offs associated with it. I suspect that mass adoption may not be plausible at all unless the gap between centralized and decentralized solutions becomes minimal, which will be difficult as far more resources are being invested into innovating centralized systems.

However, Bitcoin and other cryptocurrencies appeal to a subset of users that value their privacy and control over their data above all else (including performance and convenience). Even for this subset of users, I suspect it could take 20 years before we see real use because:

• It will take a while to narrow the gap between decentralized and centralized solutions to an acceptable level even for more passionate users
• Both businesses and users need more time to understand why they should accept / use crypto
• Cryptocurrency storage needs to be streamlined and far safer than it currently is
• The ease-of-use and overall interfacing with the blockchain must improve drastically, otherwise it will remain too uncomfortable for most users (e.g: copying and pasting addresses)

There are some potential trends that could result in larger scale adoption than what I expect, such as the fight over privacy and banking the third world. However, these are predictably unpredictable trends and it is difficult to comprehend how Bitcoin and other public blockchains will fit into that future.

Some industries and applications will be better suited for decentralized solutions and therefore could see high levels of saturation than implied in this article (e.g: gambling). However, I believe this article covers the greater overall themes of cryptocurrency mass adoption. Future articles might venture further into identifying industries where public blockchains are and aren’t best suited. Keep an open mind and be cautious when investing in this new asset class as always.

I hope you enjoyed this video / article. Forgive the rather weak video - I wanted to do so much more, but my computer is old (will be updating soon) and struggled with the footage in Premiere (crashed so many times and rendering took 4 times as long), but wanted to get video out today. If you found this analysis useful in anyway, please follow me here on Steem so you'll receive updates from me in your feed. Additionally, you can support me by subscribing on YouTube or following on Twitter. Thank you for watching / reading!