Cryptocurrencies could become mainstream payment solution within next decade


Cup of coffee with bitcoin

A new report from academics at Imperial College London and eToro argues cryptocurrencies are already fulfilling one of three main criteria for money.

Cryptocurrencies like Bitcoin offer a viable evolutionary ‘next step’ for money and have the potential to become a mainstream form of payment within the next decade.

This is the central finding of a new report from Imperial academics commissioned by eToro through Imperial Consultants.

In a report published today - Cryptocurrencies: Overcoming Barriers to Trust and Adoption - Professor William Knottenbelt from Imperial College London and Dr Zeynep Gurguc from Imperial College Business School argue cryptocurrencies are already equipped to fulfil one of the three fundamental roles of traditional fiat money: acting as a store of value.

The three criteria are as follows:

  • Store of value: allowing individuals to make intertemporal choices on when to spend their purchasing power.
  • Medium of exchange: facilitating the exchange of goods and services by eliminating the inefficiencies associated with a barter economy.
  • Unit of account: acting as a measure of value in the economic system.

Meeting the last two criteria will require Bitcoin and other cryptocurrencies to make progress on remaining challenges such as scalability, design and regulation.

The report argues that money has evolved significantly over time. The earliest forms were based on systems of barter and objects of value such as cowrie shells. Over time, these early ideas were replaced by coins, notes and payment cards. The rise of contactless and mobile payments is the most recent step.

In each case, new forms emerged which rendered older ones obsolete, such as coin minting and electronic banking. However, despite the changes, money’s three core functions have remained constant throughout.

Provided they can demonstrate progress as a medium of exchange and unit of account, as well as a store of value, cryptocurrencies represent a viable technological update to the way we spend money.

The report also notes that each evolutionary stage of money has brought about a reduction in payments friction. Given their design principles, the paper concludes that the widespread use of cryptocurrencies can be a natural next step to reduce friction in the global economy.

Professor William Knottenbelt from Imperial, said: "The world of cryptocurrency is evolving as rapidly as the considerable collection of confusing terminology that accompanies it. These decentralised technologies have the potential to upend everything we thought we knew about the nature of financial systems and financial assets.

"In this context, we wanted to get back to basics: clarifying the nature of cryptocurrencies as a new kind of asset class, contrasting them with traditional forms of wealth, and classifying the main challenges that need to be overcome in order to drive their success forward.

"There’s a lot of scepticism over cryptocurrencies and how they could ever become a day-to-day payment system used by the man on the street. In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment."


Sean Conner

Sean Conner
Faculty of Natural Sciences

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