The way that cryptocurrencies have been implemented – with blockchain technology – is absolutely not a viable consumer product, says South African entrepreneur Hannes van Rensburg.
Van Rensburg, who sold his payments platform Fundamo to Visa for $110 million (R1.4 billion) in 2011, was speaking at StartupGrind Cape Town on Thursday evening, reports Ventureburn.
He said that cryptocurrrencies that use the blockchain won’t see the same kind of adoption as credit or debit cards because of the impracticality of settling payments on the blockchain.
“I think there are a lot of things that could happen in the back. I think there’s a lot of things that could happen around settlement of transactions and so forth, but it is a fallacy. I know people are going to shoot me, but I am just a straight shooter,” said Van Rensburg.
One of van Rensburg’s biggest sticking points is the way in which cryptocurrency transactions take place – also arguably one of their biggest selling points.
“If I do a transaction in Bitcoin it means that before it is actually concluded with the text in the distributed ledger, 50% plus one of the participants in this ecosystem have to acknowledge that they have written it into the ledger,” he said
“Now just consider if you were to run it as a global currency where, before you walk out of the shop having bought my packet of chips for a dollar, half the population has to acknowledge that I bought a packet of chips. It isn’t going to work in that environment.”
Van Rensburg said that he still believed that blockchain was an important technology – just not one that is consumer-driven.
Good for business but not for consumers
Van Rensburg’s viewpoint is not a unique one, with many financial experts around the world voicing their concern about the commercial applications of Bitcoin and other cryptocurrencies.
Regulatory uncertainty is a big hurdle, especially in the financial-services industry. Legal frameworks, globally, will have to change to adapt to the growing use of the new technology, said a former former US Reserve official speaking to the Wall Street Journal.
There are also issues of cybersecurity; despite backers of blockchains claiming that they are secure by design, the technology hasn’t been adopted widely enough yet for it to be seriously tested.