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Cryptocurrency Mainstream Acceptance
Even if you are not involved, we have all seen the cryptocurrency exchanges bankruptcies over the past year plague crypto investors. But did you ever notice that large companies do not transact in cryptocurrency? Sure, a few companies that sell directly to consumers might accept bitcoin such as AMC for movie tickets, or PayPal. However, you do not see Apple using BitCoin in transaction with Exxon for some polymers need in making iPhones. How come?
Well, beside the typical concerns about price volatility, and fraud, It is extremely costly to adapt a company’s IT system to accept these types of transactions. There is still a bad taste in the mouths of big business from an attempt they made in the early 2000s. As a response to the dot.com boom, and a dislike of paying Value Added Networks or (VANS) high transaction fees for EDI, many industries created consortiums to eliminate the VANS by using XML technology to do business directly. Transactions were validated through mining similar to what is currently used in cryptocurrency.
There was even talk about replacing the banking system with the technology developed in the consortiums. The Automotive Industry had COVISNT, the Chemical industry created Elemica, Oil and Gas had Trade Ranger, etc. The problem arose when it became clear that the cost to each company of mapping hundreds or thousands of customer and vendor numbers to match the numbers already in your ERP system was quite high. In addition, each industry wanted their consortium to be the standard for all the other consortiums. It became clear that the existing system of VANS that had been tested over the years was the most efficient and secure way to conduct these types of transactions. Hundreds of millions, if not billions, of dollars were spent globally to learn that lesson. I don’t believe they ever made it far enough to take on the banking system.
So, although we still hear about cryptocurrency in the news, an important piece of understanding its acceptance is to watch business to business transactions. Given the Fortune 500 makes up 33% percent of the global economy, and the U.S. Middle Market another 10%. This is a key indicator.