The Gap Between Traditional Banking & Crypto Could Be Bridged Faster Than You Think

May 31, 2019 at 10:58 // PR
Guest Author
Back in late 2017 and early 2018, cryptocurrency exploded into the consciousness of the mainstream and that put crypto under a very bright, though brief, spotlight.

It seems to be in fashion to talk about cryptocurrency adoption and how some established business has decided to accept crypto as a payment method. Yes, all that does help expand the use-case of cryptocurrency as a medium of exchange, but it does not solve a key fundamental problem for crypto. Back in late 2017 and early 2018, cryptocurrency exploded into the consciousness of the mainstream and that put crypto under a very bright, though brief, spotlight.

What many people don’t want to tell you is that even after all that hype, there are currently only 24.6 million Bitcoin addresses in the world. The truth is that many Bitcoin holders own or have created more than one wallet address and 11.9 million of these contain less than 0.001 Bitcoin (around $6). Given that there are around 7.7 billion people in the world, that means there has only been one Bitcoin address for every 311 people in the world. Yes, awareness of cryptocurrency was exceptionally high in early 2018, however, it doesn’t appear that many people actually bought any.

This conclusion seems to be supported in a report published in March 2019 by the UK Financial Conduct Authority Agency, titled ‘Cryptoassets: Ownership and attitudes in the UK’. The findings indicate that around half of the UK population had heard about cryptocurrencies and that only 3% of the respondents to the survey had claimed to have actually bought any crypto. The study goes on to examine why people had not bought any crypto and a total of 30% of the respondents replied:

  • 20% - Lack of knowledge of how to buy cryptocurrencies.
  • 8% - Too difficult or complex to buy.
  • 2% Lack of knowledge (no detail).

Essentially what the FCA identified was a key pain point preventing people from entering cryptocurrency markets. The awareness and interest appear to be there for crypto to be adopted on a mass scale. Put simply, many people find it too difficult to buy crypto and that is a major reason why the awareness in late 2018 failed to translate into wider scale adoption of crypto. 

The Problem: The Traditional Banking Network Vs Crypto 


A big part of the reason why crypto is so difficult for your typical person to buy is that there is no direct link between the traditional banking network and cryptocurrencies. The two ecosystems can be viewed as separate islands where value cannot currently be transacted between. If traditional banking networks were connected with the crypto ecosystem, then it would be possible for those interested in crypto to buy cryptoassets with their bank account. Now, this would likely be significantly simpler and more familiar process, which should address many of the pain points highlighted in the recent FCA report.

The problem is that cryptocurrency and traditional banking universes cannot speak to each other (even if they wanted to). The problem becomes worse when you consider that different cryptocurrency networks like Bitcoin or Ethereum find it hard to understand each other. When you hear your resident ‘crypto expert’ talking about ‘inter-operability’, they are talking about different crypto networks like Ripple, Bitcoin and Ethereum understanding each other.

The issue of inter-operability is further deepened when we think about the cryptocurrency universe speaking to the traditional banking network. The reason is that traditional banking networks run on older protocols such as SWIFT and these legacy systems have their own business logic rules and languages. Needless to say, the older protocols like SWIFT are not compatible with newer crypto protocols like Bitcoin and cannot currently communicate with each other. This is why there is currently a gap between traditional banking and crypto universes and why value cannot be transacted between the two. For your everyday crypto enthusiast, the result is that you cannot buy crypto with your bank account and is why you must instead deposit money on a crypto exchange and endure the complications this entails.

Cardano (ADA) founder Charles Hoskinson recently commented:

“What we are seeing is a collection of standards being created [that] will inevitably converge over the next three to five years to create a situation where you can move information and value between all these different systems ー not just Bitcoin to Litecoin to Ethereum to Cardano ー but also your regular bank account”.

Issues With Exchanges 


What is obvious from the FCA report is that many people didn’t even work out how to buy cryptocurrencies in the first place (it’s not the most straight-forward, see this guide.) Even if a complete newbie to cryptocurrency discovered crypto exchanges, they then have the problem of deciding if they should trust it. Then there is the issue of getting used to new interfaces and navigating through a confusing array of markets. 

Another issue with buying crypto through an exchange is the deposit fees incurred. Many of you will know that on certain exchanges, fiat deposit fees can be as high as 5% or even more. That’s a hard pill for many to swallow and it wouldn’t be surprising if these sorts of fees put off a significant number of would-be crypto buyers. 

The truth behind exchange deposit fees is that many exchanges are not getting rich off fiat depositors. Instead, a crypto payment processor is used to act as an intermediary between the crypto and traditional banking network and that’s where the lions share of the fee usually goes. In a nutshell, if we were able to successfully connect crypto with the traditional banking network, then this could certainly render crypto payment processors obsolete.   

Why An Alternative To Crypto Payment Processors Is Needed? 


Cryptocurrency adoption can be seen as a classic chicken and egg problem. People like to talk about cryptocurrencies like Bitcoin as a medium of exchange, store, and transfer of value. However, if only a limited number of merchants accept crypto as a payment method, this reduces the ability of crypto to act as a true medium of exchange. 

Most of you will know that very few merchants actually accept crypto as a payment method. The low adoption of crypto amongst merchants is not because the technology isn't there but instead it doesn’t make much business. Consider that the vast majority of merchants are using crypto payment processors to accept cryptocurrency as a form of payment and that these services can charge up to 5% in fees. Then consider that the majority of online merchants operate off net margins as low as 0.5% to 3.5%

It is true that some traditional merchants could reject the acceptance of crypto due to numerous other reasons. However, accepting crypto and making a loss on sales due to high crypto payment processing fees is simply bad business. Knowing this, you should now understand why so many online retailers are staying away from cryptocurrency right now and how a cheaper alternative to crypto payment processors could play a vital role in wider crypto adoption and use-case. 

It goes without saying that cryptocurrency payment processors are adding tremendous value right now. Indeed, without these solutions, it would be almost impossible for cryptocurrency to have got as far as it has. However, for crypto to really reach the ultimate audience and adoption levels, it is clear that a better and cheaper solution is needed. This probably means cutting out the intermediary crypto payment processors which sit between the traditional banking and cryptocurrency networks by connecting them in a more direct way. History has shown that cutting out middlemen usually results in cheaper costs and in the area of online retail, this could mean opening up crypto as a viable method of payment for an ever-increasing number of merchants. 

Could Nimiq OASIS Bridge The Gap By The End Of 2019? 


Nimiq has created a blueprint to develop Nimiq OASIS (Open Asset Swap Interaction Scheme), which is a middle layer solution to power an innovative crypto-to-fiat bridge. This approach is centered on making fiat currencies, like the Euro, behave as if they were blockchain compatible. This provides a unique way of connecting the traditional banking system to the crypto universe and enabling value transfers between the two. In short, the blueprint proposes a potentially revolutionary way to buy or sell crypto with a bank account holder. All this, without a single, centralized intermediary ever controlling the two assets that are being exchanged, and without the owner of the asset surrendering custody until the conditions of the settlement are verified. 

In a nutshell, the Nimiq crypto-to-fiat bridge could enable convenient and easy value transfers between the crypto and traditional banking ecosystems. However, it is important to understand that despite all it’s promising potential the solution is still just a blueprint, with a target go-live date of Q4 2019. 

What’s important to know is that there is more backing up Nimiq OASIS than just a blueprint. Nimiq is also collaborating with WEG Bank AG on the traditional banking network side of things (by acting as a gateway to the SEPA instant banking network) and the non-custodial exchange Agora.Trade on the crypto exchange side. 

Nimiq has also further the partnership with WEG Bank by acquiring a 9.9% stake in the bank, alongside Litecoin and Tokenpay. Agora.Trade, on the other hand, is led by Forbes 30 Under 30 list-maker Reto Trinkler. Both Nimiq and Reto have further strengthened their strategic partnership by pursuing additional blockchain research collaborations on blockchain scaling solutions. The first results of this collaboration between Nimiq and Trinkler Software were Albatross, an optimistic consensus algorithm. This blueprint proposes a proof-of-stake consensus algorithm that could achieve performance close to the theoretical maximum for a single chain. This initial research is currently undergoing testing and is being pursued in conjunction with Nimiq OASIS and the Nimiq-led crypto-to-fiat bridge. 

The target date of the first such crypto-to-fiat transaction is Q4 2019, with being support being offered for the Euro, BTC, ETH, and NIM. Nimiq’s vision is to expand Nimiq OASIS support to other fiat currencies, crypto assets, platforms, and financial institutions. What is particularly interesting is that the efforts for this innovative solution are viewed as being a wider contribution to the cryptocurrency community, rather than as a vehicle to exclusively promote and increase the use-case of NIM. 

If the Nimiq team and their partners at Agora.Trade and WEG Bank succeed in bridging the gap between the traditional banking and the crypto world, then the potential is certainly there to usher in a new wave of crypto merchant adoption, which could then render crypto payment processors obsolete. Nimiq OASIS could also have a big impact on both the stable coins and over-the-counter markets too. 

What Is Nimiq? 


In a nutshell, Nimiq is a decentralized payment system (like Bitcoin) in which the native NIM token is used as a store and transfer of value. Truthfully, there is nothing groundbreaking about this and you will see numerous cryptocurrency projects making similar claims. 

However, what makes Nimiq special is that the project has taken a cutting-edge browser-based blockchain approach. This means that users can connect to the blockchain with nothing more than a web-browser and do so without trusting any intermediaries. Now, that may sound like a word salad, but what this means is that you can create a Nimiq wallet without any downloads whatsoever and this makes things significantly easier and quicker for new users. Essentially, people using Nimiq as a store and transfer of value enjoy the ‘it just works’ feeling and this is combined with a emphasis on ease of use and simple user interfaces. 

Nimiq is a cryptocurrency designed for the masses and not just the tech-savvy. It has been designed and geared for mass-adoption from the ground up. Nimiq is also home to a diverse ecosystem of dozens of apps, many of which are supported or granted seed funding by the project itself. 

The Nimiq OASIS crypto-to-fiat bridge can be viewed as the embodiment of Nimiq’s wider vision of ‘barrier-free value exchange for everyone’ and that substance certainly makes it a crypto project worth following


For now, it is clear that the gap between the traditional banking sector and the crypto world has caused inefficiencies and created wider crypto adoption bottlenecks (particularly when it comes to merchant adoption). However, we might only have to wait until Q4 2019 for Nimiq OASIS to begin providing a viable solution to bridge that gap. That alone is probably a good reason to keep up to date with Nimiq OASIS developments at Nimiq. Maybe the gap between the traditional banking network and crypto universes will be bridged sooner than expected. 

Disclaimer: The author holds some NIM in their portfolio and is compensated in a long-term independent consulting capacity by Nimiq. This article must not be construed as investment advice. Always do your own research. 

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