Innopay: Cryptocurrencies potential market disruptor

05 August 2014 4 min. read

Despite the current skepticism that surrounds cryptocurrencies like Bitcoin and Litecoin, the technology and ideas behind virtual currencies have a bright future and even have the potential to disrupt the financial sector and other transaction-driven eco-systems, claims a new white paper from consulting firm Innopay.

Digital currencies have been around for more than two decades now, ever since the launch of Digicash in the early ‘90’s. Since then the alternative currency market has evolved to virtual currencies (e.g. Facebook credits, Amazon coins) and Cryptocurrencies – a virtual currency system based on the principles of cryptography. Since the launch of the first cryptocurrency in 2009 (Bitcoin) the transfer and payment method has been surrounded by mystique and uncertainty – some calling the approach a revolutionary breakthrough in payments, others referring to it as a system doomed to fail.

To understand the implications of cryptocurrencies for the markets that drive on high-volume transactions (e.g. financials, telecom, retail, etc), Innopay decided to conduct a research on its potential. The end result – the white paper ‘Cryptocurrencies: Exploring a revolutionary technology’ – bundles Innopay’s own lessons learned on the topic combined with desk research and key findings from interviews with eleven leading payments and cryptocurrency experts in the field.

Cryptocurrencies - Exploring a revulutionary technology

Blockchain technology
The research report concludes that cryptocurrencies have the potential to become a breakthrough innovation. Currently cryptocurrencies are perceived as an alternative payments method, a currency. Yet its real value lies in the technology behind cryptocurrency, the so-called ‘blockchain technology’, a ledger of transactions that through a cryptographic algorithm keeps cryptocurrencies secure and allows all users to agree on exactly who owns how many units. The approach in essence makes transactions more reliable (as faking a transaction is nearly impossible) and boosts transparency within the entire system (as the entire history of transactions is stored within the blockchain network).

Although the ‘blockchain technology’ was first applied in Bitcoins by its founder Satoshi Nakamoto, the underlying building blocks of the principle can be applied to any situation where assets, information or resources need to securely change hands. This will lead to applications of cryptocurrency technology beyond the financial services domain, such as for loyalty schemes, digital invoices, digital identity processes or authorization of connected devices in the Internet of Things.

Similar to other technological-driven innovations, cryptocurrencies and the underlying blockchain technology is based on an open-source approach to business. The system is therefore transparent and open to continuous innovation, making it comparable to the Internet, which has used the principles of open-source to evolve from an innovation with major bugs to an indispensible part of society.


“By leveraging its unique advantages, cryptocurrency can become an innovation on par with the Internet itself, and can enable a myriad of services that will revolutionize the way we do business online,” says Gijs Burgers, consultant at Innopay.

Tipping point
Despite that massive potential, the success of cryptocurrencies is not guaranteed, warn the Innopay consultants behind the research report. The main challenge lies in reaching the tipping point – the point after which mass adoption starts. If all stays the way it is, cryptocurrencies risk remaining in a deadlock situation. “Regulators are waiting to see how the market develops before issuing regulations, banks are waiting for the regulators to come up with clear guidelines and entrepreneurs are waiting for acceptance by the banks and the regulators,” says Burgers. “ This early market stage calls for pioneers within each stakeholder group, who dare to move forward and show confidence that challenges can be solved as they appear.”

Jacob Boersma - Gijs Burgers - Jacqueline van Huijstee - Maarten Rood

The consulting firm sees three areas that will be instrumental in the success of cryptocurrencies. A clear governance around the system will have to be erected, one which involves cryptocurrency initiators, governing bodies and (financial) players in the eco-system. Secondly, regulation will have to come in place to ensure that confidence in the technology and existing systems rises and to facilitate the learning curve the system will have to go through. Lastly, education is needed, on “both the good and bad sides of cryptocurrencies” says Burgers. Through objective learning, testimonials and case studies the concept of cryptocurrencies and blockchain technology will have to reposition itself from its current ‘mystique and dark’ image to a more positive and sustainable image.