For a user to manage and use cryptocurrencies he needs a crypto wallet. A wallet is comparable to banking applications and can be downloaded onto smartphones and other devices. In general, they are straightforward to use, but there are a few issues that users have to be aware of. First of all, there is the problem of losing the password to one’s digital wallet. If a user loses access information to his Bitcoin wallet, there is no possibility to unlock the wallet again. Due to the lack of an institution behind the blockchain technology, there is no one to contact for the user to possibly reset his password. According to The New York Times, around 20 per cent of the 18.93 million Bitcoin (as of January 19th , 2022) in circulation are lost in digital wallets whose owners have forgotten or lost their passwords (Popper, 2021). Most of the victims are early adopters of Bitcoin who stored their passwords on protected hard drives which they are unable to unlock. This problem has even led to the creation of a new form of business. Companies like “Wallet Recovery Services” offer people a service to regain access to their digital wallets. In case of success, customers are then charged a percentage of the wallet’s value.
A major problem with using Bitcoin for daily transactions is the scalability of the blockchain network and the resulting transaction cost. The average rate of daily transactions has constantly stayed between 2 and 4.5 transactions per second since 2017, with the highest and lowest absolute values of 7.7 and 1.2. In comparison, credit card processes like Visa can handle up to 24.000 transactions per second, the average number lies at around 2.000. (Sedgwick, 2022)
As the first country in the world, El Salvador made Bitcoin a legal tender that can be used in daily life as well as for tax payments. Bitcoin acts as an alternative method of payment besides the country’s other currency, the US Dollar.