Bitcoin is Popular, But It Won’t Transform Payments Any Time Soon

in crypto •  25 days ago 

After months of relative dormancy, Bitcoin is having a big month. After hovering around $4,000 for most of 2019, this spring has brought a thaw to a year-long crypto winter that has kept prices constrained.

First, the digital currency broached the $6,000 price point, a critical resistance level for ultimately higher valuations. The token even briefly reached $8,000 for the first time since last summer.

These positive price signals are rekindling a conversation about the role of digital currencies and their disruptive potential. In an interview with Fox Business, famed Bitcoin bull Tim Draper, rehashed his position that Bitcoin would exceed 250,000 by 2023.

Believing that the digital token could attain 5% of the global currency market share, Draper and other supporters believe that its next phase of adoption will consist of making payments using Bitcoin.

In some ways, it seems like Draper is on to something. Bitcoin has consolidated its market presence, attaining a 58% market dominance for the first time since it comprised 85% of the crypto market in 2017.

However, while Bitcoin is indelibly popular, and it will undoubtedly play an important role in the future of finance, it won’t be transforming the checkout experience any time soon. Here’s why.

#1 – Nobody wants to make purchases with a volatile currency.*

Bitcoin’s erratic value has been a contentious point practically since its inception. Perhaps nothing illustrates this better than the annual celebration of Bitcoin pizza day, a sardonic ritual dedicated to Laszlo Hanyecz’s decision to spend 100,000 Bitcoins on pizza in 2010.

Image by Igor Ovsyannykov from Pixabay

Today, those tokens would be worth $800 million, a hilarious discrepancy that demonstrates the problem of using Bitcoin as payment.

While retailers like Starbucks, Whole Foods, GameStop, and Nordstrom are making waves by accepting Bitcoin at checkout, the same problems that plagued Hanyecz in 2010 apply to users today. If Bitcoin is going to reach $250,000 by 2022, there is little incentive to buy lattes with the token.

Of course, that doesn’t mean that cryptocurrencies won’t play an essential role in the future of transactions. Stablecoins and asset-backed tokens use the same technology that underscores Bitcoin, but they are usable in ways that Bitcoin won’t be for years, if ever.
With e-commerce already dominating the retail space and head-turning data breaches increasingly on the rise, cryptocurrencies are a natural next step for the future of payments. Those payments just won’t be made using Bitcoin.

#2 – Payments exclude privacy

Bitcoin was initially intended to be a peer-to-peer electronic cash system that didn’t have to answer to central governments or financial institutions. Therefore, bringing the digital token into the institutional environment is inherently problematic.

First, using Bitcoin at checkout requires a custody service, something that is close to using Bitcoin, but failures to truly encapsulate the process. For instance, many retailers accepting Bitcoin as payments are using Spend, a custodial service that collaborates with the Gemini crypto exchange to immediately convert Bitcoin to fiat.

It’s a weird workaround that doesn’t really fit the spirit of digital currencies. Making matters worse, these services require users to provide personally identifiable information, including names, email addresses, home addresses, and phone numbers.

In other words, users provide the same information that they offer to a traditional credit card or other payment services. As retailers like Overstock.com have proven for a while, accepting Bitcoin at checkout makes good headlines, but it’s not the real deal.

#3 - Stability

Before businesses can accept Bitcoin or other digital currencies at checkout, they need to become more stable. Throughout its rise in popularity, Bitcoin has demonstrated erratic price behaviors, and it’s not uncommon for its value to rise or fall by double digits in a single day or even within an hour.

For those hoping to use this rapidly fluctuating currency to make purchases, Bitcoin Pizza Day serves as an ominous reminder that making purchases in crypto is risky.

Indeed, the number of merchants receiving Bitcoin at checkout has fallen precipitously since the token’s 2017 peak. In comments to Bloomberg, crypto-advocate Graham Tonkin notes, “I don’t believe [Bitcoin] fits the characteristics of money very well.”

In response, so-called asset-backed tokens like Tether have emerged in an attempt to provide a more stable buying experience. Although the token claims to be backed 1:1 by dollars in the company’s bank account, Tether has been mired in numerous controversies.

However, stability is the goal, and Xank’s free-floating stable coin bridges the gap between the unpredictability of Bitcoin and the ineptitude of Tether by. The digital currency has an investment component, but it also makes cryptocurrencies a real option for businesses by providing a stable asset that can be used to fuel the digital economy.

#4 – Bitcoin is more like digital gold.

Finally, and perhaps most obviously, Bitcoin seems to work best as a speculative asset, more akin to gold than to modern cash.

Many pundits, including crypto evangelist and founder & CEO of Galaxy Digital, Mike Novogratz have ascribed to this belief. In comments to Bloomberg, Novogratz reaffirmed his belief that Bitcoin will ultimately become a version of digital gold. That doesn’t mean that Bitcoin can’t be valuable.

In the wake of Bitcoin’s recent price movements, others, like Gemini co-founder and CEO Tyler Winklevoss, expressed his view that Bitcoin is gold 2.0. In a tweet, Winklevoss notes, “It matches or beats gold across the board. Its market cap is ~140bil, gold’s market cap is ~7tril. Do the math!”

Indeed, when TD Ameritrade executives recently conveyed that they have “tens of thousands” of clients interested in crypto, the message was clear. Bitcoin is a noteworthy speculative asset that is remaking the financial system in its wake.

In the meantime, its most significant impact might be the broad exposure to cryptocurrencies, which will eventually make an impact on the way that people buy and sell items in the digital age.

In short, Bitcoin is popular, but it won’t be transforming the way we buy things anytime soon. In fact, it might never be the payment method that many are clamoring for. Fortunately, there is a diverse crypto ecosystem ready to take that torch.

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The whole stability thing is correct, people need bitcoin to have some sort of "when sending stability protocol" on another layer maybe.

Without stability people would not use any crypto, personally, I don't use bitcoin to buy things as I know the price fluctuation could make me regret, also, the seller asks more because of his risk. interesting to see what the market evolves to in the coming years.

how about pegging bitcoin to gold price? maybe that helps stabilize the price

Bitcoin already transformed payments as we know it.

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Yes exactly. There should be more applications to make btc more stable

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I do not agree. I think Bitcoin is perfectly fine the way it is. Stable is overrated.

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In regards to the custodial bit, there is actually an app that helps bridge the gap: BTCPay. It uses a node in a way that no third party would be necessary. https://btcpayserver.org/

Great time for crypto ! The crypto market cap is showing positive signs, with bullish moves in bitcoin (BTC) and Ethereum (ETH).

I don't see bitcoin transforming payments either. But With the advent of privacy coins such as Veil, Monero, Dash, Pivy etc, payments has come to be facilitated by blockchain. What more do we need other than privacy and security on blockchain technology?

I think that bitcoin will popular,

As time goes by our typical days changes our simple life become much easier because of the digital technologies and Digital Nomads take advantage of it. Read their lifestyle here; https://blog.kucoin.com/how-to-live-a-decentralized-lifestyle-as-a-crypto-digital-nomad-sk-st

Privacy is just the real thing to look out for. I strongly support privacy wallets to do this. You can take a look at veil platform.