Bitcoin is moving closer to Satoshi Nakamoto’s payment dream
The 15-year-old cryptocurrency has filled many roles – from source of speculation to hedge against inflation – but has struggled to find a clear identity. Now there are growing signs that it is moving towards its intended purpose: payments.
“Development in developing crypto-payments has continued apace, although it has gone somewhat unnoticed due to volatility in the broader market,” said Richard Mico, US CEO of Banxa, a payments and compliance infrastructure provider.
The amount of bitcoin stored on the Lightning network — a payment protocol layered on top of the blockchain — has jumped by two-thirds over the past year to reach an all-time high of 5,580 coins, according to crypto data firm The Block.
Crypto payment specialists have also seen strong volumes.
US-based BitPay said transaction volumes rose 18% last year against 2021. CoinsPaid said volumes in the fourth quarter of 2022 rose 32% compared to the previous year.
So why has crypto failed to fulfill pseudonymous inventor Nakamoto’s dream spelled out in a famous 2008 white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”?
Price volatility, slow processing speeds and persistent regulatory uncertainty are among the factors that have made cryptocurrencies unwieldy as a means of payment. Few sellers price goods or services in crypto.
Pegged
Nonetheless, proponents say bitcoin offers lower transaction costs and faster speeds than traditional cash, especially for cross-border transfers.
Apart from bitcoin, other cryptocurrencies including stablecoins, which are pegged to the value of traditional currencies, have emerged as popular alternatives, especially for cross-border payments, money transfers, plus in emerging markets where the value of local currencies has been hit by inflation.
Stellar, a blockchain that enables cross-border payments, saw the number of transactions on its platform increase to 103.4 million last month from 50.6 million in January 2022.
Cross-exchange trade volumes between bitcoin and Turkey’s lira and Brazil’s real increased by 232% and 72%, respectively, CryptoCompare data showed.
It is not entirely without problems for the widespread use of crypto for payments; first, there is the question of whether blockchains are ready to handle the stress of processing thousands of transactions at a time, especially without a concomitant jump in transaction fees.
Traditional financial firms looking to embrace crypto payments have also shrugged off recent market volatility. One, Visa, inked aBitcoin is moving closer to Satoshi Nakamoto’s payments dream deal this month with crypto firm WireX to directly issue crypto-enabled debit and prepaid cards.
“Crypto is evolving into a viable option for more and more people around the world,” said Banxa’s Mico. — Lisa Pauline Mattackal and Medha Singh, (c) 2023 Reuters
