It is a well-known fact that the majority of investors in both traditional financial and cryptocurrency fields see Bitcoin (BTC) as a store of long-term value similar to “digital gold”. And while it may be the dominant story surrounding assets, it’s worth noting that in recent years there has been an increase in the use of flagship crypto as a medium of exchange.
At this point, the central bank of El Salvador recently revealed that citizens living abroad have sent more than $ 50 million to friends and family. In detail, El Salvador’s Central Reserve Bank Governor Douglas Rodriguez said $ 52 million worth of BTC transfers were processed through the country’s digital wallet service Chivo in the first five months of this year alone, 3.9%, 100 million. Announced that it recorded $ 18 million. Increase in value compared to the same period in 2021.
Bitcoin as a payment medium is on the rise, as evidenced by the significant increase in the adoption of layer 2 payment protocols such as Lightning Network. At this point, BTC’s transaction volume has now increased by a whopping 400% in the last 12 months.
Therefore, Bitcoin is still lagging behind in key areas when compared to other networks such as Ethereum, Solana and Cardano, making it useful as a daily transaction medium, especially from a long-term perspective. It is worth considering whether is really feasible, including scalability and transaction throughput.
Is Bitcoin’s usefulness as a payment method overrated?
Bitcoin has lost the benefits of its first mover as peer-to-peer (P2P) cash, according to Corbin Fraser, head of financial services for Bitcoin exchange and cryptocurrency wallet developer Bitcoin.com. This is due to the fact that since 2016, the Bitcoin community has done everything possible to explain to users that Bitcoin should never be used for payment or remittance related purposes. is. He added:
“The use cases for remittances and P2P cash payments have moved to other blockchains with high throughput and low fees. Bitcoin has focused on these use cases where we found homes under various other banners. It will be difficult to reintroduce the concept of daily payments to the guessed user and other communities. “
Fraser said the situation is even more complicated given the difficulty of things, such as the hassle of a typical crypto user deploying a Layer 2 solution like Lightning Network to process payments. “Competition in low-cost, high-throughput chains has increased significantly over the last two years. Bitcoin is just around the corner when it comes to refocusing on using Bitcoin for daily payments. “Masu,” he added.
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In a technical note, he said that Bitcoin’s limited throughput of 5 transactions per second fills its memory pool and expands the toll market as people begin to flock to the blockchain for daily transactions. He emphasized that it means that more and more users will be priced and create a negative experience for users who intend to use it for daily payments. He said:
“Even in the event of a large spill from Layer 1 BTC to the Layer 2 BTC protocol, the system will struggle to both deposit and withdraw from Lightning Network, though, but Bitcoin’s core development. One can make some changes to further enhance the usefulness of payments. If the BTC community can be gathered behind payment use cases, consensus could be reached. “
Toya Zhang, Chief Marketing Officer of Cryptocurrency Exchange Bit.com, could do that with the development of various protocols and stablecoin, even though Bitcoin was originally designed as a payment currency. Told Cointelegraph that it was very low. Even if you implement a Layer 2 solution, it can quickly be used as a payment token. She explained further:
“In the long run, limits related to confirmation time and price volatility are not an issue. The reason why Bitcoin cannot serve as a remittance medium is very simple, and Bitcoin’s assets are too pure. It will only fulfill its original mission if all payment-centric cryptocurrencies fail. That possibility has probably sailed. “
BTC transaction number looks unstable
Andrew Weiner, Vice President of Cryptocurrency Exchange MEXC Global VIP Services, said BTC tends to be used for large payments technically and philosophically, but uses Layer 1 blocks of Bitcoin to make micropayments. I told Cointelegraph that things are difficult. Why are so many developers driving micropayments on Bitcoin’s Layer 2 network?
By this point, he said Bitcoin’s micropayments were completely flat and public capacity was less than $ 5,000 from 2018 to 2021. But last year, the situation took a whole new level when the network increased from 10 million users to about 80 million from October 2021 to March 2022. In this regard, Weiner emphasized:
“The main reason for this is that the complexity of Layer 2 networks (such as Lightning Network) is reduced and the infrastructure for setting up nodes and utilizing the network is gradually maturing with more and more wallets. Payment processors continue to grow. Node cloud hosting and node management software companies support BTC’s Lightning payments, enabling companies to further integrate into these products and services. “
However, whether BTC will be a day-to-day payment method is whether its infrastructure is mature enough to achieve low cost and convenient use, sufficient for large corporations, institutions, national governments, etc. Admitted to relying on assets that meet the three core criteria of use. We are happy to use our assets and, finally, make sure we can provide a sufficient level of security and privacy.
Even though Yohannes Christian, a research analyst at Digital Asset Exchange Bitrue, is one of the most secure networks in existence today, Bitcoin’s remittance function is one of the worst in terms of speed and price. Said. He pointed out that an asset can only process 5-7 transactions per second (which is 3,500-4,000 transactions in a 10-minute block). In addition, when this transaction peaked, Christians said it could take up to an hour to settle payments, he added:
“In terms of fees, the Bitcoin network follows the law of supply and demand, with a minimum of $ 0.20 and a maximum of $ 50 per transaction during the heyday of Bull Run in 2017. This congestion issue is a problem with daily Bitcoin payments. It can cause systematic problems. “
He also said that while developing a Layer 2 solution could help solve some of the scalability issues in the problem, it will still take some time before the network becomes available for everyday transactions. Is thinking. To get an overview of things, the Bitcoin network currently has a 10 minute block transaction with a block size of only 1MB. In comparison, its close alternative, Bitcoin Cash (BCH), has a block transaction of 2.5 minutes and a block size of 32MB, which is 128 times faster than BTC.
The future of Bitcoin lies in a layered approach
Muneeb Ali, CEO and co-founder of TrustMachines, an ecosystem of Bitcoin-centric applications and platform technologies, can easily add additional utilities and scalability on top of a decentralized base as good as Bitcoin. I told Cointelegraph that I could build it. :
“That’s what we see in other blockchain ecosystems and what we can expect from Bitcoin. When it comes to global money transfer capabilities, Bitcoin is decentralized, long-term durable and operational. It offers the most powerful features in terms of time and accessibility. Transfers can be made in BTC or via stable coins built on the Bitcoin layer. “
Ali said that despite the 10-year value of Bitcoin development, we are still in the early stages of a growing ecosystem. This is because it has traditionally been difficult to build on the Bitcoin ecosystem, given that the base layer is very simple and lacks advanced programming capabilities.
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However, with different Bitcoin layers such as Lightning Network, Stack, and RSK, developers can build more complex applications relatively easily. “Developer traction is an early indicator of increased app development and use by mainstream users, and it’s starting to be seen around 2021,” he concludes.
Therefore, as we move toward the decentralized future of digital finance, it seems that more and more countries, institutions and companies are willing to use Bitcoin as their payment currency due to various factors. However, the fact that BTC is still experiencing significant fluctuations in day-to-day price behavior still limits the overall range of ease of use, especially as a payment medium. Thus, it will be interesting to see how the future of digital assets will evolve.