Cryptoverse: Bitcoin moves towards Satoshi's payment dream
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[February 28, 2023] By
Medha Singh and Lisa Pauline Mattackal
(Reuters) - Satoshi Nakamoto would be proud. Adolescent bitcoin may
finally be repaying its creator's faith.
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 it's edging towards its
intended purpose: payments.
"The development in terms of building out crypto payments has continued
apace, even if it's gone somewhat unnoticed because of the volatility in
the broader market," said Richard Mico, U.S. CEO of Banxa, a
payment-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 hit an all-time high of 5,580 coin, according to
crypto data firm The Block.
Crypto payment specialists have also seen strong volumes.
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U.S.-based BitPay said transaction volumes jumped 18% last year versus
2021. CoinsPaid said volumes in the fourth quarter of 2022 rose 32%
compared with a year before.
BITCOIN AND BRAZILIAN REAL
So why has crypto failed to fulfill pseudonymous inventor Nakamoto's
dream, spelt out in a famed 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 rendered cryptocurrencies
unwieldy as a means of payment. Few merchants price good or services in
crypto.
Nonetheless, proponents say bitcoin offers lower transaction costs and
quicker speeds than traditional cash, especially for cross-border
transfers.
Aside from bitcoin, other cryptocurrencies including stablecoins, which
are pegged to the value of traditional currencies, have emerged as
popular options, particularly for cross-border payments, remittances,
plus in emerging markets where the value of local currencies have been
hit by inflation.
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Representations of the Bitcoin
cryptocurrency are seen in this picture illustration taken June 7,
2021. REUTERS/Edgar Su/Illustration
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Stellar, a blockchain that enables cross-border payments, saw the
number of trades on its platform increase to 103.4 million last
month from 50.6 million in January 2022.
Volumes for trades across exchanges between bitcoin and Turkey's
lira and Brazil's real increased by 232% and 72%, respectively,
CryptoCompare data showed.
CAN YOU HANDLE THE STRESS?
It's not all smooth sailing for the widespread adoption of crypto
for payments; for one thing, there's the question of whether
blockchains are ready to handle the stress of processing thousands
of transactions at a time, especially without a simultaneous jump in
transaction fees.
Efforts by some of the world's largest economies, including Japan,
China and India, to create their own digital currencies (CBDCs)
could also choke crypto payments growth, say some market players.
For others, though, growing interest in CBDCs is evidence that
blockchain payments tech is here to stay.
Traditional finance firms looking to embrace crypto payments have
also shrugged off recent market volatility. One, Visa inking a deal
this month with crypto firm WireX to directly issue crypto-enabled
debit and prepaid cards.
"Crypto is evolving into a viable alternative for more and more
people around the world," said Mico at Banxa.
(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru;
Editing by Tom Wilson and Pravin Char)
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