This year, attention is focused on the roller coaster market, where the price of bitcoin is sharply fluctuating, but the number of companies announcing that they will start a bitcoin payment service is steadily increasing. It’s not about a small startup that jumped in with an ideal goal.
In a recent release of Visa’s first quarter results, Al Kelly said that Visa could add cryptocurrency payments in the future. He said that bitcoin is still “not being used as a meaningful payment method,” but how Visa customers can use Visa credential to purchase cryptocurrency or use it as cash at 70 million merchants worldwide. Explained.
Currently, Visa is supporting Bitcoin payments by providing credit card payment infrastructure to 35 cryptocurrency companies.
PayPal, which launched a (investment) service that allows all customers to buy and sell cryptocurrency within the app at the end of last year, also recently released its fourth quarter 2020 earnings. At this meeting, which was the first performance announcement after the launch of the service, PayPal announced that it is preparing a (payment) service that allows you to purchase goods and services with cryptocurrency at over 29 million affiliates. In addition, he said that he is “investing heavily” in the cryptocurrency business sector.
Large cryptocurrency companies are also jumping into the payment industry. Last month, Gemini, a cryptocurrency exchange and trust company, launched a credit card that accumulates 3% of the purchase amount as points. In December 2020, cryptocurrency lender BlockFi also announced that it would launch a similar credit card in early 2021.
However, this is only the tip of the iceberg. In the past few months, cryptocurrency exchanges such as Binance, Coinbase, Paxful, and BitPanda have launched personal cryptocurrency debit cards. This week, cryptocurrency platform Uphold announced the acquisition of card issuer Optimus Cards UK.
Binance, the largest cryptocurrency exchange in the world, announced that it is launching a payment system called Binance Pay to encourage cross-border cryptocurrency payments. Binance CEO Changfeng Zhao argued, “Payment is the most obvious practical use case of cryptocurrency.”
But wait
Will it be? ‘Crypto’ is a term that encompasses a wide variety of assets, but for now, let’s focus on bitcoin.
The white paper that introduced bitcoin to the world in 2008 begins with the following sentence.
“The complete P2P method of electronic money will enable direct payment between the two parties without the involvement of financial institutions.”
It is unknown whether Satoshi Nakamoto, known as the founder of Bitcoin, used payment as a representative practical use case for cryptocurrency. It is controversial as it has been written elsewhere that Bitcoin could be a store of value. However, as time went on, the scalability problem inherent in the protocol design became more prominent, making it clear that it is practically difficult to process large-scale payments with Bitcoin.
Some point out that the bitcoin payment rate is slower than other payment methods, but this is somewhat misleading. Bitcoin payment takes about 10 minutes on average. It takes up to an hour for payment to be finalized.
In comparison, credit card or non-face-to-face payments are processed much faster, but payments usually take several days to complete. In addition, since data is collected in electronic transactions, there is also a problem of financial privacy. Cash payments are characterized by being instantaneous and not trackable, but the payer must actually be there.
In addition, Bitcoin payments are relatively expensive. Not long ago, the average bitcoin payment fee rose to the highest level since January 2018.
The industry is developing solutions such as Lighting Network to speed up Bitcoin payments and lower costs. The Lightning Network is the addition of a separate payment layer that connects to the Bitcoin blockchain at certain intervals. Adoption of such technology is on the rise, but it is still in its infancy.
Existentialist question
However, most people who say that Bitcoin cannot be a real payment method have easy access to other payment systems that already work. However, not all regions of the world have good financial access.
Depending on the region, there are strict regulations prohibiting overseas remittances, and in some countries, even domestic remittances are not well equipped with payment infrastructure. Even in developed countries, some groups do not have access to online payments and often rely solely on banks.
Bitcoin can be a tool that gives freedom to thousands of people who have not been able to access the payment system. Also, if bitcoin is widely used as a payment method, the usefulness of bitcoin increases accordingly.
So, can Bitcoin be both a store of value and a payment method? This seems to be the most important question.
Bitcoin is a means of payment and value storage Reasons to be bothIs as follows.
First of all, the value as a means of storing value depends on the usefulness of Bitcoin itself. Regardless of the price, if there is a lot of residual demand to use bitcoin as a payment method, you can invest with confidence that the demand for bitcoin will continue to increase.
In addition, even for the health of the Bitcoin network, the number of people who use Bitcoin as a payment method should continue to increase. The reason is that each time a new bitcoin block is mined, the number of bitcoins awarded as rewards will be reduced by half. As the rewards that can be received when mining Bitcoin blocks decrease, miners will move according to transaction fees.
There is still not much demand to use Bitcoin as a payment method. In a survey conducted by Binance Research of 16,000 cryptocurrency users in 178 regions, only 38% of respondents view bitcoin as a medium of exchange.
In a December 2020 survey of PayPal customers by Susquehanna Financial Group, 53% of them said they would use bitcoin to purchase products if they own it.
Bitcoin is a means of payment and value storage The reason not to be bothIs as follows.
First of all, when bitcoin begins to be widely used as a payment method, governments feel it as a threat to fiat currency. Actions to contain BitcoinThere is a reasonable concern that it may be able to go on.
The government may seem to value markets and asset prices more, but it is settlement that is directly linked to monetary policy, consumption and wages, all of which are linked to votes. Investing is putting money in one place and waiting for it to rise, but settlement is moving money. And humans and regulation focus on moving instinctively.
Also, according to Gresham’s Law, people will rarely use Bitcoin if it is considered a true store of value. In accordance with Gresham’s law that low-value (deterioration) drives out high-value (positive), people will store’positive’ bitcoins and use other assets of lower potential as payment methods.
Last gateway
Questions like this are likely to be the final gateway for many cryptocurrency payment companies. Maybe it has nothing to do with Bitcoin.
Currently, the crypto asset with the least regulatory uncertainty is Bitcoin. There are still many unclear regulations on stablecoins. (Some time ago, the U.S. Currency Supervisory Service (OCC) released a statement of opinion that banks can handle stablecoins, but as Biden’s era enters, there is a possibility that this will be absent if a new director takes office.)
So, first of all, it would be safest to try bitcoin as a new payment method. Probably after that, Ethereum will follow, and wherever Ethereum goes, stablecoins will follow.
What banks or payment companies currently working on cryptocurrency payment services are looking at is potentially a bigger food for the future. It may be that the day will come when the blockchain-based payment method that handles various kinds of assets will become the main payment method someday.
If that happens, we will all use cryptocurrency, private stablecoins, digital dollars and GameStop shares in the form of tokens in our digital wallet. These companies may be preparing for this future with a view to the future. It could be a picture of a future financial environment where users’ choices are much wider.
Cryptocurrency payment functions that exist today are fulfilling their purpose. It provides useful services to many people and works together with the advanced market infrastructure. In addition, it is creating the basis for popular introduction of various types of assets with various usefulness.
In the future, if there are more options besides Bitcoin, the value of Bitcoin as a payment method will be determined. Whenever a new service emerges, we will experiment with its introduction, and through it, we will learn what users of today and tomorrow value value. Such experiments are welcome.
· Translated by NewsPeppermint.
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