Bitcoin Pace Has Been at a 13-Year Stagnation, Can BTC Payments Make a Breakthrough?
Although Bitcoin originated more than a decade ago with Satoshi Nakamoto’s vision to facilitate peer-to-peer electronic cash transactions, its current use reflects its early days. Bitcoin (BTC) transactions are circulating at a pace reminiscent of 13 years ago. This statement came from CryptoQuant CEO Ki Young Ju, who emphasized the stagnation in Bitcoin’s speed.
Bitcoin Speed Stagnates
Ju noted that the trend indicates a shift towards the digital gold narrative rather than widespread adoption in daily transactions. Bitcoin’s “Digital Gold” concept is attracting attention. That’s why institutions are increasingly holding cryptocurrency as a store of value rather than using it for frequent transactions.
Source: Ki Young Ju | X
The speed of Bitcoin transactions, shown in a chart shared by Ki Young Ju, is at a level similar to 2011. This reflects a long-standing trend of slow movement in the Bitcoin ecosystem. According to CryptoQuant, although Bitcoin velocity has increased several times in these 13 years, it is now back to 2011 levels.
Nick Tomaino, a former Coinbase executive, remembers the early days of Bitcoin adoption. He noted that Coinbase initially raised significant funding on the assumption that Bitcoin would revolutionize payments and spur the creation of new applications. However, the facts changed when the platform accepted merchants like Overstock to accept Bitcoin, but the long-term viability of Bitcoin payments has been elusive.
Tomaino’s views shed light on the challenges facing Bitcoin as a payment method. He also emphasizes that there is no compelling business case for Bitcoin payments versus emerging alternatives such as Ethereum and decentralized applications. He also highlighted how the launch of Ethereum changed the entire crypto payments game.
Also Read: $2 Billion Inflow Coming to Bitcoin But Ethereum Stands Out, Here’s Why
Limitations of BTC Payments
Chainlink community lead Zach Rynes took a deeper dive into the technical limitations of Bitcoin for payments. He specifically highlighted Bitcoin’s lack of programmability compared to Ethereum and other blockchain platforms. Rynes highlighted two important issues: volatility risk and payout accuracy; Both of these are critical for merchants considering paying with cryptocurrency.
Rynes explained that Ethereum’s smart contract capabilities enable the seamless conversion of crypto assets into stablecoins. Therefore, it reduces volatility concerns for traders. Additionally, Ethereum’s programmability enables automatic verification of payment amounts. This reduces the burden of manual reconciliation for erroneous payments.
In contrast, Bitcoin’s UTXO-based architecture presents obstacles to implementing similar functions directly on its blockchain. While the Lightning Network offers potential solutions to verification issues, challenges remain in managing liquidity and scalability. This limits Bitcoin’s effectiveness in addressing payment shortfalls.
Additionally, Rynes’ analysis underscores the complexity of Bitcoin payments. It also highlights the need for pragmatic solutions to meet trader needs while maintaining decentralized management and non-custodial principles.
Despite the backlash from Bitcoin maximalists, Rynes argues that acknowledging Bitcoin’s limitations in payment processing is necessary to spur innovation. But Bitcoin maximalists also see hope in increasing BTC payments as the Layer 2 network makes great progress towards the goal. However, Tier 1 BTC payments may not become mainstream anytime soon.
Also Read: How Will Bitcoin Benefit from the Expiration of the US-Saudi Petrodollar Deal?
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