In the August 2020 paper “Is Bitcoin Money?” Peter Hazlett and William Luther wrote that only “a small corner of the Internet exists where transactions are routinely carried out with bitcoin as a medium of exchange.” But that corner can grow in a room, or even in a house.
“Demand for bitcoin has definitely increased over the last year,” co-author Luther, an assistant professor of economics at Florida Atlantic University, said in a recent conversation. “As new users find themselves with bitcoin, and existing users find themselves with more bitcoin, it is only natural that more people will consider using it to pay.”
Others see a recent increase in crypto payment options. “Definitely,” Joanna Wasick, a partner at law firm BakerHostler, told Cointegraph, “More people own cryptocurrencies, and more companies are accepting them – sometimes even on Fiat’s incentives. There are also influx of exchanges and payment platforms that facilitate this type of transaction. I don’t think it happens without demand. “
Last week eBay was reported to be exploring crypto payment options including NXT auctions, while PayPal was asked to discuss the development of its own fixed currency. Elsewhere, Switzerland’s Kent of Zug recently launched Accepting Tax payment in Bitcoin (BTC) and Ether (ETH).
Christine Smith, executive director of the Blockchain Association, told Visa, PayPal – that there have been some big announcements from mainstream financial services companies over the past several months that point to the pace of seeing crypto as an alternative to payment. And from the crypto world – Blockfi.
Still very unstable?
Everyone believes that bitcoin is viable as a medium of exchange, however. “I don’t see it, and the reasons are simple: it’s an incredibly inefficient currency, in which transaction costs increase profits,” Ashwath Damodaran, a professor of finance at New York University’s Stern School of Business, told Cointegraph.
These inefficiencies are likely to be manifold, as BTC is nearing its 21 million limit. He said, “It is a distant thing for people to trust it.”
James Bullard, president of the St. Louis Federal Reserve, said that in the 19th century — before the American Civil War — it was common for private United States banks to issue their own notes, a practice consistent with today’s cryptocurrency. “They were doing business around [i.e., the banknotes], And they traded each other at different discounts, and people did not like it at all. “People want a uniform currency like the US dollar,” Bullard said.
Because bitcoin is yet to find widespread use as a means of exchange, a growing number have suggested that its proper role may actually be as an alternative store of value, like gold. But Luther, for one, does not think it makes much sense, tell Contelgraf:
“I do not understand people who are better suited to store bitcoin as a store of value than through the medium of exchange. An asset can only act as a store of value if positive value is expected in the future. And it will only have positive value in the future when it is of some use in the future. “
To say that bitcoin can be a storehouse of value today, and possibly a means of exchange one day – though perhaps not – can put a cart in front of a horse. In Luther’s view: “Bitcoin is expected to act as a medium of exchange in the future – that its price fluctuates today as people expect it to as a medium of exchange in the future Would be more or less useful. ” Furthermore, he believes that “conditioned on its utility as a medium of exchange in the future, it can also serve as a storehouse of value.”
Meanwhile, according to bitcoin, bitcoin is the most commonly used crypto payment platform, which processes some $ 1 billion annually in crypto payments. In March, Bitcoin accounted for 72% of Bitpay’s crypto payments (by number), well ahead of Bitcoin Cash (BCH) (14%) and ETH (10%), ranking second and third, respectively.
BTC can be quite good
There are actually valid reasons why crypto participants continue to use BTC for transactions – even though other crypto platforms may be faster with lower fees. Matty Greenspan, founder of Quantum Economics, recently said in a newspaper, “I don’t like spending my bitcoins, but I know that as soon as I get those words ‘just send me my bitcoin address’ the transfer is quick and cheap.” Will be in Adding further:
“I know for a fact that my analyst would be happy to get bitcoins, and I have a bitcoin stash that I can use to pay. However, if I say to him, ‘Hey, I got you some Let the XLM send, ‘So the response probably won’t be enthusiastic because it will probably need to spend time and exchange wallets and energy for energy research. “
Bitcoin plays a somewhat unusual role as a “niche medium of exchange” according to Lawrence White of the Keto Institute in a blog post today. “It is better than other media to make certain payments, even if for legitimate purposes, to be censored when routed through payment systems controlled by national governments and central banks.” For example, a grassroots human rights organization in Belarus has used the BTC network to transfer money to striking workers – in a way that the government cannot stop.
Others hope that BTC will gain mainstream acceptance as a payment option. BitPay’s chief marketing officer Bill Zilke told CoinTelegraph that “crypto is already an important payment method, as it has more than one billion volumes annually.” Firms like both top 100 merchants such as Newegg and Apex already “see a meaningful percentage of their sales in bitcoin and other cryptocurrencies.”
Requires more stability
However, more needs to be done before bitcoin and / or other cryptocurrencies are widely adopted as payment options. “The most important thing is that cryptocurrency needs to be more stable and prevented from becoming a speculative vehicle,” Wasik said:. I am going to sit on it so that I can realize more profit.
Damodaran agreed, because individuals who think of buying items to use bitcoin are concerned that their BTC will be 30% higher in a day or two. Sellers – like, merchants – “don’t want to get it because they’re worried about the exact opposite.” Damodaran said: “For a good cryptocurrency to make it, governments have to buy it, some version of a trusted authority to reduce transaction costs and [become] Less than speculative play. ”
related: The upcoming taprot upgrade of bitcoin and why it matters to the network
“The two biggest obstacles, in my view, are the volatility of its purchasing power and the relatively small number of transactions,” Luther said while walking Cointegraph: “a long way toward eliminating the second-layer solution. The second problem has been done – and there will be no doubt going forward. Of course, this means that most chain-bitcoin transactions will be for settlement only. “
“There are regulatory issues that we believe will encourage widespread adoption, such as adoption De minimis Discounts for cryptocurrency transactions, ”added Smith. For example, cryptocurrency transactions under $ 200 can be exempt from taxation.
Wasic said, “The regulatory regime needs to change people or at least be clear,” besides asking the question, “How many people who use crypto for payment know what the tax implications of their payment transactions are?” “
Do people want a common currency?
But what about Bullard’s contention that people are not eager to deal with all these private forms. What they really want is a similar currency, such as the US dollar.
He said “Bullard has a point – people generally want a uniform currency” they are “decentralized and deflationary – or, at least, non-inflationary – by design”. Fiat, Comparison, Built and Managed by Governments, “Design is by Inflation. […] Dollars lose value over time. “
Bullard, in Luther’s view, also throws light on some important historical details. Most pre-civil war notes were not exempted, he said – “they usually did equal business.” Were they exempted only when they aired far away from the issuing bank. For example, bank notes issued in Chicago can trade in New York at a discount – but only because they were expensive to redeem. Luther continued:
“Banknote collectors had to send them back to the issuing bank to redeem them for gold. Then, they had to bring that gold back home. And, of course, they risked theft both ways. ”
Banks would prefer to provide a loan redemption option, but regulatory restrictions on branch banking did not allow this. According to Luther: “As Bullard claims, far from demonstrating an indomitable desire for a similar redeemable currency, historical evidence suggests that many redeemable currencies may prevail, even as a bad regulator. Even under the system that makes them perform far worse. “
If the BTC cannot make it, can the stabilizers prevail?
Nevertheless, the problem of instability with crypto persists, which is why some believe that a payment mechanism for crypto starts with StatesUp. “We see steady stock usage increasing”, Zilke answered, “Accepting or paying with fixed stocks opens up new possibilities for global businesses that require dollar stability but blockchain payments Safety, speed and efficiency. “
“I like the idea of Stablox,” Luther said. But as is the case with traditional cryptocurrency, they still require some improvements. “For one, they are stable relative to the dollar, meaning they will never be better managed by the dollar.” A second concern is “Luther said,” that they usually need to rely on the issuer to manage the supply – a risky proposition.
related: Method of stable posture: a journey towards stability, trust and decentralization
Damodaran was skeptical about the utility of stable stocks, which he described as “solutions in search of problems”, adding: “Of all the problems in the world, the one currency that is not working is the world’s top 100. I do not have “
But this is a problem in some places, causing Smith, for one, to believe that crypto as a payment option has previously been widely “non-US jurisdictions,” especially in countries “in particular countries”. Cannot hold the same access. Payment system that simplifies internal transactions. “
Meanwhile, White listed some other current BTC use cases, including “fundraising by activists in Nigeria, Hong Kong and Russia, savings campaigns by people migrating from Venezuela, remittances to Iran, and peer-to-peer among people from China.” Two-peer transistors include state avoidance demands. Financial monitoring. “He concluded:” Such uses – along with forecasts of broader future usage – are sufficient to maintain the positive market value of bitcoin. “