Can Bitcoin Claw its Way Back to Being a Payment System?
The header of the Bitcoin white paper defines the digital currency as “A Peer-to-Peer Electronic Cash System.” However, a deeper look into what Bitcoin has become, and where it has come from, shows a very different picture.
Users have flooded to the cryptomarket, usually through the gateway that is Bitcoin, for its possibilities as a store of value and an expanding asset. Its potential to work as a legitimate payment system, one that could replace fiat and revolutionize money, has fallen away somewhat.
There are ways in which to make Bitcoin work as payment system though, even for micro payments like for a cup of coffee, but in all reality, it is still very much a tool for the rich when it comes to its buying power.
There are also plans in the pipeworks to try and bring Bitcoin back to its original purpose, with the Lightning Network being tested in certain instances. The belief being that Lightening network can cut the exorbitant transaction fees, and slice the waiting times to a manageable level.
Not for your daily cup o’ Joe
The way Bitcoin has grown and been shaped with upgrades such as SegWit2x failing to fire has seen its scaling languish. This, tied to the influx of users on the network, has led to a backlog and bottleneck which in turns means slow transactions, and expensive ones to boot. Hardly ideal for a currency.
Because transactions must compete to get picked up by miners, who favor the ones that offer the biggest fees, somebody who wants to move $1 mln can easily afford to offer $20, but someone who wants to buy a pizza probably can’t.
This is why Bitcoin is still growing in adoption for things like art, luxury cars, and real estate as a payment method. The fees matter little, and the transactions are speedy, but this smacks a bit of elitism and inequality, something very much against Bitcoin’s mantra.
So, what if you are steadfast in leaving fiat currencies behind and freeing yourself with Bitcoin as a functioning currency?
There are ways to do this, using major exchanges and popular wallets. People, who for instance are with Coinbase, can make Bitcoin payments to one another instantly, through the provider’s own books, without the cost or delay of broadcasting to the Blockchain.
This again though is not really in Bitcoin's mantra as now individuals are trusting a centralized entity to ensure their payments, bypassing the Blockchain which is designed to be this decentralized technology freeing people of such control.
The next Lightning strike
There is an option on the horizon, that is gaining a lot of traction seeing as the first physical transaction using it took place - the Lightning Network.
The idea behind this on-chain upgrade would allow micropayments as a payment channel will be opened between two parties, which is recorded on the Blockchain. This channel allows a user to make as many transactions through this channel as they wish, in a predetermined time. These transactions are not put directly onto the Blockchain but are rather verified once the channel is closed.
Lightning could well become a game changer for Bitcoin as it could maintain its monumental power as a store of value while restraining its bow with a payment string that could double its use effectively.