The original cryptocurrency may never be a widespread payment instrument. Too much hassle for limited benefit. Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and blockstream bitcoin information, news and insight around the world.
What are you searching for? More hassle than it’s worth? The Bitcoin rate spike, still alive despite bitter divisions in the community that supports the cryptocurrency, has laid bare the biggest problem with Bitcoin: Compared with fiat currencies, it’s painfully inconvenient and expensive to use as a means of payment. Bitcoin is set up to reward users for verifying transactions. Their reasoning is that only people with more computing power can live in a big-block world and going down that path would make Bitcoin less democratic. As Bitcoin’s exchange rate rose rapidly and more people wanted to get in on the boom, getting into blocks became difficult, and miners prioritize transactions on which users are willing to pay a higher fee. At the time of this writing, the median fee paid to process the median transaction — 226 bytes of information — was 171,760 satoshis, or 0.
If you just want to pay for a cup of coffee or order something relatively inexpensive on an e-commerce site without waiting many hours for the transaction to clear, this is uneconomical. If you’re a speculator, though, hoping to make money on the wild exchange rate fluctuations, you’ll be willing to pay an even bigger premium for speed. Bitcoin was never a particularly convenient means of payment. Bitcoin transaction fees — are generally higher than at your bank. For merchants, it’s convenient to sign on to accept the cryptocurrency via specialized payment platforms — but then the rate volatility and the same high transaction fees make it unattractive for a merchant who mostly works in a fiat currency economy. Bitcoin was on a downward trend just as the cryptocurrency’s exchange rate went through the roof.
Some merchants stick to the currency, perhaps for PR value. January through September was up 328 percent year-on-year, the company said. 3 trillion in payments last year. Bitcoin hasn’t even begun to make a dent in this market. There is a notable group of merchants and customers willing to put up with Bitcoin’s inconveniences: U. Chinese investors trying to bypass their country’s currency restrictions.
The essential value of Bitcoin, speculation aside, is to provide payment and transfer services in grey or black areas, where governments don’t want banks to go and where electronic fiat money is too traceable for comfort. 1 megabyte and the strong resistance to increasing it, the original Bitcoin may never expand beyond its current narrow usefulness. This creates a window of opportunity for Ethereum, Bitcoin Cash and other cryptocurrencies to gain wider acceptance. But dealing in several of them will inevitably be confusing for merchants. Besides, various combinations of design, technology and market failures such the one now afflicting Bitcoin as a means of payment, will keep cropping up. It’s likely that, if we ever switch to paying in cryptocurrency, it will be of the fiat variety, issued by central banks. As the sole issuers, they will fit their systems to historical transaction volumes and dictate transaction fees.