It is not a secret that the vast majority of conventional and crypto investors see Bitcoin (BTC) as a long-term wealth storage equivalent to “digital gold.” This is true for both conventional and cryptocurrency investors. And although that may be the prevalent narrative around the asset, it is vital to remember that the leading cryptocurrency’s use as a means of trade has increased in recent years. This is a factor that should be taken into account.

Recently, the central bank of El Salvador announced that its citizens living in other countries had sent more than $50 million in remittances to their friends and relatives in El Salvador. Douglas Rodrguez, head of El Salvador’s Central Reserve Bank, clarified that $52 million worth of BTC remittances were handled using the country’s official digital wallet service Chivo in the first five months of this year. This indicates a value gain of 3.9%, or $118 million, compared to the same period in 2021.

The use of Bitcoin as a medium of trade has increased, as seen by the emergence of layer-2 payment systems such as the Lightning Network. In the past twelve months, the total number of Bitcoin transactions has increased by an astounding 400 per cent.

Bitcoin lags behind competing networks, such as Ethereum, Solana, and Cardano, in critical aspects like scalability and transaction throughput. Therefore, it is necessary to study if Bitcoin’s usefulness as a medium for everyday transactions is indeed viable. This is particularly true when observed from a long-term vantage point.

 

Is Bitcoin Still Not Ready To Be An Option For Regular Payments? https://t.co/YSWPLvNMGS #BitcoinNews

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Is Bitcoin as a payment method overrated?

Bitcoin has lost its first-mover advantage as peer-to-peer (P2P) cash, according to Bitcoin.com’s head of financial services Corbin Fraser. Fraser was cited in an article that Bitcoin.com published. This is because, since 2016, the Bitcoin community has been trying everything possible to emphasise to its users that they should not use Bitcoin for payment or remittance purposes. This is because Bitcoin is not intended for usage in this manner. He added:  Use cases involving remittances and peer-to-peer financial transfers have switched to blockchains with quicker throughput and lower transaction fees. Bitcoin will struggle to reintroduce the concept of daily payments to its users and other organisations focusing on comparable use cases, which have already found a home under several other banners.

According to Fraser, the situation becomes considerably more convoluted when one considers the problems, such as the hassles connected with typical crypto users utilising layer-2 solutions to process payments, such as the Lightning Network. “Over the last two years, the degree of competition in low-fee, high-throughput chains has increased significantly. Bitcoin is on the cusp of making a return when it comes to using it for everyday transactions, he observed.

On a more technical note, he said that Bitcoin’s throughput is restricted to five transactions per second, which implies that as more and more individuals flock to the blockchain for everyday transactions, its memory pool will fill up. This will extend the fee market, pricing out an increasing number of users and creating a bad experience for those who wish to use Bitcoin for everyday payments. He said:

On a more technical note, he said that Bitcoin’s throughput is restricted to five transactions per second, which implies that as more and more individuals flock to the blockchain for everyday transactions, its memory pool will fill up. This will extend the fee market, pricing out an increasing number of users and creating a bad experience for those who wish to use Bitcoin for everyday payments. He said:

Toya Zhang, chief marketing officer of cryptocurrency exchange Bit.com, told that even though Bitcoin was initially designed as a payment currency, the development of various protocols and stablecoin has made it extremely unlikely that it will ever be used as a payment token, even with the implementation of layer-2 solutions. This viewpoint is fairly similar to that of Toya Zhang. Toya Zhang’s viewpoint resembles that of Toya Zhang in certain respects.

She continued by explaining:  Restrictions such as confirmation delays and price volatility will not be a concern in the long run. The fact that Bitcoin is a too-close-to-its-original-form asset hinders it from acting as a transfer currency. This explanation is quite clear. It will only achieve its original goal if every other cryptocurrency focused on payments fails, which is improbable at this time.

Also, read – Why Do New Investors Find Bitcoin Better Than Other Cryptocurrency?

BTC transaction figures look unstable.

According to Andrew Weiner, vice president of VIP services at cryptocurrency exchange MEXC Global, it is technically and conceptually challenging to execute micropayments using Bitcoin’s layer-1 blocks, even if Bitcoin (BTC) is often used for massive payments. This is precisely why so many Bitcoin layer-2 network engineers are pushing for micropayments. In other words, Bitcoin’s layer-1 blocks make micropayments problematic.

To this point, he noted that Bitcoin’s capacity for public micropayments did not expand between 2018 and 2021, staying below $5,000 the whole period. However, in the preceding year, from October 2021 to March 2022, the network went from 10 million members to around 80 million users. This happened over the course of a year. In this regard, Weiner highlighted the following:

This is due to the gradual maturity of infrastructure for deploying nodes and utilising networks, as well as the reduction in complexity of layer-2 networks (such as the Lightning Network). Wallets and payment processors continue to proliferate at a fast pace. Companies that offer node cloud hosting and node management software enable Lightning payments. This enables companies to include more into their products and services.

However, he did admit that Bitcoin’s usage as an everyday payment method is predicated on the asset meeting three essential requirements. These conditions are as follows: first, that its infrastructure is sufficiently developed to achieve low costs and convenient use; second, that there is sufficient usage such that large enterprises, institutions, and national governments are willing to use the asset; and third, that it is capable of providing an adequate level of security and privacy.

Bitcoin’s remittance capabilities, according to Yohannes Christian, a research analyst at the digital asset exchange Bitrue, are among the slowest and most expensive. Even though Bitcoin is now one of the most secure networks, this is the case. According to him, the asset can only handle five to seven transactions per second (which works out to 3,500 to 4,000 transactions in a 10-minute block). In addition, when the total number of transactions hit its peak, Christian observed that a payment settlement may take up to an hour, and he added:

When it comes to fees, the Bitcoin network follows the Supply and Demand Law, with a minimum of $0.20 per transaction and a maximum of $50 per transaction during the pinnacle of the 2017 bull run. This congestion issue has the potential to become a systemic problem for everyday bitcoin transactions.

And even though the development of layer-2 solutions might help mitigate some of the scalability issues in question, he believes that the network still needs further time before it can be used for daily transactions. For context, a Bitcoin network block transaction presently takes 10 minutes and has a block size of just 1 megabyte. Bitcoin Cash (BCH), a near substitute for Bitcoin (BTC), has a block transaction time of 2.5 minutes and a block size of 32 megabytes, making it 128 times faster than BTC.

The future of Bitcoin resides in a layered strategy.

According to Muneeb Ali, CEO and co-founder of Trust Machines, an ecosystem of Bitcoin-centric apps and platform technologies, it is straightforward to develop extra value and scalability on top of a decentralised substrate as excellent as Bitcoin. Once you have a decentralised foundation as strong as Bitcoin, it is simple to add usefulness and scalability.

This is a common occurrence in other blockchain ecosystems, and we may expect Bitcoin to follow suit. Bitcoin offers the most sophisticated international money transfer capabilities because of its decentralised structure, long-term durability, near-perfect availability, and simple accessibility. The transfer may be done using Bitcoin (BTC) or stablecoin created on top of Bitcoin layers.

Ali said that after ten years of Bitcoin development, the ecosystem growth is still in its early phases. It has always been difficult to build on top of the Bitcoin ecosystem since its underlying layer was relatively simplistic and lacked advanced programming tools.

Nevertheless, with Bitcoin layers like the Lightning Network, Stacks, and RSK, developers can now construct sophisticated apps with relative ease. He said, “Developer traction is an early signal of greater app creation and adoption by general consumers, and we’re beginning to see this around 2021.”

Consequently, as we approach the decentralised future of digital banking, an increasing number of nations, organisations, and corporations look eager to embrace Bitcoin as a settlement currency for a variety of reasons. Because Bitcoin’s day-to-day price action is still very volatile, its general use, particularly as a payment medium, remains constrained. Thus, it will be fascinating to see how digital asset develops in thefuture.