Bitcoin moves towards Satoshi’s payment dream

Bitcoin moves towards Satoshi’s payment dream

Written by Medha Singh and Lisa Pauline Mattall

(Reuters) – Satoshi Nakamoto would be proud. Adolescent Bitcoin may finally repay its creator’s faith.

The 15-year-old cryptocurrency has played many roles — from a source of speculation to a hedge against inflation — but has struggled to find a clear identity. Now there are growing signs that it is moving toward its intended purpose: payments.

“Development in terms of crypto payment creation continues to accelerate, even if it has gone somewhat unnoticed due to volatility in the broader market,” said Richard Miko, CEO of Bankser US, a payments-and-compliance infrastructure provider.

The amount of bitcoins stored on the Lightning network — a payment protocol layered on top of the blockchain — has risen by two-thirds over the past year to an all-time high of 5,580 coins, according to crypto data firm The Block.

Crypto payment experts also saw strong volumes.

US-based BitPay said transaction volume grew 18% last year compared to 2021. CoinsPaid said volume in the fourth quarter of 2022 was up 32% from a year earlier.

Bitcoin and Brazilian Real

So why has crypto failed to fulfill the dream of pseudonymous inventor Nakamoto, as outlined in a famous 2008 white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”?

Price volatility, slow processing speed and constant regulatory uncertainty are among the factors that have made cryptocurrencies irresistible as a means of payment. Some merchants price goods or services in crypto.

Still, proponents say bitcoin offers lower transaction costs and faster speeds than traditional cash, especially cross-border transfers.

In addition to Bitcoin, other cryptocurrencies, including stablecoins, which depend on the value of traditional currencies, have emerged as popular alternatives, especially for cross-border payments, remittances, plus emerging markets where local currency values ​​have been affected by inflation.

Stellar, a blockchain that enables cross-border payments, saw the number of transactions on its platform last month rise to 103.4 million from 50.6 million in January 2022.

Transaction volumes between bitcoin and the Turkish lira and Brazilian real grew by 232% and 72%, respectively, CryptoCompare data shows.

Can you handle stress?

It hasn’t been all smooth sailing for the widespread adoption of crypto for payments; For one thing, there are questions about whether blockchains are ready to handle the pressure of processing thousands of transactions at once, especially without transaction fees jumping all at once.

Efforts by some of the world’s major economies, including Japan, China and India, to create their own digital currencies (CBDCs) could also hamper the growth of crypto payments, some market players say. For others, however, the growing interest in CBDC proves that blockchain payment technology is here to stay.

Traditional financial institutions looking to accept crypto payments have also been put off by recent market volatility. One, Visa is inking a deal this month with crypto firm WireX to directly issue crypto-enabled debit and prepaid cards.

“Crypto is evolving as a viable option for more and more people around the world,” said Miko at Banksa

(Reporting by Lisa Pauline Mattall and Medha Singh in Bengaluru; Editing by Tom Wilson and Pravin Char)

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