As far as I understand it, bitcoin was specifically designed to make transactions more and more costly (in terms of processing power) as time passes. Every transaction on the blockchain requires that processing to take place. They call it “mining” and the reward is in the form of additional bitcoins that the miner owns, plus sometimes a fee that people are willing to pay for their transactions. Because mining becomes more and more difficult over time, transactions become more and more expensive over time. Meanwhile for fiat currency transactions, the cost has dropped, and continues to drop, over the years.
Now crypto aficionados will say “but you don’t have to use the blockchain for transactions, you can use a service”. Sure, that’s true, it’s just like using visa, mastercard, or amex for your transactions and paying them for their service. Except for crypto you would use coinbase, nu, etc for transactions … and pay them for their service.
Is that true? AIUI, the speed of BTC transactions is “baked into” the current structure of the system, and wouldn’t really be affected by the speed/cost of computing power. There are potential solutions, but having faster computers doesn’t appear to be one of them
Merchants hate the swipe fees, and Visa’s margins are huge, like 40%. And Visa doesn’t take any risk or sign up any customers. All Visa does is run the network and collect amazing fees. At first blush, it seems like the industry is ripe for disruption.
But there is zero chance Bitcoin will be doing the disrupting. None. The way Bitcoin prevents double spend is by requiring proof of work. There is a difficulty adjustment on Bitcoin’s hash rate every 2 weeks such that a block is mined about every 10 minutes. That keeps the block rate consistent regardless of the computing power of the network.
So, the theoretical minimum transaction time is 10 minutes, but some transactions may require multiple confirmations (for security purposes), and transaction speed is also affected by network congestion so in a practical sense you’re looking at a half an hour, maybe a several hours. Yesterday the average transaction time was almost four hours.
That’s way too long for typical consumer purchases like groceries. But it is too long for big purchases like cars too. The volatility is such that the price can change by several percent before the transaction is finalized. You can’t run a business like that. On top of that, there are still transaction fees. And unlike credit cards, Bitcoin has no consumer protections.
And it gets worse from there. The total number of Bitcoin transactions per second is limited by the number of transactions per block and the block processing time. So the Bitcoin network can only process about 3-7 transactions per second, total. That’s might not be fast enough for you local shopping mall. The Visa network can process 65,000 transactions per second. In every aspect Bitcoin is not only a worse payment system Visa/Mastercard. It is much worse.
Even the maxis have given up using Bitcoin for payments. For example, the ETFs discussed above. The ETF is not peer-to-peer, the transactions are not on the blockchain, it is not decentralized, there is no self-custody and it cannot be used to make payments. 100% of the claimed utility and advantages of Bitcoin have been stripped out of the ETF. But the maxis don’t care transactions, they just want the price action.
It doesn’t have to be Bitcoin. Bitcoin is a store of wealth. Stablecoins have already disrupted it and allows faster and cheaper processing of transactions. All of this came about with the disruption Bitcoin started, now everyone is trying to come up with a faster and cheaper way of doing business.
So I did that (and a few other queries besides), and all of the responses came back with some variant of “you can’t.” But they were all at least a year old.
I’m talking about disruption of the Visa/Mastercard network. The author of that article was all over the map. Sometimes he was talking payments, sometimes he was talking about transfers.
Visa/Mastercard are plenty fast. I highly doubt other networks are faster. But even if they were, Visa/Mastercard is fast enough.
I doubt the stable coin fees are lower too. There are fees to go from dollars to stable coin, then transactions fees, and then the fees to go from stable coins back to dollars.
At least one of those fees are on the consumer end. Visa/Mastercard don’t have any consumer transaction fees. So why would consumers switch?
It was a rhetorical question (using the 4 largest retailers … according to google). Because you can’t do it. The reason for the question was simple - if it is “faster and cheaper” why won’t any of the largest retailers use it for receiving payment???
Interesting; all the results showed the query did not match with ‘Walmart’, ‘Amazon’, or ‘Costco’ - so it was some generic ‘how’? And not for those stores.
Yep. But I actually looked at what those results said. Because none of them tell you ways to buy stuff with stablecoins at those merchants.
All of them are ways you can convert your stablecoins into something that you can use at merchants. You can use stablecoins to buy gift cards. You can get a Mastercard debit card on an account where you store your stablecoins. Etc.
But none of those things allow you to actually spend your stablecoins at the merchant. You can’t go to the merchant and exchange your stablecoins for goods. They won’t accept it as payment. They take Mastercard and gift cards, of course - and you can find people that will offer you those things in exchange for stablecoins (for a price, natch) - but they won’t take stablecoins.
So until that’s bridged, stablecoins aren’t going to be competing with MC/Visa as a payments mechanism.
Would you consider Amazon a large retailer? You can use Bitpay to buy products off of Amazon. You just buy an Amazon gift card and buy products. The same can be done for any retailer ie Home depot, that have gift cards. Which is most large retailers.
Oh so we are going to get pedantic about it? It has to be stablecoins directly that buy something. So tell me. Can I take a gold rock and buy anything at any large retailer?
No, you can’t buy anything from Walmart with gold. They won’t accept it as payment.
It’s not pedantic. This part of the conversation was about whether BTC or stablecoins might disintermediate MC/Visa as a method of payment. But that obviously can’t happen unless and until merchants start accepting BTC or stablecoins as a method of payment.
The fact that there are some financial services companies that let you pay your MasterCard using stablecoins (or just handle the stablecoin to $ converstion for you) isn’t going to disintermediate MasterCard - it’s still MasterCard that’s processing the payment.
That simply isn’t true because if you can buy a gift card it is the same as cash. I buy gift cards on Amazon all the time with my Visa so if I can use a stablecoin for the same thing than it doesn’t matter.
It does matter. The question at hand isn’t whether you can use stablecoins instead of dollars. It’s whether you can use stablecoins instead of MC/Visa as a method of payment.
You can’t. Retailers won’t accept stablecoins as a method of payment. They will accept MC/Visa, of course, regardless of whether you pay your credit or debit card charges with dollars or stablecoins. They’ll accept their own gift cards, of course, regardless of whether you pay for those cards with dollars or stablecoins.
But they won’t accept stablecoins as payment. So stablecoins can’t disintermediate MC/Visa as a payments system.
