Bitcoin unlikely to overhaul the world’s payment system: report
Since its emergence, Bitcoin [BTC] strove to become the one true currency used for all types of financial activities due to its nature of immutability and decentralization. However, the use of the top crypto as a payment mechanism has decreased, as reported by Reuters.
The price of Bitcoin has been debilitating since the unprecedented bull run it experienced late last year. A Chainalysis research found that 80% of major payment processors dropped the top crypto from the start of the year to September. Bitcoin’s price has dropped nearly 74% since its highest point this year – $17,000.
Even the acceptance of Bitcoin as payment requires prior conversion to fiat. Chainalysis, in its study, surveyed 17 Bitcoin payment processors who receive cryptos and convert them to fiat before disseminating it to merchants, indicating the apprehension of retail merchants towards cryptocurrencies.
Bitcoin prices remained relatively calm over the last few months compared with the bull run of late 2017, which saw prices rise to almost $20,000 and then fall sharply. This year has been fairly turbulence-free, with no significant bull and bear runs, which adds to the list of requirements for a stable payment system.
“There would have to be a stability requirement if it is to become another form of money,” said Joni Teves, a UBS strategist.
Several proponents have been looking to shore up the technological infrastructure to create a better foundation on which a payment mechanism can be built, as they work towards integrating it with the global economy.
Teves pointed out the issue of scalability in cryptos. “Is it (Bitcoin) able to process the value or volume of transactions that money tends to do?” she asked.
Blockchain technology cannot process transactions at the same speed as credit card companies. Speed should also be improved to build an efficient payment system.
“Bitcoin payments processing is seeing a slow but consistent decline,” said Lex Sokolin, global director of fintech research firm Autonomous Next.
The internal infrastructure of virtual currencies has to be remodeled to enable faster and more efficient processing of transactions. Additionally, the external environment – specifically government regulation – has to be conducive to the use of cryptocurrencies as a payment gateway.