Bitcoin Still Unsuited for Mainstream Payments, Says Deutsche Bank

Legacy payment networks still win for mainstream payment uses, the investment bank wrote this week.

Nov 17, 2021 at 3:28 p.m. UTC
Updated Nov 17, 2021 at 4:46 p.m. UTC

Bitcoin must overcome extreme volatility, high transaction costs and its large carbon footprint before it can be used more widely as a global payment option, Deutsche Bank analyst Marion Laboure wrote in a note to clients earlier this week.

Laboure noted that the Bitcoin network can process up to seven transactions per second, or 600,000 per day, while payment giant Visa can handle up to 24,000 transactions per second, or over two billion transactions per day.

In this respect, The Lightning Network, which aims to improve Bitcoin’s scalability by boosting speed and lowering costs, could be promising, Laboure wrote. Lightning Network claims it can process 25 million transactions per second at a cost of four cents per transaction, implying that it is a thousand times faster than Visa at processing payments and with lower fees, Deutsche wrote. But Visa and Mastercard currently post transaction volumes that dwarf those of the Lightning Network.

“Even if the Lightning Network exceeds $100 billion a year in transaction volume by 2025, that will still be less than 1% of the value of Visa’s annual payment transactions,” Laboure wrote.

Bitcoin becoming more accepted and used as a payment method will require “significant regulatory involvement,” Laboure added.

The Taproot upgrade helps improve some of Bitcoin’s scalability issues, Deutsche Bank said, but Laboure still sees third-party developer initiatives such as the Lightning Network playing a larger role for Bitcoin’s adoption as a payment method going forward.

Payment services provider Square said on its website this week that all Cash App customers should be able to send bitcoin to Taproot-enabled wallets by Dec. 1 as the company seeks to confirm its activation is working properly. The company added the Taproot upgrade should help Cash App customers with increased privacy features, lower transaction fees and better smart contracts.

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Michael Bellusci is CoinDesk's crypto payments reporter.