Satoshi Nakamoto was clear about what Bitcoin should be.
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,” reads the first line of the Bitcoin white paper.
Bitcoin was supposed to be a payments system allowing people to send money person to person, without banks involved. But somehow that vision got lost along the way.
This article is part of CoinDesk’s Payments Week series.
Today, bitcoin (BTC) the currency is a $1 trillion global phenomenon, but not yet a common payment vehicle. By far its biggest use is as digital gold (storing value while inflation soars). Generally, people don’t use it to buy coffee or pints of beer.
For hodlers, or die-hard owners, the argument against using bitcoin to pay for stuff has also been: “Why spend an asset if I believe it’s going to rise in price?” Who wants to be Laszlo Hanyecz, paying 100,000 bitcoin in 2010 for two pizzas? (That BTC is now worth about $4 billion).
And Bitcoin’s decentralized design – with its small blocks and long block time – is better for maintaining censorship resistance than competing with established payments systems. In 2021, Visa (V) processed transactions about 742 times more quickly per second than Bitcoin did.
This has led a lot of people to write off crypto for payments. But that’s a mistake.
Stablecoins, like Tether’s USDT and Circle’s USDC, fix the price of the asset being transferred, reducing risks for parties involved (though introducing others). The stablecoin sector is now worth $200 billion and was discussed extensively in a recent White House executive order, showing its viability. We’re starting to see central banks issue digital versions of fiat currency, from China to the Marshall Islands. And projects like Stellar, Ripple and Solana all offer greater payments scalability than Bitcoin’s layer 1 blockchain.
“I haven't seen it wane, I've only seen it grow,” said Tammy Camp, who has been doing payments in blockchain since 2014. Camp is CEO of Stronghold, a San Francisco start-up that integrates crypto and legacy payment systems for hundreds of e-commerce and brick-and-mortar clients.
Camp said media organizations like CoinDesk are fixated on Bitcoin and have downplayed the payments innovation happening on other networks. Stablecoins are moving billions of dollars every day, she notes, and Stronghold is onboarding clients from industries underserved by traditional payments providers.
“We focus on customers that have high compliance needs, because they're typically ones that are more underserved,” Camp said. That might include legal but frowned-upon industries like gaming, CBD and alcohol.
Meanwhile, the Lightning Network, a layer 2 system running atop the blockchain, is dramatically improving Bitcoin’s payments use case. It allows anyone to settle fragments of Bitcoin in an instant anywhere in the world with minimal fees. Volume today is small: about $15 million in Q1, according to a recent report from Arcane Research. But the installed base of people who can use Lightning is increasing rapidly. About 80 million now have access through integrations like Block’s Cash App and El Salvador’s Chivo wallet. Lightning is on its way to rivaling the main network for volume of non-trading transactions.
The ability to send instantly settled bearer payments to any phone in the world could be game-changing. It would mean increased access for people excluded from the financial system, lower transaction fees and speedier commerce. Cross-border transactions today involve relationships of correspondent banks and take days to settle, increasing costs for everybody.
Lightning also opens new forms of online activity. Take gaming. For CoinDesk’s Payments Week, our research analyst George Kaloudis interviewed Desiree Dickerson, the founder of THNDR, a mobile gaming startup that rewards players in satoshis, or tiny amounts of BTC. Such projects provide new reasons for people to get involved with bitcoin: In this case, they can play simple handset games and get instantly rewarded for doing so.
Dickerson, an alum of Lightning Labs, a leading Lightning developer, reckons gaming integration could bring millions into the Bitcoin fold. “Gaming is becoming the next social network, and I believe that mobile gaming is how we can onboard the most people to Bitcoin,” she told Kaloudis.
The Lightning Network gives hope that Bitcoin can finally deliver on its founder’s original vision of peer-to-peer payments unmediated by third parties that slow down transaction times and raise costs.
We’ll explore all this for CoinDesk’s Payments Week (April 25-29), from gaming and rewards to regulation and policy. We have deep dives into Lightning, El Salvador’s bitcoin experiment, how Washington, D.C., is regulating payments, the role of crypto in the Ukraine conflict and lots of interviews, op-eds and perspectives from people all over the industry.
Stand by for coverage throughout the week.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.