Since Bitcoin (BTC) garnered some semblance of traction, it has been touted as a viable alternative to traditional digital payment rails, like Visa, Mastercard, or PayPal. As ShapeShift Erik Voorhees said in a recent interview, BTC, unlike centralized digital monies, is free to use (accessible), borderless, and uncensorable — arguably making it a perfect substitute.
While this sentiment has taken some flak for being too optimistic, as many see Bitcoin as slow, unscalable, and energy-intensive, a leading industry research unit recently came out to claim BTC has a chance to overtake traditional payment ecosystems. And here’s why.
Bitcoin To Surpass “All Competition” In 10 Years
DataLight writes that Bitcoin’s total transaction count, average daily price volatility, second-by-second transactional throughput, and annual usage trends pale in comparison to that of the big three fintech companies mentioned earlier.
As seen in the chart below (heads-up: the Bitcoin bubble is 1,000 times too large), classical payment networks put BTC to shame, issuing as many transactions in under a day as Bitcoin processes yearly. This is due to Bitcoin’s lack of mainstream adoption and network bandwidth, which is capped at seven transactions per second — a far cry from Visa’s 65,000 transactions/second or even PayPal’s relatively measly 400.
But, in spite of this, the researchers assert that Bitcoin has long-term potential in the payments realm. In fact, DataLight explains that if the blockchain keeps up its current pace of growth, it will surmount “all competition” in ten years’ time, which will be when the cryptocurrency turns 20.
The fact that the Bitcoin blockchain has already processed $3.4 trillion of value in its lifetime — almost an order of magnitude larger than PayPal’s $578 billion, and slightly smaller than Mastercard’s $5.9 trillion and Visa’s $11.2 trillion — only solidifies this theory. But what else is going for Bitcoin?
Transaction fees, that’s what. As the DataLight team depicts in their report, compared to Visa, Mastercard, and PayPal, which all sport hefty fees (PayPal especially, with an average 4.5% toll), Bitcoin’s average fee is effectively negligible. With the average fee on a BTC transaction amounting to only 0.0005%, it really is nothing. And the fact that fees are effectively identical, whether the transaction amounts to $1 in value or $5,000,000, is even more tantalizing. As DataLight asserts:
“Bitcoin was the first cryptocurrency ever and its code is still imperfect. However, with all of its imperfections, it is still many hundred times faster than the existing wire transfers. Its fees are so small that you can transfer millions of dollars for a dozen cents. This is the reason many financial organizations find it so attractive… Technical improvement of Bitcoin’s network is almost certain to make it the world’s main payment system.”
Not Cut Out To Be Visa 2.0
DataLight may be making quite the case, but a pro-Bitcoin cryptographer who participated in friendly discourse with Satoshi contender Hal Finney as a mere teenager, Peter Todd, doesn’t fully agree.
According to Forbes, Todd, a former contributor to the Bitcoin Core client, surprisingly remarks that Visa and Mastercard, which have an effective iron grip over global payments, have “already won in many respects.” Surprisingly, the long-time Bitcoin pundit adds that the cryptocurrency doesn’t “have a hope” in Visa’s realm, presumably due to the minimal levels of adoption, the relatively slow growth of the Lightning Network, and other shortcomings.
Thus, Todd tells the crowd that Bitcoin should be seen as an alternative to rails where regulation decreases speed and increases costs, such as the remittance markets that many in lesser-developed nations rely on.
Then again, with the eventual growth of the Lightning Network, cryptocurrency optimists are sure that Bitcoin should at least pose a threat to Visa, if not take the company out in its entirety.