Bitcoin and cryptocurrencies Both are mocked for being incompetent when compared to traditional payment systems Visa, PayPal, and MasterCard. Both the payment options have noteworthy fame. Payment systems like PayPal, Visa are huge in the online payments market, and bitcoin is often quoted as the currency of the future. Naturally, they’ve captivated a lot of attention as options for international money transfers. But a potential challenge from bitcoin and cryptocurrencies to the traditional payment methods is not impossible according to tech analysts.
The bitcoin price which increased to nearly $20,000 in December 2017, has been decreasing steadily. But since bitcoin’s are rarely considered to use as a mainstream means of payment and has become a store of value for the last few years, with people investing in stock hoping to cash in on the future price increase.
But when the bitcoin payment network and the crypto user experience increases, the threat Bitcoin create to traditional payment networks should not be ignored, MoffettNathanson analyst Lisa Ellis wrote to clients.
“Why would I ever buy coffee with bitcoin?” Ellis said, first reported by financial newswire Bloomberg. But it could eventually happen, “as ludicrous as it may sound.”
In the developed world the benefit is less when accepting bitcoin or other cryptocurrencies over traditional type of payments.
Transactions using Bitcoin has become slow. It has also become more expensive than it was a few years ago.
A maximum speed for Bitcoin that has been circulating online is seven transactions per second. However, in reality, the Bitcoin network is achieving maximums of 3 to 4 transactions per second, and the bitcoin network takes around 10 mins to confirm a single transaction.
The network that Visa and MasterCard use has processed thousands of transactions per second. PayPal handled 6.1 billion transactions in 2016. This explains 193 transactions per second on average.
In failed countries like Venezuela, there is more evidence of bitcoin and other cryptocurrencies being used in real where traditional payment networks have failed.
And improvements are being continuously made, with bitcoin critics pointing to the lightning network, designed to speed up and reduce costs of bitcoin transactions, as a possible catalyst for payment adoption.
The threat of bitcoin and crypto to traditional payment methods also comes from their “freedom of money” ideology, says Ellis.
“Cryptocurrency systems (e.g., bitcoin, ethereum, ripple) are potentially disruptive to private payment systems,”
“Their core design characteristics—which are aimed at enabling ‘freedom of money’—are in direct contrast to the characteristics of most traditional, private payment systems.”
Banks and payments processors could increase this risk by moving towards crypto and blockchain technologies, Ellis advised. United States private bank J.P. Morgan last month made shocking waves with the announcement of its own cryptocurrency JPM Coin.
Bitcoins have advantages like lower fees, community support, choice of coin preference, truly global availability, privacy, versatile and decentralized nature. These reasons may put down the traditional payment methods like PayPal, visa
The bitcoin sector is currently stuck in a market where share prices are falling with some $400 billion in value wiped from the world’s cryptocurrencies over the past 12 months.
Twitter’s Jack Dorsey, Apple co-founder Steve Wozniak, and Tesla’s Elon Musk have continued to praise bitcoin and its technology, arguing the digital tokens are still in their early, formative days.
Others have advised that it will be Amazon’s Jeff Bezos who triggers the next bitcoin Bull Run if his huge online retailer begins accepting bitcoin or other cryptocurrencies.
Bitcoin’s best 2017 Bull Run has created strong beliefs. The institutional investments and huge bank support for bitcoin are expected to happen soon. Due to the slowness of 2018 many investors and traders slipped out of their bitcoin and cryptocurrency positions. This caused a crypto winter that has lead to many bitcoin, cryptocurrency and blockchain start-ups to shut down.
It is always difficult to compare centralized operations such as PayPal, Visa with a decentralized method such as Bitcoin. Many claims that Bitcoin is not only a means of payment but also as a means for storing wealth. The digital currencies may boom and gain momentum to surpass traditional payment methods in the future.