I spend a lot of time these days thinking about the things that prevent Bitcoin from fulfilling its destiny and becoming an everyday payment method. Today I finally reached a breakthrough that made me realize I’ve been asking the wrong question. Now I see Bitcoin in a completely different light, and this makes me happy and calm. I have stopped worrying that I won’t be able to use Bitcoin for regular commercial operations. As a bonus, I totally stopped caring now about Bitcoin block size and transaction costs. Here’s why.
A Merchant’s View on Bitcoin Disadvantages
From a merchant point of view (that’s my own viewpoint, as I run several webshops), the design of Bitcoin puts it at lasting disadvantage for commercial activity. There are simply too many obstacles in the path of wide-scale adoption:
- exchange rate instability, which makes it impossible to use for storing value short-term (unacceptable when dealing in physical goods, tough for electronic goods or services)
- financial & accounting limitations, which make proper book keeping difficult
- legislative ambiguity (we simply don’t know if tomorrow some idiot in the European Parliament will wake up on the wrong side of the bed and propose a Bitcoin ban like the Chinese have done and the Russians are doing right now)
- banking uncertainty (we are unsure if our bankers will decide to block our payments to and from an exchange such as Coinbase, Bitstamp or Kraken)
- long payment confirmation delays & inability to reverse payments (fine for us as merchants, but not so much for some customers who are used to asking PayPal to intervene if they are unhappy in the slightest)
- and so much and so on.
Of course there are many smart people who are trying to find ways past that but just see what the whole No2X vs SegWit2x mess turned into and how it divided all of us. If this ugly debacle has taught us anything, it has been proven that Bitcoin is incapable of radical change in short amounts of time (years), no matter what the motives and leverage of all who push for such changes.
But today it dawned on me. This simply does not matter. Never has, and never will.
Bitcoin will never become a mainstream payment method. And that is good for everybody.
Bitcoin ≡ Digital Gold
Remember how everybody is trying to explain Bitcoin to non-technical users by comparing it to gold? Well, let’s use this analogy to its fullest!
Nobody in their right mind uses gold to pay for their groceries. Gold is difficult to store, buy or sell, but that is OK because we generally purchase gold for long-term keeping. If we use Bitcoin for the same purpose that we use gold, everything we’ve learned to see as its deficiencies becomes moot.
Expensive transactions? Who cares when you have to do them only several times a year (when you buy more coins to help your retirement fund). Slow confirmation time? Same. Difficult to store or transport? Seriously? More difficult for you to store or transport a piece of paper with a QR code on it than move gold bullion? Come on.
As soon as you shift your thinking from ‘how to change Bitcoin to make it easier to use’ to ‘how to best use Bitcoin as it is’, everything begins to look normal.
Bitcoin Scaling Arguments Don’t Matter
We can argue as much as we like about ways to make Bitcoin scale like the Visa or MasterCard network, but do we have to? There are so many altcoins that are ready to be used for whatever you want. There are ‘fast’ altcoins which can have several blocks per minute. There are ‘private’ altcoins that protect the identity of the buyer. What is common among these altcoins? They are all easy to trade for Bitcoin or cash. Most of them wouldn’t even exist if users weren’t able to trade them for Bitcoin or cash.
Bitcoin will always remain the reserve currency of the crypto economy, and even when we become able to make atomic swaps for every given altcoin pair, the exchange rate will still be determined via Bitcoin, because… it is easy.
Merchants Will Adapt
Building your business around the ability to use crypto currencies might be difficult, but once that job is done it becomes trivial to make your website take payments in multiple coins. If there is one thing merchants are good at, it is finding out what customers want and offering it to them.
If we throw away our prejudices about the ‘purity of Bitcoin’ and ‘Satoshi’s Vision’, what prevents us to accept BCH for books, LTC for music and XMR for sex toys? Absolutely nothing. It is not our job as merchants to pick the ‘right’ coin — it is up to us to make it easy for the customer to spend money with us.
But… Do We Retire Bitcoin?
Nothing further from the truth. Bitcoin will remain a vehicle for storing long-term value. Sooner or later the market will discover the real price of Bitcoin, and the 50% monthly growth spurts followed by short panic declines will give way to predictable, stable prices. There will always be people who will want to buy Bitcoin to add to their savings, and there will be other people looking to sell some Bitcoin to cover medical expenses, buy a new home or do some other thing you do with your savings.
If we reduce the necessity to buy or sell Bitcoin on daily basis, all of our worries about congested blockchains and failed scaling efforts will disappear. Just like our ancestors used gold as a store of family wealth, we will be able to keep our life savings in Bitcoins — even if governments decide to ban Bitcoin from day to day use.
If we collectively decide to use Bitcoin solely as a long-term storage solution for our savings, we can afford to be conservative with it as much as we like. F*ck large blocks, f*ck Layer 2 solutions — other coins may have them, we want our Bitcoin old-fashioned and simple.
Hodling remains the best strategy for Bitcoin.
Do you think Bitcoin will eventually become solely a savings vehicle and we will use other coins for day to day operation? Or am I bonkers? Let me know in the comments below.