“Bitcoin: A Peer-to-Peer Electronic Cash System” is the title of the original white paper for the world’s favorite cryptocurrency. This simple line, which may not convey much to the average reader, has led to mass discourse within the cryptocurrency community.
The individuals behind Bitcoin Cash believes that the blockchain should achieve “digital cash” status through bigger blocks; Bitcoin’s proponents claim that BTC is best used as a digital medium of exchange through second-layer scaling solutions, which remove transactional stress off the bottom layer of the blockchain.
An executive of Blockstream, the Canadian-American Bitcoin development outfit, recently doubled down on the second-layer narrative.
Bitcoin, Not Natively Digital Cash?
Over the past few months and years, Bitcoin has been adopted by a number of retailers and merchants. Just look to the NBA’s Dallas Mavericks, which last week revealed that it would be accepting Bitcoin payments for tickets and certain merchandise.
AT&T, Bic Camera in Japan, Whole Foods, Nordstrom, and Gamestop are among the other companies that have started to accept the leading cryptocurrency through certain payment solutions.
But according to Samson Mow, the chief strategy officer of Blockstream and the chief executive of Pixelmatic, Bitcoin isn’t exactly natively prepared to be used in that manner.
Speaking to cryptocurrency exchange SFOX in an exclusive interview, the Canadian cryptocurrency entrepreneur accentuated that at its core, “Bitcoin is bad for payments”, adding that the public shouldn’t take this statement the wrong way.
To back his point, he looks to the fact that at the base layer, Bitcoin takes an average of 10 minutes to process transactions, sometimes upwards of three hours. “You don’t design a payment system that takes 10 minutes to settle on average,” Mow asserted.
Indeed. On Bitcoin, transactions are far from instant (due to the trade-off for security), can often cost upwards of $1, and aren’t fully private. Physical cash, on the other hand, can be transacted instantly, traded without cost, and are effectively untraceable in today’s society.
So what’s the answer to Bitcoin’s identity crisis? What will make it actually digital cash?
According to Mow, it is clearly the Lightning Network, a second-layer scaling solution that doesn’t always require block times and transaction fees. He stated:
“You should be making payments over the Lightning Network because that is instantaneous and almost free. That’s what it was designed for. Everything is designed for a different purpose. Bitcoin was designed for settlement and wealth transfer. Litecoin — ah, sorry, Lightning; Charlie’s going to like that one! — Lightning was designed for fast payments and cheap payments.”
Indeed, those that have used Lightning have lauded its ability to make Bitcoin fast, cheap, and somewhat private. The thing is, it has yet to be adopted by retailers and merchants due to the technical difficulty often required.
But, with time, these kinks are likely to be ironed out, especially with a firm like Blockstream working to improve Lightning.
What is Bitcoin Good For Then?
All this may leave you wondering, what is the Bitcoin base layer good for then?
Well, according to a growing number of analysts and Mow himself, the cryptocurrency is “more of a store of value and medium of wealth transfer” play. Like gold, Bitcoin on the base layer is scarce, divisible, somewhat fungible, decentralized, and non-sovereign — five of the main tenets of a store of value.
This isn’t only a theory. As detailed by DemandSolutionNews, Bitcoin has been rallying in tandem with gold over the past few months, which comes as trade wars have erupted (China & US, Japan and South Korea, etc.), European and some Asian banks have been capitulating, Hong Kong and France have erupted in protest, and so on and so forth.