We still don’t know who will emerge as THE ‘Payments Currency’ of choice in cryptocurrency

Bitcoin is not it. Transactions often take 20–50 minutes. While there are some potential improvements in speed, it is not enough. Bitcoin miners have repeatedly held Bitcoin innovation hostage; denying attempts to improve the block size to increase transactions (TX) processed by the Bitcoin network. They may continue to do so because these improvements for the end-user only cause them complications with no financial reward. Further lack of incentives hamper core improvements. For example, the Lightning network has been in discussion for 4 years, and no implementation. It has the potential to speed up TX through state channels/off-chain processing. But nothing.

Today, TX takes too long on Bitcoin. The wallets are not usable by the . mainstream. People have to copy in 30+ character hashes & send into the void with no assurance they are sending to the right person. TX times vary too much based on network traffic. And the fees are not great; often rivaling or exceeding what you have to pay with credit cards. You can see the average fee to get processed in the next block is around $1.50. That’s terrible if you want to make a $20 transaction. It’s 7.5%.

And the alternatives are not much better. While Dash corrects some of what’s wrong with Bitcoin, the reality is that Dash should have done major deals with the primary digital payment processors by now- PayPal, Apple Pay, Android Pay, Square. They’ve done very little. They don’t have the business development, marketing chops to make Dash the go-to for payments currency.

There is still room for a crypto entrant to nail Payments. That entrant will likely come from Silicon Valley. That organization needs to:

  • Understand that Payments is an experience not technology. That includes assurance of who you are sending to, having sensible address names, receiving confirmation when you send (both on the blockchain and through verifiable ID like email or phone/SMS). The winner in Payments will invest AS much time in their wallet tech as they do in the back-end processing tech. They will understand end-to-end user experience and manage the metrics carefully. The winner in Payments crypto will be a mixture of Apple and Bitcoin; this is not possible with purely technologists at the helm or a project team with a static mindset based on assumptions we have in Bitcoin or crypto generally.
  • Be Pragmatic, not Philosophical. Bitcoin is based on libertarian philosophy and many of its contributors and advocates believe in this. There are assumptions to it that a new entrant need not embrace. For example, the vast majority of people DON’T CARE about making anonymous payments. They want convenience and ease of use. A Payments currency that emerges need not embrace the assumptions of a Bitcoin maximalist, and instead make it something that people love to spend and stores love to accept. As well as make it acceptable to regulatory authorities and that may mean providing a setting where ID information is provided.
  • Know that Marketing, Sales, and Business Development is core to getting traction. Crypto orgs today are heavily tech focused. For payments to truly take off, they have to plug into existing payment mechanisms that people use by the millions. The winner of Payments will have experienced marketing, sales, and bizdev to forge the alliances needed for mass adoption. Given the network effect in Payments, it could be a winner take all space.

Dash was supposed to be the payments cryptocurrency of choice. Take a look at its dinky wallet and you’ll realize they don’t understand what’s required to win in this market. Somehow they command a multi-billion valuation with very little traction in the market. The winner in this space could command a valuation on par with Bitcoin; Payments are perhaps more valuable than “Stores of Value”. Bitcoin is effectively digital ‘gold’ and for reasons mentioned, it will be hard for it become the digital dollar. But whoever does will have to tackle the problem in a decidedly different way in the areas mentioned, while staying true to the virtues of Bitcoin, namely decentralization and disintermediation.


Update: An added note. Currency must have stable prices. Period. There is no currency that people trust that fluctuates in price 50% in a month. The only times you here about this are in banana republics or countries with dire financial problems and instability. In such cases, people are fleeing the currency. If you buy coffee with crypto, you want to pay the same effective price from week to week; and not have it change because your “money” keeps losing or gaining value. The company that develops the transaction cryptocurrency of the future will have to build safeguards in such a way to avoid serious price fluctuation. For example, insisting on a fixed supply of coins is problematic because as that coin is used more, the amount of value that finds its way to it increases, and its price necessarily increases. Not a simple problem to be sure. Some like USDT (Tether) and BitSquares’ SmartCoins find pegging to a more reliable store of value, one answer.

I'm a Bitcoin and Alt-coin investor based in the Bay Area. Started investing in crypto in 2015.