What is the first thing that comes to your mind when you hear the word “Bitcoin?” Investment, isn’t it? There is no denying that Bitcoin is a potential investment. However, replacing paper-coin currencies is at the core of it.
You can currently pay for your Starbucks cafe latte, buy domain names, book hotels, etc. using bitcoin. However, it has still miles to cover in order to establish itself as a day-to-day currency.
Jack Dorsey, the founder of Twitter and the leading payment processor, Square, is a massive Bitcoin supporter. He believes it will surely transition from the world’s largest cryptocurrency to its most used currency.
This article highlights Jack Dorsey’s views on Bitcoin and his suggestions on how it could become a mainstream currency.
The Internet Of Economy
In an interview with Reuters, Jack Dorsey voiced his belief in Bitcoin. He pinpointed that it is the best digital currency among its competitors.
“The Internet needs a native currency, and Bitcoin is possibly the best of that thus far.”
His belief isn’t a mere opinion since cryptocurrency stats seem to sing the same song. Bitcoin sits at the top of the crypto charts by establishing itself as the world’s largest cryptocurrency by market capitalization.
Dorsey also drew similarities between the internet and the Bitcoin blockchain technology.
The internet is people’s technology, and no one owns it. Similarly, Bitcoin is a decentralized ledger of transactions with no central influence. At the most basic level, Bitcoin is a peer-to-peer digital cash transfer. The transactions are stored in thousands of participating nodes (computers) worldwide. If you ever made a Bitcoin transaction, a copy of the blockchain is stored on your computer, too.
In the current financial infrastructure, banks, governments, etc. have indirect control over the economy. On the other hand, Bitcoin democratizes the economy by prioritizing consensus.
To summarize, what the internet did for the world, Bitcoin will do for the economy. Honestly, it has already started shaping the market of the future.
What Needs to be Fixed?
Jack Dorsey isn’t all for Bitcoin, and thus, he also outlined various Bitcoin issues that need to be addressed.
Dorsey suggested that Bitcoin transactions must be faster and cost-effective for them to become mainstream.
According to BitInfoCharts, an average Bitcoin transaction can cost up to $2.50. This transaction fee is significantly higher than the traditional payment processors like VISA. However, the Bitcoin transaction fee isn’t fixed, and it keeps fluctuating. For instance, the said charge dropped to just $0.50 in the first half of November 2018.
Also, as Bitcoin transactions are validated using the Proof-of-Work (PoW) algorithm, it’s not the fastest. Transaction speed is also decreasing due to the rising network congestion. Moreover, the Bitcoin algorithm also allows only one block to be mined every 10 minutes. Each block contains numerous transactions depending on the size of the transactions. According to Statista, it takes an average of 9.4 minutes to complete a Bitcoin transaction.
Apart from affordability and speed, Dorsey also advised increasing awareness about Bitcoin among the people. The more comfortable people are with Bitcoin, the more they will use it.
Lightning Network – The Solution
The good news is that the lightning network is circumnavigating all the blockchain issues, be it affordability or scalability.
Lightning Network is a second layer protocol built on top of the blockchain network. It involves creating a bi-directional channel outside the blockchain network.
Suppose you buy coffee from a shop using Bitcoin. To create a channel (lightning network), you and the coffee shop have to lock some Bitcoins on the main chain, in this case, a bitcoin blockchain. Now, every time you make a transaction, it doesn’t need to go through the bitcoin blockchain. Your transaction goes through the lightning network between you and the coffee shop. Now, the trades are almost instantaneous and at a lower transaction fee. To put things in perspective, by using a lightning network, you can carry 42 transactions at just 4.9 cents in transaction cost.
Bitcoin is revolutionizing the way we do finance. Nonetheless, no technology is perfect, and thus, Bitcoin has its flaws, too. The good news is that this cryptocurrency is rapidly upgrading. Hence, it would be wise to say that Bitcoin would soon be at par with the traditional paper-coin currency, or perhaps even replace it.