Even though Bitcoin remains the world’s leading cryptocurrency by market capitalization, it has not always lived up to its promise of serving as digital cash. Instead, BTC is a store of value and speculative asset above anything else. Other currencies can take their place as leading digital cash as competition continues to heat up in this space, written by Alex Zha of MXC Global Ltd. for FX Street.
Bitcoin is losing ground
Although the price of BTC and overall market cap may not confirm this sentiment, Bitcoin struggles to keep up with other cryptocurrencies. More specifically, the world’s leading crypto asset has given up its position as digital cash in favor of becoming the next gold and serving as a store of value. Moreover, there is a highly speculative angle to Bitcoin, reducing its chances of ever gaining momentum as a globally accepted payment method.
Even the not-that-distant fork that created Bitcoin Cash has not been sufficient to push the digital cash angle of Bitcoin higher up the agenda. Its scaling and transaction fees remain rather atrocious for a project that has existed for over eleven years. Moreover, the asset has been a thorn in the side of regulators and institutions, further enhancing its speculative aspect rather than its potential utility.
As a result of this “lack of focus” on what really matters, there are now more competitors on the market than before. More specifically, more viable options can serve as digital cash before Bitcoin ever achieves that status. Opinions on this front may be divided for the most part, yet no one can deny that cryptocurrencies are not gaining too much ground among merchants experimenting with alternative payment options.
Unfortunately, it has proven very difficult to change that narrative. The inherent volatility of Bitcoin remains a problem for merchants, despite payment processing having the option to guarantee a fixed transaction value at all times. Moreover, there seems to be an increase in the number of Bitcoin holders, yet incentivizing people to spend BTC is nearly impossible, primarily because everyone sees this crypto asset as a speculative asset with store-of-value qualities.
A lack of innovation
One can argue that Bitcoin today looks very different from the initial network set up by Satoshi Nakamoto. There are thousands of nodes and the network has achieved upgrades such as Segregated Witness and the Lightning Network. From a scaling viewpoint, those latter two changes are prominent and can make Bitcoin more appealing as a payment tool.
As is often the case in the industry, SegWit adoption has taken a while to take hold. Leading Bitcoin wallet provider Blockchain.com integrated this technology less than a month ago, despite SegWit residing on the network for years. It goes to show that even service providers — in my opinion — are not willing to push Bitcoin in the direction of digital cash. Unwise, as payment processors will benefit from more people spending BTC rather than hoarding it. Still, even with perfect SegWit adoption, Bitcoin fees would remain high.
For the Lightning Network, the situation doesn’t look great either. It has taken far too long to finally surpass 300 BTC in liquidity. Anyone can set up a Lightning Network node and payment channel — and every should, in my opinion — yet few people go out of their way to support the network. More nodes, payment channels, and liquidity can turn this faster and cheaper way of conducting Bitcoin transfers into a mainstream solution.
Even though I remain a fan of Bitcoin and consider the asset as a global game-changer, the lack of effort by community members and service providers is irksome. There is little sense of community among Bitcoins when the prices are not going up exponentially. Most people forget this network is active 24/7 and needs to keep evolving as such. Sadly, that is not happening, putting the vision of Satoshi Nakamoto out of reach even further.
Are there alternatives?
The lack of support from Bitcoin community members and service providers creates an opportunity for alternative currencies to gain momentum. I am not talking about the dime-a-dozen altcoins and tokens that populate the crypto and DeFi space these days. Instead, I actively look for ideas that can align with what Satoshi Nakamoto wanted for Bitcoin: to serve as digital cash first, and a store-of-value second.
One project capturing my attention is eCash, or Bitcoin ABC as it was known formally. Spearheaded by Amaury Sechet, the Bitcoin ABC team is building a different iteration of Bitcoin that can potentially live up to the “digital cash” label. A competent group of developers with a proven track record always instills some degree of confidence.
However, eCash also goes much further than just focusing on the financial aspect. It aims to instill a sense of empowerment among community members, creating a new tool for everyday people to tackle our digital world head-on. Under the hood, eCash will serve as scalable and secure low-latency hard digital cash, but one that transcends the “number go up” aspect associated with Bitcoin and other crypto assets.
Getting people to use this new project and its native asset as a currency will always be the hard part. Cryptocurrencies have a certain unfavorable stigma that needs to be remedied in one way or another. When even assets with Bitcoin’s branding cannot succeed as digital cash, the uphill battle will be even steeper for other projects.
The eCash team recognizes this and in fact, their development budget is related to the price of eCash, so they are highly motivated to build value over the long term. Upcoming features like Avalanche and staking rewards are also designed to attract and retain new users.
Going beyond the likes of Bitcoin and Ethereum will never be an easy task, regardless of the infrastructure and appeal of a project. However, developers should not abandon the mission to create true “digital cash” either. Forward-thinking remains a crucial aspect for cryptocurrencies, yet very few projects can live up to that standard today, which is rather problematic.
Personally, I am happy to see new initiatives come to market with a focus on empowering users, rather than serving as the next money grab or “be the next Bitcoin in terms of value appreciation”. The industry needs to move past that stage sooner rather than later.