One of the most common questions new investors ask is whether Bitcoin is a currency or a store of value. While most investors purchase Bitcoin as an investment, the original idea was for Bitcoin to become a peer-to-peer electronic cash system that could replace the US dollar. At least that was the vision of Bitcoin’s founder, Satoshi Nakamoto when he released its whitepaper in 2009.
While Bitcoin can be sent to anyone, anywhere, crushing most limitations we experience with online banking and payment systems, the latest bull market uncovered a number of challenges:
- First off, each transaction block takes 10 minutes to confirm, and can only take so many transactions. Due to this, a P2P transfer can take a long time to confirm when many people are using the network.
- Due to the popularity of the network, and a large number of simultaneous transactions, fees can become very expensive, as occurred during the bull run of 2017.
For these reasons, the public got frustrated. Not only was it hard to transact between users, but it seemed highly unlikely that Bitcoin could ever be used for everyday purchases. For that reason, we started seeing new cryptocurrencies enter the mainstream.
“Lighter” cryptos for daily transactions
If you’ve been around since the early days, you might remember that two cryptocurrencies because of the most popular options for performing small transactions on the blockchain. Bitcoin Cash and Litecoin were both built as solutions to Bitcoin’s scalability problems. They both saw a rapid price growth due to being listed on popular exchanges, and because of the revolutionary solutions they offered.
Both Bitcoin Cash and Litecoin have larger transaction blocks, which allow them to confirm blocks faster and cheaper than Bitcoin. You could use any of the two coins to purchase smaller things, like your weekly groceries, or your Starbucks coffee.
However, even though both cryptocurrencies received a massive amount of public interest, their unique selling point was just a temporary fix. Bitcoin eventually managed to outgrow its problem, by introducing a second layer solution.
Introducing the Lightning Network
Since 2017, Elizabeth Starks and a team of ambitious developers have been working on a solution to Bitcoin’s scalability problems. They do this by introducing a second-layer solution that allows transactions to be confirmed before miners resolve them in the Bitcoin network. Transactions can now happen much faster, allowing more user-friendly payment systems to be developed. One of them is Strike, an app developed by Jack Mallers. Check the following video to understand just how fast such transactions can occur.
The introduction of both the Lightning Network and Stablecoins as a means of transaction has made BCH and LTC less popular over time. One can easily see this when looking at the growth curve of the cryptocurrencies during the 2020 bull market. While Bitcoin is near its ATH, Litecoin is nearly 90% from its top.
What about Stablecoins?
After the development of Tether (USDT), a large number of cryptocurrencies were created to represent a blockchain-based US dollar. These coins are now used to make small transactions, pay employee wages, and do other common things that we now use FIAT for.
Aside from that, exchanges are also coming out with their very own cryptocurrency debit cards. By transferring any amount of their exchange-based coins, or stablecoins, users can now use cryptocurrency for everyday purchases all over the world, as long as a POS machine is present.
This move will inherently lead to cryptocurrencies being used in our daily life for purchases, and we may even see companies shifting towards crypto-first salaries. If this occurs, the overall demand for cryptocurrency will increase as well, and we could see Bitcoin increasing in popularity over the next few months.
So, should we use Bitcoin or Stablecoins?
Why not both? Each cryptocurrency has its own set of strengths and features that make it unique. Stablecoin can imitate traditional FIAT currencies but are still susceptive to inflation. Due to this, most people store their value in Bitcoin. However, Bitcoin can also be used for transactions, as the scalability issues are now being resolved.
Overall, the question shouldn’t be “which” cryptocurrency you should use for purchases, but whether you should be spending your crypto at all. With a large amount of public interest, Bitcoin is steadily growing towards new highs, making many people think twice before spending any of their coins on non-essential things. After all, if you invested your money wisely, you shouldn’t need to access your coins any time soon. And with that said, we will leave you on a rather “futuristic” note – one where Bitcoin and Stablecoins will support most transactions.