Future potential of BTC as a global payments technology
In 2008, an anonymous person or group calling themselves Satoshi Nakamoto created Bitcoin as a decentralised alternative to traditional fiat money controlled by central banks.
The reasoning was that traditional money was difficult to move across borders, whereas Bitcoin could be sent frictionlessly anywhere and anytime without the need for intermediaries.
Fiat was expensive to send, whereas Bitcoin was relatively cheap. And fiat could be printed at will, whereas the supply of Bitcoin was capped at 21 million
When the supply reached this threshold, no more new coins could be created.
Bitcoin was created as digital money for the Digital Age, but there were challenges.
The network’s transaction processing speed was designed to handle roughly seven transactions per second (TPS), a far cry from what was required for the technology to become a legitimate global payments network.
Another challenge was that many investors gradually started seeing Bitcoin as a store of value, similar to gold, which made them reluctant to pay for goods and services with their ‘digital gold’, a long-term investment.
In a way, Bitcoin became a victim of its own success.
The Lightning Network
As things go in the technology sector, the first iteration of a new project generally lays the foundations on which layers are built, improving on the original idea.
The Lightning Network was proposed in 2016 as a solution to Bitcoin’s processing inefficiencies.
It operates as a secondary layer on top of the Bitcoin network, allowing off-chain transactions to occur and then later settle on the Bitcoin blockchain when they are completed.
This design significantly enhances Bitcoin’s transaction processing capabilities.
The Lightning Network has effectively increased Bitcoin’s TPS from seven to a theoretical 1 million transactions per second, compared to the 24,000 TPS of a traditional payments network like Visa.
It has again brought the original use for Bitcoin as a means of transaction, not just an investment, to the fore.
Where can I pay with Bitcoin?
Whether you’re buying groceries or investing in Bitcoin, the use of cryptocurrencies is evolving.
Luno has made it possible to pay for your groceries with Bitcoin at all Pick n Pay stores across South Africa.
In doing so, we’re helping put these technological innovations in the hands of millions of customers in South Africa and around the world in a sensible and responsible way.
Investing in Crypto assets may result in the loss of capital. Investing in Crypto assets may result in the loss of capital. This information is not intended to be nor does it constitute financial, tax, legal, investment or other advice.
Before making any decision or taking any action regarding your finances, you should consult a qualified Financial Advisor.
