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Why Is Bitcoin Still Not A Payment System?

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It has been argued that Bitcoin can’t compete with existing payment systems such as Visa and Mastercard. What prevents it from becoming their full-fledged competitor further in the article.

The main property of Bitcoin is decentralization. It is especially attractive to those who are opposed to centralized management and control over the movement of personal funds. But what benefits does it have?


Bitcoin is based on a decentralized network which means that:

  1. no one controls it;
  2. there is no central infrastructure to launch it.

Theoretically decentralization has several advantages:

  • Confidence: a decentralized system complicates the competition process between participants who intend to make a profit at the expense of others.
  • Security: unlike typical centralized systems, a decentralized system is more difficult to manipulate due to the presence of a multitude number of nodes.
  • Efficiency: eliminates the necessity of intermediaries, thereby reducing transaction costs.

Despite the above "benefits" Bitcoin is less safe and effective than modern payment systems.

As Morgan Stanley notes, "Visa and MasterCard run two of the largest centralized consumer payment rails and offer many benefits."

In case if a payment for goods or services was made by card to fraudsters, Visa and MasterCard guarantee consumers 100% protection against the loss of stolen funds.

Since Bitcoin is decentralized, it can’t provide consumers with the same level of protection and return funds to the sender’s address. Currently, many people pay by cards online without thinking about possible threats from fraudsters, but unfortunately there is no such certainty while using Bitcoin.

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The existing card payment ecosystem is designed to provide consumers with comfort for making deals with unfamiliar merchants, if necessary, and in the case of fraud consumers can write a complaint while the payment giants will blacklist the unscrupulous seller. In the case of cryptocurrency transactions, there is no intermediary and as a result the buyer risks dealing with the seller-fraud.

So, even though bitcoin blockchain can’t be changed or cracked and central banks can’t manipulate or print Bitcoins, but decentralization is a step backwards in terms of consumer protection.

Wild Volatility

Increased volatility is another problem of the first cryptocurrency. Bitcoin must be stable to use it as a payment instrument. If today Bitcoin costs near $4000 then in a week it can costs $3000; any fiat currency experiences such high price fluctuations. The problem is more acute for institutions that are planning a budget for the future, and therefore can’t foresee the price movement at the transaction time. At best, users can plan payments in bitcoins leaving hope that they will be able to convert the acquired number of bitcoins into a large amount of dollars.

Bitcoin rather is simply a tool for speculation. Because of this, its value is subject to wild fluctuations. In addition, the processing of payments may require payment of considerable fees; for the consumer these expensive transactions are not beneficial.


Primarily, high fees are the result of the low bandwidth of Bitcoin network. Bitcoin can process about seven transactions per second, while VISA process averages 24,000. Scalability plays a particularly important role. In order to be a competitive payment system, the rate of cryptocurrency transactions must increase at least 2000 times. When any of us pay in bitcoins, miners process not only the transaction sent by the consumer, but also all other transactions recorded in the blockchain. Thus, a high traffic is generated and delays can reach several hours in conducting Bitcoin transactions not to mention several days.

Such delays are not peculiar to currencies; therefore, bitcoin is often considered as a tool for speculators. Until the technical problems of bitcoin are resolved, it will yield to traditional payment systems and is unlikely to receive more acceptance as a currency.

Solution To The Problem

As we can see, for now bitcoin has several problems that do not allow it to become a full-fledged payment system.

But do not forget about the proposal for scalability of the Lightning Network. On the one hand the creation of this second-level payment protocol proves that the first cryptocurrency has significant drawbacks, but, on the other hand, its development suggests that the Bitcoin Core team behind cryptocurrency Bitcoin to eliminate them. Along with Segregated Witness the solution is one of the major improvements in the Bitcoin architecture. The development has played a significant role in reducing fees on the Bitcoin network and is aimed at solving transaction processing problems.

Now, the Lightning Network continues to receive recognition among the cryptocurrency community. It is worth noting that on July 19 the number of open channels of the Lightning Network for the first time exceeded 10,000, while the number of active nodes was more than 2,800, although now these figures have slightly decreased.

As planned, the increase in adoption of Segregated Witness has had a significant impact on the size of fees in Bitcoin network. Although this year the fees decreased significantly compared with 2017, partly due to a decrease in the transactions volume; the transition to an improved protocol only improved the situation. For example, at the time of writing the material the fee is slightly more than 4 sat/byte.

transaction fee

Since the size of the template has a fairly large impact on the translation cost, load reduction has allowed transactions to be processed relatively quickly on the network with minimal fees.

Few months ago, an unknown user managed to transfer an amount of 48,500 BTC, with a total fees of 675 satoshi. This deal made a lot of noise in the cryptocurrency space and proves once again that the fee below the established standard is a reality.

Segregated Witness along with the Lightning Network has become good news for the cryptocurrency community. Interestingly that many supporters are optimistic that other more advanced solutions based on this technology may soon pave the way for decentralized cryptocurrency exchanges.

In general, bitcoin is waiting for a bright future, but it still needs technical corrections, otherwise the first cryptocurrency will not be able to become a payment system and moreover to surpass such payment giants as Visa and Mastercard.