Why Bitcoin is No Longer Convenient for Transactions

Why Bitcoin is No Longer Convenient for Transactions

Last year on December 17 bitcoin’s value reached an unprecedented rate of over $20,000, though the correction, which occurred a few days later, didn’t lead to a complete disaster as bitcoin stabilized at about $13,000-14,000 by the beginning of 2018. Therefore, lots of crypto enthusiasts still consider it as a valuable type of investment.

But on the other hand, bitcoin becomes less and less profitable for ordinary users, who don’t pile into it but simply use it for making transactions. The overload of bitcoin’s network is demonstrating that this coin is not going to be accessible for a plethora of customers in the long-term perspective.

The average biotin transaction fee on December 1 was $14.6. However, a few days before that, on December 27, it was $22.99, whereas on December 23 the median transaction fee reached its record of $34.

No wonder, that because of such high fees bitcoin’s clones were forked, such as Bitcoin Cash in August 2017. The last one, by the way, was launched with enlarged block size. This way, the supply of block space rises, but BCH remains less liquid than bitcoin.

Bitcoin Under Pressure

Lots of people prefer bitcoin for storing their assets or speculating on its value rather than purchasing it for conducting transactions. For example, within the frames of 2013-2016, over the half of Coinbase customers were giving preference to keeping bitcoin rather than making operations in it. This has led to a situation whereby bitcoin’s value increased by ten times last year, while the number of daily transactions was sluggish.

Let’s look at gold, which adequate market capitalization makes up around $6 trillion. Though this ore is valuable, nobody uses it for daily transactions, so it’s visible how much pressure is now on bitcoin, especially when media at the beginning of its functioning, were emphasizing its utility when making small and speedy transactions.

“[…] the current plan on the development side of things for Bitcoin is to move payments to layers above the base Bitcoin protocol, with the Lightning Network being the most well-known solution,” a Forbes contributor Kyle Torpey suggested.

Even though, in his opinion, the Lightning Network is an endeavor to construct payments on top of bitcoin’s ground level. However, currently, the network is not prepared for overall employment.

Why Can Maneuvering Altcoins Not Overtake Bitcoin?

Networks of altcoins are more beneficial for people who aim at transactions, as they offer reduced operation fees. Yet, they cannot substitute bitcoin due to its liquidity, as it stayed on the market for the most prolonged period.

Conducting operations between crypto and the standard financial system becomes more smooth thanks to higher liquidity, which bitcoin can provide. Also, experts emphasize that if bitcoin is used as a store of assets, this way the exact level of liquidity is created, which is needed for bitcoin to be means of exchange.

Sure enough, the high fees charged on the bitcoin network have led to the situation, when lots of crypto customers have already opted for alternative digital coins. But such a popularity of altcoins is endangered as long as it depends on layer-two solutions on bitcoin. Once the functioning of bitcoin regarding making transactions will be optimized, for example, with the help of Lightning Network, the future of altcoins may remain indefinite.

But for now, those who want to pile into the most prominent cryptocurrency, should not worry as they don’t have to face high fees at all. And those, who merely consider bitcoin as a store of value, are still purchasing bitcoin with no concern.

Charts Source: bitinfocharts.com