New Green Blockchain Is Bitcoin’s Biggest Threat
Using bitcoin for payments may not get as much chatter as it did at the beginning of the year, but under the hood, a lot has happened in 2022.
Payment technology firms such as Stripe, Block and PayPal have expanded their crypto offerings and capabilities. Strike announced a partnership that will bring its crypto payments to NCR’s point of sale terminals, as well as partnerships with Shopify and prepaid payment provider Blackhawk Network.
Read more: Take Bitcoin well into payments, Strike Partners with NCR, Shopify, Blackhawk
Beyond that, the Lightning Network’s Layer 2 service finally began taking the work of transactions off the Bitcoin blockchain, making them much faster and cheaper, taking some of the power out of arguments that it can’t handle payments. And the use of crypto debit cards is also growing.
More here: Stripe rolls out crypto payment capabilities, Twitter signs on as first user
At the same time, bitcoin payments have come under increasing pressure from stablecoins — which now make up about a quarter of payments technology provider BitPay, its CEO told PYMNTS’ Karen Webster in August. And that’s on top of an ever-deepening crypto winter in value that has made Bitcoin holders less likely to use them.
See also: BitPay CEO Says Stablecoin Payment Volumes Doubling in 2022
But the biggest hurdle bitcoin will face as a payment currency may well be raised this week by something largely unrelated: Blockchain No. 2, Ethereum, is on the verge of moving to a more environmentally friendly Ethereum 2.0 blockchain that will cut more than 99% of the country’s energy needs. It will remove one About the size of Chile the amount of power consumption.
And that’s going to double and redouble the strength of the case for bitcoin payments’ staunchest opponents: the environmentalists and ESG investors who say the staggering amount of electricity bitcoin mining requires makes it a threat that can’t be ignored.
Related: Bitcoin’s new headwind: ESG investors double down on its ‘fraudulent’ pollution
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There are more than a few pros and cons about the security, centralization, and fairness of bitcoin’s power-hungry proof-of-work (PoW) consensus mechanism—mining—versus the Ethereum 2.0 proof-of-stake (PoS) version, called staking.
Read more: PYMNTS Crypto Basics Series: What is a consensus mechanism and why is it destroying the planet?
Bitcoin uses almost same amount of power like Pakistan. The European Commission had to fight back a strong move to add a ban on both bitcoin mining and bitcoin itself to the Markets in Crypto-Assets (MiCA) regulatory regime for digital assets.
See more: The EU Parliament votes against a ban on cryptomining
Most bills in the United States include at least a study of the pollution it causes, and the first report by a government agency under President Joe Biden’s Executive Order on crypto said that if its impact cannot be mitigated, a mining ban should be considered.
While “direct comparisons are complicated,” the report of the White House Office of Science and Technology Policy (OSTP) said: “Visa, MasterCard and American Express combined … consumed less than 1% of the power that Bitcoin and Ethereum used [in 2020]despite processing many times the number of transactions in the chain and supporting their wider business operations.”
It then added, “responsible development of digital assets includes ensuring operations with dramatically lower energy intensity as digital assets are adopted.”
Which is a pretty obvious question, if not demand: If Ethereum can do it, why can’t Bitcoin?
The problem is that it has been a seven-year process for Ethereum, and there is much more centralization of thought and influence in the Ethereum Foundation, starting with the person who was the creator and main founder, Vitalik Buterin.
Bitcoin is not only missing Satoshi Nakamoto, its followers don’t even know who he or she is or was. And without Ethereum’s need to appeal to business users and developers of a smart contract platform, Bitcoin doesn’t have the drive or consensus to take on such a huge task.
Adoption is happening
Despite all this, adoption happens. According to PYMNTS’ 2022 American crypto consumer study, more Americans have a negative view of cryptocurrencies as a payment method than a positive one – 28% to 36%.
Read this: The American Crypto Consumer: Use of Cryptocurrency in Online and In-Store Purchases
There are two “buts” with this data. First, 28% is a big, big number.
Second, however, is that if you take out baby boomers and the elderly, these numbers change dramatically. Generation Z has 42% positive and 22% negative, Millennials are 44% to 18% on the positive side, Bridge Millennials are 39% to 20% favorable, and Gen X is roughly tied at 30% to 31%.
Has it changed during the year? Yes, according to BitPay CEO Stephen Pair. Bitcoin was down 40% to 50% of transaction volumes as committed bitcoin owners pull back from using the cryptocurrency they believe will shoot up in price sooner or later.
But they’re still there, they’re still using, and bitcoin is still the biggest and best-known cryptocurrency. Whether it can stay that way when it burps out pollution is a question that will be answered.
New PYMNTS study: How consumers use digital banks
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