Guest post by Jason Oxman from Electronic Transactions Association
Jason is the CEO of Electronic Transactions Association.
Once the domain of hobbyists, digital currency first grabbed public attention in 2017 thanks to the meteoric rise of the price of a single Bitcoin to nearly $20,000. But for the payments industry—companies that enable fast, secure and affordable payments for merchants and consumers—the trade in Bitcoins was less compelling. Rather, it is the underlying transmission technology of digital currency—blockchain—that has captured the public’s interest and billions in investment.
At the start of 2015, when a single Bitcoin was trading digital hands at around $250, about 3 million people across the world used a virtual currency wallet, according to data from blockchain.info. At the time, the popular conversation in the payments industry around blockchain pivoted on cryptocurrency acceptance. Will people flock to Bitcoin ATMs to exchange their cash for digital currency? Numerous payments startups sought to capture the anticipated market demand for merchant acceptance of digital currency.
Today, nearly 30 million people use blockchain—based virtual wallets around the world, and the rate of adoption is picking up. But cryptocurrency is not likely to replace electronic payment systems like credit and debit cards and mobile wallets, or even the humble cash note.
The fees for Bitcoin transaction can vary widely based on transaction volumes and time to settlement; the average transaction fee peaked at $55 in December 2017 and has dropped as low as $0.54, making it hard for a merchant to predict fees and settlement timelines. Bitcoin transactions also tend to take a long time to complete because they must be verified by a majority of nodes on the blockchain.
These challenges, in addition to significant scalability and volatility issues,