Which is the Most Usable for Merchants?

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Volatile or not, there’s growing public demand for retailers and businesses to accept payment in cryptocurrency. According to a survey published in June by the United Kingdom-based crypto-exchange CreditCoin, 75 percent of American consumers want the option to use cryptocurrencies to pay for items they purchase in stores. Sadly, the proportion of stores providing this option doesn’t seem to have reached three-quarters yet.

However, the number of merchants accepting Bitcoin (BTC) and other coins is nonetheless steadily increasing, with the number of Bitcoin-accepting stores reported to Coinmap — worldwide — had risen by 3,716 in a single year. There is, therefore, continuing interest among businesses in accepting cryptocurrency as a means of payment, even if the noticeable ups and downs of the crypto-market has strengthened the popular impression that such use might not be 100 percent optimal right now.

Customers & Venues

Yet, a question remains for those merchants still undecided on whether to jump into the world of crypto payments: Which coin is the most usable and practical as a means of payment? Well, Bitcoin has an advantage insofar as the fact that vastly more people hold the original cryptocurrency than they do any other. However, numerous altcoins — particularly Bitcoin Cash, Dash and Litecoin — are already faster and cheaper than Bitcoin as a method of payment, and while they may lack the value of their older rival, they currently provide a more seamless retail experience.

That said, businesses are increasingly becoming less likely to face an either/or choice when deciding on whether to accept crypto as payment. That’s because a number of companies are providing crypto-payment portals that enable merchants to accept a variety of different currencies, while most major currencies are regularly taking steps to improve their transactions speeds and cost-effectiveness. As a result, retailers of the future will find that they can take greater advantage of the fact that people hold (and want to pay for things with) different currencies for different purposes, making the situation a win-win for more than one single coin.

Bitcoin: Popularity and (relatively) stable value

One of the simplest and most important requirements that has to be met by a cryptocurrency before any business begins accepting it is that it be held by a large number of people. If this condition isn’t met, then a merchant would be limiting their market by accepting it rather than a more popular rival. This is why — forgetting how cryptocurrencies and their blockchains actually work for a moment — Bitcoin is still the most viable currency for retailers to accept.

There are now some 27.6 million Bitcoin wallet addresses in existence, while there are in fact 40.7 million Ethereum addresses. However, before it’s concluded that there are more Ethereum holders than Bitcoin holders, it needs to be pointed out that a significant proportion of these addresses are smart contracts rather than wallets — and there’s also the fact that the Ethereum blockchain houses 599 ERC-20 tokens, which are included in its address count. And while there’s no specific data that breaks down this figure into contract and wallet addresses respectively, there is data on the number of addresses that have been active within the last 24 hours, and it shows that Bitcoin has more active wallets than any other coin:

Active Adresses

Putting aside estimations and calculations, there’s other evidence to suggest that Bitcoin is the decisive winner in crypto popularity stakes. In March, consumer website Finder.com published a survey which discovered that 5.15 percent of Americans owned Bitcoin, compared to Ethereum’s 1.8 percent and Bitcoin Cash’s 0.9 percent. Similarly, a poll of gamers conducted by the Swiss-based gaming company also found that Bitcoin was the most popular cryptocurrency, with 83 percent having purchased Bitcoin compared to 75 percent buying Ethereum. And lastly, 60 percent of Americans have heard of Bitcoin, with only 46 percent and 41 percent having heard of Ethereum and Litecoin respectively.

This all suggests that, for any merchant wanting to ensure that they open their doors to as many potential customers as possible, Bitcoin would be the way to go — that is, if they could accept payment in only one cryptocurrency. And according to those who track merchant acceptance of cryptocurrency, it appears to be the way most customers and merchants are still going, despite the recent growth in the usage of altcoins.

Devan Calabrez, the co-founder of crypto-merchant search engine Spendabit, which is currently inviting retailers to participate in a new survey on the coins they accept, said to Cointelegraph:

“BTC is by far the dominant cryptocurrency for transaction. This is likely due to the maturity of BTC, its ‘brand recognition’ and the momentum of Bitcoin.”

Calabrez explained that much of the draw of Bitcoin is its ability to attract new markets:

“Merchants are always looking for ways to bring in more sales. Some merchants are interested in riding the ‘cryptocurrency wave’ from a marketing point of view, and they accept cryptocurrency to get more business. To them, it’s a marketing experiment with minimal overhead to add acceptance alongside mitigated risk of chargeback.”

And aside from “brand recognition” and momentum, Bitcoin has emerged through the recent crypto-market turbulence as one of the more resilient coins, and it’s this that also adds to its usability from the perspective of merchants. It may still be volatile compared to, say, the U.S. dollar, but it’s held much more of its value during the recent bear market than its rivals. For example, over the month leading up to Aug. 14, it fell by 2.7 percent, from $6,230.32 to $6,061.74. However, by contrast, Ethereum, Ripple, Bitcoin Cash and EOS fell by 38.5 percent, 39.5 percent, 29 percent, and 36.5 percent respectively. This is a big difference, and while plenty of traditional economists would argue against accepting any kind of cryptocurrency as a means of payment, it’s clear that Bitcoin is the best in terms of preserving its value.

Admittedly, the fact that Bitcoin has been preserving its value and may very well continue appreciating steadily in the future is also a knock against its usability, although not so much from the perspective of merchants. Because Bitcoin could potentially rise — perhaps even bullishly — owners of BTC are discouraged from using it to buy a pizza, for example, since most are now acutely aware that today’s BTC equivalent of a pizza could be worth so much more in a year’s time.

“Not spending Bitcoin until it becomes the unit of account,” said MATH_BOT founder Nate Agapi on Twitter in early August, while another Twitter user encapsulated this anti-spending ethos by writing:

Nonetheless, even with the reluctance of some holders to part with their Bitcoin, BTC is still being spent more liberally than any other cryptocurrency. Last December, BitPay reported that it had processed BTC payments worth over $1 billion, while it currently processes a Bitcoin transaction every 10 seconds. Meanwhile, it processed $591 million in transactions in the first half of 2018 alone — up 40 percent compared to the same period last year — according to BitPay’s PR representative Jan Jahosky. And to put this in perspective, Jahosky told Cointelegraph that, even though the company began processing Bitcoin Cash payments at the beginning of this year, Bitcoin remains dominant:

“Bitcoin Cash, which BitPay started to accept earlier this year, is less than 10 percent of BitPay’s volume. Bitcoin remains the most popular and over 90 percent.”

Altcoins have lower transaction fees and confirmation times

Aside from the disadvantage of discouraging a portion of its owners from actually spending it, Bitcoin also doesn’t compare favorably with certain altcoins in terms of how it can actually be used in practice to buy goods and services. Devan Calabrez acknowledges:

“Bitcoin is definitely useful as a means of payment, especially for higher price items and across borders. On the other hand, few people are using Bitcoin to buy cheap items like paper plates, for good reason. The weaknesses include high volatility, transaction times and fees that are paid by the buyers which create barriers to conversion. The weaknesses tend to put a damper on sales by Bitcoin for low-cost items.”

BTC generally has the highest transaction fees of the major cryptocurrencies. BitInfoCharts puts its current average transaction fee at $0.72. This might seem relatively low when compared to the $55 peak in fees it witnessed in December, but as the list below illustrates, it still falls distinctly short of its major rivals:

Avg Transaction Fees

These are current averages, but when you look at the six-month and annual charts, it becomes apparent that, during times of heavy congestion, Bitcoin also tends to spike upward more dramatically than its nearest competitors. On June 20, its daily average fee shot up to $6.852, an increase of 132.6 percent compared to the day before. On the other hand, Bitcoin Cash and Dash’s six-month peaks were only $0.217 and $1.25 respectively, with these highs both falling on Feb. 20, when Bitcoin’s average fee was $3.042 (it rose to $6.209 four days later). Meanwhile, Litecoin’s six-month peak was $0.416 (on Feb. 26), although Ethereum’s was $5.528 (on July 2, when it was most likely subjected to a spam attack).

Bitcoin may be popular, but …

Bitcoin may be popular, and it may be a good store of value, but it’s clearly not the cheapest way of buying goods. Even though its transaction fees have gradually declined since the SegWit upgrade was rolled out in February, the occasional surge of congestion can increase fees by as much as a few dollars — something which can make a considerable amount of difference when what you’re purchasing is less expensive than the fee. Indeed, Devan Calabrez told Cointelegraph that BTC’s “non-trivial transaction fees” have created a certain amount of friction with businesses, with some receiving complaints as a result of their customers having to pay the same amount of money for transaction fees as they do for the items they want to purchase.

“As someone who has accepted Bitcoin since 2011,” said one unnamed merchant registered with Spendabit, “it is very sad for me to see that use case dry up. There may be some hope in the future with the Lightning Network […] For now, I recommend they use BCH.”

The issue of BTC’s fees is compounded by its longer confirmation times, with the average confirmation time notoriously hitting a peak of 11,453 minutes — i.e., seven days, 22 hours and 53 minutes — on Jan. 23. As with fees, it’s now doing much better thanks to its SegWit upgrade, seeing as how its average confirmation time for the week between Aug. 1 and Aug. 8 was only 14.7 minutes. Yet, it still has some work to do — not least because the average is meant to be only 10 minutes. For instance, the average block time for Ethereum was a mere 14.5 seconds during this same week (according to Etherscan), while the current averages for Dash, Litecoin and Dogecoin are 2.37, 2.43 and 1.02 minutes respectively.

However, it’s not just slow confirmation times that restricts Bitcoin’s usability, but also its 1MB block size and the average number of transactions it can process per second. This number remains technologically limited, with the current upper ceiling being seven transactions per second — although the SegWit upgrade technically multiplied this by four. Conversely, Ethereum can reportedly handle a theoretical maximum of 30 transactions per second, while Bitcoin Cash’s block-size limit of 32MB should mean that it can handle 32-times as many transactions as Bitcoin — i.e., around 224 per second. While not quite as fast as this, Litecoin is still four times faster than Bitcoin (forgetting SegWit), given that its block confirmation time is a quarter of Bitcoin’s. Similarly, Dash’s theoretical limit at launch was four times that of Bitcoin’s (i.e., 28 per second), although in December, it changed its block size from 1MB to 2MB, thereby doubling the number of transactions it could handle per second.

Bitcoin Cash

Simply put, Bitcoin can’t — in its current state — handle a high throughput of transactions as well as its main rivals. In particular, it presently comes nowhere near topping the speeds offered by Bitcoin Cash, which at maximum beats its closest rival — Dash — by approximately 168 transactions per second. On top of this, Bitcoin Cash also has the lowest transaction fees, meaning that it’s the most usable cryptocurrency from a standpoint that focuses mostly on cost and speed. It’s largely for this reason that the coin has won many converts in the crypto community since forking from Bitcoin on Aug. 1, 2017.

“Bitcoin Cash is what I started working on in 2010,” said one-time lead Bitcoin developer Gavin Andresen in a November tweet, “a store of value AND means of exchange.”

Devan Calabrez agrees that Bitcoin Cash has reason to be recommend as an alternative to Bitcoin and other currencies, particularly with respect to the purchase of cheaper products. “BCH seems to be evolving as a compliment to Bitcoin,” he explains. “Merchants appreciate the faster transaction times and low fees, which are also appealing to shoppers. This is particularly true for merchants that sell lower ticket items, where even small fees can increase the bottom line by a significant fraction. So, for all intents and purposes, two of the three weaknesses can be considered overcome under the current conditions. However, volatility is still a big concern, which is why most merchants immediately convert to another currency rather than hold BCH.”

Dash

And while Bitcoin Cash may seem like the best practical option to some, one of its closest rivals in terms of cost-effectiveness — Dash — informed Cointelegraph that it’s gaining considerable traction among retailers.

“The Dash network is specifically designed for the payments use case,” said Dash Core CEO Ryan Taylor. “It offers instant payments, which makes it viable at the point of sale. In addition, fees are very low, with a median transaction fee of about one-tenth of a cent. This combination makes Dash feasible for everyday consumer purchases. We also focus a lot of effort on making the network useful by funding business integrations, and today Dash is among the most accepted digital currencies. Merchant adoption is growing quickly. The number of listings on discoverdash.com — a website for merchants to register — has experienced 250 percent growth over the last six months, and Dash is now accepted at over 2,200 merchants globally.”

Taylor is realistic about Dash’s — and crypto’s — prospects of becoming a ubiquitous payment method, believing that this process will take “many years.” Nonetheless, circumstances in certain economically pressured nations reveal that the speed and ease offered by such currencies as Dash make them ideal as new payment vectors.

“I think we can become ubiquitous within specific countries or regions, or within certain industries as a first step. That could happen very quickly, and we’re already seeing that happen in certain locations. Venezuela, which is currently experiencing hyperinflation, has over 800 merchants [reportedly more than all other cryptos combined], making it the highest density of Dash acceptance in the world. I would expect pockets like that to develop as a base from which we can continue to expand.”

Decentralization and choice

Speed and cost are important factors when considering which cryptocurrencies to accept as a merchant, yet they can count for very little in cases where price fluctuations threaten to reduce the value of a payment you’ve received. This is why there’s no hard-and-fast answer to the question of which cryptocurrency is the undisputed champion of usability for retailers, since Bitcoin has fared much better in preserving its value recently than most altcoins. Added to this, Bitcoin may not be as fast or as scalable as some of its rivals, but it is more decentralized than many of them on a number of levels, and with greater decentralization comes greater security of its network.

For instance, there are reports that Bitcoin Cash is significantly more centralized than Bitcoin. For one, the 32MB block size may tend toward greater centralization of mining nodes in the future, since the ability to process 32MB blocks requires the kind of computational power that only the biggest mining companies are likely to possess. And secondly, there are reports that Bitcoin Cash is already quite centralized as it is — even as most nodes do not yet use the full 32MB bandwidth — with Jameson Lopp revealing data in December which indicated that as many as 54 percent of Bitcoin Cash nodes are running on Hangzhou Alibaba virtual servers in China, compared to 2 percent of Bitcoin nodes.

Such (relative) centralization arguably puts a blockchain at greater risk of failure, since it could theoretically be disabled by a government agency shutting down a small handful of servers or nodes. Clearly, this isn’t what any business or retailer would want from a cryptocurrency they’ve just begun accepting as payment — although, even if Bitcoin is more decentralized than Bitcoin Cash when it comes to servers, the dominance of Bitmain gives it problems of its own when it comes to mining. And in terms of block share, it’s not as decentralized as Bitcoin Cash or Dash, since the top four Bitcoin Cash and Dash miners produce 55.1 percent and 41 percent of blocks, compared with 57.5 percent for Bitcoin — it’s currently 69.75 percent for Ethereum, 68 percent for Litecoin.

However, before we descend into an endless — and often subjective — debate about which cryptocurrency is the most decentralized, it’s worth noting that merchants and businesses don’t have to choose only a single coin when deciding to accept crypto as payment. Increasingly, platforms are becoming available that enable merchants to accept any one of the multiple cryptocurrencies, thereby providing their customers with a choice of different coins to pay with — which effectively enables them to lean on the strengths of each currency at different times.

For example, Coinbase Commerce was launched in February of this year, and as the company explained in a blog post, it makes accepting numerous coins easy for businesses and online retailers. “Coinbase Commerce can be directly integrated into a merchant’s checkout flow or added as a payment option on an e-commerce platform,” read the launch announcement. “With just an email address and a phone, merchants can sign up and begin accepting payments in Bitcoin, Bitcoin Cash, Ethereum and Litecoin.” And since its launch, it has been integrated with a number of e-commerce platforms, such as Shopify and WooCommerce, bringing the possibility of accepting crypto payments to millions of retailers, as WooCommerce powers around 22 percent of online stores on the web.

And there are other platforms that make accepting multiple cryptocurrencies possible, including BitPay and CoinGate. CoinGate, for example, is a Lithuania-based platform that enables businesses to accept payments in Bitcoin, Ethereum, Litecoin, Dash and over 50 other altcoins. This March, it announced a new partnership with the France-based PrestaShop e-commerce platform, enabling it to reach over 80,000 merchants within the EU. As it said in its press release, the cryptocurrencies it offers “are in a single payment environment, that caters [to] the widest range of cryptocurrency owners,” and that, therefore, eliminates the need for merchants to make a false choice between numerous coins, each with their own advantages and disadvantages.

As such platforms expand and proliferate, there will obviously be less need for merchants to choose between the usability of competing cryptocurrencies. And funnily enough, the beauty of such platforms will be that, by making cryptocurrencies more accessible as a means of payment, their expansion will also make crypto more usable. Not only will their increasing use stabilize their values — thereby rendering them less volatile — but the increasing pressure and testing provided by real-world usage will force and enable development communities to come through with innovations, bug fixes and scalability improvements more quickly. The situation will be a win-win for merchants and customers alike, and given that crypto-payment platforms will increasingly offer a wide range of coins, it will be a situation that mutually benefits all cryptocurrencies, not just the ‘most usable’ one.



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