One of the main incentives behind Bitcoin was the manner in which people could quickly and easily send funds to someone else at a cost that was fractions of the established alternatives. However, this is unfortunately no longer the case. Fees are on some occasions more than PayPal and the backlog of unconfirmed transactions can be an issue.
For example, the cost of sending a Bitcoin transaction has risen from about 13 cents for an average transaction in late 2016 to about $2.30 now. This can be seen in the graph below which was obtained from blockchain.info
This means that that practicality of using Bitcoin as a method of payment (its initial purpose) is now for the first time being called into question by a number of companies.
Search for Alternatives
The result of these Bitcoin growing pains has been that a number of online retailers as well as Bitcoin businesses have decided to move away from Bitcoin in search of other more practical alternatives. For example, the owner of Yours, Ryan Charles explained his reason for leaving Bitcoin behind.
Bitcoin is now in a situation where the fees are very high and are likely to continue to increase, so it’s not even competitive with PayPal or Western Union in most cases
They decided to switch to Litecoin as a means of payment. This is because the size of the transactions that the company undertakes are quite small. These micropayments are costing way too much for them on Bitcoin.
Another company that has left the Bitcoin payment processing behind is a gift card company called BitCart. They complained about how the slow transaction times and the cost of sending funds had forced them in search of an alternative. They have now implemented Dash which is much faster and cheaper.
This is also particularly troublesome for the people Bitcoin was most likely to impact, citizens of the developing world. For example, users in countries such as Venezuela and Zimbabwe may find that they cannot afford the fees anymore. This could make it quite difficult especially in these countries where Bitcoin is a way for the people to escape hyperinflation.
Indeed, these sentiments are also being expressed by those who are intimately involved in facilitating those transactions. Shaun Chong who is the lead developer at the Bitcoin.com mining pool. He claimed that Bitcoin could not realistically be used when transaction fees exceeded $2. He said that
…in its current state Bitcoin is broken.
How this will play out over the next couple of months is uncertain. This is particularly relevant in the context of the ongoing scaling debate. What is certain though is that more Bitcoin businesses will move to Altcoin alternatives until the transaction costs start to come back down again.
Featured Image via Fotolia
