Bitcoin

PayPal CFO John Rainey: Bitcoin “Not a Reliable Currency”

Bitcoin may succeed in the future as a payment system, but it may take years, said the CFO of PayPal John Rainey in a WSJ interview.

“Given the volatility of Bitcoin right now, it’s not a reliable currency for transactions because if you’re a merchant and you have a 10% profit margin, and you accept bitcoin, and the very next day bitcoin drops 15%, you are now underwater on that transaction,” said Rainey.

Rainey went on to present the Venmo payment platform, which has social media features and appeals to Millenial consumers for the ability to share purchases. At the same time, crypto payments are still tending toward anonymity, and in fact more users are trying to obscure their crypto holdings.

Currently, the advantage of PayPal is the wider merchant acceptance, as well as payment speed:

“It’s important to make it a more frictionless experience: 60% to 70% of all shopping experiences begin on mobile in the U.S., so there is a ton of friction in typing in your credit-card number and address that can be eliminated. With PayPal One Touch, with a simple fingerprint or click of a button you can follow through with a purchase,” added Rainey.

Crypto coins are seeing a slower adoption, but the most current round of expansion comes from Litecoin, expecting to popularize the LitePay approach in 2018.

The Bitcoin Network Moves Faster

At the moment, the Bitcoin network has survived the unexplained transaction overload of the past months, and there are less than 4,000 pending transactions, with a speed of more than 28 transactions per second. Because of the high network power, a single transaction has become more expensive not only in terms of miner fees, but in terms of electricity: more than 749 KW/h of electricity go toward one transaction.

The cost of electricity is only partially covered by miner fees, and it is difficult to trace who absorbs the real cost. Miners usually cover their costs by selling the block rewards, and thus most of the electricity bill is paid by Bitcoin speculators.

But there is a more worrying reason for the low network load: there are less overall Bitcoin transactions:

This is because BTC’s usage is also at its lowest level in two years. Many users were driven away by outrageous fees and merchant un-adoption. Merchants have been dropping BTC because of the high fees. https://twitter.com/lopp/status/966108179116441600 

As the market price of BTC strives to recover and regain its dominance, time will tell where Bitcoin adoption would lead, and whether the asset would indeed continue to rule as the future payment system.

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