Bitcoin company executives and
analysts including Irene Katzela, CEO of Chain of Points, firmly believe
retailer and merchant adoption is the key to bitcoin mainstream
adoption.
Since 2014, the bitcoin industry and
market have seen a rapid emergence of bitcoin-accepting merchants.
Companies like TigerDirect and Expedia have begun to offer bitcoin as
one of their main payment methods.
Currently, bitcoin is perceived more
as a store of value and a safe haven asset rather than an actual digital
currency. Some bitcoin investors like Roger Ver argue that the
development community of bitcoin must work towards transforming bitcoin
into a settlement system and digital cash rather than digital gold.
While this approach isn’t necessary
as bitcoin can be used as both a store of value or settlement system
depending on certain users, it is important to understand that limited
merchant adoption is restricting the mainstream adoption of bitcoin.
With the integration of various
scaling technologies like Segregated Witness (Segwit) that are currently
on the verge of activation, bitcoin blocks are set to see at least a
2.1x increase. Considering the average blocksize of 1 mb, a 2.1x expansion of the bitcoin blockchain will appropriately scale the network.
In contrary to what many investors
claim, the expansion of bitcoin blocksize will not abruptly bring
hundreds of millions users into bitcoin. The user base of bitcoin is not
growing at linear rate. Instead, it is demonstrating an exponential
growth rate as the digital currency is still at an early stage of
adoption.
As Katzela emphasizes, it is
important to persuade the general population and consumer base to
utilize bitcoin by introducing its benefits and advantages over cash or
other traditional forms of payments in existence. Some bitcoin platforms
like Purse.io are already targeting the general population or
mainstream users by offering 20% discount on products. Some individual
merchants also provide special discounts to bitcoin users, as bitcoin
significantly decreases credit card fees or financial service fees
handled by merchants.
When a user tries to utilize bitcoin
for the first time and sees that it is secure, fast, and cheaper than
credit card payments or bank transfers due to a merchant’s effort in
providing a discount or a special promotion in appreciation of lowered
fees, the adoption rate amongst beginner bitcoin users will drastically
increase.
“The savings on the merchant side are
clear considering the fees incurred by using existing payment methods.
An increasing number of merchants pass some of the cost savings onto
consumers, in the form of discounts and incentives. As these cost
savings continue, consumers will soon realize that virtual currency
enables lower prices for goods and services,” said Katzela.
An increasing number of merchants are
beginning to accept bitcoin as they’re seeing a significant decline in
the volatility rate of bitcoin. The digital currency has been
demonstrating stability over the past 12 months.
As Katzela explains, the number of
merchants accepting bitcoin is increasing but the mainstream user base
of bitcoin isn’t growing at a similar rate. Bitcoin-accepting merchants
that aren’t taking a step further to convince mainstream users in using
bitcoin will only appeal to existing consumer base of bitcoin.
“Aiming only to increase the number
of merchants that accept virtual currency is only half of the equation
for wide consumer adoption. Achieving greater consumer adoption equates
making consumers feel safe using virtual currency in their everyday
lives,” said Katzela.