In Bitcoin’s early days, one of its selling points was the ability to move money globally, with little to no fees. That is no longer the case, as the cost of moving Bitcoin can sometimes exceed the costs of PayPal and Western Union.
Commerce companies are struggling to use Bitcoin for its intended purpose, as a currency, even as fees erode their profit margins.
Exodus away from Bitcoin
There have been instances where major retailers have moved away from Bitcoin, for their own reasons, but now there are even cases of Blockchain businesses leaving the leader cryptocurrency behind.
Social platform Yours Inc. has recently moved away from using Bitcoin as a payment method due to its high fees. Owner Ryan Charles explains:
“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.”
Yours Inc. is a company that is built around writers receiving small payments from readers of their posts, but because of the small amounts, Bitcoin fees were killing the idea. The company switched to Litecoin for payments.
Likewise, Irish gift card company Bitcart recently abandoned Bitcoin and now accepts payments exclusively in Dash. The company complained that fees and delays were damaging their business, so they chose Dash as a less expensive, instant way to receive money.
Bitcoin fees have risen nearly 19-fold, from 13 cents per average transaction in the second quarter of 2016 to $2.40 in the same quarter of this year.
Bitcoin is more expensive than the competitors.
The fees for sending Bitcoin are also hurting emerging markets where the digital currency could make sense – such as in Venezuela and India. However, when consumers are only earning a couple dollars a day in these countries, it does not make sense to spend a week’s worth of wages just on fees.
Even in first world countries, there is a big burn that can be felt with high Bitcoin fees. It can cost as much as $15 to send $25 from the US to a bank account in the UK via Bitcoin, or three times as much as using v.
Using Bitcoin can also be quite the ordeal. Researchers conducted a test, trying to send $25 from the US to the UK Buying $25 in Bitcoin on Coinbase resulted in a 3.99% fee. Then $1.34 was paid to the Bitcoin network as a transaction fee. Finally, while converting Bitcoin to pounds was free on the exchange Coinfloor, $13.56 was charged to place the money in a UK bank account. That totals at $15.90 to get the payment through.
Of course this example involves converting to fiat, but it illustrates that there are more fees than just miner’s fees.
The difficulty and expense of using Bitcoin is making it an unpopular choice for those commerce stores who want to embrace the new technology of money. Shaun Chong, lead developer of the Bitcoin.com mining pool, stated:
“Bitcoin cannot be used properly for commerce when a transaction costs more than $2. If the fees were lower, the Bitcoin price would be even higher because Bitcoin would be more usable.”
Chong added that in it’s current state, Bitcoin is broken.