Bitcoin-Visa-Mastercard
Bitcoin competes

Bitcoin, a first choice alternative to the international payment system

26th October, 2023

From its humble beginnings as a technological experiment, Bitcoin has slowly taken hold, embodying a silent revolution in the world of finance. Rising above simple digital currencies, it has forged a path, challenging established norms and promising a future where monetary control is not concentrated in a few all-powerful hands. As Bitcoin continues to attract followers, its disruptive potential is becoming increasingly palpable, particularly in the area of ​​payments.

For decades, VISA and Mastercard have been the undisputed titans of this space, facilitating countless transactions across the world and becoming household names.

Their omnipresence has made it difficult to imagine a viable alternative. However, on the horizon, Bitcoin is emerging, not as a simple alternative, but as a real competitor.

Appearance of VISA and Mastercard companies

Visa and Mastercard are two of the largest payment processing companies in the world. They provide electronic payment services to consumers, merchants and more than 22 banks and financial institutions. In 000, the market is estimated at more than 2021300 billions of dollars, the credit card market being dominated 75% by Visa and MasterCard, compared to 15% for American Express.

The saga of bank cards began in the Parisian streets of the 1960s, with the birth of the legendary “Carte Bleue”. It then symbolized more than a simple piece of plastic. It was the promise of a new financial era, a world where paper money gave way to a more convenient electronic version.

While France was taking its first steps into the card era, across the Atlantic, two giants were taking shape: Visa and Mastercard. Both of these companies, in their early days, aimed to simplify payments for Americans traveling abroad.

But over time, their ambition expanded far beyond national borders. Their logos, which once adorned only American wallets, quickly became omnipresent in the most remote corners of the planet. Their expansion has been meteoric, with each card issued a testament to their growing dominance in the global payments market.

Magnetic cards, once the norm, have given way to chip cards, offering increased security. The advent of contactless payment has further pushed the boundaries, enabling transactions in a fraction of a second. From the busy streets of Paris to the bustling markets of Bangkok, the bank card has become much more than a means of payment: it is a reflection of our modern and collective financial history.

However, in 2009, with Bitcoin, a new concept of digital payments appeared, bringing greater fluidity to bank card payments. Considered a real disruption in the financial world, bitcoin payments are even more practical than bank card payments.

How is cryptocurrency disruptive?

When we talk about Bitcoin, we talk about much more than just a currency. We are referring to a revolution, an upheaval of established codes which called into question our way of perceiving value, currency and trust. It is for this reason that it is considered by many to be a currency ideal for cross-border payments.

At the heart of this disruption is a distributed ledger technology which, like an indelible accounting ledger, records every transaction with complete transparency.

But where Bitcoin has shined is in its ability to evolve beyond its original form. This is where we need to address the mysteries of the Lightning Network, this additional layer of the Bitcoin network that has promised to make transactions faster and less expensive.

Designed as a decentralized network, the Lightning Network facilitates micro-payments by avoiding the burden and fees associated with the main network.

The idea is simple but powerful: why record every coffee purchase on an already overloaded blockchain, when you can group together many off-chain transactions and record just one?

Thus, by combining the robustness of its original blockchain with the flexibility of the Lightning Network, Bitcoin positions itself not only as a viable alternative to traditional currencies, but also as a a precursor to a new golden age of digital payments. Through it, a promise emerges: that of a world where exchanges are rapid, fair and devoid of artificial barriers.

Lightning Network Adoption

The Lightning Network, as an emerging technology, has quickly found its way into the Bitcoin ecosystem, gaining considerable traction among crypto aficionados.

There has been exponential growth in the number of Lightning Network users. According to Arcane Research, from humble beginnings with 100 users in 000, the network has surged to reach almost 80 million users in March 2022.

These numbers demonstrate not only the mass adoption, but also the confidence in this technology to solve Bitcoin's scalability issues.

Imagine walking into a trendy bar, where the screens not only display prices in euros, but also in satoshis. You order a Perrier. The server presents a unique QR Code for an amount of 10 satoshis.

In just a few seconds, using your Lightning Network wallet, you scan the QR Code and confirm the transaction. Before you even catch your breath, the payment is validated. No wait times, no exorbitant fees, just a fast and smooth transaction. Au Salvador, residents are already benefiting from this payment revolution, as we can see, very rightly in a documentary dedicated to his adoption in the village of El Zonte.

For merchants, the Lightning Network is a boon. Unlike the intermediation and transaction fees of traditional bank cards, the cost on Lightning is minimal.

Additionally, there are no setup fees or hardware costs associated with adopting this technology. For customers, simplicity is king. Without having to worry about minimum payment limits or hidden fees, transactions are fast, secure and transparent.

So, with such compelling benefits, it's no surprise that the Lightning Network is seeing such rapid adoption, perhaps marking the beginning of a new era of financial transactions.

-> Read our complete guide to the Lighting Network

Comparison between Bitcoin and traditional bank cards

In the arena of financial transactions, a battle is emerging between the pioneer of cryptocurrency, Bitcoin (in particular with its Lightning Network), and the giants of traditional payments: bank cards.

👉 Time : The final validation time can sometimes extend over days. In contrast, Bitcoin's Lightning Network offers an innovative solution with near-instant microtransactions, making the payment experience seamless and wait-free.

👉 Expenses : In addition, bank cards, although common, can come with hidden fees, currency conversion fees or even percentages charged per transaction. The Lightning Network, for its part, disrupts this model by offering transactions at very low costs, making each transaction more economical, especially for small amounts.

👉 Traceability of transactions: Additionally, credit card transactions can be subject to fraud, and each transaction leaves an easily traceable digital footprint. The Lightning Network offers a different approach: although transactions are transparent, they offer a greater degree of anonymity. Only the nodes involved have a partial vision of it, making data much less exposed.

👉 Accessibility: Credit cards, with decades of presence, are almost universally accepted and recognized. However, usage often requires a bank account, which can exclude a portion of the world's unbanked population. Even more, it is not easy to find ATMs and exchange offices in all countries of the world. Bitcoin, with its decentralized essence, offers an open door to anyone with Internet access, potentially democratizing access to financial services.

In short, while credit cards continue to dominate thanks to their familiarity and robust infrastructure, Bitcoin, via the Lightning Network, is emerging as a viable and potentially superior alternative. Its adoption and undeniable advantages position it as the future competitor to traditional payment systems.

Challenges and obstacles for Bitcoin payments

Bitcoin, often nicknamed “digital gold,” faces monumental challenges on its road to widespread recognition and adoption.

If Bitcoin's rising tide has captivated investors around the world, its tumultuous waves of volatility are a whole different story. This price instability, where the asset can experience huge spikes and falls in the space of a few hours, makes some reluctant to view it as a true store of value. For the average person, the idea of ​​seeing their net worth fluctuate so drastically can be frightening, especially when it comes to everyday transactions.

In addition, the world of Bitcoin is moving in still murky legal waters. Many countries are struggling to define a clear regulatory framework for cryptocurrencies, fearing their implications in terms of money laundering, tax evasion or terrorist financing. The lack of an international regulatory consensus adds a layer of uncertainty for investors and companies wishing to legally operate in this space.

Although Bitcoin has been in the spotlight for over a decade, it remains in an early adoption phase. Its image has been tarnished by stories of hacks, fraud and black markets. For many, the underlying technology, blockchain, remains unknown.

The infrastructure needed for mass adoption – secure exchanges, easy-to-use wallets, fund recovery mechanisms, etc. – is still in development.

The integration of cryptocurrencies with Visa and Mastercard

Despite these challenges, the rise of Bitcoin is undeniable and the behemoths VISA and Mastercard have understood this well. Both giants have begun exploring cryptocurrency-related options, such as with the integration of Ripple (XRP) by some banks for example or with the Stella Lumens system.

We can also see that many crypto bank cards like Wirex or Advcash for example have appeared in recent years, making it possible to pay with VISA and Mastercard cards while owning cryptocurrencies.

However, the situation in the field of cryptocurrencies is evolving rapidly and it is likely that more and more governments are opting for MNBCs. This would then involve issuing state currencies operating on private blockchains.

That said, beyond technological innovation, the process of monetary creation would not be modified and yet this is also where the innovation of Bitcoin lies. Even more, the freedom and protection of privacy that Bitcoin offers us is ever more necessary in a hyper-connected world.

In fact, even if States had national and legal cryptocurrencies, the importance and necessity of using Bitcoin as a decentralized alternative will only be stronger.

Conclusion

Scanning the financial landscape, it is clear that we are currently going through a major transformation. Bitcoin, with its potential to disrupt the established order, is at the heart of this revolution. However, the question on everyone's lips is: can Bitcoin really compete with titans like Visa and Mastercard?

These two payment giants have decades of experience, a global presence and robust infrastructure. However, the appeal of Bitcoin lies in its promise of decentralization, enhanced security and unprecedented transparency. 

Rather than seeing these systems as antagonistic, it is wiser to consider them as complementary. Traditional payment methods could coexist with cryptocurrencies, each bringing their own benefits to the transaction table.


Note: No financial advice is given in this or any other article on this blog. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.

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Evan Selemani

Fascinated by bitcoin since 2017, Evariste has continued to research the subject ever since. If his first interest was in trading, he is now actively trying to understand all the advances centered on cryptocurrencies. As a crypto editor, he aspires to continually deliver high-quality work that reflects the state of the industry as a whole.

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