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Bitcoin, a first choice alternative to the international payment system

Bitcoin

8 min read

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 world's largest payment processing companies. They provide electronic payment services to consumers, merchants, and more than 22,000 banks and financial institutions. In 2021, the market was estimated at over $1.3 trillion, with Visa and Mastercard dominating 75% of the credit card market, compared to 15% for American Express.

The saga of bank cards begins in the streets of Paris in the 1960s, with the birth of the legendary “Carte Bleue”. It symbolized more than just a piece of plastic. It was the promise of a new financial era, a world where paper money gave way to a more practical 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're talking about much more than just a currency. We're referring to a revolution, a disruption of established norms that has challenged our perception of value, money, and trust . This is why it's considered by many to be an ideal currency for cross-border payments.

At the heart of this disruption is a distributed ledger technology which, like a large indelible accounting book, 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 precursor to a new golden age of digital payments. Through it, a promise emerges: that of a world where exchanges are fast, fair, and free of artificial barriers.

Lightning Network Adoption

The Lightning Network , as an emerging technology, has rapidly made its way into the Bitcoin ecosystem, gaining considerable traction among crypto enthusiasts.

There has been exponential growth in the number of Lightning Network users. According to Arcane Research, from modest beginnings with 100,000 users in 2021, the network leaped to reach nearly 80 million users in March 2022.

These figures demonstrate not only the massive adoption, but also the confidence in this technology to solve Bitcoin's scalability problems.

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 seconds, using your Lightning Network wallet, you scan the QR code and confirm the transaction. Before you know it, the payment is complete. No waiting, no exorbitant fees, just a fast and seamless transaction. In El Salvador , residents are already benefiting from this payment revolution, as can be seen in a documentary dedicated to its 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.

Thus, with such compelling advantages, it is not surprising that the Lightning Network is experiencing such rapid adoption, perhaps marking the beginning of a new era in financial transactions.

—> Read our complete guide on 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 micro-transactions, making the payment experience seamless and without waiting.

Fees : In addition, bank cards, while common, can come with hidden fees, currency conversion fees, or percentages charged per transaction. The Lightning Network, however, is revolutionizing this model by offering transactions at very low costs, making each transaction more economical, especially for small amounts.

Transaction traceability: Furthermore , credit card transactions can be subject to fraud, and each transaction leaves an easily traceable digital fingerprint. The Lightning Network offers a different approach: while transactions are transparent, they offer a higher degree of anonymity. Only the nodes involved have partial visibility of the transaction, making the data much less exposed.

Accessibility : Bank cards, with decades of existence, are almost universally accepted and recognized. However, their use often requires a bank account, which can exclude a portion of the unbanked global population. Furthermore, ATMs and currency exchange offices are not readily available in all countries. Bitcoin, with its decentralized nature, 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 dubbed “digital gold,” faces monumental challenges on its road to widespread recognition and adoption.

While Bitcoin's rising tide has captivated investors worldwide, its tumultuous waves of volatility are a different story altogether. This price instability, where the asset can experience enormous spikes and drops within hours, makes some hesitant to consider it a true store of value. For the average person, the idea of seeing their net worth fluctuate so dramatically can be frightening, especially when it comes to day-to-day 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, Bitcoin's rise is undeniable, and giants like VISA and Mastercard have clearly recognized this. Both companies have begun exploring cryptocurrency-related options, such as the integration of Ripple (XRP) by some banks or the Stella Lumens system.

We can also see that many cryptographic bank cards such as 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 cryptocurrency landscape is evolving rapidly, and it is likely that more and more governments will opt for CBDCs (Central Bank Digital Currencies) . This would involve issuing state-backed 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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