Stripe: bitcoin is "better-suited to being an asset than a means of exchange."
But a lot has changed in the last four years. The bitcoin network has become a lot more widely used, and with popularity comes congestion and high fees. Last month the median daily transaction fee—which had been just pennies prior to 2017—peaked at $34. This figure has declined substantially this month, but is still around $5. That's a lot if you're just trying to buy a cup of coffee.
So on Tuesday, Stripe argued that it was ending support for bitcoin.
"Bitcoin has evolved to become better-suited to being an asset than being a means of exchange," writes Stripe's Tom Karlo.Transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies," Karlo argues. "By the time the transaction is confirmed, fluctuations in Bitcoin price mean that it’s for the 'wrong' amount."
As a result, Stripe's customers have become less and less interested in accepting bitcoin payments. "There are fewer and fewer use cases for which accepting or paying with Bitcoin makes sense," Karlo writes.
A broader shift away from bitcoin for routine payments
Stripe says it remains optimistic about the future of cryptocurrency. Karlo specifically pointed to the Lightning network—a payment network layered on top of bitcoin that could address bitcoin's scalability and cost problems—as an experiment Stripe is watching. But Lightning is still in its infancy, so it's not ready for use by a mainstream payment processor like Stripe.
Stripe is hardly the first company to back away from bitcoin. The Steam gaming platform stopped accepting bitcoins last month. The same month, Bitcoin payments provide Bitpay announced it was instituting a $5 minimum for bitcoin transactions while warning that "Many invoice payments under $100 may be uneconomical for bitcoin purchasers due to high bitcoin network fees." Bitpay has embraced Bitcoin Cash, a rival version of bitcoin that is optimized for fast transactions and low fees.
You might expect bitcoin insiders to be panicking about bitcoin's rising fees, but you'd be wrong.
"I'm pulling out the champaign [sic] that market behavior is producing activity levels that can pay for security without inflation," wrote bitcoin core developer Gregory Maxwell last month. Maxwell and others in bitcoin's "small block" faction believe that it's never going to be possible to scale the bitcoin network up enough to accommodate demand for routine payments.
Instead, their vision for bitcoin's future is for most transactions to shift to off-chain payment technologies like Lightning, freeing up capacity for high-value payments on the bitcoin blockchain itself. In their view, announcements like Stripes aren't a sign of bitcoin failing—it's a sign that market signals are shifting the bitcoin network's scarce capacity away from low-value transactions.