Bitcoin for 'the buy'? Volatility and transaction confirmations call it into question
"For day-to-day payments there are other virtual currencies with better benefits," says Onyze
Since El Salvador took the first step towards what in the crypto community is called 'bitcoinization' of the economy, thousands of experts and institutions have raised their eyebrows regarding the suitability of the creation of Satoshi Nakamoto to be used for such simple gestures as buying a loaf of bread or paying for breakfast. Many are the doubts that arise about the usefulness of bitcoin in shops of all kinds, from the supermarket to the hairdresser, despite the fact that since the decision of the Salvadoran Parliament of June 9 they are obliged to accept the cryptocurrency in any type of exchange of goods and services.
Others have declared their intentions to follow in the footsteps of the country chaired by Nayib Bukele, but the most determined is Tanzania, whose president, Samia Suluhu Hassan's, has urged its central bank this week to prepare for the adoption of the most popular of the cryptocurrencies. Numerous observers have pointed out that such a crazy step would be counterproductive for the economy of this nation, since it does not have brokers or ‘expertise’ in this market or in the blockchain. Also, bitcoin is volatile and extremely expensive.
El Salvador has also had to face a hard truth this week when it was rejected by the World Bank in its request for help to implement cryptocurrency as legal tender. The agency cited as reasons concern about the transparency of the process and the environmental impact of mining.
The question of the uses of bitcoin has been extensively addressed. With Nakamoto's coin almost in its teens, there is a more or less accepted consensus about its usefulness as a store of digital value. A kind of gold 2.0 for the new economy. However, when it comes to accepting it as a currency, the rejection extends throughout the financial markets.
Without going any further, this week the Governor of the Bank of England, Andrew Bailey, warned against the use of cryptocurrencies for payments, giving another blow to digital tokens. "Its value fluctuates substantially," he told a virtual conference call. "So, in general, they are not a good way to make payments." "Given the volatility of the asset value and the fact that there is no real asset to back it up, I'm afraid if you want to buy it, please understand that you can lose, you could lose all your money," he stated.
Bitcoin can be many things (a blockchain, a ledger, a store of value) but as a means of payment I see two handicaps today, ”says Enrique Palacios Rojo, COO of Onyze. "One is the confirmation of transactions, only 7 for every second, (Visa supports 56,000 euros) and the other is its volatility," he lists. "Second layer solutions are being developed that increase transactions and volatility is reducing, but for day-to-day payments there are other virtual currencies with better benefits such as some stablecoins", adds the expert of the company that acts as cryptocurrency custodian.
In terms of practical use, he is moderately optimistic, since "just as multi-currency mortgages were marketed years ago, it is possible that operations of this nature could materialize, although not everyone would be willing to do so." In addition, "it can give rise to additional financial services of risk coverage, exchange insurance, etc.", argues Palacios.
Instead, the Onyze expert highlights that in the cases of El Salvaor or Tanzania and other unbanked countries, “the true value for the population of both countries may lie in receiving remittances through bitcoin in a direct way and then converting them to your local currency ”. In the case of the Central American country, 20% of its wealth is based on these capital flows, so the use of a peer-to-peer currency through smartphones “would save costs for both the sender and whoever receives it ”, Palacios rounded off.
Translated by Caoimhe Toman