Here is the next installation of Parker Lewis’s Gradually, Then Suddenly articles.
In this rip, Parker dismantles the popular misconception that Bitcoin is a failure as a medium of exchange. Anyone who has studied the matter properly knows that Bitcoin’s base layer protocol was never designed to compete with Visa to make payments for groceries or coffee. A payment processor like Visa is a centralized service, essentially a large database accounting system. By virtue of being centralized, a system like Visa can achieve efficiencies that a a decentralized network like Bitcoin cannot. Therefore, a centralized system will always strictly dominate a decentralized one when it comes to speed.
Instead, Bitcoin was designed to provide censorship resistant peer-to-peer transaction settlement. To accomplish this, a robust, autonomous, decentralized network of nodes that verify and keep a record of every transaction is necessary. This is the mechanism by which Bitcoin settles transactions without the need for a centralized intermediary like Visa. However, it is also the mechanism that does not allow the Bitcoin settlement layer to achieve the speeds and efficiencies of a centralized system.
So, rather than competing as a payment processor, Bitcoin is better understood as competing as a clearing and settlements system, similar to a central bank which provides these functions for commercial banks. In that light, Bitcoin is an extremely efficient and reliable system.
My brief comments here don’t even get into the fact that a robust network is also necessary to enforce consensus network rules, which provide the real killer app for Bitcoin—strictly scarce, sound money.
Not to mention it is still early days. Additional protocol layers and payment networks will be built on top of the Bitcoin base layer in the future. In fact, I wouldn’t be surprised to simply see Visa ported to Bitcoin in the future (prices and balances are denominated in bitcoin and instead of making your monthly payments in your local currency, you simply pay in bitcoin).
Enjoy!