Earlier this week, Circle continued the process of pivoting away from bitcoin as a currency in their payments app. After previously deciding to denominate user accounts in fiat currencies by default, the payments application is now removing the ability to buy and sell bitcoin from their platform.
In an interview with the Wall Street Journal, Circle CEO Jeremy Allaire claimed the company’s fiat-denominated payments are growing many times faster than bitcoin payments on their platform. Allaire also claimed Bitcoin has not evolved quickly enough to support common, everyday payments, and he pointed to what he perceives as development gridlock among Bitcoin Core contributors as the main cause of this lack of progress. Although Allaire is frustrated with the Bitcoin Core development community, the reality is that they released their main scalability improvement, Segregated Witness, this past October.
While Circle has continued their pivot away from bitcoin, Blockchain is doubling down on the digital currency. CoinJournal reached out to Blockchain CEO and co-founder Peter Smith to get his thoughts on Circle’s decision and Bitcoin’s ability to scale to a larger user base.
Doubling Down on Bitcoin
When asked if he sympathizes with Circle’s decision to remove the ability to buy and sell bitcoin on their platform, Smith responded, “Of course – it’s never easy to pivot away from a product.”
Having said that, Smith and Blockchain do not intend on making a similar move at any point in the near future. In Smith’s view, sticking with Bitcoin is the better option because it allows for radical innovation to take place, as opposed to general improvements of the current system.
“I believe that radical innovation comes not from incrementally improving the current system but, rather, from building a new system purpose-built for today’s global world,” said Smith. “Digital currencies and block chain technology are the first (and only) credible candidates to enable that transformation within financial services (and beyond).”
To clarify, Circle is not giving up on blockchain technology as a whole. Indeed, they stated their intent to “[dive] headfirst into next-gen blockchain technology” in a recent announcement on their customer support page. Exactly what sort of blockchain technology Circle may use in the future is unclear at this point, but it leaves a large amount of room for interpretation due to the way “blockchain” is thrown around as a buzzword these days.
Users may also still store, send, and receive bitcoin with their Circle accounts. The only functionality that has been removed is the ability to transfer between bitcoin and fiat currencies. Circle will also continue to use Bitcoin in the background as a settlement mechanism.
Ironically, Blockchain recently made the opposite decision when it comes to allowing their users to buy and sell bitcoin. The bitcoin wallet provider recently partnered with Coinify to allow users to purchase bitcoin directly from within the app. Smith believes moves like these where bitcoin is made faster and easier to acquire will give the digital currency a greater chance of success over the long term.
Bitcoin Can’t Handle Mainstream Adoption Right Now
While Smith believes Bitcoin has the potential to enable radically innovative changes to the way people move money around the world, he also sees the need for the network to increase capacity and allow for more transactions to take place every ten minutes (the average time when a new block of transactions is confirmed).
“Needless to say, it’s frustrating to see growing demand on our platform against the backdrop of a network that is increasingly overwhelmed,” added Smith.
When Smith talks about the network becoming “overwhelmed,” he’s referring to periods of time when the demand for sending a Bitcoin transaction becomes so high that a larger backlog forms and users are forced to wait longer for their transactions to confirm. Earlier this year, Blockchain implemented a dynamic fee structure in their wallet, which improves the user experience during these times of congestion.
When blocks are full, all consumer-facing bitcoin businesses have to deal with endless support tickets from pissed off customers.
— Roger Ver (@rogerkver) 7 December 2016
Having said that, further improvements are definitely needed to help Bitcoin scale to more users. “Dynamic fees have helped our users transact, but they are certainly not a long term fix to the problem before us,” said Smith.
Is Segregated Witness a Solution?
As mentioned above, the group of developers behind Bitcoin Core have released the next step in their plan for capacity increases for the network, which is called Segregated Witness. In addition to increasing the overall capacity of each Bitcoin block, SegWit (as it’s sometimes called) will also enable advanced versions of various layer-2 Bitcoin protocols such as the Lightning Network.
While Blockchain is working on their own Lightning Network implementation, called Thunder, Smith remains uncertain as to whether these solutions will provide Bitcoin with the capacity it needs to grow over the near term. “SegWit, in concert with Lightning Networks (like Thunder), may help remedy a lot of the current backlog, but we won’t know its impact, if any, until [or] unless it is deployed,” said Smith. “Regardless, I’m hopeful we can work together as an ecosystem to build and deploy long term solutions that will support our ever growing user base.”