Bitcoin, the concept which was introduced by Satoshi Nakamoto almost
Bitcoin, the concept which was introduced by Satoshi Nakamoto almost a decade ago has intrigued the world right from the beginning. The digital peer-to-peer cashless network was aimed to bring in a decentralized economy, which promised faster transaction at minimal charges.
Bitcoin was invented to end the monopoly of traditional centralized banking systems which held a monopoly over people’s money. Right after Bitcoin gained the popularity and people realized that the digital asset is not just another internet phenomenon, it started to draw a direct comparison with the traditional transaction systems like Visa and MasterCard. So, the obvious question is where does Bitcoin stand when compared to these traditional payment portals? Would it ever be able to surpass the likes of Visa and MasterCard?
We will try to evaluate various aspects of both the bitcoin and the traditional payment portals and see how far has Bitcoin come since its inception and whether it has any chance to surpass the traditional payment portals.
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Visa/ Mastercard vs Bitcoin Transaction Speed
Bitcoin as a payment portal draws a direct comparison with the likes of Visa, MasterCard, and Paypal which are established players in the game. Now let us compare the transaction speeds of the traditional payment portals and see where Bitcoin stands in comparison.
Visa/ Mastercard – Visa the most used payment portal of the world amount to 150 million transactions every day. This brings in the transaction speed on via Visa at 1,667 transaction/ second.
PayPal: Paypal is one of the most preferred cross-border transaction medium and amounts to almost 193 transactions/ second.
Bitcoin: Bitcoin in comparison is nowhere near the traditional portals and only amounts to around 4 transactions/ second.
When we look at the number of transactions processed by the traditional networks, Bitcoin pales in comparison. The reason for such a drastic difference lies in the use of technology for processing the transactions.
Most of the traditional portals are centralized and have a very streamlined form of working and having a centralized database also comes in as a great savior. In the case of Bitcoin, the decentralization aspect which is a USP otherwise comes back to haunt it.
When someone put out a request on the Bitcoin network, the miners are responsible for verifying the transaction. These miners are competing against each other to verify the transaction earlier than its peers, in order to get the Block Reward. The Block time of Bitcoin is fixed at 10 minutes and the mining difficulty is increased to maintain the constant block time. This leads to scalability issues, which has been predominant and a cause of worry among the Bitcoin community.
On the contrary, the traditional portals rely on a centralized database, where when a transaction request is initiated, the system simply put your identification on the network, check whether you have the required fund to initiate the payment and if everything is fine your transaction is processed.
Bitcoin’s tryst with the scaling its transaction has been a cause of worry for the developers, and this has led to many off-chain solutions like the lightning network which is still under construction. However, even if when the Lightning network becomes fully functional, the Bitcoin network would still won’t be able to come even close to the traditional methods.
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Why Bitcoin can Never Surpass Traditional Payment Methods?
The answer is centralization, Bitcoin does promise a peer-to-peer network, where no one has control over your money, but decentralization has its share of shortcomings. The processing speed is greatly hampered by the design of the Bitcoin blockchain.
Since it’s a decentralized network of peers, the transaction is encrypted with a 256-bit cryptographic signature and in order to verify the transactions, the miners need to put in a certain hash power to verify those transactions. This combined with the fixed block time add to the worries of the Bitcoin network scalability issues.
Look at the number of transactions processed by the traditional network and then look at the Bitcoin network, the problem lies in the concept and technology in use. The only saving grace for Bitcoin is that it can help you transact huge amount running in million in the same time frame as any other transaction on the network while not burning a hole in your pocket in the transaction fee.
The traditional portals might take days or even weeks to transact a huge amount and the charges for the transactions won’t be worth it.
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Final Thoughts
In order to ever achieve the transaction speeds of the traditional portals, the Bitcoin network either have to look at changing the protocol of mining or bring in some form of centralization. Otherwise, there is no way that the Bitcoin can ever come near the transaction speed of traditional payment portals like Visa or MasterCard
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