If you want to spend it — will they come? Apologies to the old baseball movie, but the question is a fair one. As cryptocurrencies continue to gather their fair share of headlines, consumers are becoming more interested in how, where and when they’ll be able to take those digital offerings and use them in everyday spend.
According to a recent PYMNTS report done in collaboration with BitPay, based on the responses of more than 8,000 consumers, people want to own and use cryptos in order to transact. Roughly 18 percent of the adult population is likely to use crypto to make a buy, which translates to 46 million consumers. Those who have used cryptos in transactions have done so to buy everything from real estate to food delivery. In terms of familiarity, 12 percent of consumers own cryptos and 4.5 percent have owned them in the past.
Conventional wisdom may hold that volatility — the wild percentage changes in the price of bitcoin and other coins — may keep consumers from really wanting to transact. But Pair theorized that the volatility is actually stimulating the purchases. Media attention is also stimulating activity, as cryptos are top of mind.
He noted that in some cases, consumers have been loading crypto assets onto gift cards to spend with merchants, which in turn do not yet offer the option. And elsewhere, PayPal’s Checkout with Crypto feature launched in late March — which, it should be noted, has a “stutter step” where cryptos are in actuality converted into fiat to enable the transaction.
As Pair noted, “It’s great, overall, having PayPal’s name attached to bitcoin and cryptocurrency in such a powerful way. Enabling 300 million users to buy bitcoin in their app is a great thing.”
But in terms of mechanics, he said, consumers transacting with cryptos — at least for now — are not using blockchain for the payment. Instead, it involves a couple of steps, where holders sell their crypto and then conduct a “normal” purchase with a PayPal merchant.
“It’s not actually a transaction that goes on a blockchain to clear the payment,” Pair told Webster, though loading the crypto onto cards through BitPay does leverage the blockchain. “Now they’re still using PayPal’s proprietary network.” Using gift cards or debit cards acts in much the same way (connected as they are to Visa and Mastercard rails).
We are at least some way away from stepping aside from that stutter step. As Pair illustrated, different blockchains have different levels of congestion, which still makes it relatively expensive to transact with, say, bitcoin or Ethereum. “Other blockchains can be a fraction of a penny to create a transaction, but there’s a trade-off,” he said. Bitcoin transactions are more secure, and the relatively higher levels of security may be desirable for higher-value transactions.
Blockchain payments are the future, Pair said, predicting that “practically all payments” will be done on a blockchain of some sort. For PayPal, he said, the back-office infrastructure will eventually move to (private or open) blockchain.
Picture, then, a parallel in the evolution of the internet, where only a few decades ago, companies and individuals were wary of transacting online. Now, such activity is second nature — in fact, even preferred — amid the great digital shift.
Five Years From Now
As to the ubiquity of the blockchain(s), Pair said we’ll get there within as few as five years. That’s not to say that proprietary networks will disappear entirely — just as people are still writing paper checks today. The internet itself, he said, will move to a world of interconnected blockchains — carrying not just bitcoin or Dogecoin, but also dollars, euros and euro stablecoins.
As Pair noted, “For our customers, we usually advise them that they should receive a settlement in whatever currency their accounting system is based in.” But in developing markets where BitPay may not have bank accounts in place, stablecoins are gaining traction as an option to settle payments.
Over the near term, Pair predicted, there will be more companies and payment service providers adopting blockchain. “The places where you happen to be shopping will give you the option to make that purchase with a blockchain payment,” he said. “If you fast-forward from now to the end of 2021, I think you will be surprised at the number of places that you never would have thought would take crypto payments … will now take them.”