The autumn of 2020 has been a lucrative one for bitcoin investors, with the world’s most famous cryptocurrency being awoken from a bearish end to the summer with the news that payments giant PayPal was set to begin accommodating BTC payments within its 346 million global user base.
With the news of PayPal’s accommodation of Bitcoin emerging on October 21, we can see a significant rise in the value of the cryptocurrency leading to BTC almost reaching highs of $14,000 before a correction took place.
However, the long-term impact of PayPal accepting the buying, selling, holding and spending of bitcoin within their accounts could lead to huge levels of adoption of the currency. Could we be on the verge of an era of unprecedented growth for both Bitcoin and the world of crypto as a whole?
A “Pivotal Moment” In Bitcoin’s History
The arrival of PayPal accommodating Bitcoin represents the biggest single step that any cryptocurrency has made toward mainstream adoption in over 10 years of existence.
In the past, cryptocurrencies have been met with scepticism from would-be adopters due to its links to the black market and shady dealings, but the arrival of a major player in finance will not only supply its users with the opportunity to invest in Bitcoin (though, critically, not directly on the Bitcoin network) but can also go a long way in establishing a new level of confidence in consumers who were fearful of investing before.
Jason Deane, an analyst at Quantum Economics, told Decrypt that PayPal’s announcement regarding its accommodation of bitcoin “could very much be the moment that is considered pivotal when the Bitcoin history books are written.”
“In my view, this is an extremely significant move for cryptocurrency adoption that is likely to expand Bitcoin’s reach at a vastly accelerated level, drive the development of additional services and serve as a rock-solid endorsement of the concept of cryptocurrency leading to further institutional involvement,” Deane explained.
Entering A Market Of 346 Million Users
One vitally significant aspect of PayPal’s move to accommodate bitcoin is the fact that it, along with other cryptocurrencies like bitcoin cash, ether and litecoin, can now be used to shop with the firm’s 26 million merchants across the world from 2021 onward.
With over 346 million users, PayPal has provided a brand-new layer of practicality for cryptocurrencies that can help its users not only invest in bitcoin but also spend it as if it were a fiat currency within its network.
Furthermore, PayPal appears to understand its role in propelling cryptocurrencies into the financial mainstream, and the company’s President and CEO Dan Schulman has spoken of the challenges that the payment giant expects to face in opening bitcoin up to wider audiences.
“Our global reach, digital payments expertise, two-sided network and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange,” Shulman explained, per Finextra. “We are eager to work with central banks and regulators around the world to offer our support, and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce.”
With the price of bitcoin hovering above the $16,000 mark at the time of writing, mass adoption could see the value of investments in the currency rise exponentially — making the coin an attractive proposition for those looking to find an asset that can appreciate faster than traditional stocks and shares.
But what about the notion of adopting Bitcoin with the intention of spending on grocery shopping with PayPal? The scalability of coins with older blockchain frameworks like Bitcoin could be troublesome for any meaningfully practical applications. Currently, Bitcoin is able to process up to seven transactions per second — a far cry from Visa’s 24,000 transactions per second.
While this could be a problem in terms of practical usage, some altcoin networks like Ripple have the ability to handle as many as 1,500 transactions per second. And second layer applications for Bitcoin like the Lightning Network are actively iterating toward faster and more efficient BTC transactions.
Risks To Bitcoin Adoption
One of the most significant issues in PayPal’s adoption of cryptocurrencies stems from the fact that the platform is offering a “custodial service” to users. This means that, despite having the power to buy and sell bitcoin, users won’t actually be able to hold their assets or transfer them to other wallets. Cryptocurrency commentator and the leader of Lightning development firm Zap Jack Mallers explained on Twitter that this move effectively renders PayPal bitcoin as “more or less a separate asset confined to the PayPal network.”
Also, there may also still be uncertainty as to whether the cryptocurrency can overcome the threat of new rivals entering the market.
Many of the world’s biggest economies are looking to make their way into developing central bank digital currencies (CBDCs), with powerhouses like China already leading the way with its own digital yuan. However, both the U.S. and EU have also been exploring the prospect of transitioning into CBDCs also.
Last month, European Central Bank President Christine Lagard commented that a digital euro currency should be issued to trade alongside the fiat version, with the traditional Euro ultimately being phased out soon after.
As more of the world’s largest central banks and large corporations transition towards digital currencies, it seems inevitable that Bitcoin will soon have to face the threats of new competitors backed by global governments. Global central banks will likely make moves in order to continue their control over the issuance of money supply, and future governmental regulations to clamp down on decentralized cryptocurrencies like bitcoin could hinder the progress made by PayPal’s foray into crypto.
Bitcoin’s move into the financial mainstream was never going to be an easy one, and there’s bound to be great hurdles to overcome in the future. But for now, the world of crypto should rejoice at the arrival of PayPal, and the biggest leap yet towards a new frontier of mass adoption.
This is a guest post by Peter Jobes. Opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Peter is a tech, cryptocurrency and blockchain writer who has worked with the Press Association and clients like Tesco and RAC. The CMO at Solvid he has been featured on the pages of Entrepreneur, Tech Radar, VentureBeat, Social Media Examiner and CoinMarketCap.