Bitcoin Ƀ, now useless for small payments
I noticed that most people are unaware of the high processing fees of Bitcoin payments. This is because most people hold on to this as (highly speculative) investment and rarely use it. Once they start to use it, they will get a shock.
High Bitcoin transaction fees and slow processing time currently prevents mainstream adoption of this cryptocurrency. To illustrate, here is a real word transaction I did on Takealot.com through my local currency (ZAR):
- Cost of items: R630
- Bitcoin processing fee: R261
As you can see, the fee was a whopping 41% of the item cost.
The average shopper will be unaware of this fee and nowhere is there an indication of the fee on the Takealot checkout (using their PayFast Bitcoin processor):
Even Takealot is unsure about Bitcoin fees, which is quite scary for such a large online retailer:
Note: Takealot has since cancelled one of the items without notifying me, so my Bitcoin processing fee is now 100% that of my purchase.
For anything roughly under $950, you are better off using your credit card. This is because of skyrocketing Bitcoin transaction fees, where you now have to easily pay ̶$̶2̶0̶ $30 per transaction as indicated in the chart below:
The Lightning Network promises to solve this with instant transactions. How far away we are with this, I don’t know. Other cryptocurrencies including Bitcoin Cash also presents a good solution but requires mainstream adoption.
So, if you speculate with Bitcoin, understand the inherent risk and growth issues involved and that you may end up with a lot less. Also understand that it is useless in its present state to buy stuff like coffee and why most shops are not offering it. At current transaction fees it does however make sense for purchases over $1000, when you compare it with average credit card fees. It would make sense purchasing a car or house with it.
Cryptocurrencies including Bitcoin, and the Blockchain platform itself, is the future, but there are growing pains that needs to be solved first, and why we are seeing so many alternative cryptocurrencies established.
PS: I wonder what the effect will be on processing time and cost if everyone starts to sell their Bitcoin?
Further interesting reading:
- https://medium.com/@davidgibbons/the-4-horsemen-of-the-bitcoin-apocalypse-how-btcs-bubble-will-burst-f078c3bf4205 021VC