Is using Cryptocurrency cheaper, faster and safer?
I’ve seen and heard many people say Bitcoin will make it cheaper, faster and safer to transact. The question is whether this is currently so, and if not, whether it could be in the future.
Cheaper, faster and safer than what?
The implicit message is that Bitcoin works better than the traditional banking and payments systems, but what exactly should we compare it to? Let’s draw a basic comparison between on-chain Bitcoin and other specific types of transactions (forget about Lightning for a second, since it’s not widely deployed yet).
Cash: Cash has no transaction fee if you are the customer. It also has no block confirmation time but walking around with cash is more dangerous than walking around with a locked Bitcoin wallet.
Credit Card Payment (as a customer): There’s no per-transaction credit card fee and it’s mostly instant as merchants have strict timeout requirements on CC payments. However, it is possible to clone your card details and sell it, whereas with Bitcoin you have zero risk when paying someone.
Same Bank Transfer: Whether it is cheaper to use Bitcoin depends on Bitcoin network congestion and the Bitcoin price. It may be cheaper to use one or the other, depending on time. Same-bank transfers are usually instant. The real benefit of Bitcoin is that because all transactions are public, you not only have proof of payment, but also proof of receipt. The recipient can not claim not to have received the funds.
International Bank Transfer: Unless there is significant network congestion, a Bitcoin transaction is likely to be cheaper than an international bank transfer. Bitcoin is also much faster than a multi-day transfer. Bitcoin is safer - too - as you can see the exact (direct) route it travelled, as opposed to the opaque multi-nostro-vostro-hop process the banks use.
Credit Card Payment (as a merchant): Merchants typically pay high fees on credit card receipts. Even though the payment completes quickly from the customer’s point of view, the merchant only gets settled after a couple of days. There’s also the risk of fraud, which is not an issue if Bitcoin is accepted since payments are 0-trust.
Apples and Oranges
So I think the answer to the question is “Is Bitcoin cheaper, faster and safer than cash, bank transfers, credit cards and mobile payments under some very specific circumstances”. On-chain Bitcoin, when used correctly, is safer in all cases because it is inherently a system that does not rely on trusting a 3rd party and because of full visibility on all transactions. However, it is currently neither cheaper nor faster in general.
The real problem, however, is that we are comparing apples to oranges. In the above table I am comparing systems that handle 2000+ transactions per second (tps) to the Bitcoin network with a capacity of 3.3–7 tps. For example, if I look at the last four mined blocks, there was a nearly full block with 1902 transactions that took about six minutes to mine. 1902/6/60 = 5.28 tps.
We are actually comparing technologies that have had decades to mature and optimise to a nascent technology that is experimenting with several scaling solutions like increasing the block size or “Layer 2” solutions like The Routed Lightning Network.
Apples and Apples
It seems that everything comes back to the scaling debate. Only if the network can handle the number of transactions required for mainstream adoption can we make a true comparison between a scaled Bitcoin protocol and traditional transaction systems. In a scaled Bitcoin ecosystem, transaction fees would be cheap, and most transactions would enjoy a high priority. I believe scaling is a technical problem that can be solved with a technical solution and it is fair to say Bitcoin will — at least eventually — be cheaper, faster and safer than any other form of payment that exists today.
