Close to one million commercial payments were made with crypto last year, and that’s just through one crypto payment processor.
CoinGate, which says it has been operating since 2014 and now has 430,000 users, states 927,294 payments were made in 2022, a 63% increase over 2021.
Bitcoin dominates with 48% of all payments made with BTC. Curiously, it is USDt that comes second, at 14.8% or more than 100,000 payments.
Ethereum has just 10% of this market, at least through this provider, despite it bing the second biggest crypto.
That might indicate some sort of specialization with eth never really trying to grab the commerce market, while merchant adoption has been a big theme for bitcoin.
Hosting providers and entities like VPNs seem to benefit the most from crypto payments with Vaidas Rutkauskas, the CEO of IT infrastructure provider Cherry Servers, stating:
“We have integrated crypto payments based on our customer needs – most of them prefer paying with crypto.”
From IRC servers – Satoshi Nakamoto bootstrapped bitcoin there – to VPNs, crypto has found a niche as a payment method for entities that do not want to collect user information.
NordVPN is the latest to accept crypto through CoinGate, with Donatas Strazdas, the spokesperson for another VPN, Surfshark, stating:
“Some of our customers take care of their privacy on the internet almost religiously, so paying with a decentralized and completely anonymous currency is one of the few acceptable ways to pay for services.”
Crypto usage however has spread far more widely with all merchants in El Salvador, for example, mandated to accept it for payments.
The nature of crypto in addition means that you don’t necessarily need a payment processor.
Trustnodes for example uses the self-custody option by Coinbase Commerce, which is open source and doesn’t require any sign up with Coinbase either on the part of the customer or the merchant.
As open source code, you can modify it to fit your needs, and you can modify it further to change it completely by taking price feeds from another provider and by sending the funds to whatever address you please, though in that case you might miss out on customers that have already signed up with Coinbase and so can pay more easily.
Some merchants however want the convenience of insta converting the crypto to fiat with Gediminas Griška, Hostinger’s Head of Payments, stating:
“Not only do we have the option to offer different types of cryptocurrencies for payments, but we are also able to control the volatility risk by converting crypto to fiat instantly, which is one of CoinGate’s features we enjoy the most.”
Nowadays apps allow you to insta convert the crypto to fiat and pay anywhere where contactless payments are accepted as the phone becomes contactless, with the merchant never having to quite accept crypto.
But, adoption online has in some ways been slower than one would expect. In China back in 2014 for example, Alibaba and all the other tech giants accepted bitcoin until the government there prohibited them.
Amazon still does not accept crypto, nor do many airlines. For the latter, you can use AlternativeAirlines and others which act as a middleman of sorts, allowing you to pay in crypto.
For Amazon, you can use giftcards that you can buy with bitcoin, but that the entity itself does not accept it speaks to potentially a semi-monopolistic desire for control, including maybe knowing your credit card details, data that can potentially be mined especially as Amazon now offers credit cards of its own.
Google Cloud however has started accepting crypto through Coinbase. Microsoft used to, Steam, Stripe. For the latter, they have started allowing crypto again though only for US entities and only when that entity makes payments to employees or clients.
This restrictive approach is slightly puzzling because the costs of setting up crypto infrastructure are close to nil.
The usage of crypto for commerce might not be high, however, but where it concerns these sort of giants, it may be around 20% of their customers have crypto.
They still might not use it, hodl, but there are instances where they might want to for numerous edge reasons – like all their balance is in investments or fixed savings accounts and the wage has not yet come through.
For small corner shops, those edge reasons might be few transactions and still even there a happy customer might be worth it. But for giant entities with millions of customers, those edges can translate to even millions of transactions a year.
One reason why big online merchants have not adopted bitcoin is because of high network fees, even though that’s the client’s problem since the sender pays the fee.
In addition, the Lightning Network now is sort of chugging along. It only has about $87 million worth of bitcoin, but the fees are pretty much zero.
“In 2022 alone, payments made through the Lightning Network grew by 97% and accounted for 6.29% of all orders paid in Bitcoin, compared to 4.53% in 2021,” CoinGate says.
That translates to about 50,000 payments, or 130 payments a day. Making it a number that sounds quite surprising, especially since it is through just one provider.
Indeed that people make crypto payments at all sounds surprising when you’re at the receiving end of it.
It’s new, still. It’s different, and that alone makes it exciting. It also has the potential to create a new economy outside of the banking and fiat system if the crypto given to the merchant is then used to pay their employees who then give it back to merchants in return for necessities or desirables.
The high volatility however has made such bootstrapping a very niche matter, with crypto and fiat likely to coexist for a very long time, but crypto at this point has established itself as an alternative in edge cases, and those edge cases add up significantly.
Indeed we’d estimate that about half of bitcoin’s current market cap, presuming we’re at the bottom, is due to that commerce use.
Our theory is that this commerce use puts a floor on the price, and if we had to estimate, we’d say it may be as much as half a billion to one billion dollars a day transacted in crypto for all global commerce.
And such usage should be encouraged because it distributes crypto ownership more widely across the world, and because sometime the fiat system fails.
Indeed, the fiat system in some five countries has collapsed since bitcoin was invented. Venezuela and Zimbabwe are old stories. Lebanon and Sri Lanka may be joined to a lesser extent by Russia, Ukraine, or even Turkey.
Nowadays in fact even the Japanese Yen has collapsed some 50% against the dollar as a final goxing to the MT Gox holders.
That makes bitcoin, and crypto more widely, an insurance policy among many other things. It adds resilience to society, and globally, because those that had crypto, in Lebanon and elsewhere, had a cushion.