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Report: Massive Increase in Bitcoin Usage with Merchants

Although Bitcoin remains somewhat clunky in the traditional retail space that hasn’t kept the cryptocurrency from making massive strides over the last couple years according to data collected by Coinbase and BitPay. According to new reports Bitcoin usage with merchants is up 600% from 2018 to 2019 and showing no signs of slowing down. We will take a look at this increase and discuss how the emergence of the Fold app and Strike by Zap could push paying with Bitcoin further into the mainstream.

Bitcoin transaction

Contactless payment with smartphone, close-up

Two of the largest cryptocurrency payment processors are reporting that usage of cryptocurrency, lead handily by Bitcoin, experienced a large increase from 2018 to 2019. BitPay Chief Marketing Officer Bill Zielke said they processed over $1 billion in cryptocurrency transactions in 2019. Coinbase Commerce echoed a similar experience as they announced that they processed $135 million in cryptocurrency payments for thousands of merchants in 2019. This number represents a 600% increase in unique cryptocurrency transactions since 2018 for Coinbase Commerce.

Chainalysis reported an estimation that $4 billion in Bitcoin was sent through payment processors in 2019, with Ether and stablecoins figures being dwarfed in comparison. The $4 billion in Bitcoin is then absolutely eclipsed by the credit card purchase total of 2018 which came in at a whopping $3.7 trillion according to the U.S. Bureau of Consumer Financial Protection.

Apps Pushing Bitcoin Usage into the Mainstream

It’s not just Bitcoin on its own that has been responsible for the dramatic increase as a method for making payments. Bitcoin still struggles with a relatively slow transaction speeds compared to traditional payment methods. That’s why a number of different app developers have stepped in to help streamline Bitcoin transactions and help catapult the cryptocurrency to the mainstream.

Here’s a look at several of the apps that are helping fuel Bitcoin into the retail space:

Fold

The CEO of Fold, Will Reeves, said that his shopping app processed more than 2,000 transactions during the 2019 holidays, of which 80% were Bitcoin payments using the Lightning Network. Fold is an app that uses the Lightning Network and allows users to pay with Bitcoin either in store or online at retailers such as Starbucks, Whole Foods, Home Depot, and AMC Theatres.
Fold works as a payment platform that uses a Lightning Network protocol which interacts with the merchants’ Point of Sale (POS) system and integrates their existing payments systems.

Essentially Fold allows the consumer to pay in Bitcoin, but the merchant receives the payment in their own currency. The app takes your Bitcoin and automatically converts it into things such as gift cards, store credit, or other commonly used payment options the merchant accepts, and then uses that method to pay for the transaction, ensuring no effort is required on the merchants’ end.

Strike by Zap

Just last week Zap’s founder Josh Mallers, announced the company’s new product called Strike. Strike is an application that allows users to make Lightning Network payments with their bank account or debit card. That’s also all it requires the user to provide, no wallet address, node, swaps, channels, or the like. The app is built on top of Zap’s existing Olympus infrastructure, which was designed to allow users to buy Bitcoin inside their Zap wallet using the Lightning Network.

Though still in Beta phase, Strike aims to cover many of the issues faced by Bitcoin in its fight to become a mainstream payment option. With the app users will not need to create crypto wallets and protect their keys, they will not need to worry about price volatility, and they will not even need to know anything about buying and selling Bitcoin.

Strike’s initial version Olympus, aimed to instantly convert users’ cash to Bitcoin within the wallet, but with Strike Zap will instead be holding a static balance for each user and send Lightning payments for them on a transaction by transaction basis. This means if a user adds $20 to their Strike wallet app, they are not buying $20 worth of Bitcoin, but instead a claim on $20 worth of it, so no matter where the price of Bitcoin is in the market, the user has $20. Then they can spend as needed with no worry about market volatility.

In order to do this Zep holds all USD deposits with an FDIC banking partner and has to hedge all deposits they receive. So if 500 people have orders for $100 on the app, then Zep owes $50,000 worth of Bitcoin transactions to those customers. If Bitcoin drops then theoretically Zep loses the difference, so they will be conducting leverage trading to keep reserves on par with deposits they receive.

There is still work to be done with regard to legal and compliance issues as with most crypto products, but the beta has been promising, and many users downloaded and used the app to pay without even knowing it was technically done with Bitcoin. For now the service is accepting new users to the beta on a rolling weekly basis, but Mallers is hoping for full public access by the end of Q1 2020.