Stripe to drop bitcoin because of volatility and lengthy transaction times

24 Jan 2018

Image: Inked Pixels/Shutterstock

Stripe calls time on volatile bitcoin, which has become more of an asset than a fluid currency.

Payments player Stripe has said that it will stop supporting bitcoin on 23 April due to the cryptocurrency’s volatility.

These are just some of the issues dogging the cryptocurrency of our time, with long delay times and transaction fees stifling its potency.

‘Transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies’

According to Stripe product manager Tom Carlo, bitcoin is no longer fit for purpose as a currency for transactions that need to take place in a speedy manner.

Stripe was an early proponent of bitcoin and, in 2014, it became the first major payments company to support bitcoin payments.

“Our hope was that bitcoin could become a universal, decentralised substrate for online transactions, and help our customers enable buyers in places that had less credit card penetration, or use cases where credit card fees were prohibitive.

“Over the past year or two, as block size limits have been reached, bitcoin has evolved to become better suited to being an asset than being a means of exchange. Given the overall success that the bitcoin community has achieved, it’s hard to quibble with the decisions that have been made along the way.”

Dropping change on bitcoin

Fundamentally, Carlo argues that bitcoin has become less useful for payments.

“Transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies.”

What Carlo means is that by the time the transaction is confirmed, fluctuations in bitcoin prices mean that the transaction ends up being for the wrong amount.

Another bane of bitcoin of late is that transaction fees have risen substantiually.

“For a regular bitcoin transaction, a fee of tens of US dollars is common, making bitcoin transactions about as expensive as bank wires.”

For such a nimble, fast-moving player, which is becoming a stalwart of the digital payments scene, Stripe’s decision may set off alarm bells across the cryptocurrency world.

Stripe, which was valued at $9bn in 2016, is emerging as one of America’s fastest-growing tech brands.

Ironically, one of Stripe’s leading investors is Peter Thiel, whose Founders Fund is understood to have amassed a bitcoin stash worth potentially hundreds of millions of dollars.

Either way, Stripe could definitely be on to something here.

Carlo said that because of the lengthy transaction times, failures due to fluctuations and exorbitant fees, the company has seen the desire in customers to accept bitcoin decrease.

“And, of the businesses that are accepting bitcoin on Stripe, we’ve seen their revenues from bitcoin decline substantially. Empirically, there are fewer and fewer use cases for which accepting or paying with bitcoin makes sense.

“Therefore, starting today, we are winding down support for bitcoin payments. Over the next three months, we will work with affected Stripe users to ensure a smooth transition before we stop processing bitcoin transactions on 23 April 2018.”

The future of cryptocurrencies is still viable

Carlo said that Stripe isn’t giving up on cryptocurrencies and will continue to pay close attention to the ecosystem, especially in terms of what’s happening with Lightning, OmiseGO, Ethereum and Stellar as well as bitcoin cash and Litecoin, and other variants of bitcoin.

“We remain very optimistic about cryptocurrencies overall. There are a lot of efforts that we view as promising and that we can certainly imagine enabling support for in the future.”

Carlo said it may even be possible that bitcoin itself may become viable for payments again in the future.

“Of course, there’ll be more ideas and technologies in the years ahead.

“So, we will continue to pay close attention to the ecosystem and to look for opportunities to help our customers by adding support for cryptocurrencies and new distributed protocols in the future.”

Stripe’s observations are worth noting as the company becomes a global bellwether for the payments industry.

It doesn’t mean that cryptocurrencies have had their day, it just means that the world of payments moves fast, and bitcoin and its supporting apparatus has become a bit bloated amid the cryptocurrency gold rush.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years