Bitcoin Is Losing the Payments War

Mastercard recently announced its Crypto Partner Program, “a new global initiative that brings together more than 100 crypto‑native companies, payment providers, and financial institutions to create a forum for meaningful dialogue and collaboration as this space continues to mature.” Mastercard understands that crypto is what’s next for digital value settlement and they are rallying “innovators building on chain every day,” going on to say that, “the program will allow expertise and insights to flow both ways as we shape the future together.”

The “crypto-native innovators” they mention include Solana, Ripple, Tron, Polygon, Circle, Binance, PayPal, Gemini, and many more. All at the table, all helping shape how digital assets plug into one of the largest payment networks in the world.

You’ll notice that in this list I mentioned, Bitcoin specific representation is noticeably absent. I didn’t omit them, there are none to speak of.

The Bitcoin community also noticed and proceeded to scoff and rolled their eyes at the omission. “Of course Bitcoin isn't there. It's all a scam. Bitcoin is all that matters.” Then came the usual refrain: just keep building.

And it's not just Mastercard.

Coinbase recently launched an initiative around 402 payments, the HTTP status code originally designated to digital value exchange on the internet. It has gained significant traction with mainstream technology providers including AWS, Cloudflare, Stripe, and Vercel.

And again, the Bitcoin community stays firm: just keep building.

To top it off, in December, Visa launched USDC settlement in the US on the Solana blockchain. Over 130 stablecoin-linked card programs across 40+ countries, expanding to 100+ by year end. All while Visa is helping shape Circle's new L1 chain, Arc, as a design partner.

And I guess we just keep building?

But I have to ask, what are we building when we aren't even in the arena?

You can build in parallel for a while, but payments come down to network effects. Once the other side has real distribution, it's nearly impossible to break through. And look, crypto as a technology is winning. The world is moving to digitally native value exchange. We've won that much. The question is whether those rails have the properties they need for a better future.

This is where I am concerned and there are three things in particular that worry me.

First, we're not even in the conversation. We have almost no presence in the rooms where this payment infrastructure upgrade is being negotiated.

Second, many of us got into this fearing CBDCs, censorship, and debanking. But the way things are going, the leading “blockchain” technologies in these rooms are centralized chains run by foundations and companies. All with their own interests and a “throat to choke” when the government comes calling. If they win in payments, we likely get the same problems we have today on new infrastructure.

But most importantly, some of the smartest and most freedom-first builders in all of crypto are in Bitcoin. That is part of what makes the ecosystem special. But it also means a lot of talent gets poured into building the most privacy-preserving and principled tools imaginable, even when those tools do not line up with the problems most people want solved right now. The result is a lot of great engineering pointed at products with very little chance of broad adoption.

Bitcoin isn't inferior technology. We should be in these rooms. But there aren't enough Bitcoin companies in the arena to even have someone there advocating for Bitcoin-first technologies. Too much of Bitcoin has decided these rooms don't matter, or that building for them is some kind of compromise.

But building alone isn't a strategy. What you build is only half the battle. We can’t make a difference if we’re only building for our bubble.

What are we trying to do here?

I am so thankful we are finally getting off the old system. It was time.

For years, we have been plagued with outdated and centralized rails. Rails that take forever to settle and are easy to abuse.

I originally got into Bitcoin because of these issues. And being so easily de-banked while building at Strike only deepened my desire to upgrade our technology into something more free, fair, robust, and decentralized.

I believe that to be Bitcoin. After going so far down the rabbit hole, I firmly believe it is the best chance we have at free and fair digital value exchange. It's more private, more decentralized, and more censorship-resistant than anything else out there. It doesn’t have a CEO or founder — that’s still around anyway — and its interests are the least shaped by a group, business, or foundation.

I want more people to go down the rabbit hole, but I also understand it shouldn’t be a requirement for everyone to be able to reap Bitcoin’s benefits. I’d love it if we were able to flip our current system to one entirely run on Bitcoin, but things don’t work that way. It takes a long time to grow adoption in an organic and durable way.

So when I sit back and think, “How can we get normies on Bitcoin rails?” it is disappointing that the best answer I have is that they need to become Bitcoiners first.

That unfortunately cannot scale.

And honestly, I’m not even sure it should. I don’t even want to spend my Bitcoin. The opportunity cost in my eyes is too great. I try to accumulate and stack as much as I possibly can, especially when we are at a “buy” price range.

However, many of the best minds and engineers in the space seem to be building exactly for that. Bitcoiners spending their Bitcoin.

So while you may scoff not being at these tables, they are the companies who are providing services today for normies needing payments. And if they are open to upgrading their technology, I want Bitcoin to be the one they are upgrading to. But since we don’t have a seat, I’m not sure there is a path for that to happen.

So why isn’t Bitcoin there?

Ironically, I attribute our absence mostly to how amazing Bitcoin is. Most of us who go down the rabbit hole want to skip straight to the part where it has taken over as the global reserve currency.

Unfortunately, today most people, if they are interested at all, view Bitcoin as a ~risky investment. If their risk appetite allows it, it is usually only some small percentage of their portfolio. And for most, until time shows how this finite digital resource scales, it will stay that way.

So why are our best builders building for people to spend their Bitcoin?

For example, Block just rolled out Bitcoin payments on Square using Lightning as the default on their terminals. That's great and I'm genuinely glad they did. But why would a normal user use this? And honestly, why would I? I believe Bitcoin will be multiples higher in the future so the opportunity cost doesn’t seem worth it. Moreover, my credit card gives me rewards every time I use it. Bitcoin payments on Square don't. I love what Block is doing for Bitcoin, but I can't see a world where this drives meaningful adoption when the alternative literally pays you to use it.

Changing consumer behavior is borderline impossible. If there is anything I have learned in my time in product, it’s that. You need the wind at your back and, as Peter Thiel says, you need to improve the experience for the user by 10x.

Do Bitcoin-to-Bitcoin payments do that today? I know many of us feel that Bitcoin as money is 10x better, but is it 10x better to the person with zero to 5% of their portfolio in Bitcoin?

I would argue that Bitcoin-to-Bitcoin payments right now add more problems than they solve for the normal user.

To get someone onto Bitcoin payments, you're really asking them to do a few things at once. Stop using the thing that pays them rewards. Start spending an asset they bought because we told them it would go up. And then deal with the accounting and tax implications of every single one of those transactions.

The network effects around how people pay right now are just so strong. Dollars, credit cards, rewards. You'd need something that completely blows that away to get people to move. Bitcoin-to-Bitcoin payments do not do that. We could hope that Visa, Mastercard, and Western Union adopt “in-time-dollar-exchange” like Strike, but I don’t even see anyone proposing that. And why would they? This is the same type of accounting and volatility risk even I dread when selling my Bitcoin.

Bitcoiners would use these rails occasionally strictly based on ideology, but realistically, Bitcoin-to-Bitcoin payments and their “dollar exchange” equivalents would need to offer something like 5% cash back rewards or greater to start to move the needle in terms of adoption. Starting from zero, I’m not sure how we can make those economics make sense. So in reality, it seems like our strategy is force people down the rabbit hole —> become Bitcoiners —> use Bitcoin rails out of goodwill because it’s “better” for our collective future —> dollar (fiat) becomes obsolete. I don’t think that’s a realistic strategy.

And that's exactly why we aren't at those tables. Our solutions by and large create more problems than they solve and don’t have a clear value proposition outside of ideological reasons. Why would Mastercard or Visa open up their distribution network to a payment rail that requires their users to adopt a new currency first or at a minimum, makes them susceptible to market fluctuations?

There needs to be a bridge technology that catalyzes this move away from dollars. One that gets us off government run rails, but solves issues today for incumbents open to digitally native value exchange.

So how do we catch up?

As a savings technology, there is no doubt Bitcoin is winning. But for payments, as I identified, it’s clear we need a different strategy. One void of ideology that focuses on incentives and value propositions.

So to start, I propose that instead of asking "how can we get users to use Bitcoin today?" We ask, ”how can we use Bitcoin to solve problems users have today?”

We need to get refocused on solving problems. We need to stop forcing solutions that jam Bitcoin down users’ throats. We need to be thinking about how users can benefit from Bitcoin without first needing to become Bitcoiners. Ideally, they should be using it without even knowing they are.

And if users still live in dollars, then the first job is obvious: Trojan horse the dollar and get Bitcoin underneath its digital settlement.

The best way to do this today is stablecoins, which for some reason, is a dirty word in Bitcoin circles.

I understand why. A whole lot of Bitcoin’s appeal is that it makes up for the failures of the dollar. It has a set inflation schedule so it’s a finite resource, and it’s completely decentralized, permission-less, and censorship resistant, all of which the dollar lacks.

However, everyone in the United States is still using dollars. Its network effects are quite literally ingrained by force. On top of that, Congress has passed stablecoin legislation giving it a clear regulatory framework. I hate the dollar too, but would it be the worst thing in the world for dollars to settle on the best value exchange network to ever be created? I think it could be a good first step.

And I am certainly not one of those people that feels we need to make protocol changes on the base layer to incorporate dollars. A beautiful thing about a protocol is that it doesn’t have to do everything, it can work in layers. Each layer can build on each other and cater to specific use cases as long as the base is rock solid, and there is no base more rock solid than Bitcoin.

Which is why I believe that layers above the Bitcoin base layer would be a much better place for these types of stablecoin-specific technologies to live. A good corollary would be something like dial-up/PPP for the internet. This was an early “adapter” protocol built on top of internet base layers that was used to help advance early adoption. It allowed your computer to use the phone network to be able to transfer data. We rarely hear about it today because the infrastructure for native internet data has been built out.

I think of stablecoin infrastructure as something similar, though it may take much longer to become irrelevant like PPP did.

A technology like Spark, as an example, with stablecoin support is a great “Layer 3 (L3)” on top of Lightning as “Layer 2 (L2),” which was developed as Bitcoin’s payments layer. L2s and L3s are perfect for fast-throughput, private payment technologies sitting on top of the best decentralized consensus mechanism for larger settlement.

The right solutions are only one part of the battle, though, we also need to get in front of users.

A cheat code to mass adoption

A glaring hole we have in the Bitcoin technology space is distribution. Getting distribution is another of those near-impossible problems in product. But for some reason, every Bitcoin app feels like it needs to take the hardest route and start from zero.

There are companies today that could benefit from Bitcoin technology. But instead of partnering, we compete, preaching that our solutions need to be a “parallel system” that lives alongside the existing one. I diagnose this mostly out of ideological and purity reasons. Instead of being complementary, we try to disrupt. And if this is the only way we build, we will keep losing.

I genuinely believe you would make more of a difference for Bitcoin by getting a job at Western Union and advocating for Bitcoin technologies from within than by building a Bitcoin payment solution from scratch to disrupt Western Union from the outside. Western Union already has customers doing the exact kinds of things Bitcoin is built to improve. If it is still too early to get them to use Bitcoin directly for the task itself, why not improve what they are doing today using Bitcoin rails?

It is not a requirement that we disrupt companies out of existence. We can be complementary. Some of the most successful businesses start that way.

Unfortunately, we are far behind here. Companies like Circle and Solana are attacking where the distribution is right now. They are partnering with companies whose customers are already doing the things our technology is built to improve. They're integrating into existing workflows, compromising where they need to, and leaving the ideology at the door. They are giving these companies something that adds value today and getting the recognition and publicity while they are doing it.

There's no reason Bitcoin can't do the same.

We can keep building in our corner, for ourselves, and watch Solana and Circle take every partnership, every integration, and eventually, every user. Or we can solve the problems that exist today, where the users already are, on the rails that actually deserve to win.

The arena is open

I wrote this because I'm worried. Not about Bitcoin as an asset. Bitcoin is winning the store of value game and I don't see that changing. But as a payment rail, as the foundation for how value moves on the internet, we are losing. And we're losing to worse technology with the momentum for change at our backs.

We can keep living in our Bitcoin silo. We can keep building for each other. We can keep telling ourselves that the world will come to us because we have the best underlying technology.

But the majority of people who start using crypto for payments won't be using the one we think they need to be. They'll be using whatever is on the rails that Visa settled on, that Mastercard partnered with, that got integrated into the apps they already use. And right now, that's not Bitcoin.

It doesn't have to be this way. Bitcoin has the best protocol and it has the most principled builders. It has every technical reason to win this. What it doesn't have is enough people willing to meet the world where it’s at instead of where we want it to be.

Bitcoin has to win the rail before it can ever win the currency. And right now, we aren't even competing.