The problem bitcoin didn’t solve…

Beans App

Published:

Oct 26, 2022

Over the past few years Bitcoin has made giant strides to become a store of value, positioning it as “Digital Gold”. With Central Banks creating ever more fiat money, Bitcoin has become a safe haven for an increasing diverse set of people. As an example, Microstrategy announced the purchase of $1B in Bitcoin. They believe “Bitcoin will provide the opportunity for better returns and preserve the value of our capital over time compared to holding cash”. Despite the increase in adoption, there is an important problem that Bitcoin did not solve: Peer to peer payments.

This problem in fact can be found in the first line of the white-paper:

“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. The cost of mediation increases transaction costs. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.”

After more than 10 years of development and a Bitcoin market cap of almost 600 billion dollar, we still mostly pay online through trusted third parties (like banks). One apparent reason for this is:

If I want to pay in Bitcoin, but my friend or my favorite web shop wants to receive dollars, I’m stuck with paying in dollars.

Most western consumers or web shop owners don’t have much benefit of paying in Bitcoin compared to regular fiat. It’s most often not cheaper, faster or easier than the already existing infrastructure. This leaves Bitcoin with the “Digital Gold” use case, where it functions as a hedge against inflation. A strong use case, but wouldn’t it be amazing to realize broad adoption of the peer to peer payments use case as well?

For this to happen, the challenge above needs to be solved — I need to be able to spend X, while my friend receives Y.

Solving the payments use case

This challenge can be solved by onboarding the legacy payments systems onto the same network as a digital currency.

This is where the Stellar Network comes in. It is an open network for storing and moving value of any kind. This makes it possible to create, send, and trade digital representations of all forms of money: dollars, pesos, Bitcoin, pretty much anything. These representations come in the form of tokens. The protocol has a built-in decentralized exchange, which makes it possible to trade any kind of value for any other kind of value, at almost zero fee.

There is even such a thing as “path payments”, which means you can pay X, while your friend receives Y (sounds familiar?). The protocol finds the cheapest route from for example Peso to Naira and executes it in one atomic transactions.

This is an interesting way to improve international remittances, but how is this related to the peer to peer payments use case?

Well, the network has a native digital currency called the Lumens (XLM). Like Bitcoin, it can be used to transact peer to peer and has a fixed total supply. The fact that it’s part of a network that is interoperable with legacy payment systems, means that you can pay with it, even if your friends want to receive something else (fiat). As an added benefit, Stellar transaction are way faster and cheaper compared to Bitcoin; a Bitcoin transaction can take up to 10 minutes, whilst a Stellar transaction takes a mere second. The result is that this makes it easier to adopt by general people.

As more and more entities issue tokens that represent value on the network, the utility of lumens grows. Cowrie for example tokenized the Nigirian Naira on the network. Which means I can pay XLM to my friend Alex, who receives Naira in his bank account. What happens behind the hood is that my XLM are traded for Naira tokens, which are then instantly redeemed for Naira in Alex’s bank account. Naira and Tempo explain here how they enabled payments from Euro bank accounts into Naira bank accounts in seconds by using the Stellar network.

Every new “anchor”, as issuers of these tokens are called, enables me to pay friends in more different assets. Even if these anchors only use XLM to pay for network fees, they increase the utility of lumens. As time goes by, some of these new friends will want to transact in this peer to peer digital currency as well.

Solving the problem Bitcoin didn’t solve

While Bitcoin will continue to have its utility when storing value. The Stellar Network and the digital currency lumens are getting closer to solving a problem that was addressed in the original Bitcoin white-paper: Peer to peer payments. For those that like to pay in Bitcoin, it can be represented on the Stellar network, making it interconnected with legacy payment systems.

Achieving mass adoption is a massive challenge. Even the most widely accepted crypto, bitcoin, hasn’t even come close to holding this status. It’s not difficult to reason why this would be the case; blockchain is difficult, not user friendly, error-prone and hard to understand. Before mass-adoption will occur, all these challenges have to be tackled and solved. Everyone should be able to interact with the blockchain without having to worry about private keys, badly designed UI or losing money within 1 click.

That is the pinnacle of our vision at Beans app; utilising the power of the stellar blockchain to bring flexible peer-to-peer payments to mass adoption. You can pay and receive in any currency using the stellar blockchain. This way, we are solving a problem bitcoin once was out solving, but it shifted focus to the “store-of-value” use-case.

With the help of Beans, everyone will be able to exchange value and assets in a decentralised way, bridging the gap between online and offline money. We are out to solve the ultimate challenge of peer-to-peer payments by presenting all the benefits of the blockchain without all the drawbacks. The result? An app that creates an experience where you are not noticing you are interacting with the blockchain!

Sending USD to Paul, who prefers to receive EUR.

In the end, that is our mission; to on-board everyone to the blockchain whilst giving them a seamless experience. To solve the problem where bitcoin fell short. To transact value where it does not matter where you live, and what you want to receive; to create an app where you shouldn’t have had to study blockchain to experience its benefits!

The problem bitcoin didn’t solve…

Solving the payments use case

Solving the problem Bitcoin didn’t solve

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