You probably heard the news on Monday that Starbucks, Whole Foods, GameStop, and a large number of other big retailers are now accepting bitcoin and other cryptocurrencies as payment. One would assume that this sort of announcement would excite bitcoin enthusiasts, but the app behind this new functionality has received criticism from those who wish to stick to the cryptocurrency’s core ethos.
Permission to Use Permissionless Money?
The Spedn app, which is the custodial cryptocurrency wallet associated with Monday’s announcement, has received criticism from bitcoin users like Sam Patterson, who works on the decentralized online commerce protocol OpenBazaar.
For one, the custodial nature of the app (the coins are held by the Winklevoss Twins co-founded exchange Gemini) means it goes against the “not your keys, not your bitcoin” mantra. Additionally, taking custody of funds also leads to the gathering of users’ personal data.
“Coup” might be all too fitting a term.
It’s a company running a custodial wallet that sends fiat payments to merchants, and abides by New York state financial regs.
If this is what “crypto adoption” looks like then what exactly is the point? https://t.co/2NuQB6SFfM
— SamPatt (@SamuelPatt) May 13, 2019
This doesn’t exactly sound like the crypto revolution bitcoin users have been excited about for the past decade. While this setup may make sense for centralized stablecoins like the U.S. dollar-focused offering from Gemini, Bitcoin was not invented to make buying coffee at Starbucks with a government-issued currency more efficient.
Preserving Bitcoin’s Ethos with the Lightning Network
Bitcoin’s high level of decentralization comes at the cost of an efficiency loss in terms of the fees associated with bitcoin payments as compared to more centralized solutions. This is why the Lightning Network is being built as a faster, lower cost secondary layer of the Bitcoin network that preserves the core ethos of permissionless money.
There are also altcoins that aim to provide payments that are cheaper and faster than what bitcoin can offer, but these alternative coins tend to be more centralized and lack the liquidity found with the world’s original cryptocurrency. For example, payments made via Bitcoin’s Lightning Network already surpassed all altcoins at online retailer Bitrefill earlier this year.
The hope is that the Lightning Network will enable a better user experience without having to turn to custodial solutions that put into question why the digital asset is being used in the first place.
Everything Old is New Again
It’s also unclear if what the Spedn app provides is much different from what has already been possible with bitcoin for years. As Foldapp pointed out on Twitter, they’ve been allowing their users to spend bitcoin at places like Starbucks for many years now, oftentimes with an added discount. Foldapp is also non-custodial, so it keeps with the original intention of how bitcoin was meant to be used.
Foldapp is now experimenting with the Lightning network via their ln.pizza website.
Purse.io is another well-known option for saving money when shopping at Amazon with bitcoin, and Gyft has allowed their users to convert bitcoin into gift cards for popular retail outlets since 2013.