“Bitcoin has failed as means of payment” is one of the prevalent criticisms of Bitcoin (BTC) that Fidelity Digital Assets is seeking to rebut. In a post published on Nov. 13, the firm took on six “persistent” criticisms, such as Bitcoin volatility, environmental wastefulness and use in illicit activities.
Regarding the coin’s purported failure as a means of payment for daily transactions, Fidelity argues that these kind of criticisms fail to understand major purpose of Bitcoin. The currency is outperformed, Fidelity accepts, by conventional payment rails like Visa, Mastercard and PayPal, all of which can offer higher throughput. However, Bitcoin has been designed with other priorities, like “perfect scarcity,” Fidelity claims.
“Bitcoin makes deliberate trade-offs, such as limited and expensive capacity, to offer core properties such as decentralization and immutability. Given its high settlement assurances, Bitcoin optimizes its limited capacity for settling transactions that aren’t well served by traditional rails.”
While the coin is, theoretically, viable as a payment tool, its limitations mean that daily usage is not necessarily the end goal for the asset. As well as price volatility, BTC’s tax definition as property in some jurisdictions — meaning that users have to calculate gains and losses for each payment or buy in Bitcoin — renders it impractical for many payments.
Fidelity says that users should be aware that the BTC’s design has prioritized aspects including decentralization, finite supply and immutable settlement. These should be valued on their own terms, with the acceptance that they come with downsides on the daily transactions front.
Fidelity tackles the criticism that the coin’s high volatility compromises its use as a store of value. Here, Fidelity again reframes the terms of the criticism, noting that volatility is the price paid for an “intervention resistant market”:
“No central bank or government can step in to support or prop up markets and artificially subdue volatility. Bitcoin’s volatility is a trade-off for a distortion-free market. True price discovery accompanied by volatility might be preferable to artificial stability if it results in distorted markets that may break down without intervention.”
Fidelity provides more detailed arguments surrounding volatility as well, relating it to the asset’s “perfectly inelastic supply.”
The rest of six criticisms tackled in the blog post are environmental wastefulness, Bitcoin’s use for illicit activity, the asset “not being backed by anything,” and its potential overtaking by a competitor.