In a recent Medium Digest article Kevin Schellinger went to some lengths to point out both the strengths and weakness of Bitcoin in terms of it being a real world usable digital currency in the same was as the Eur or the US Dollar. As he stated "As Bitcoin is facing many issues in its transition from a prototype to a real-world application, we should explore alternative use cases for this ingenious invention."

His analysis of Bitcoin as a "Bad Currency" covered what he considered to be the three main functions of money (1) medium of exchange, (2) unit of account, (3) store of value.

Medium of Exchange

The medium of exchange is considered to be most crucial functions of a currency as its  why currencies exist in the first place. It allows overcoming the barter system in which goods can only be exchanged for goods. In its favour Bitcoin does this well. As a digital asset it is:

• Freely transferrable
• entails no counterparty risk
• defies all control by regulators
• is cencorship resistant.
• Is highly reliable
• has reasonable low transaction fees
• and is fast compared to other international payement options. 

Some reference is made to the Lightening Network [The Lightning Network is a "Layer 2" payment protocol that operates on top of a blockchain-based cryptocurrency (like Bitcoin). It enables fast transactions between participating nodes and has been touted as a solution to the Bitcoin scalability problem.]

Store of Value

Schellinger states that "Being a store of value is important to be a widely accepted currency, because holding a currency is a form of investment. Knowing that anything could lose value anytime soon doesn’t make it very attractive. Ideally, it would be rather stable in value so that we don’t need to change price tags every day. As Bitcoin lacks any price-stability mechanisms, the value will always fluctuate. With higher adoption and a higher market cap, the volatility would certainly drop. Still, it would be much more volatile than good national currencies. The volatility of gold is much higher than currencies such as the euro or dollar."

Unit of Account

We are all more comfortable with with "Apples for apples" valuations. Therefore , ideally the value of the asset other assets is stable.  Bitcoin has shown that it will have troubles to become a widely used unit in most cases, based on the volatility of its recent Bull and Bear market swings.Thus, even if its value grew by two more orders of magnitude, which would make it comparable to gold, it would be still volatile compared to the best fiat currencies.

The Bitcoin Payment Option

Schellinger goes on to suggest that perhaps to best us for Bitcoin is to use it solely as a "payment platform" and promotes as abetter option to say credit cards on the basis the Unlike credit cards, it’s an instant settlement. Once the payment provider on the merchant’s side received the bitcoins, the payment provider converts them immediately and credits them to the merchant’s account. The payment provider will likely send the money just once a day, week or month." 

Conclusion

His conclusion being that Bitcoin could in some sense become the money of the internet, but not the money of the people. It might not necessarily be the store of value all speculators hope for, but it would be a solution that works in every place where bitcoins can be efficiently exchanged for local currencies."

Feedback  

Having read this article I left the following  message "I enjoyed the read but quickly came to the conclusion that what your proposing is already the focus of Ripple and Steller to name just two."

Schellinger's resply was "

Happy to hear that you enjoyed reading it.

It’s true that Ripple and Stellar are other contenders for this use case. But Bitcoin is far ahead when it comes to infrastructure and adoption, what puts it in a good position..

Don Bielak also replied: 

Indeed. And with Stellar, there is no mining, hence no waste of electrical power and the associated harm to the environment. It’s a reason why many developers have chosen the Stellar network to build on.

An explanation can be found here.

It’s hard to believe we are still having the discussion on whether or not bitcoin can serve as a universally adopted form of currency. It can’t, and for the reasons outlined in the article. With regard to speed and cost effectiveness, Stellar outpaces bitcoin by a mile. 2,000 transactions per second at a cost of a fraction of a cent. Not even close.

I’ve said it many times before but it bears repeating here: the first token to achieve mass adoption will not be bitcoin, but likely a stable token which operates on Stellar.

Full disclosure: I am the CEO of Monetran LLC, an internet fintech company which has developed Moneda, a stable token based on the general principles outlined above. The method is patent pending at this time. More information can be found here.