Circle removed bitcoin trading from its payments app this week, completing a transition it began by setting user accounts to display fiat balances. CEO Jeremy Allaire told the Wall Street Journal that
Circle removed bitcoin trading from its payments app this week, completing a transition it began by setting user accounts to display fiat balances. CEO Jeremy Allaire told the Wall Street Journal that the company's dollar-based payments grow many times faster than its bitcoin transactions. He blamed Bitcoin Core for the protocol's inability to handle retail use, citing what he sees as development gridlock among its contributors.
But Bitcoin Core had delivered a major capacity upgrade in October. Segregated Witness improved block size and enabled second-layer solutions like the Lightning Network. Circle said it would "dive headfirst into next-gen blockchain technology," though the company provided no details on what that meant. Users can still hold and transfer bitcoin through Circle. The company cut off the ability to exchange bitcoin for dollars and vice versa.
Blockchain, the wallet provider, is moving in the opposite direction. CEO and co-founder Peter Smith showed no sympathy when asked about Circle's decision. "Of course – it's never easy to pivot away from a product," he said. Blockchain has no intention of following the same path. Smith views bitcoin as the vehicle for transformative change. "I believe that radical innovation comes not from incrementally improving the current system but, rather, from building a new system purpose-built for today's global world," he said. "Digital currencies and block chain technology are the first (and only) credible candidates to enable that transformation within financial services (and beyond)."
Blockchain took concrete steps to lower the barrier to bitcoin ownership. The company partnered with Coinify to let users buy bitcoin from within the wallet app. Smith argues that easier access to bitcoin improves its chances of mainstream success.
The network, however, has a severe constraint. A new block of transactions settles on the Bitcoin blockchain every ten minutes. When demand surges, a backlog forms and users face extended waits. "Needless to say, it's frustrating to see growing demand on our platform against the backdrop of a network that is increasingly overwhelmed," Smith said.
Congestion creates operational chaos for companies that handle bitcoin. Customers barrage support teams with complaints. Roger Ver tweeted on December 7: "When blocks are full, all consumer-facing bitcoin businesses have to deal with endless support tickets from pissed off customers."
Blockchain implemented dynamic fee adjustment to ease the problem. The system charges higher fees during congestion and lower fees during quiet periods. It helps but isn't a fix. "Dynamic fees have helped our users transact, but they are certainly not a long term fix to the problem before us," Smith said.
Segregated Witness offered potential relief. The upgrade expands block capacity and opens the path to second-layer protocols. Blockchain is building its own, called Thunder. Smith declined to declare victory. "SegWit, in concert with Lightning Networks (like Thunder), may help remedy a lot of the current backlog, but we won't know its impact, if any, until [or] unless it is deployed," he said. "Regardless, I'm hopeful we can work together as an ecosystem to build and deploy long term solutions that will support our ever growing user base."
