Key facts: Grayscale estimates that stablecoins will take over in retail transactions. Bitcoin would also serve as a settlement layer for non-financial utilities. “Bitcoin (BTC) could compete with the dollar as an international currency,” says investment firm Grayscale in a recent report. This is due to the low transaction costs driven by the Lightning network. However, the use of bitcoin as a means of payment in retail transactions can reach parts of the global economy “where certain conditions are met,” Grayscale says. Those conditions that Grayscale talks about are met in those countries with unstable national currencies or banking systems. Additionally, it states that users may also “appreciate” the censorship-resistant properties of bitcoin, especially “if transaction costs are lower” or if existing payment systems in those countries do not meet what is necessary to operate. .
The total value locked (TVL) on the Lightning network went from less than 1,000 BTC in 2019 to more than 4,000 BTC in 2023. Source: Grayscale. An example is the adoption of bitcoin in El Salvador. In 2021, the Central American nation converted the asset into legal tender, a fact reported by CriptoNoticias. Grayscale explains that the BTC wallet created by the Salvadoran government, Chivo Wallet, “covers all retail transaction fees and network challenges were overcome.” “What is most important is that the nation [El Salvador] “It did not have a volatile national currency beforehand (it was dollarized) and it remains to be seen to what extent bitcoin will continue to be a durable transaction medium,” notes Grayscale. Otherwise, the report highlights that in developed economies with stable economic systems it is “unlikely” that BTC will be used as a means of payment, even in the “long term.” In any case, if these economies can benefit from anything, it is from blockchains, since can help improve payment infrastructures existing, Grayscale highlights. On the other hand, it points out that the vast majority of retail transactions will use stable cryptocurrencies or stablecoins. These are tokens whose value is pegged to an external asset, such as the US dollar. And, perhaps, eventually, central bank digital currencies (CBDCs) will be used.
Non-financial utilities of the Bitcoin network
Another use of the Bitcoin network taken into account by Grayscale would be its use as a settlement layer for non-financial profits. This category is headed by smart contracts and non-fungible tokens (NFT). It is worth remembering that, in December 2022, Ordinals, a system for creating NFTs on the Bitcoin network, was unveiled. “This use case also opens the network to digital art and collectibles markets,” the report says (although NFTs have existed on Bitcoin for several years with protocols like CounterParty). The NFT, here called “inscription”, is created in Ordinals by associating an image, text, video, application, among others, to a satoshi (minimum unit of bitcoin) that will then be identifiable, transferable and traceable. Although the NFT boom last May was large, with 832,648 transactions of these tokens, last August fell to just over 20,000. This implies a drop of 97%. Regarding the settlement layer, Grayscale indicates that smart contracts would further open the reach of the Bitcoin network. In that sense, it focuses on Stacks, a Bitcoin sidechain. “Stacks brings smart contract functionality to the Bitcoin ecosystem and offers decentralized applications (dApps) including financial, gaming and social applications,” he notes. Although Stacks is still in an experimental stage. Advances in both Ordinals and Stacks suggest Bitcoin’s “possible relevance to sectors ranging from digital art and collectibles to any asset that can be programmed into a smart contract.”
