Bitcoin is the most used payment method

“Dominant global monetary network”: this is how Michael Saylor defined Bitcoin. 

The reference is to total dollar volumes of all transactions. 

Saylor shows a graph illustrating that in 2021 this metric has skyrocketed to over $13 trillion in Bitcoin transactions, and in 2022 it has already also surpassed the $14 trillion mark. 

The on-chain data of the Bitcoin network

When checking on-chain, it turns out that for more than a year now, an average of about 250,000 transactions per day have been recorded on the Bitcoin blockchain every day. The fact is that on average each transaction moves about 7.7 BTC, or nearly $160,000. Multiplying this amount by 250,000 transactions, about $40 billion is moved on the Bitcoin blockchain every day. 

In fact, the latter figure in recent months has been even far greater, peaking at $380 billion on the single day of 14 September 2021.

However, if isolated spikes are excluded, the average seems to hover around $50 billion daily, although in April of this year it rose as high as $200, while in recent weeks it has fallen to $20 billion. 

The most resounding figure is surely the average single transaction volume of about $160,000. 

The very high amount of transactions in Bitcoin (BTC)

This very high number can be explained by several causes. 

The first certainly is the increasing use of Lightning Network for transactions of small amounts. Indeed, LN transactions are not recorded on the blockchain, so the average on-chain transaction value does not take into account the millions of small transactions that are made on LN. 

This figure started to grow significantly precisely in 2021, which is the year when LN use started to become very widespread. 

The second is the use of mixers and multiple transactions. Indeed, many transactions that are recorded on the Bitcoin blockchain actually contain within them many transactions grouped into one. This serves both to reduce transaction costs and to mask the senders and receivers of transactions. In this way, there are many individual transactions that turn out to have high trading volumes because they are actually groupings of many transactions. 

The third is that Bitcoin is less and less used as a means of payment, or as a transactional currency, while it is increasingly used as an investment asset, especially by whales. Since trades on exchanges takes place off-chain, only transactions that whales make by depositing or withdrawing large sums from the exchanges themselves are often recorded on the blockchain. 

The fourth, more trivially, is that sometimes large exchanges make huge transactions only for strictly technical reasons, such as transferring funds from one wallet to another. 

And so the average amount of the single transaction goes up, making the annual volume go up as well. 

The performance of the Ethereum (ETH) blockchain

It is worth mentioning that an average of one million transactions per day are recorded on the Ethereum blockchain, which is four times those recorded on the Bitcoin blockchain. 

However, their average volume is much lower, at about 1.3 ETH (just over $2,000). While this figure refers only to transactions in ETH, and not for example to that in USDT or all other ERC-20 tokens, it is unlikely that the average volume of individual transactions in USDT could be much higher. 

So despite having a quarter of the transactions, Bitcoin’s blockchain sees a higher overall volume transacted each day because of enormously higher average individual transaction amounts. 

This once again confirms that BTC is not used as a payment medium or transactional currency, but as an investment asset. 

Traditional payment systems

What is most interesting then is the comparison with traditional global payment networks. 

According to a February report, in 2021 Visa and Mastercard credit, debit, and prepaid cards combined generated a total volume of $7.387 billion in the US. Although this is a figure referring only to the U.S., it is still a little more than half of Bitcoin. 

By contrast, according to Mastercard’s official report for 2021, the total volume transacted worldwide was $7.7 trillion, still only slightly more than half of Bitcoin. 

Visa did much better, with $13 trillion, which is still slightly less than Bitcoin’s $13.1 trillion. Furthermore, in just ten months, Bitcoin has also already surpassed 14 trillion in 2022. 

PayPal‘s volumes are far lower, and by no means comparable to these figures (about 19 billion). 

Global currency

The achievements of the giants Visa and Mastercard are limited by the fact that they operate primarily in the Western world, and particularly in the US. In fact, for instance, in Asia, and particularly in China, different payment networks, such as UnionPay, are used. 

It is not easy in the West to get accurate data regarding the annual volumes transacted on the Chinese UnionPay network, but they appear to be on the level of Visa. 

In reality, they may even be higher, and perhaps even surpass Bitcoin, but in the absence of hard, verifiable data it is difficult to make sensible comparisons. 

Also, it is worth mentioning that both Visa and MasterCard and UnionPay process transactions in different currencies, while all Bitcoin transactions take place in a single currency, BTC. 

Therefore even if, for example, the UnionPay network handled a higher annual volume, considering only the volumes of individual currencies, Bitcoin would probably be in the lead. 

The advantage of BTC also lies right here, namely in the fact that it is a single global currency, whereas neither the dollar nor the Chinese renminbi really are. It is true that nowadays it is easy to use dollars all over the world, but only because of the fact that they can be easily exchanged into local currency. Bitcoin, on the other hand, can theoretically be used anywhere in the world even without the need to exchange it. 

Transparency

But there is one thing that clearly distinguishes Bitcoin from all other fiat currencies and traditional payment circuits. 

Indeed, all transactions recorded on its blockchain are public, recorded in plain text, and thus easily verifiable by anyone anywhere in the world. 

As for fiat currencies, on the other hand, and international payment circuits, none of the transactions are public, so none are publicly verifiable by anyone. 

This is a feature not to be underestimated for Bitcoin, because it allows anyone to have absolute, firsthand verifiable certainty not only that a transaction has been made, but also who has received it. 

Although the addresses recorded on the public blockchain are anonymous, any debtor who gets the public address to which to send his or her payment can then verify in person, and have everyone verify publicly, that his or her payment was made. Conversely, any creditor who sends his public address to be paid can then verify in person, and have anyone publicly verify, that he has not yet received it. 

This feature makes it extremely useful in certain situations to make a BTC payment, because it makes it indisputable how many BTC were sent, when, and to whom. 

Source: https://en.cryptonomist.ch/2022/11/04/bitcoin-most-payment-method/