Is Coinbase Moving Away From Bitcoin?
Coinbase recently announced that it would no longer support native Bitcoin (BTC) payments on its payment platform for merchants, Coinbase Commerce. This decision has sparked controversy within the industry, with some critics arguing that Coinbase is straying away from the founding principles of Bitcoin.
However, Coinbase Commerce will still allow customers to pay with unspent transaction output (UTXO) assets like Bitcoin from their Coinbase account. According to Coinbaseโs head of product, Lauren Dowling, this accounts for a significant portion of the Bitcoin volume handled by Coinbase Commerce.
Native Bitcoin Payment Alternatives
Rena Shah, Vice President of Operations and Strategy at Trust Machines, a team focused on growing the Bitcoin ecosystem, believes that native Bitcoin payments have always presented challenges. She explains that there are coordination issues with both on-chain and off-chain protocols, and on-chain fees can fluctuate based on miner activity and demand.
Shah suggests that UTXO assets like Bitcoin may make payments easier because they represent a certain amount of authorized Bitcoin that can be spent by recipients. Additionally, she highlights layer 2 (L2) solutions as alternatives for seamless native Bitcoin transactions. For example, Stacks (STX), a Bitcoin L2 infrastructure, can facilitate instant Bitcoin payments.
Coinbase CEO Brian Armstrong has also mentioned that the company is integrating the Lightning Network into its platform. The Lightning Network is a peer-to-peer payment protocol built on the Bitcoin blockchain.
Lightning Network Versus a Bitcoin L2
While the Lightning Network could potentially bring back support for native Bitcoin payments on Coinbase, Joe Nakamoto, a Bitcoin journalist, believes that platforms like Coinbase should prioritize blockchain-based L2s over peer-to-peer networks like Lightning.
According to Nakamoto, several other cryptocurrency platforms have already integrated Lightning as a spending and payments solution. He questions why Coinbase has not done the same.
However, Mark Hendrickson, General Manager at Bitcoin-only wallet provider Leather, argues that blockchain-based L2s, like Stacks, may be a better long-term solution for enterprises like Coinbase. He believes that integrating such L2s alongside Ethereum Virtual Machine (EVM) based L2s can provide smart-contract advantages and ensure compatibility with future developments.
Challenges May Hamper Adoption for Native BTC Payments
While there are alternative solutions available, it may take some time for Coinbase to move forward with implementing native Bitcoin payments. Nakamoto remains skeptical that Coinbase will support the Lightning Network and criticizes CEO Brian Armstrong for allegedly falling prey to โinnovationโ in crypto and failing to keep up with Bitcoinโs development.
Shah suggests that Coinbase has yet to explore Bitcoin L2 solutions like Stacks and mentions that most L2 EVMs are built on Solidity, a more well-known smart contract language compared to Clarity, which is used by Stacks.
Despite these challenges, Shah predicts that Bitcoin transactions will increasingly rely on L2 infrastructure in the future while the base layer focuses on high-value settlements.
Hot Take: The Future of Native Bitcoin Payments on Coinbase
While Coinbaseโs decision to remove support for native Bitcoin payments has raised concerns among some in the industry, alternative solutions exist that could ensure seamless transactions. Whether through UTXO assets or L2 solutions like Stacks or the Lightning Network, there are options available for users looking to pay with Bitcoin on Coinbase Commerce.
It remains to be seen how Coinbase will navigate these challenges and whether they will embrace blockchain-based L2s or peer-to-peer networks. However, as the industry continues to evolve, itโs clear that native Bitcoin payments will play a significant role in the future of cryptocurrency transactions.
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