Since Bitcoin (BTC) was thrust into this world, its most fervent advocates understood that it was created to be a digital alternative to the incumbent financial system. While this underlying raison d’etre has been misconstrued by onlookers time and time again, this industry’s fervent believers have kept anti-establishment sentiment sequestered away for when the time is right.
With the rise of the Lightning Network, among an array of other scalability-centric protocols, an argument can be made that it is only a matter of time before decentralized money makes a move on the establishment. But, according to one analyst, this tectonic shift in global finance may not come as soon as some libertarians expect.
Crypto Assets Could Disrupt Private Payment Networks
In a note obtained by Bloomberg, MoffettNathanson analyst Lisa Ellis explained that sauntering down to your local Starbucks to purchase coffee with Bitcoin may not be a hypothetical scenario in the future. She explained that while this sounds “ludicrous,” cryptocurrencies, especially Bitcoin, Ethereum, and Ripple’s XRP, could become an existential threat to Visa, PayPal, among other digital-centric, centralized payment ecosystems in time. Ellis added that this trend in global finance will be worth watching.
Backing her comment, likely deemed sacrilegious by the who’s who of Wall Street, the MoffettNathanson representative noted that firstly, decentralized cryptocurrencies are, by nature, much unlike centralized payment processing schemes. Her second and arguably more important point was that shortcomings, especially in regards to transaction throughput, privacy, and security, have begun to lose their potency.
Thus, she noted that unless “networks fully embrace these technologies (blockchain, cryptocurrency, and related innovations) themselves,” Wall Street’s darlings could start to cede fractions of their business to projects built on Bitcoin-esque protocols. Case in point, Ellis pointed a finger at the San Francisco-based Ripple Labs, noting that portions of the cross-border business-to-business and consumer-to-consumer market will begin to get handed over from Western Union To Ripple.
Pompliano Believes Bitcoin Could Surmount Visa
While Ellis seemed to be in Ripple’s camp, many have still argued that Bitcoin, the world’s oldest (functioning) and most well-known cryptocurrency still has a chance to begin chipping away at the hegemony that Visa, Mastercard, among other institutions have carved out for themselves.
Anthony “Pomp” Pompliano, a founder of Morgan Creek Digital, took to Off The Chain, a publication he heads, to divulge that Bitcoin may be undervalued when compared to Visa and Mastercard. The cryptocurrency investor, known for his incessant utilization of anti-establishment rhetoric on Twitter, subsequently noted that this figure accentuates the network’s performance and growth potential.
In fact, he claimed that “given the fast growth rate and historical premiums” of promising upstarts and networks, the cryptocurrency could begin to take stabs at Visa’s and Mastercard’s valuations in the coming years. Pomp wrote:
“Today, it is 1/4th the market cap of Mastercard and 1/6th of Visa, but it wouldn’t surprise me if Bitcoin surpasses both within the next 36 months. The legacy networks were built for a world that we no longer live in and the decentralized network is built for the future.”
While Pompliano, a former Facebook and Snapchat employee, is making his argument from a quantitative perspective, many argue that the fundamentals are already there. On Visa’s and Mastercard’s end, the sources speaking to the Wall Street Journal have revealed that the companies are looking to increase interchange fees by April, for both consumers and banks alike. While no exact specifics were cited, CMSPI, a merchants-payments consulting group, estimated that from April 2019 to April 2020, Visa’s newfangled fees will cost American consumers an additional $570 million.
On Bitcoin’s end, the Lightning Network, which some argue puts the cryptocurrency on par with centralized systems, has seen jaw-dropping growth in recent weeks. While the development of the scaling solution has mainly been a byproduct of one man’s efforts, Lightning seems to be on the verge of a Cambrian explosion. But will that be enough to make Bitcoin a competitor to Visa?