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Here’s Why Valve Dropping Bitcoin Doesn’t Affect its Future

Valve dropped Bitcoin from its list of supported currencies on December 7th 2017, citing high transaction fees and volatility. It seems like a huge blow to the Bitcoin network. But is it?

Valve Corporation, which runs Steam, the largest gaming platform in the world, used to be a believer in Bitcoin. (What is Bitcoin?) Around a year and a half ago, Steam started accepting Bitcoin payments through tying up with Bitcoin payment intermediary Bitpay. However, the company seems to have lost its trust in the technology after a blog post revealed that Steam would indefinitely suspend their Bitcoin transactions.

Steam Doesn’t Really Need Bitcoin Anymore

Steam started accepting Bitcoin through Bitpay not for altruistic reasons or because GabeN (praise be) is a fan of cryptos. He might be; we don’t have conclusive evidence. Bitcoin was introduced an online payment solution to developing economies like India, Brazil and China. A large pain point in these countries is access to financial instruments allowing cheap and seamless online transactions. The lack of a credit card is the biggest problem. Bitcoin was able to bridge that gap last year. Most developing countries have thriving local Bitcoin communities, and access to Bitcoin is often easier than access to a bank account and credit card that allows international/online transactions.

bitcoin credit card

Unfortunately the lack of any definitive scaling solutions, whether it’s increasing the block size or implementation of Segwit, or even off-chain scaling like Lightning Network, has made Bitcoin difficult to use for small transactions.

Steam itself has evolved as a platform. With in-game purchases and microtransactions picking up as percentage of revenue, the viability of Bitcoin diminishes. It’s also to do with market penetration in emerging markets – CS:GO launched successfully in China earlier this September with a partnership with Perfect World. Steam entered India and started accepting the Indian Rupee back in October 2015, and has since become a mainstay in the Indian gaming community. These factors add up to the irrelevancy of Bitcoin to the Steam platform.

Bitcoin Transaction Volume is Still on the Rise

The recent spike in price has brought a lot of attention to Bitcoin, and vice versa. Metcalfe’s Law states that the value of a network is proportional to the square of its number of users, and Bitcoin has met that trend so far. However, transaction volume is an important metric to gauge the actual usage rate of Bitcoin. Network congestion plays a big role here, and Bitcoin is intrinsically allowed only upto 3 transactions per second. The growth in transaction volume is a healthy indicator of the interest and viability of Bitcoin. The fact that it remains high despite the insane transaction fees is a testament to the value of the Bitcoin network today.

Bitcoin Transaction Volume per Day From Blockchain.info

 

Bitcoin’s Use Case Seems to be Evolving

It’s no secret that Bitcoin today is more of a speculative investment than a means of exchange. Volatility that sees the price reducing by 1/5th, transaction fees amounting to several hundreds of dollars, and a clogged mempool leave much to be desired in the efficiency aspect of Bitcoin. However, this hasn’t immediately led to the destruction and decimation of Bitcoin. Instead, the world has started embracing it for a different use – something akin to that of digital gold. A standard for all cryptocurrencies to follow, and one that’s probably too popular to fail despite its scaling problems.

How Bitcoin Works

This means that while Valve’s concerns about transaction fees and volatility are perfectly reasonable, people will find another use for Bitcoin while the scaling solutions are ironed out.  Perhaps Valve will let let the medium of exchange temporarily slip to another cryptocurrency. Candidates for “internet money” are plenty – Bitcoin Cash, Litecoin, Monero and Ripple are some of the popular ones with lower transaction fees and a network that’s able to handle the increased demand. Notice how I didn’t include Ethereum. It’s still clogged by the CryptoKitties.

Bitcoin Scaling Solutions are Coming

The block size increase doesn’t seem to be happening for Bitcoin. The hard-fork with Bitcoin Cash made it abundantly clear to both communities where the future vision lies. BTC believes in smaller blocks, which allow for more full nodes on cheaper hardware, while BCH believes increasing the block size to a reasonable level is better for the network, despite decreasing decentralization.

We do, however, have the Lightning Network to look forward to in Bitcoin’s immediate future. The testnet for Lightning is currently operational and one can use it today, but a public release is expected some time in 2018. Lightning is also thought to decrease decentralization. Lightning should make the network faster and more secure when coupled with the already implemented Segwit technology, which has been soft-forked into Bitcoin.

What this means for our micro-transaction loving gamers is that Bitcoin will be back on Steam. If not it’ll be some other alternative cryptocurrency that better balances the use case for an internet currency. At the moment, though, Steam remains available only through fiat currencies.

Written by Upamanyu Acharya

I founded Fynestuff. I play games, write TV and tech articles and look towards putting Buzzfeed out of business someday. Reach me on Twitter:
@upa007

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