Fiat Wallets: The Key to Bitcoin Going Mainstream?

Jack C. Liu is head of international at OKCoin and OKLink. He is based in Beijing and previously held roles at Barclays Capital and bitcoin exchange Kraken. In this article, he explores whether the crypto industry should be pushing fiat wallets, rather than bitcoin wallets, if it wants digital currency to go mainstream.

Fiat on phone

Since bitcoin was introduced in 2009, we have seen endless efforts to make it mainstream.

These efforts have spanned the launches of the world’s ‘easiest bitcoin web wallet’, ‘easiest bitcoin mobile wallet’, ‘consumer multi-sig wallets’ and ‘easiest way to buy bitcoins’.

The user interface has improved by leaps and bounds. We as a community even spent more than a year debating ‘bits’ vs ‘bitcoin’ in an effort to make new bitcoin owners feel wealthier. Startups who act as custodians of customers’ bitcoins began advertising “we are fully insured”, “we have proof of reserves”, “we have the world’s most secure vault” and “we are fully licensed”. 

What has been achieved so far? 

One could argue that instead of mainstreaming bitcoin as a payment network, we’ve instead encouraged the speculation on bitcoin prices.

In the past couple of years, as volatility became an issue in light of a more than 70% drop in bitcoin prices, merchant services offered retailers the ability to accept fiat over the bitcoin network.

The way it works is that consumer bitcoins would be sent to the merchant processor, who then settles with the merchant in the desired fiat currency. However, the benchmarks of success for these services have included statistics on the percentage of revenues merchants keep as bitcoin.

It begs the question: Why does that even matter?

This spring, on the consumer side, services such as OKLink, Coinbase, and Circle have solved the volatility issue for consumers by adding or pre-announcing fiat wallets linked to the bitcoin network. CNY (OKLink) and USD (Coinbase and Circle). This will let users pay and receive in their local currency, while the transfer is made using bitcoins in the background and without any currency exchange risk.

Thus far, this is being offered as somewhat of a side feature. These services are maintaining the dual mode of allowing users the choice to use bitcoin as the front end (bitcoin wallet over the bitcoin network) or the back end (fiat wallet over the bitcoin network).

This is akin to a gas station offering you a core service of buying and storing oil, while giving you the optional side service of filling your car.

In no way am I disparaging bitcoin’s long term value and the promise it holds as the best money the world has ever seen. A different approach towards mainstreaming adoption of the network won’t weaken this function, and could in fact strengthen it.

Bitcoin’s three common user functions

1. Opting out of the system – be your own bank

Services range from, Mycelium, Breadwallet, Ledger Nano, LocalBitcoins, etc.

2. Investing in bitcoin the asset

Services range from bitcoin exchanges such as OKCoin, to investment vehicles including Bitcoin Investment Trust (GBTC), NASDAQ ETN, to paper wallets.

3. Using bitcoin as the open payment network 

What’s magical about bitcoin is that it can be all three. It can even be a hundred more things. However, if we are to accelerate the process of bitcoin becoming mainstream, there is good reason to focus on strengthening the third function – the universal payment network.

The opting-out lifestyle is currently a choice made by a minority of people. Bitcoin as an investment is largely for those looking to diversity their portfolio or those with excess funds to spare. Bitcoin as an open payment network however, is something that the entire planet can use. That is mainstream by definition.

The store of value/unit of account conundrum

As long as the currency used for store of value (bitcoin) and the currency used for unit of account (fiat) are different, the short-term balance sheet risk is something the majority will not accept even if bitcoin generally appreciates in value.

To suggest otherwise, one would come across as being out of touch with the lives of most people who live paycheck to paycheck.

We can’t sit around waiting for a financial crises or a massive inflation in fiat currencies to help bitcoin take off. The mark of a superior technology is that it never relies on failures of its predecessor.

Bitcoin is not for the unbanked, just as email was not for those without access to the post office. Email did not wait for postage stamps to become more expensive or mail to be lost to gain adoption.

Sure, bitcoin may eventually have the greatest impact on the lives of the unbanked just as $25 Android phones have proven to. However, it should be noted that smartphones did not start in those markets.

Taking all this into consideration, it is my thought that perhaps companies should consider fiat wallets as the sole option for consumers and merchants, or at least the default option.

Imagine making micro-payments to anyone using any service instantly for free, in your preferred currency without any systemic counter-party risk. That’s something we could all use.

The more the bitcoin payment rails are accepted, the more those who live on bitcoin and those who invest in bitcoin the asset will benefit. It’s virtuous.

This article was originally published on, an edited version has been published here with permission.

Fiat phone image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

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