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People Are Buying Less with Bitcoin

FILE - Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies, Feb. 13, 2018. Barriers to the wide use of blockchain currencies remain.
FILE - Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies, Feb. 13, 2018. Barriers to the wide use of blockchain currencies remain.
People Are Buying Less with Bitcoin
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The use of bitcoin has decreased sharply in 2018.

Chainalysis is a company that researches bitcoin, a digital form of money that is not controlled by a state. The company said that the value of bitcoins traded by major payment processing companies has fallen by 80 percent in the first nine months of this year.

Some financial experts suspect this is because bitcoin is struggling to change from a risky asset into a widely-accepted currency.

At the same time, the exchange value of bitcoin is now becoming relatively stable – although sharp changes remain common.

This week, bitcoin’s value again dropped sharply to its lowest level this year.

But, financial experts say stability is what the currency needs to be used as money for payment.

Joni Teves is with the bank UBS in London. She noted, “There would have to be a stability requirement if it is to become another form of money.”

However, that is not the only thing that Teves is concerned about.

“One thing that would take bitcoin into the mainstream is scalability,” she told Reuters news service. She said people need to be able to process it just like they do money and in very large amounts on a large scale.

That could be a problem.

Bitcoin, and currencies like it, are based on blockchain technology. That means all activity related to bitcoin is recorded and confirmed by computer in a blockchain. Blockchain technology permits records to be checked and stored securely, but requires a lot of computing power.

The system can only process a small number of transactions compared to, for example, a major credit card company.

This suggests that the use of the currency by many people could be difficult.

Chainalysis said its research shows that in the month of December the value of payments made with Bitcoin reached $427 million. By September, however, that number had fallen to $96 million.

The company studied 17 bitcoin payment processors, including one of the biggest, BitPay. Reuters reports that most sellers which accept bitcoin use a processor like BitPay to change bitcoin into a normal currency.

However, information about bitcoin payments remains incomplete.

Early successes

Through its first 10 years, Bitcoin attracted many different investors who believed the currency would change traditional finance. In December, the value of a bitcoin rose to nearly $20,000.

Since that time, the value has fallen a lot.

That has affected some businesses that had expected profits to rise with the growth of bitcoin and other blockchain currencies.

Computer chip designer Nvidia blamed a lack of demand for its products on weak bitcoin demand. The company’s stock price has fallen sharply since October.

Some experts argue stability in bitcoin prices is not enough. They say bitcoin use needs to be faster and less costly. Teves said that clearer rules by financial officials across the world would also help people gain trust in the currency. But such rules are expected to take time as the technology develops.

One new technology promises to make bitcoin transactions faster. The so-called lightning network adds code to bitcoin blockchain that can make transactions faster and less costly.

Users say lightning lets them send money to one another on the network without completing a blockchain. Ed Cooper is with Revolut, a financial technology company. He said, “Lightning solves some of bitcoin’s scaling issue.”

I’m Mario Ritter Jr.

Reuters reported this story. Mario Ritter Jr. adapted it for VOA Learning English. Caty Weaver was the editor.

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Words in This Story

digital –adj. using computer technology

asset –n. something of monetary value that is owned by a person, company, etc.

stable –adj. not easily changed

currency –n. the money that a country uses and supports

scalability –n. the ability to easily make something larger or in much greater numbers

transaction –n. a business deal in which money passes from one person or group to another

code –n. a set of instructions for a computer