As merchants and customers gain familiarity with cryptocurrencies and the number of business applications grows, bitcoin's supremacy as the prefered payment currency erodes.

Almost a third of payments processed by BitPay, a crypto-focused payment processor, are made using ether, stablecoins, and a handful of smaller, so-called altcoins.

Ether currently accounts for 15% of payments made through BitPay, which offers businesses the ability to take cryptocurrencies at the point of sale, as well as a Mastercard-branded debit card that enables customers to spend a variety of cryptocurrencies at millions of retailers.

Stablecoins such as tether, or USDT, and Circle's USD Coin, or USDC, are rapidly gaining traction, accounting for 13% of BitPay payments, Bloomberg said. The remaining 3% is made up of three minor cryptocurrencies that BitPay began accepting in 2021: early bitcoin competitor litecoin (LTC), Tesla CEO Elon Musk's favoured dogecoin, or DOGE, and its spinoff shiba inu, or SHIB.

This is down from 92% in 2020, according to BitPay CEO Stephen Pair. He attributed some of the increase to the increasing use of stablecoins for cross-border business-to-business payments.

That However, the use of ether, the Ethereum blockchain's cryptocurrency, has risen rapidly since 2021, when the explosion in decentralised finance, or DeFi, and new financial technologies, or NFT, initiatives boosted its profile. The majority of them are based on the Ethereum blockchain and use ether to conduct transactions. For instance, Christie's recently auctioned a $69 million NFT collage valued in ether.

Consumption-Driven

"Consumer choice is what motivates the boss and their desire for an omnichannel approach to payments," BitPay COO Jim Lester recently told PYMNTS Karen Webster. "Merchants and billers must truly meet consumers where they are, and if that is through the use of a credit card, fantastic. If the card is a debit card, that is excellent. However, if the currency is crypto, this must be factored in."

Additionally, as cryptocurrency continues to grow, BitPay's COO sees an opportunity for financial institutions to lead or risk falling behind.

BitPay's volume increased 57% in 2021, he claimed, with fourth-quarter volumes increasing by 27% over the previous quarter.

Apart from the need to attract and retain customers, retailers who accept cryptocurrencies directly profit significantly from the absence of credit card issuers' hefty transaction costs, Lester said. BitPay enables retailers to accept bitcoin altogether or to convert it effortlessly from the cryptocurrency used by the customer to fiat currency at the point of sale.

"There are undeniable reductions and efficiency" in terms of merchant costs, he added.

Last year, PayPal extended support for ether and litecoin, as well as bitcoin (BTC) and competitor bitcoin cash, or BCH. After allowing clients to trade the three cryptocurrencies, the payments business began accepting them as payment at its 32 million-strong merchant network.

It's also worth noting how users are utilising cryptocurrencies. Pair told Webster that BitPay experienced a significant surge in the use of cryptocurrency for luxury products such as jewellery, watches, automobiles, boats, and even gold last year, nearly tripling from 9% in 2020 to 21% last year.

Use Cases Expanding

Stablecoin adoption is expected to continue to grow significantly in 2022 for a variety of reasons, most notably that by maintaining a one-to-one peg to the dollar (and other currencies such as the euro and pound sterling), they enable consumers and merchants to avoid the price volatility associated with cryptocurrencies such as bitcoin and ether, which regularly experience daily price changes of 5% to 10%. Additionally, Facebook's WhatsApp messaging programme, which has more than two billion users, has revealed plans to employ the smaller stablecoin Paxos as an internal currency.

Additional information is available at: Are Paxos and Diem the New Diems? The Issuer of Stablecoins' Facebook Pilot Program Has Just Been Expanded to 2 Billion WhatsApp Users.

Concerns regarding bitcoin and ether's huge environmental footprint, with power consumption similar to that of small- to medium-sized countries, are a significant and developing issue. Ethereum is addressing this by transitioning over the next year or two to a low-power blockchain system. Bitcoin miners are converting to more environmentally friendly energy sources.

Additionally, see Can Proof-of-Stake Solve Crypto's Environmental, Social, and Governance (ESG) Issues?

Tesla briefly considered accepting bitcoin as payment for its cars last year, but Musk later reversed his decision in response to outrage from environmentalists and ESG investors. Last week, he boosted dogecoin, which grew from obscurity to a top 15 — and occasionally top 10 cryptocurrency after Musk began promoting it on Twitter.

Despite this, BitPay COO Jim Lester told Webster that the crypto payments sector is still young and expanding.

"However, there is sufficient market traction," he explained. "As these huge merchants begin to move down this route, as the large processors begin to feel real pressure from their merchants, their enterprises, and their consumers to adopt it as a medium of exchange, the world will begin to shift in that direction."

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