The internet is the most powerful information distribution tool in human history. People can learn almost anything through Google, YouTube, Wikipedia, and even social media. However, these channels can easily be polluted or even manipulated. For example, if you mention cryptocurrency on Twitter, you will almost certainly receive a large number of replies from random Twitter users who will recommend their favorite coins while belittling all other coins. If you look closely, you will find that many of these accounts have fake profile pictures, no followers, and seem to promote their favorite crypto projects on Twitter every day. Individually, these accounts may seem insignificant and powerless to change anything, but when hundreds or thousands of accounts are doing this, it can influence public opinion. I have experienced this deeply. The cryptocurrency industry has been permanently affected by social media activity and online misinformation. These technologies have been particularly ugly in the history of Bitcoin.
Although these strategies are morally repugnant, they are undoubtedly effective. The reason the Bitcoin core narrative has been so successful is that it has created a divergence and confusion about Bitcoin's true purpose. Bitcoin is no longer seen as a system for everyday commercial payments but is almost entirely described as a 'store of value,' with its utility unrelated to its use as cash. Such claims are ubiquitous, even in academia. For example, the bestselling book (The Bitcoin Standard) describes:
Bitcoin's true competitive advantage may lie in its ability as a store of value and a final settlement network for large payments — a digital form of gold with built-in settlement infrastructure.
I used to love using the term 'digital gold' until its meaning was completely reversed. We used to say Bitcoin was like digital gold because it was a currency that wouldn't be inflated by central banks, and because it is digital, it could almost be sent anywhere in the world instantly at zero cost. But now, the term 'digital gold' has been given a completely opposite meaning — Bitcoin is like gold because its transaction costs are expensive and it is rarely used as a medium of exchange. Bitcoin is no longer compared to the currency advantages of gold but rather to the currency disadvantages of gold.
Some supporters of Bitcoin core even pushed this argument further. They not only claim that Bitcoin as a store of value is better than as a payment system but also assert that Bitcoin was intentionally designed from the beginning as a store of value, not as a medium of exchange. For example, Dan Held, the business development director at Kraken exchange, stated:
Those who advocate that 'Bitcoin was initially designed for payments' often quote the white paper and forum posts out of context to support their views... The design purpose of Bitcoin is primarily to be a store of value.
While such bold claims may garner likes on social media and praise from cryptocurrency commentators, they are not factual. Historical records clearly show that Bitcoin was designed for everyday payments.
Satoshi's original words
Bitcoin was specifically designed for payment systems; what evidence supports this? The answer is that all of Satoshi Nakamoto's statements on this topic point to this. Besides the white paper that first introduced Bitcoin to the world, we have hundreds of his posts on online forums and over fifty public emails. These records clearly showcase the vision for this technology. First, let's take a look at the white paper published in 2008, which is the document where Bitcoin was first proposed and defined. I recommend everyone read the complete white paper online; it is well-written and many key concepts can be understood even without a technical background. Let's analyze from the title:
(Bitcoin: A Peer-to-Peer Electronic Cash System)
If Satoshi's intention was to design an 'electronic store of value,' he could have named it that, but he chose 'electronic cash system.' Next, let's look at the first sentence of the abstract:
A completely peer-to-peer version of electronic cash that allows online payments to be sent directly from one party to another without going through a financial institution.
'Online payment' is mentioned in the very first sentence of the white paper. After the abstract, the introduction states:
Internet business relies almost entirely on financial institutions as trusted third parties to process electronic payments. While this system works well for most transactions, it still has inherent weaknesses based on a trust model...
In the first two sentences of the introduction, Satoshi mentioned 'internet business', 'electronic payments', and 'transactions'. He continued to write:
Completely irreversible transactions are actually impossible because financial institutions cannot avoid intervening in dispute resolution. Mediation costs increase transaction costs, restrict the minimum size of actual transaction amounts, and cut off the possibility of small casual transactions. In addition, for irreversible services, the lack of the ability to make irreversible payments leads to higher costs and payment uncertainty. These costs and uncertainties can be avoided when using physical currency in face-to-face transactions, but there is no mechanism to complete payments without a trusted third party communication channel.
In other words, existing online payment methods have high transaction costs due to the trust requirements in the system. Credit cards, PayPal, and others rely on companies with expensive dispute resolution mechanisms. These costs make 'small casual transactions' on the internet practically impossible. In contrast, physical cash payments do not require trust in a third party, but using physical cash online is not possible. At this point, Bitcoin came into being:
What we need is an electronic payment system based on cryptographic proof rather than trust, allowing any two willing participants to transact directly without a trusted third party. Computationally irreversible transactions can protect sellers from fraud, while conventional escrow mechanisms can easily achieve buyer protection.
In other words, Bitcoin is like cash, where both parties can exchange directly without intermediaries. In the first few paragraphs of the white paper, Satoshi explicitly stated that Bitcoin is related to 'business', 'transactions', 'payments', 'merchants', 'buyers', and 'sellers'. The concept of 'store of value' is not mentioned anywhere in the entire white paper.
Even in Satoshi Nakamoto's emails and forum posts, the concept of Bitcoin as a 'store of value' was mentioned only a handful of times. Sam Patterson, co-founder of the cryptocurrency company OB1, wrote a popular article where he categorized every instance Satoshi referred to Bitcoin as a payment system and store of value. His conclusion was:
After reviewing all of Satoshi Nakamoto's works, I can confidently say that Bitcoin was not designed from the beginning as a store of value. It was designed for payments... Satoshi mentioned payments more than four times as often as he mentioned stores of value...
Not only does the white paper clearly state that Bitcoin was designed for payments, but Satoshi's statements in online forums are equally clear:
Bitcoin is suitable for small transactions that existing payment methods cannot handle. Small enough to include transactions you might call the upper limit of micropayments.
Micropayment payments
'How small is a micropayment?' While there is no unified definition, here it refers to transactions under $1. Gavin Andresen, the developer selected by Satoshi's successor, also expressed similar views:
I still believe that the Bitcoin network is not suitable for handling transactions below $0.01. But I see no reason why it cannot handle small transactions (between $1 and $0.01) well.
Bitcoin was once thought to be suitable for transactions in the range of a few cents to a few dollars. However, due to increasing transaction fees, such small transactions are often not feasible since transaction fees often exceed the actual amount sent. If the balance of a Bitcoin address is not enough to cover the miner's fee, it cannot actually be used. Satoshi elaborated further on micropayments:
While I believe Bitcoin is currently not suitable for handling smaller micropayments, it will eventually become feasible as storage and bandwidth costs continue to decrease. If Bitcoin is widely adopted, it may already have this capability by then. Another way to make micropayments more practical is to implement a client mode and consolidate network nodes into a few specialized server farms. No matter how small the micropayment you need to handle, it will eventually become feasible. I believe that within five to ten years, bandwidth and storage costs will seem negligible.
This statement has two interesting points: first, Satoshi envisioned Bitcoin could eventually support 'micropayments of any scale'; second, he predicted that the network infrastructure would integrate into 'professional server farms,' which is particularly relevant to the debate about large blocks.
Once [Bitcoin] is launched, if it can easily pay a few cents to websites like inserting coins into a vending machine, there will be many application scenarios.
Satoshi Nakamoto hoped that Bitcoin could be used to 'easily pay a few cents to websites.' In contrast, Bitcoin core developer Peter Todd stated:
If I could completely transfer money globally without central control for a fee of $20, I would be very satisfied. Similarly, when I'm just buying a chocolate bar, I would also be willing to accept a more centralized transfer method.
Satoshi Nakamoto's and Todd's visions are completely incompatible because their views on acceptable transaction fees differ by three orders of magnitude. A $20 fee destroys all use cases for Bitcoin except for high-value transfers, which is an extreme 'digital gold' mentality.
We do have a quote from Satoshi directly comparing Bitcoin to gold. At the time, he was responding to concerns about the electricity waste of Bitcoin mining and stated:
This is similar to the situation with gold and gold mining. The marginal cost of gold mining is often close to the price of gold. Gold mining is a waste, but that waste is far less than the utility of gold as a medium of exchange.
I think the same is true for Bitcoin. The utility of transactions facilitated by Bitcoin will far exceed the power costs incurred. Therefore, not having Bitcoin is the real waste.
Gold is used as an analogy to illustrate that its utility as a medium of exchange far exceeds the costs of extraction. From today's perspective, this analogy seems somewhat ironic.
In a forum post, there were also mentions of scenarios where Bitcoin could be used to purchase from vending machines, emphasizing Bitcoin's ability for instant small payments. Since instant payments are not entirely secure, Satoshi envisioned that payment processing companies could take on a small amount of fraud risk to handle these payments:
I believe payment processing companies can provide such services: quickly distributing transactions in about 10 seconds or less and conducting sufficient verifications.
His prediction was correct; it turns out Bitcoin payment processors can complete sufficient verifications in just a few seconds.
Everything about business
The forums are filled with similar discussions about using Bitcoin for commerce. Satoshi and others talked about creating interfaces for online merchants, providing tools for physical merchants, supporting point-of-sale (POS) transactions, addressing scenarios where customers are hesitant to use credit cards, storing small amounts of Bitcoin on mobile devices to manage daily expenses, and so on. There is no doubt that Satoshi's original intention in designing Bitcoin was for payments, even including small transactions of a few cents. In fact, the initial version 0.1.0 software included unfinished code for a peer-to-peer trading market and even a basic framework for virtual poker.
The broader Bitcoin industry is also built on the assumption of Bitcoin as a fast, cheap, reliable internet payment system. Successful companies like BitPay — the largest Bitcoin payment processor globally — have had their entire business model challenged by unreasonable high transaction fees. In 2017, BitPay's CEO Stephen Pair stated in an interview:
For BitPay, the Bitcoin blockchain can no longer meet our needs... We have several options. One is to use a forked version of Bitcoin. The second option is to use a forked version of Bitcoin. The third option is still to use a forked version of Bitcoin. We really have no choice but to do this now.
For this reason, BitPay became one of the first companies to integrate Bitcoin Cash (Bitcoin Cash) after the split. Coinbase CEO Brian Armstrong also shares the same vision, seeing Bitcoin as global digital cash. He explained in a 2017 interview why BTC's failure to scale 'broke his heart':
The reason I am passionate about Bitcoin and digital currencies is that I want the world to have an open financial system... where all payments are fast, cheap, instant, and global... but Bitcoin ultimately failed to scale into such a system.
He went on to explain that other projects like Bitcoin Cash or Ethereum are more likely to achieve this goal:
I believe that even operating [the Bitcoin network] at the scale of VISA, its costs might still be two to three orders of magnitude lower than VISA's current fees. Therefore, the cost of each payment could be one cent or less...
But I believe that other networks like Bitcoin Cash or Ethereum are working towards this, so this vision will be realized, but it is indeed frustrating that the original Bitcoin has failed to achieve this.
Armstrong's viewpoint was very common among early Bitcoin entrepreneurs and early supporters. I remember the online community often compared Bitcoin to Western Union to highlight its superiority as a payment system. One of the most popular early infographics (as shown below) compared Western Union's advertisement with Bitcoin's advertisement. Western Union's ad stated: 'Send warm wishes today. Send up to $50 within the U.S. for just $5, for pickup. Let money flow better.' Bitcoin's ad stated: 'Send warm wishes 24/7. Send any amount for global pickup for just $0.01. Let money flow better.'
The Bitcoin.org website also promotes the advantages of Bitcoin in everyday commerce. An archived version from 2010 mentioned: 'Bitcoin transactions are almost free, while credit cards and online payment systems typically charge 1%-5% per transaction, plus various other merchant fees, totaling potentially hundreds of dollars.' Even by 2015, the site still promoted 'zero or low processing fees' and 'instant peer-to-peer transactions.'
Pretending that Bitcoin was never designed as a tool for everyday payments is a blatant rewriting of history. Anyone involved in the development of Bitcoin before 2014 would attest that the original plan was to create a low-cost digital cash system. The belief that Bitcoin should become an expensive and exclusive store of value is held by only a tiny minority.
Excerpted from <Hijacking Bitcoin>
Original author Roger Ver
