A lot of people on Reddit think of Bitcoin primarily as a competitor to card payment networks. I think this is more than a little odd-- Bitcoin is a digital currency. Visa and the US dollar are not usually considered competitors, Mastercard and gold coins are not usually considered competitors. Bitcoin isn't a front end for something that provides credit, etc.
Never the less, some are mostly interested in Bitcoin for payments (not a new phenomenon)-- and are not so concerned about what are, in my view, Bitcoin's primary distinguishing values-- monetary sovereignty, censorship resistance, trust cost minimization, international accessibility/borderless operation, etc. (Or other areas we need to improve, like personal and commercial privacy) Instead some are very concerned about Bitcoin's competitive properties compared to legacy payment networks. ... And although consumer payments are only one small part of whole global space of money, ... money gains value from network effects, and so I would want all the "payments only" fans to love Bitcoin too, even if I didn't care about payments.
But what does it mean to be seriously competitive in that space? The existing payments solutions have huge deployed infrastructure and merchant adoption-- lets ignore that. What about capacity? Combined the major card networks are now doing something on the other of 5000 transactions per second on a year round average; and likely something on the order of 120,000 transactions per second on peak days.
The decentralized Bitcoin blockchain is globally shared broadcast medium-- probably the most insanely inefficient mode of communication ever devised by man. Yet, considering that, it has some impressive capacity. But relative to highly efficient non-decentralized networks, not so much. The issue is that in the basic Bitcoin system every node takes on the whole load of the system, that is how it achieves its monetary sovereignty, censorship resistance, trust cost minimization, etc. Adding nodes increases costs, but not capacity. Even the most
reckless hopeful blocksize growth numbers don't come anywhere close to matching those TPS figures. And even if they did, card processing rates are rapidly increasing, especially as the developing world is brought into them-- a few more years of growth would have their traffic levels vastly beyond the Bitcoin figures again.
No amount of spin, inaccurately comparing a global broadcast consensus system to loading a webpage changes any of this.
So-- Does that mean that Bitcoin can't be a big winner as a payments technology? No. But to reach the kind of capacity required to serve the payments needs of the world we must work more intelligently.
From its very beginning Bitcoin was design to incorporate layers in secure ways through its smart contracting capability (What, do you think that was just put there so people could wax-philosophic about meaningless "DAOs"?). In effect we will use the Bitcoin system as a highly accessible and perfectly trustworthy robotic judge and conduct most of our business outside of the court room-- but transact in such a way that if something goes wrong we have all the evidence and established agreements so we can be confident that the robotic court will make it right. (Geek sidebar: If this seems impossible, go read this old post on transaction cut-through)
This is possible precisely because of the core properties of Bitcoin. A censorable or reversible base system is not very suitable to build powerful upper layer transaction processing on top of... and if the underlying asset isn't sound, there is little point in transacting with it at all.
The science around Bitcoin is new and we don't know exactly where the breaking points are-- I hope we never discover them for sure-- we do know that at the current load levels the decentralization of the system has not improved as the users base has grown (and appear to have reduced substantially: even businesses are largely relying on third party processing for all their transactions; something we didn't expect early on).
There are many ways of layering Bitcoin, with varying levels of security, ease of implementation, capacity, etc. Ranging from the strongest-- bidirectional payment channels (often discussed as the 'lightning' system), which provide nearly equal security and anti-censorship while also adding instantaneous payments and improved privacy-- to the simplest, using centralized payment processors, which I believe are (in spite of my reflexive distaste for all things centralized) a perfectly reasonable thing to do for low value transactions, and can be highly cost efficient. Many of these approaches are competing with each other, and from that we gain a vibrant ecosystem with the strongest features.
Growing by layers is the gold standard for technological innovation. It's how we build our understanding of mathematics and the physical sciences, it's how we build our communications protocols and networks... Not to mention payment networks. Thus far a multi-staged approach has been an integral part of the design of rockets which have, from time to time, brought mankind to the moon.
Bitcoin does many unprecedented things, but this doesn't release it from physical reality or from the existence of engineering trade-offs. It is not acceptable, in the mad dash to fulfill a particular application set, to turn our backs on the fundamentals that make the Bitcoin currency valuable to begin with-- especially not when established forms in engineering already tell us the path to have our cake and eat it too-- harmoniously satisfying all the demands.
Before and beyond the layers, there are other things being done to improve capacity-- e.g. Bitcoin Core's capacity plan from December (see also: the FAQ) proposes some new improvements and inventions to nearly double the system's capacity while offsetting many of the costs and risks, in a fully backwards compatible way. ... but, at least for those who are focused on payments, no amount of simple changes really makes a difference; not in the way layered engineering does.