Bitcoin Vegetables

Why we are still not buying our vegetables with Bitcoin and how could that work out?

Why did Bitcoin fail as peer-to-peer electronic cash?

One of the reasons why Bitcoin was created is to become a peer-to-peer electronic cash system eventually. However, until today it hasn’t yet succeeded to replace the current fiat/cash system we are using in our daily transactions.

As Bitcoin developed, we started using it to order pizza or buy coffee. Even Subway and other big players have introduced a Bitcoin payment option. As more and more users began transacting on the Bitcoin Blockchain, the system reached its technical limits and transaction costs skyrocketed due to the low transaction per second rate. Miners only accepted transactions with big fees due to the high amount of transaction requests queued up at that time.

At the same time, payments via Fintech companies like PayPal got more adopted, and banking transactions got faster. While this happened, volatility made Bitcoin an unattractive payment option for the average user. Furthermore, we started losing Bitcoins due to hacks or untrustworthy exchanges.

Improvements in the Crypto Space

Today, we are in a much better place than before. Exchanges have become more trustworthy, and we have better wallet solutions. We are more educated about how the Blockchain works and how to safely store our cryptocurrencies.

The TPS issue has been more and more dealt with since basically every cryptocurrency has now faster transaction times than Bitcoin (Litecoin, Monero, Neo, to name only a few). However, this side of Bitcoin is just part of its design, and not everybody likes it. This is the main reason why back in August 2017 Bitcoin forked into two versions: Bitcoin Core and Bitcoin Cash.

The parties that were interested in Bitcoin Core (what we nowadays directly call Bitcoin), didn’t want to increase the block size limit to 8MB, leaving Bitcoin users to deal with slower, but more secure transactions. They argue that Bitcoin’s central value proposition is its censorship-resistant nature and ability to minimize needed trust. An increase of block size and therefore faster transaction per second would damage the decentralization aspect, due to higher participation costs. The more data that needs to be downloaded and verified, the larger the necessary system requirements will be to keep pace with the network. This could preclude most of the participants who run a Bitcoin node. Currently altering a transaction would need much more electric power than a transaction in Bitcoin Cash, due to Bitcoin Core’s bigger Hash rate (more Miners run the code).

The Lightning Network addresses Bitcoin’s TPS issue from a different angle. Theoretically, this technology would enable the scaling of up to millions of transactions per second, and should this technology succeed; there would be no need to boost the Bitcoin transaction volume on the Chain itself.

The development of the Lightning Network

To understand the importance of the Lightning Network, we have to know how it works. Transactions on the Lightning Network happen off-chain, and therefore they are not recorded in the transaction history. To enable that, users of the network are required to open a payment channel between themselves and their transacting parties by locking up their Bitcoin on the Blockchain.

An unlimited number of transactions can be made through this payment channel until a pre-defined amount of transactions is made or a pre-defined point of time is reached. The more payment channels are open, the easier it is to transact with network participants. The system is described on the LN’s website as follows:

“This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.”

The Lightning Network was launched in January 2018 and is still in the testing phase. It currently consists of 5,551 nodes (2,756 with active channels), 20,808 channels and 544.450 BTC capacity ($1,935,681.84), according to @LNstats Twitter profile.

There is still a long way for the network to reach mass adoption, due to its multiple issues. One of the most significant problems is that any devices running the Lightning node have to be permanently connected to the internet, to keep the payment channel running. If your devices don’t comply with that, you will not be receiving payments or, according to Dryja, one of the authors of the Lightning Network whitepaper, you could potentially lose your Bitcoin through a “Fraudulent Channel Close”.

Even with that issue solved, there are different opinions on whether the network will succeed to lower transaction fees and be genuinely decentralized. As more and more participants connect to the network, we will be able to see the growth of hubs, which have many open payment channels and transactions, which are routed through them. Lawmakers could identify these hubs and enforce them to identify transacting parties or implement policies.

However, let us assume that all the problems of the LN are solved and it will be working as intended in the first place. Is that enough to trigger mass adoption for the average user? Will we open to buy our groceries with Bitcoin from this point on? Alternatively, is an essential piece of the puzzle still missing?

Buying vegetables with Bitcoin

If we think about Bitcoin as an alternative payment system to Fiat, it is fair to raise the question, under which circumstances we would change to the Cryptosystem. Currently, Fiat currency is more reliable, cheap to transact with, fast enough and already well established. The only main advantage of Bitcoin is that its system is trustless. This may be very valuable for certain people around the world, but the average user won’t care in the end, if Bitcoin stays inconvenient to use for payments.

My focus is to figure out, how to have a competitive advantage to the Fiat payment system by using the technology we already have. At the same time, I exclude theories of how we could lose trust in the Fiat system by Inflation, monopolistic Banks or the next economic crisis.

One of my friends, who is not a Bitcoin enthusiast said, “Bitcoin will never succeed if I can’t buy my vegetables with it.” This got me thinking, how I want to buy my tomatoes with Bitcoin. In future, I would like to walk into the store, choose my vegetable, scan the QR Code on the packaging, confirm the transaction popping up on my mobile and walk straight out of the store without hesitation. There would be no checkout counter where I would have to wait in a queue. All this in a fraction of a minute. It would be a user experience that has never been seen. Besides, the store would have the advantage to lower personnel costs and could perhaps offer their products cheaper.

For this to be realized, we need to combine different technologies. We have already talked about the Lightning Network and how it could enable fast transactions. Additionally, we need a system, which would check the validity of a transaction. The validation will be performed at the entrance with the help of security towers. Such towers are already used against thieves.

Stores have installed theft-preventing systems by using radio frequency tags. These tags are mounted on the products and send precise frequency signals, once a customer passes through the security towers of the store’s entrance. In this example, the alarm system is connected to the Lightning Network and an internal database. For verification purposes, the database assigns product IDs to Bitcoin wallets, on which payments of customers are received. If the target amount of Bitcoin is in the wallet, the alarm will not be initiated.

Due to the access to transaction history, customers, as well as business operators, can profit from transaction information. As a user, one could check if the store still has cucumber on offer, or if it has to deliver subsequently. Regarding the business side, one could plan supply management more efficiently and analyze data in real-time.

If the Lightning Network would fail and Bitcoin’s price would be too volatile for the consumer, then there would be still a chance for Crypto to be mass adopted. A Stablecoin like Gemini could be created on top of a Smart Contract Ecosystem like Ethereum with high transaction per second characteristics. A stable coin is a Cryptocurrency, where the value remains the same in regards to Fiat currencies. Gemini is a stable coin, which represents a Dollar in a 1:1 ratio. The corresponding Dollars are held at the State Street Bank and Trust Company and examined monthly by a reputable third party. This gives assurance that 1 Gemini Dollar is valued exactly as 1 Dollar. Currently, the Gemini Dollar is an ERC-20 Token on top of Ethereum.

Unfortunately, Ethereum has also a low TPS as Bitcoin. Until there is no feasible solution to scale in a decentralized manner, we could use a more centralized Smart Contract Ecosystems. The average user would be more confident to use a stable coin on his mobile, to experience counter-less shopping. In the same time, a mass adoption would educate the society and people would be more likely to understand the value in Bitcoin.

If we genuinely want to use the current advantages of Crypto and trigger mass adoption, then in my opinion decentralization should not play a role in developing a fast peer-to-peer payment solution. If Bitcoin manages with time, to scale with Lightning or other technologies, we will still be able to replace the first mass adopted Crypto payment system with Bitcoin. However, maybe Bitcoin’s use-case turns out to be a store of value instead of a peer-to-peer electronic cash system. However, that is an entirely different story.

Most of the people argue that a counter-less shop system can be made without the blockchain technology. This is true. Amazon and Alibaba are already developing and testing such stores. I am not a tech person, but I assume, that checking a transaction on the blockchain is more comfortable and more reliable than to build a product checkout system without access to transaction data. Additionally, I think a Crypto solution is cheaper and more user-friendly because the customer can use any wallet he wants and not a specific app developed by Amazon.


Gemini Dollar, Blocksize debate, Problems of LN, Biggest Flaw of LN, Lightning Network, Lightning Stats, Radio Frequency tags

OP-ED Disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

Published by Benjamin Harmat

Benjamin Harmat
Economist, HODLer, Lightning enthusiast