Bitcoin Could Lose Its Market Dominance As El Salvador Makes it a Legal Tender

Barely two weeks ago, the El Salvadorian legislative house passed a bill announcing Bitcoin as a legal tender. The approval was by a loud majority of 62 out of 82 votes. Despite the news cheering up millions of Bitcoin enthusiasts, it might not necessarily be good news for the leading crypto asset. 

The basic criticism against Bitcoin points to the fact that it has no known creator. Several analysts are also pointing that Bitcoin might not be the best choice if a sovereign nation chooses to settle for a crypto asset as a legal tender. Bitcoin in comparison to other altcoins isn’t considered to be the most scalable network. 

The adoption of Bitcoin in El Salvador is in partnership with a payment company Strike. The company is based around the Lightning Network and is looked up to solve the scaling issues of BTC. However, even the integration cannot effectively clear all the blunders to come, and in this scenario – long-term blunders. 

Why Lightning Network Integration Won’t Stop Bitcoin From Losing Dominance

First off, since the adoption of Bitcoin in El Salvador isn’t a mere suggestion but a compulsion, all merchants in the country would be expected to join the network. Such sure would likely jam an already decelerating network. The Lightning Network Integration would trigger high transaction fees as it is native to crypto to fluctuate.

A Lightning scenario would require the creation of channels for receiving funds. These channels need money and a good amount of technical know-how to operate, implying that merchants need to be buoyant and technical to work with this. Even if Strike offers channels for all, the network itself might face scalability problems, just like crypto exchanges.

Furthermore, the majority of El Salvadorians do not have access to banking facilities. This situation would make it a strenuous task to easily convert crypto to fiat when needed. If the situation becomes too complex for average merchants to handle, it is expected that an alternative will be sought. 

Views and opinions expressed are solely those of the author and not of The DeChained or any affiliated party. Views or opinions expressed in this article (or any article on the website) are not financial advice. Articles are for informational purposes only. The author and The DeChained may hold positions in assets discussed in this or other articles.
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