Fold is a mobile application that allows bitcoin holders to use their bitcoin at some of their favorite retailers, such as Dunkin’ Donuts, Starbucks, and Chipotle. Recently, the company ran its service on the Lightening Network and has deemed the test successful.
Fold tested whether Bitcoin users were able to order Dominos Pizza using the network. The lightening network is a second-layer scaling solution that is present on the Bitcoin network.
The benefit of using the Lightning Network is that it has particularly low fees and the processing is nearly instant. Further, it is separate from the public blockchain, which is often too busy with transactions during times of high activity, which increases transaction time and potentially costs.
The new payment system that uses the Lightning Network not only alleviates pressure on the traditional blockchain, but its transactions are cheaper and faster. In this case, Fold’s test process was its Lightening Pizza initiative and it determined that it is indeed possible to use the network to purchase one’s favorite fast food using bitcoin.
The Lightning Network has become increasingly possible in recent years, especially since it integrated with Segregated Witness in 2017. One of the main hurdles affecting the networking, though, is that it needs to speed up its adoption and there are several roadblocks that may make it a challenge.
First and foremost, retailers are not certain if they want to integrate their network into their payment processing. For example, Will Reeves at Fold interviewed with Decrypt. During the interview, he stated
“While the Lightning Network itself performed well during the Lightning Pizza launch, it was onboarding and user-experience-related issues that proved to be the most challenging. In the 24hrs after releasing Lightning Pizza, over 1,500 orders were created, however only 10% resulted in sales due to frictions associated with onboarding and troubleshooting Lightning wallets.”
Without enough consumer demand, retailers may not have enough incentive to adopt the lightning network. Further, there is a lack of uptake concerning crypto debit cards, and without such cards, there is no all-in-one system that can support both cryptocurrencies and traditional funds. Of course, one of the main reasons that there is no all-in-one system is that payment processors do not want to share the fees.
This isn’t to say, though, that there has been no headway in the area. For example, interest in Bitcoin is exceptionally high in Japan and thus, retailers such as Bic Camera worked Bitcoin into its payment processing platform with the help of BitFlyer, a Japanese cryptocurrency exchange.
However, some retailers are concerned about offering bitcoin payment services. As Reeves stated,
“While we’ve received strong interest from consumers and small merchants, major retailers are still hesitant to jump in. As we’ve learned in the past, until there is sufficient consumer demand, major retailers will find it hard to justify the added risks associated with accepting Bitcoin and other altcoins. Until then, Fold will continue to open access to retailers via crypto-to-fiat conversions over existing payment rails, as well as help interested retailers get started accepting crypto-payments.”
At this point, Fold is working to make transactions at other retailers possible. Even though there has been a decline in the value of cryptocurrency, the demand for Fold’s services has been pretty high.
According to Reeves, the platform processed $100,00 in retail transaction volume. And since October 2018, the platform has gained 15,000 active users. As Reeves added,
“Since re-launch in October, we’ve been surprised to see rapid growth, despite the downturn, gaining ~1,500 monthly active users and moving $10k’s of retail transactions per month. The difference between this bear market and the ones prior is that the fundamentals are much stronger and the network is more resilient: there are more active users, there are better tools and services and there are more compelling payments use cases than ever before.”
Further, as for the Lightning Pizza initiative specifically, even though there are adoption-related issues, the initiative has demonstrated that it is possible to process large transaction volumes. Reeves continued
“Lightning Pizza mobilized the entire Lightning ecosystem around an everyday, but complex transaction at a major retailer—and it didn’t break. For the first time, the promise of the Lightning Network’s instant, low fee, private transactions materialized, which we see as marking a new era of crypto-payments.”
As for this coming year, Reeves and his team are looking to integrate Lightning with Fold’s core product applications and to streamline processing. Definitely something to look forward to.
If you want to try the Fold App click here.