The Spiral from Jack Dorsey warns that Bitcoin is losing to stablecoins in the payment competition.
The Bitcoin development team, supported by Block, stated that despite seven years of improvements in payment technology, Bitcoin still lacks appeal as a daily currency. They called for more ambitious solutions to help it compete with the increasingly popular stablecoins.
- Spiral believes that despite seven years of technological progress, the adoption rate of Bitcoin for daily payments remains weak.
- According to the report, over 1 million American merchants can accept Bitcoin through Square.
- Stablecoins are dominating the emerging AI proxy payment system, raising concerns about Bitcoin's competitiveness among outsiders.
- The team hopes to propose a solution that can significantly improve payment adoption rates within five years.
- Spiral believes that insufficient demand, price fluctuations, and US tax regulations are the main obstacles.
According to the new report Spiral titled "The Long Road to Bitcoin Payments", there are now over 1 million American merchants that can accept Bitcoin through Square, and Lightning Network is also easier to integrate into payment applications. However, consumer spending remains limited, which has prompted the team to seek ideas that could change the trajectory of Bitcoin adoption within five years.
At the time of this report's release, Stripe, Shopify, and other payment service providers are incorporating stablecoins into their service offerings, with dollar-pegged tokens seeing an increasing influence in online commerce and automated payments.
Spiral believes that, despite the continuous improvement of payment infrastructure, the challenges faced by the industry are increasingly focusing on consumer demand and incentive mechanisms.
Spiral claims that Bitcoin payments face demand issues
This report continues Jack Dorsey's long-held view that Bitcoin should become a currency used in people's daily lives. Block, co-founder Dorsey, stated in January 2025: "If Bitcoin ultimately turns out to be nothing more than digital gold, then I believe it has failed." He believes that whether it is used as a daily currency or not is what should determine its success or failure.
Spiral acknowledges that Bitcoin has to a large extent established itself as a "store of value," however, there is still disagreement among supporters regarding whether its limited use for payments constitutes a serious issue. Some believe that as Bitcoin matures, the demand for payment purposes will naturally arise; others worry that by the time Bitcoin gains prominence, financial applications will have already shifted to competing technologies.
Over the past seven years, the infrastructure of Lightning has been capable of supporting applications in a production environment, and wallet developers have also simplified payment addresses, account recovery, and liquidity management. The report indicates that the technical complexity of managed Bitcoin payments is now comparable to that of managed stablecoins, although managed services are still more challenging to operate on a large scale.
Merchant availability has significantly improved. As previously reported by crypto.news regarding the launch of Square, approximately 1 million American sellers have gained the ability to accept Bitcoin. Lightning is responsible for processing the transactions, and merchants can receive payments in US dollars.
However, Spiral believes that the availability of these infrastructures has not been translated into corresponding consumer spending. Most holders prefer to treat Bitcoin as a form of savings, while merchants usually prefer stable prices, and there is not much reason to introduce a new payment method in the absence of customer demand.
Stablecoins are accelerating their penetration in payments and AI transactions.
Spiral believes that stablecoins are the strongest competitors, as businesses and consumers can transfer dollar-denominated values without bearing the risk of Bitcoin price fluctuations. The report mentions Shopify's USDC checkout integration, PayPal's PYUSD services, as well as Stripe's acquisition of stablecoin infrastructure provider Bridge.
This competition has extended to the emerging field of machine-to-machine payments, where applications automatically purchase data, computing power, and other digital services. Spiral estimates that approximately 99% of payments in Coinbase's x402 protocol utilize USDC, and attributes this early preference to the dollar-pegged settlement system.
In September this year, Block added Lightning to x402, providing developers with the option to make payments in Bitcoin within that protocol. This integration demonstrated technical support, however, Block has not yet disclosed the volume of transactions, nor has it announced its deployment on Square and Cash App.
Other payment developers are also continuing to launch alternative solutions based on Bitcoin. Lightning Labs recently launched Wavelength on the mainnet, which allows AI agents to send Bitcoin payments without the need to manage Lightning nodes or channels themselves.
This service is currently still in the alpha phase, with an initial balance limit of 300,000聪. The Lightning payment service fee is 0.25%, excluding routing fees. The support for stablecoins is still in planning, so the current payment function provided to users is mainly based on Bitcoin.
Bitcoin faces challenges of expenditure incentives and regulatory barriers
In addition to competition, Spiral also points out several issues that hinder daily Bitcoin transactions. Consumers typically obtain Bitcoin through exchanges or financial applications before using it for purchases, which represents an additional step compared to traditional bank cards and US dollar services.
Price volatility is another obstacle, as consumers may be reluctant to spend on assets they expect to appreciate in value. Merchants seeking predictable income tend to prefer to convert them into US dollars immediately, and stablecoins have already provided a familiar unit for pricing goods and services.
US tax processing has also added friction. According to current federal regulations, spending Bitcoin is generally considered a disposition of property, and even if the purchase amount is small, it may result in taxable income or losses.
The tax exemption proposal for eligible small transactions has not yet become law. Spiral The continued stagnation of CLARITY Act is also seen as another source of uncertainty for payment developers, as they hope to obtain clearer federal regulations.
The report distinguishes between two scenarios: “paying directly with Bitcoin” and “using Bitcoin infrastructure to transfer other currencies.” A dollar payment routed through Lightning may demonstrate the practicality of the network, but it does not necessarily indicate that the customer chose to spend Bitcoin.
Spiral Calls for a five-year payment breakthrough plan
After clarifying these limitations, Spiral is seeking proposals that can substantially change the adoption rate of Bitcoin payments within five years. The team suggests exploring a shared Lightning infrastructure that would allow both Bitcoin and dollar-denominated payments to be transmitted through the same set of applications.
Another proposal focuses on people who face unstable local currencies or restricted capital flows. Spiral believes that in such situations, self-hosted Bitcoin payments may have advantages, as users do not need to rely on the permission of stablecoin issuers to transfer funds.
The team hopes that developers will try discounts, rewards, and other incentive methods to encourage existing holders to spend their Bitcoin. It also suggests measuring whether users continue to make payments after the incentives end, as well as the volume, amount, and frequency of transactions.
Micro-payment is another potential use case, especially suitable for charging creators for their content, computing power, or small services based on AI. Spiral encourages developers to explore new user experiences that allow users to make continuous payments or pay on demand, rather than engaging in traditional checkout purchases.
The person in charge, Steve Lee, posted on X that Dorsey believes the adoption rate of Bitcoin payments is still below its potential. Lee invited developers to come up with solutions to help Block, Spiral, and other participants increase the adoption rate over the next five years.
Bitcoin developer Matt Corallo also stated separately that this discussion is very important, and noted that transferring value through Bitcoin remains the core use case of this technology.
Spiral has opened discussions on GitHub, soliciting proposals and supporting data, including merchant payment volumes, reuse rates, and transaction success rates.
