The Day Came When You Can Pay For A Coffee In Bitcoin

How Bitcoin payments are possible


Vincent T

2 years ago | 4 min read

Back in 2017, Bitcoin (BTC) was reaching a FOMO phase just before the year ended. Despite its increase in popularity, which generated interest from people curious about cryptocurrency for the first time, it had plenty of detractors. The main criticism came from the mainstream financial industry, who believed it as “funny money”. It was the big finance giants who didn’t take Bitcoin seriously back then, but have since changed their tone somewhat.

One argument against Bitcoin from the traditional finance world was how useless cryptocurrency was. The main viewpoint back then was that it was extremely volatile and not suitable as a form of currency. The underlying technology supporting Bitcoin, the blockchain, was slow and not even performing at the same levels as payment giants like VISA and Mastercard. Therefore, the premise was that cryptocurrency like Bitcoin would never be used effectively for payment systems.

Another example of Bitcoin’s problem was when it came to adoption. Retailers could not accept it because it is not a legal form of tender. It was also not integrated with merchant’s payment systems (e.g. PCI retail industry) so it was rather difficult to actually use. The harshest critics would say you cannot even pay for a cup of coffee using Bitcoin. This limitation was not a problem, according to Bitcoin maximalists. That is because Bitcoin was a better store of value rather than a payment network.

Here we are in 2021, and now it is possible to pay for a cup of coffee with Bitcoin. It has also become more acceptable among institutions (e.g. MicroStrategy) as a store of value. These are features of sound money that make Bitcoin ideal for both payments and holding wealth. It can be used as a medium of exchange to pay for goods and services. At the same time, it can be treated as a personal bank for storing funds across borders and free from central authority (e.g. financial institutions). Bitcoin’s decentralized nature gives users the financial freedom they need regarding their wealth.

El Salvador’s adoption of Bitcoin and its approval as legal tender in September 7, 2021 is unprecedented. They are the first nation to officially recognize Bitcoin. That means it is legal to pay with BTC anywhere you go in El Salvador, and it will be acceptable alongside the US Dollar (USD). Unless the law changes, you can walk into a Starbucks in El Salvador and pay with BTC to buy your favorite cup of coffee. So what made this all possible? Bitcoin is supposed to be a slow network, so how can you use it to buy small items like a cup of coffee? The innovation behind this is called the Lightning Network.

The Lightning Network (est. 2016) was a project for developing what is called a Layer 2 solution for the Bitcoin blockchain. Its purpose was to scale Bitcoin beyond 3-5 transactions per second by providing another layer to speed up the processing of transactions. This would be through the use of nodes that act as payment channels to process transactions off-chain, with the final settlement going back to Layer 1 or the main Bitcoin network. Nodes that provided channels would be compensated with fees for processing transactions as their incentive.

It was very much under the radar with some even suggesting it was becoming vaporware and many critics (e.g. Bitcoin Cash proponents) had their doubts. However, the Lightning Network was able to show that it can work in reality and not just as a concept for blockchains. In El Salvador, Bitcoin payments are being processed by Strike which uses the Lighting Network. By using an app with API integration to Strike as the payment processor, users can pay for transactions using their BTC. Payments for microtransactions like buying coffee are paid in fractions of a Bitcoin that are denominated in satoshis (At 10/3/21 rates, 1 satoshi is $0.00049).

Bitcoin is divisible just like the dollar, so it has smaller denominations that can be used for payments. Every transaction is recorded on a blockchain after it has been processed, keeping a record for provenance and verification. If the cost of an item was valued at 0.00174 BTC, then it will be deducted as output from a user’s balance and transfer it to the receiving account. It then becomes a record on the blockchain that can be referenced in case of disputes. The Lighting Network makes it a lot faster and can be more user-friendly through the use of an app.

While that sounds all good, just remember that Bitcoin is highly volatile. If you want to pay for items with cryptocurrency, then you are going to have to have to understand the risks. Prices fluctuate constantly in the market. The sudden surge in prices could have you feeling regret for paying in BTC since the value is worth more after you made the payment. It is like the story of the Bitcoin Pizza guy who paid 10,000 BTC for pizzas back in 2010 when they were worth much less. In 2021 10,000 BTC ( 1 BTC = $47,711.49 closing price October 2, 2021 on Coinmarketcap) would be worth $477,114,900.00. For some users it is more convenient than cash and also more readily available as a payment option for those who don’t have credit cards. It is therefore an alternative payment option.

While solutions like the Lighting Network are providing users ways to pay in Bitcoin, it is not yet a perfect system. There is still plenty of work in progress for developers. The system in place to support payments does have users, but it is still in its early stages. There is plenty of more room to grow as adoption increases. This should push developers to continue addressing issues regarding the system. As the Lighting Network evolves, it should mature to become a more stable and highly utilized product. This is what will allow us to continue to securely pay for a cup of coffee with BTC.


Blockchain - A trustless distributed decentralized database used in cryptocurrency
FOMO - Fear of Missing Out

(Photo Banner Credit: Tirachard Kumtanom)


Created by

Vincent T

Involved in blockchain development and imaging technology.







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