Segregated Witness cannot increase the number of Bitcoin users in the short term. The number of merchants accepting Bitcoin is the key.

Bitcoin executives and analysts, including Chain of Points CEO Irene Katzela, believe that retail acceptance of Bitcoin is the key to mainstream adoption.

Since 2014, the Bitcoin industry and market have seen a large number of merchants accepting Bitcoin emerge, and companies such as TigerDirect and Expedia have begun offering Bitcoin as one of their main payment methods.

Currently, Bitcoin is considered more of a store of value and safe-haven asset than a real digital currency. Some Bitcoin investors, such as Bitcoin Jesus Roger Ver, believe that the Bitcoin development community must work on transforming Bitcoin into a settlement system and digital cash rather than digital gold.

While this is not necessary — as whether Bitcoin serves as a store of value or a settlement system is up to the user — it is important to understand that limited merchant adoption is limiting Bitcoin’s mainstream use .

By integrating various scaling technologies, such as Segregated Witness (SegWit), which is currently being activated, Bitcoin blocks are expected to be at least 2.1 times larger. Considering the average block size of 1MB, 2.1 times will enable the Bitcoin network to achieve effective scaling.

Contrary to what many investors believe, the Bitcoin block size expansion will not instantly add hundreds of millions of new Bitcoin users . The Bitcoin user base is not growing linearly. Instead, the number of Bitcoin users is growing exponentially because Bitcoin is still in the early stages of adoption.

As Katzela stressed, it is important to convince the general public and consumers to use Bitcoin by introducing the benefits of Bitcoin compared to cash or other traditional forms of payment. Some Bitcoin platforms, such as Purse.io, have begun to attract general public or mainstream users by offering 20% ​​discounts for Bitcoin payments. Some individual merchants also offer special discounts to customers who pay with Bitcoin because Bitcoin significantly reduces the credit card fees or financial service fees that merchants need to pay.

When users try Bitcoin for the first time, they see that it is a safe, fast payment method that costs less than credit card payments or bank transfers. At the same time, because merchants appreciate the lower Bitcoin fees, they will offer discounts or special promotions, which will greatly increase the use of Bitcoin by new users.

Katzela said,

“Given the fees associated with using existing payment methods, the cost savings at the merchant level are clear. And more and more merchants are passing on these cost savings to consumers in the form of discounts and incentives. As these cost savings continue, consumers will soon realize that virtual currencies can enable them to purchase goods and services at lower prices.

More merchants are beginning to accept bitcoin as they see a significant drop in volatility, after the digital currency showed an overall stable trend over the past 12 months.

As Katzela explained, the number of merchants accepting Bitcoin is increasing, but the mainstream user base of Bitcoin is not growing at the same rate. Those merchants that accept Bitcoin are currently only appealing to the existing Bitcoin user base, and are not taking further steps to attract mainstream users.

Katzela says:

“Increasing the number of merchants that accept virtual currencies is only half of the goal of achieving a broad user base. Achieving a broad consumer base requires consumers to feel safe using virtual currencies in their daily lives.”