Bakkt has hinted that the Bakkt consumer app will launch in the first half of 2020. This may be one of the most important and exciting crypto events of 2020, since the Bakkt app has the potential to significantly increase crypto adoption via partnerships with major retailers like Starbucks, providing a seamless solution for instant crypto payments in a retail environment, and the ability to instantly exchange between a wide variety of digital assets including crypto, rewards points, in-game items, gift cards, stocks, and fiat.
Why Bitcoin And Lightning Network Adoption Has Struggled
One of the main reasons that the Bakkt app has so much positive potential is that Bitcoin (BTC) is not efficient in retail environments, primarily due to transactions taking an average of 10 minutes to confirm, and sometimes hours. Also, Bitcoin (BTC) is not ideal for small payments due to a transaction fee that is usually around $1, making it so Bitcoin (BTC) can’t compete with cash and cards at bars, coffee shops, vending machines, etc.
Further, Bitcoin’s (BTC) price can be quite volatile, and therefore merchants would need a service like BitPay which instantly converts their Bitcoin (BTC) into fiat. Zooming out, if the merchant wants fiat it does not make much sense to go through the trouble of accepting Bitcoin (BTC).
The Lightning Network is one of Bitcoin’s (BTC) biggest hopes for solving the issues that are crippling retail adoption. Indeed, the Lightning Network offers instant payments with practically zero fees. However, even the Lightning Network has some inefficiencies, such as users need to lockup Bitcoin (BTC) in a Lightning channel in order to send payments, the channel must be closed and a new one opened once the locked up Bitcoin (BTC) is used up, and Lightning channels have low capacity limits, meaning it is usually not possible to send big payments.
Essentially, Bitcoin (BTC) and even the Lightning Network are much harder to use in a retail environment than cash or credit/debit cards, which is why Bitcoin (BTC) is not an accepted payment method at most physical retail stores. Simply, Bitcoin (BTC) is harder to use than cards and cash for both merchants and consumers, which is why Bitcoin (BTC) adoption at retail stores is few and far between.
How Bakkt’s App Could Be The Missing Ingredient For Widespread Bitcoin Adoption
Considering that Bitcoin (BTC) is not going to change its code anytime soon, if ever, and Lightning Network adoption and development is going slowly, it seems the best hope for a crypto adoption breakthrough is the Bakkt app.
Exact details on the Bakkt app’s capabilities are still limited. Bakkt CEO Adam White gave some hints while speaking at the World Economic Forum in Davos, suggesting that the Bakkt app will look more like PayPal than a Bitcoin (BTC) wallet, in addition to integrating a portal for merchants, equity trading, and support for a wide variety of digital assets.
A Bakkt interview with Fortune gives additional insight into what the Bakkt app could look like, saying that consumers will have a digital credit card, like Apple Pay, and will be able to make purchases wherever it is accepted. For those using crypto on the Bakkt app, this would effectively be a crypto debit card.
The truly groundbreaking idea is merchants could integrate with the Bakkt app in order to receive direct payments. Banks and credit card companies usually take around 2.5% of every retail card transaction, and apparently the Bakkt app will be much cheaper, giving retailers room to lower prices or offer more rewards.
Perhaps users will be able to directly spend their Bitcoin (BTC) and other major cryptocurrencies via the Bakkt app. In theory, users would have crypto in their Bakkt account, and this crypto will instantly and seamlessly be turned into fiat and sent to the merchant during a point of sale transaction. This would allow Bakkt users to hold crypto while having the option to spend it at any store which accepts the Bakkt app, and merchants would not need to take any extra steps since they would just receive fiat.
To be clear, this theory is just speculation, and it is not yet clear how the Bakkt app will facilitate crypto payments.
There have been several other companies which have tried to launch Bitcoin (BTC) merchant services and crypto debit cards. The X factor for Bakkt is that they are owned by the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), and therefore they have a solid reputation with regulators, the ability to deal with regulatory and legal challenges, and the resources to aggressively market the Bakkt app throughout the United States.
Essentially, other companies have tried launching services which make it easy to pay with crypto, but often these services get stopped in their tracks by regulators, especially when it comes to attempting to launch a crypto debit card.
Further, Bakkt is a qualified crypto custodian, and secures Bitcoin (BTC) with the same top level security that the NYSE uses, in addition to having insurance, ensuring that customers can never lose crypto. Therefore, Bitcoin (BTC) that is held in the Bakkt app is guaranteed to be safe, which is a major step ahead of most other crypto exchanges and services. This security paves the way for regulators to allow the Bakkt app to offer crypto payment and trading services.
The Bakkt App Will Make It Possible To Trade Rewards Points For Crypto, Incentivizing Widespread Adoption
ICE announced that Bakkt will be acquiring Bridge2 Solutions, which is a leading provider of loyalty services for merchants and customers. In-fact, Bridge2 Solutions facilitates rewards programs for 7 of the top 10 financial institutions, as well as 4,500 loyalty, incentive, and employee perk programs across a broad spectrum of corporations.
Bridge2 Solutions is already piloting Loyalty Pay, which allows users to pay for retail goods and services with universal rewards points. Bakkt brings this to the next level by making it possible to exchange rewards points for cryptocurrency. Basically, airline miles and hotel points could be used to accumulate Bitcoin (BTC) over time.
Beyond rewards points, Bakkt mentions that in-game assets like video game skins will be tradeable as well, in addition to other digital assets like store credits, digital rewards, gift cards, stocks, and of course fiat.
Essentially, the Bakkt app has the potential to be the ultimate digital asset exchange. This could increase crypto adoption via video game users, loyalty reward program members, and people interested in gift cards coming to the Bakkt app to buy or sell their digital assets, at which point they will see that they have the option to exchange their digital assets for cryptocurrency.
Also, if the Bakkt app becomes highly popular, it would help interconnect the crypto economy with the $1.2 trillion global digital asset economy, creating the potential for large influxes of money and economic activity into the crypto space.
Ultimately, the Bakkt app appears to have the potential to revolutionize the digital asset economy via allowing instant trading between crypto, rewards points, game items, and fiat, as suggested by the Bakkt app’s landing page. Also, users will be able to instantly send crypto and digital assets to other users of the Bakkt app, including retail merchants.
Considering the enormous potential of the Bakkt app to enhance crypto adoption, it seems likely that speculators will buy up Bitcoin (BTC) and other cryptocurrencies as the launch date approaches. In other words, the launch of the Bakkt app could end up being another positive market force during 2020, alongside the Bitcoin (BTC) block halving and fears of an economic slowdown. Crypto investors should watch out for the announcement that reveals the official launch date, since it could spur a crypto rally.