Coinbase Commerce Removes Native Bitcoin Payments Support for Merchants – What’s Going On?

Last update:

February 19, 2024 5:48 am EST | 2 minutes read

Source: By-3

Coinbase has removed support for native Bitcoin (BTC) and other unspent transaction output (UTXO) coins on its merchant payments platform, Coinbase Commerce.

In one last post on XLauren Dowling, the exchange's head of product, said the removal of native Bitcoin and UTXO support was due to challenges in providing current updates to Coinbase Commerce's Ethereum Virtual Machine (EVM) payment protocol for Bitcoin.

Coinbase Commerce offers support for new assets

The new Commerce product focuses on enforcing on-chain payment details and supports a wide range of assets, including native and ERC-20 tokens.

It also automatically converts payments into USDC (USD Coin) on-chain, at a guaranteed rate for merchants.

However, providing the same functionality on the Bitcoin blockchain without smart contracts and stablecoins presented significant challenges and resulted in the removal of native Bitcoin and UTXO support, Dowling said.

“Providing the same functionality on the Bitcoin blockchain without smart contracts and stablecoins has been challenging and we have therefore made the difficult decision to remove native Bitcoin and other UTXO support.”

Although Coinbase Commerce will no longer directly support Bitcoin transactions for merchants, CEO Brian Armstrong clarified that customers using Coinbase accounts can still use Bitcoin as a payment option.

He also mentioned that Coinbase is working on integrating the Lightning Network, a Layer 2 scaling solution for Bitcoin, into its platform.

This integration could potentially open up opportunities for Lightning Network-based commercial payments in the future.

Crypto payments are moving to L2s: Armstrong

Armstrong also emphasized that the mainstream adoption of crypto payments depends on moving away from layer-one solutions (the base blockchain) to reduce transaction fees and confirmation times.

“Hopefully there will be opportunities to process commercial payments with Lightning in the future,” Armstrong commented.

The Lightning Network is a payment protocol designed to enable transactions within the Bitcoin blockchain. Bitcoin transactions have been carried out using the protocol since 2017.

“We anticipate – we believe that paying for things online with crypto won't really become mainstream until we move out of Layer 1 and reduce transaction fees and confirmation times, so we're trying to accelerate the transition to that world.”

That's not entirely true, so let me provide a little more context in case it's helpful:

– Commerce uses a new EVM payment protocol.
– You can pay from any self-custody wallet
– We believe that paying with crypto in the future will be primarily done on Layer 2 and we want to help make this happen…

— Brian Armstrong 🛡️ (@brian_armstrong) February 17, 2024

The UTXO model used by Bitcoin and its forks such as Dogecoin, Litecoin, Dash and Bitcoin Cash is designed for transparency and security.

In contrast, Ethereum uses an account model that is more similar to traditional bank accounts and offers greater flexibility.

Coinbase's decision to remove native Bitcoin support has sparked criticism in the community, with some users raising concerns about its impact on Bitcoin adoption.

Critics argue that assuming every customer has a Coinbase account or is based in the U.S., where Coinbase operates, could limit broader adoption.

They liken it to requiring customers to be Bank of America account holders for merchants that bank exclusively with Bank of America to accept payments.

Coinbase often acts like they are fighting the good fight, but don't be fooled, that is not the case.

Example: “Coinbase Commerce” no longer supports payments from self-custody wallets or third-party exchanges:

“You can continue to accept Bitcoin, […] Payments as long as your… pic.twitter.com/vgyTO7MLLq

— CR1337 (@cryptonator1337) February 18, 2024

The new development comes shortly afterwards Coinbase announced its quarterly reportwhich reported a 64% increase in transaction revenue to $529.3 million in the fourth quarter of 2023.

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