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Crypto exchange Coinbase has discontinued support for native Bitcoin and other Unspent Transaction Output (UTXO) coins on its merchant payment service, Coinbase Commerce.
Lauren Dowling, the head of product at Coinbase, revealed the decision in a thread on X on Feb. 18 that the move was driven by challenges encountered while attempting to integrate recent updates into its Ethereum Virtual Machine (EVM) payment protocol for Bitcoin.
1/ Hey folks, I’m the product lead for Coinbase Commerce and want to share some thoughts on how the product is evolving, why we’ve made these changes, and clarify what it means for our asset support strategy moving forward. 👇
— Lauren Dowling (@Lauren_Dowling_) February 17, 2024The updated Coinbase Commerce product is designed to detail each payment on the blockchain, support a wide range of assets, including native and ERC-20 tokens, and automatically convert payments to USDC on the blockchain at a guaranteed rate for merchants. The absence of smart contracts and stablecoins on the Bitcoin blockchain presented significant obstacles, leading to the decision to remove support for native Bitcoin and other UTXO-based coins.
However, Coinbase CEO Brian Armstrong pointed out that Bitcoin users could still use Coinbase Commerce if they have an account with the exchange.
This isn't quite right, so let me share some more context in case helpful:
– Commerce uses a new EVM payment protocol.
– You can pay from any self-custody wallet
– We believe paying with crypto is going to primarily happen on Layer 2 in the future and we want to help make that…
Armstrong also mentioned the ongoing integration of the Lightning Network into Coinbase, expressing optimism about enabling commerce payments through this protocol in the future. The Lightning Network aims to facilitate faster and more cost-effective transactions on the Bitcoin blockchain.
Armstrong elaborated on the broader vision for cryptocurrency payments, emphasizing the need to transition away from the base layer of blockchain (layer 1) to reduce transaction fees and confirmation times. This shift, he believes, is crucial for mainstream adoption of crypto payments online.
The UTXO model, which Bitcoin utilizes to track transactions, emphasizes transparency and security. This model differs from Ethereum’s account-based system, which offers more flexibility and resembles traditional banking operations. Other cryptocurrencies that have forked from Bitcoin, such as Dogecoin, Litecoin, Dash, and Bitcoin Cash, also use the UTXO model.
Coinbase’s decision has sparked debate within the cryptocurrency community, with some expressing concerns over its impact on Bitcoin adoption. Critics argue that this move assumes all customers are based in the U.S. and willing or able to open a Coinbase account, drawing parallels to requiring all customers to bank with a specific bank to make payments.
