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Coinbase Commerce discontinues Bitcoin and UTXO coins as payment options

Crypto exchange Coinbase has recently announced the discontinuation of support for native Bitcoin and other Unspent Transaction Output (UTXO) coins on its merchant payment service, Coinbase Commerce.

This decision was revealed by Lauren Dowling, the head of product at Coinbase, in a thread on X on Feb. 18. She explained that the move was prompted by challenges faced while trying to integrate recent updates into the Ethereum Virtual Machine (EVM) payment protocol for Bitcoin.

The updated Coinbase Commerce product now aims to provide detailed payment information 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 posed significant challenges, ultimately leading to the decision to exclude support for native Bitcoin and other UTXO-based coins.

Despite this change, Coinbase CEO Brian Armstrong emphasized that Bitcoin users could still utilize Coinbase Commerce if they have an account with the exchange.

In addition, Armstrong mentioned the ongoing integration of the Lightning Network into Coinbase, expressing optimism about facilitating commerce payments through this protocol in the future. The Lightning Network aims to streamline and reduce transaction costs on the Bitcoin blockchain, making transactions faster and more cost-effective.

Expanding on the broader perspective of cryptocurrency payments, Armstrong stressed the importance of transitioning away from the base layer of blockchain (layer 1) to decrease transaction fees and confirmation times. This shift, he believes, is essential for widespread adoption of crypto payments online.

The UTXO model, utilized by Bitcoin to track transactions, prioritizes transparency and security. In contrast, Ethereum’s account-based system offers more flexibility and resembles traditional banking operations. Similar to Bitcoin, other cryptocurrencies like Dogecoin, Litecoin, Dash, and Bitcoin Cash also employ the UTXO model.

Coinbase’s decision has sparked debates within the cryptocurrency community, with some expressing concerns about its potential impact on Bitcoin adoption. Critics have raised issues regarding the assumption that all customers are based in the U.S. and willing or able to open a Coinbase account. This has drawn comparisons to requiring all customers to bank with a specific institution to enable payments.

Expanding on the discussion around Bitcoin’s UTXO model, it is essential to understand its implementation and significance in the cryptocurrency ecosystem. The UTXO model stands for Unspent Transaction Output and plays a crucial role in recording transactions on the Bitcoin blockchain. When a transaction occurs, it creates outputs, which become inputs for subsequent transactions. These outputs remain in the UTXO set until they are spent, ensuring the integrity and security of the network.

One of the key advantages of the UTXO model is its ability to enhance privacy and security in transactions. By tracking individual outputs and ensuring they are spent only once, the UTXO model prevents double-spending and reduces the risk of fraudulent activities. Additionally, the UTXO model allows for more efficient transaction validation and scalability, contributing to the overall reliability of the Bitcoin network.

While the UTXO model has demonstrated its effectiveness in maintaining the integrity of the Bitcoin blockchain, it also presents certain limitations. The UTXO set can grow significantly over time, potentially impacting the performance and efficiency of the network. Moreover, managing a large UTXO set requires additional resources and computational power, which can pose challenges for network participants.

As the cryptocurrency landscape continues to evolve, developers and industry experts are exploring alternative approaches to transaction validation and blockchain design. Some projects are experimenting with new models that aim to improve scalability, privacy, and security while addressing the limitations of existing frameworks like the UTXO model.

In conclusion, Coinbase’s decision to discontinue support for native Bitcoin and UTXO coins on its merchant payment service reflects the company’s efforts to adapt to evolving industry trends and technological developments. While this move has generated mixed reactions within the cryptocurrency community, it underscores the ongoing innovation and experimentation in the digital asset space.

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