Spiral Warns Bitcoin Is Losing Payments to Stablecoins

Bitcoin’s struggle to become everyday money

Block-backed developer collective Spiral has issued a stark warning: despite seven years of improvements to Bitcoin payment rails, the network is failing to win widespread everyday use. The group's new report, The Long Road to Bitcoin Payments, argues that technical progress on the Lightning Network and merchant integrations has not translated into consumer spending, while dollar-pegged stablecoins are rapidly capturing modern payment flows.

Where payments infrastructure stands

Spiral’s analysis acknowledges real accomplishments. Lightning Network infrastructure has matured into production-grade software, wallet developers have made payment addresses and liquidity management easier, and custodial integrations are now comparable in complexity to stablecoin payments. Square’s rollout alone has opened Bitcoin acceptance to more than one million U.S. merchants, with Lightning used to process transactions while merchants often settle in dollars.

Yet those technical gains haven’t changed user behavior at scale. Most Bitcoin holders prioritize saving and long-term value preservation, not daily spending. Merchants, meanwhile, prefer pricing predictability and shy away from adding a payment option that exposes them to volatility unless customer demand justifies it.

Key infrastructure milestones cited

• Broader Lightning support in wallets and SDKs that simplify integration into apps and checkout flows.
• Merchant-facing integrations through platforms like Square that enable instant settlement into fiat.
• Emerging developer tools (for example, new mainnet services allowing agent-driven payments) that show Bitcoin can support automated machine-to-machine transactions.

Despite these advances, Spiral emphasizes that consumer demand and incentives are now the gating factors for mainstream Bitcoin payments adoption.

Stablecoins: the rising default for digital payments

Spiral identifies stablecoins — particularly dollar-backed tokens such as USDC and PYUSD — as the principal competitive threat. Payment providers like Stripe, Shopify and PayPal have integrated or expanded stablecoin options, enabling merchants and platforms to transfer dollar-denominated value without exposure to crypto price swings.

The report highlights growing stablecoin adoption in automated and machine-to-machine payments. Spiral estimates that roughly 99% of transactions through Coinbase’s x402 protocol currently use USDC, underlining an early preference among developers and services for dollar-denominated settlement.

Block has added Lightning support to x402, demonstrating a technical path for Bitcoin-based value flows within that protocol. However, the rollout has not yet produced publicly disclosed transaction volumes or broad deployment across consumer-facing Block services such as Square and Cash App.

Why stablecoins appeal to businesses and developers

• Price stability: merchants can price goods and services in dollars without volatility risk.
• Familiar accounting: businesses can reconcile revenue in fiat-equivalent units.
• Integration momentum: major payment platforms and commerce stacks are accelerating support for stablecoins.

In this environment, Bitcoin must compete not only on technical merits but on commercial predictability and user incentives.

Demand-side frictions: volatility, taxes and payment UX

Spiral lays out three principal demand-side obstacles that keep Bitcoin from functioning as everyday money:

1. Price volatility. Consumers are reluctant to spend an asset they expect to appreciate; this behavior favors holding Bitcoin as “digital gold.”
2. Taxation and regulatory complexity. Under current U.S. federal tax treatment, spending Bitcoin is treated as a disposal of property, which can trigger capital gains or losses even for small purchases. Legislative fixes or de minimis exemptions have been proposed in the past but remain stalled, creating ongoing uncertainty for developers and users.
3. Friction in payment UX. Many consumers acquire Bitcoin through custodial exchanges or financial apps and do not treat those balances as a primary medium for daily spending. Traditional card rails avoid a custody step and deliver a frictionless checkout that users and merchants understand.

Spiral notes that routing dollar-denominated payments across Bitcoin rails (for example, settling in dollars through Lightning) demonstrates network capability but does not prove that users are choosing to spend Bitcoin itself. The psychological and fiscal barriers to spending appreciated crypto remain significant.

Moonshot proposals: changing the trajectory in five years

Facing these constraints, Spiral has invited the community to propose ambitious, measurable ideas that could materially increase Bitcoin payment adoption within five years. The group is soliciting coordinated developer efforts, experiments, and data-driven trials to test what might catalyze sustained consumer use.

Suggested directions in the report include:

• Shared Lightning infrastructure that supports both Bitcoin and dollar-denominated payments in the same applications, reducing integration friction for merchants and developers.
• Incentive experiments: discounts, loyalty rewards, or time-limited promotions designed to encourage existing Bitcoin holders to spend, with careful measurement of retention and behavior after incentives end.
• Focused adoption in contexts where fiat instability or capital controls make self-custodial Bitcoin payments more attractive, proving real-world utility for users underserved by the dollar system.
• Micropayments and continuous payment models for creator platforms, AI services, and metered compute or data access. Spiral believes that low-value, high-frequency payments are a natural fit for Bitcoin and Lightning use cases that stablecoins may not dominate initially.

Early technical experiments worth noting

• Lightning Labs’ Wavelength (now on mainnet) enables AI agents to make Bitcoin payments without maintaining personal Lightning nodes or channels. The service remains in alpha with limits (300,000 satoshi ceilings and a small service fee) but points to a path for frictionless agent payments.
• Block’s Lightning integration into x402 provides a practical option for developers to offer Bitcoin as a settlement method within protocols that previously favored stablecoins.

These experiments are promising but still nascent; Spiral’s call is for auditable proposals backed by data on merchant volumes, repeat usage, transaction success rates and user retention.

Community response and next steps

Jack Dorsey’s long-held view — that Bitcoin should function as money used in daily life rather than only as store-of-value — underpins Spiral’s initiative. Dorsey has argued in past public comments that if Bitcoin becomes only digital gold, it fails to meet its potential as a global monetary system.

The conversation has drawn engagement from well-known Bitcoin developers and advocates. For example, developer Matt Corallo emphasized that enabling value transfer remains a core purpose of Bitcoin; if the network is not used for transactions, its broader social utility diminishes despite financial value accrual.

To gather practical proposals, Spiral has opened a GitHub discussion asking developers, researchers and merchants to contribute ideas and supporting data. The group specifically requests metrics that allow objective assessment: merchant adoption rates, transaction frequency and value, retention after incentives, and technical reliability measurements.

What success would look like

Spiral’s brief frames a successful five-year outcome as a measurable shift in user behavior: material increases in the number of merchants accepting native Bitcoin payments, higher consumer spending out of Bitcoin balances, and repeat usage that persists beyond promotional periods. It also envisions technical patterns where both Bitcoin and fiat-equivalent payments can coexist in the same user experience without undue complexity for developers or merchants.

Implications for the crypto ecosystem

If Spiral’s challenge catalyzes new experiments, the industry could see a wave of product and policy work aimed at lowering the barriers to Bitcoin spending. That may include improved UX for self-custody, regulatory advocacy for tax clarity or de minimis exemptions, merchant incentive programs, and hybrid infrastructures that let apps route value in either Bitcoin or stablecoins depending on user preference.

The alternative — steady stablecoin dominance in payment rails, commerce integrations and machine-to-machine flows — would reshape expectations about which crypto assets function as money in everyday digital economies.

Conclusion: an open invitation

Spiral’s report reframes the Bitcoin payments debate from a primarily technical challenge to a question of demand, incentives and public policy. The group is asking the community for bold, testable proposals to move the needle within five years. Whether through shared Lightning infrastructure, focused incentive programs, or new micropayment experiences, the next wave of experiments will determine if Bitcoin can compete with stablecoins for the role of everyday digital money.

Developers and stakeholders who want to participate can review Spiral’s report and submit proposals and supporting data on the project’s GitHub discussion board. The outcome of this collective effort will influence whether Bitcoin remains largely a store of value or reclaims ground as a native medium for daily transactions.