Major Update: In a bid to streamline its payment processing system, Coinbase Commerce has phased out support for Bitcoin and other UTXO-based cryptocurrencies from its merchant services.

Behind the Decision

Lauren Dowling, the head of product at Coinbase, took to social media to shed light on the recent changes. On February 18, she explained that the integration of new updates into Coinbase Commerce’s Ethereum Virtual Machine (EVM) compatible protocol proved challenging for Bitcoin and similar UTXO coins. This has led to their removal from the platform’s supported assets.

New Direction for Coinbase Commerce

The revamped Coinbase Commerce aims to meticulously record each transaction on the blockchain, supporting a diverse array of assets including ERC-20 tokens. Additionally, it converts payments to the stablecoin USDC automatically at a fixed rate for the benefit of merchants. The lack of smart contracts and stablecoins within the Bitcoin network was a significant factor in the decision to drop support for UTXO coins.

CEO Clarifies the Future of Commerce Payments

Brian Armstrong, the CEO of Coinbase, clarified that Bitcoin holders are not completely left out; they can continue using Coinbase Commerce through their exchange accounts. He also highlighted the ongoing integration of the Lightning Network and its potential to enable faster and cheaper transactions for commerce in the near future.

Transitioning to Layer 2 Solutions

Armstrong emphasized the strategic shift towards Layer 2 solutions to decrease fees and transaction times, which he considers essential for the mass adoption of cryptocurrencies in online payments.

Understanding the UTXO Model

The UTXO model, foundational to Bitcoin and other forked cryptocurrencies like Dogecoin and Litecoin, is lauded for its transparency and security. This contrasts with Ethereum’s account-based system, which is more flexible and akin to traditional financial systems.

Community Reaction

The decision by Coinbase has sparked discussions within the crypto community. Critics are concerned about its potential effects on Bitcoin’s adoption, drawing comparisons to the limitations of using a single bank for all financial transactions.