10 ms·

Just to pick up on this one small point: as I understand it, the cashback you get with a credit card is more or less taken straight from the card processing fee

Just to pick up on this one small point: as I understand it, the cashback you get with a credit card is more or less taken straight from the card processing fee charged to the vendor, which of course, raises prices overall and is therefore not really cashback at all. Without the fee, you would likely have just paid a lower price in the first place. The only party benefitting from the cashback scheme is, of course, the middleman. By offering it, they give you an incentive to use the card more, which in turn gives the vendors more incentive to accept it. More card use equates directly to more money for them. One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction.

seanalltogether 9y ago
> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction. Don't all bitcoin transactions require a transaction fee in order to get processed these days?
- davnicwil 9y ago
  Yes. There is no such thing as a free transaction, because payment methods and networks take work to administrate. I mean, take cash. It's expensive to make, to process, to transport, to safely store. These costs are, obviously, passed on to the users of cash in the aggregate. Cryptocurrency transaction fees are just very direct, but it's the same deal. The difference is that clearly inefficient transaction costs, like centralised middlemen with limited competition skimming a cut from all transactions, can be eliminated. Remember that bitcoin transaction fees are a completely open market.
  - resf 9y ago
    Centralized payment networks will always be cheaper to administer than blockchains. The only reason that Visa and Mastercard have such high fees is because it's a duopoly.
    - QML 9y ago
      Harder to get access to a centralized payment network though, right?
    - vkou 9y ago
      The only other reason they have such high fees is because those fees pay for dealing with fraud. Bitcoin makes the user deal with fraud, with predictable results.
  - horsawlarway 9y ago
    But the price you pay for removing those middle men is forcing the network to perform a truly astounding amount of computational work to verify the same transactions. There's an efficiency trade-off here, and I think for at least many of the older crypto currencies, the amount of work to process transactions is literally unsustainable without some additional tech or service layer. Which often leads us right back to clearly inefficient transaction costs.
- lucaspiller 9y ago
  I paid ~$0.60 to transfer ~$900 of Bitcoin the other day. For that amount it's not too bad, but you'd pay basically the same if you are paying for a $3 coffee. The transaction fee is based on the byte size of the transaction, not the monetary amount, so in it's current form it doesn't make sense to use Bitcoin for low-value transactions.
  - sqeaky 9y ago
    > fee is based on the byte size of the transaction Aren'y all bitcoin transaction really close to the same size? The amount being transferred doesn't change the size an integer contain 1 and another container 1,000,000,000 take the same amount of space (32 or 64 bits) because the spec says so. I thought transaction fees encouraged miners to include your block in a transaction.
    - droidist2 9y ago
      I think you're both saying the same thing
    - annabellish 9y ago
      Yes, but also no. The trick here is that if you're paying for your £1,000,000 space rocket by transfering the bitcoins from one address, it's a small transaction. If you're paying for your £3 coffee by transfering small amounts from many addresses, it's a big transaction. Address fragmentation happens when your coins are distributed across many addresses, and can be caused by things like spending coins, because all transactions actually spend everything at an address and just route the "change" elsewhere. Buy two cups of coffee too close to each other and your next transaction is going to cost twice as much in fees, whoops!
    - simias 9y ago
      The size of the transactions is mostly a factor of how many addresses are included. So moving 1BTC split across hundreds of addresses ("dust" in the jargon) is a lot more expensive than moving 1000BTC from a single address for instance. Unfortunately it's generally advised to use a new receiving address for every bitcoin transaction to make it harder to trace how much money you have and how you earn and spend it (most wallet craft a new address for every receive transaction) so it's very common to end up with your assets split up across dozens or even hundred of addresses.
- vertex-four 9y ago
  One of the big things in the next couple of years is the development of Lightning Network, which requires the upcoming SegWit patches. The basic protocol allows you to move bitcoins between two entities without putting every single transaction on the chain - only 2 blockchain transactions are needed for unlimited Lightning Network transactions. Then, on top of this, there's a framework for moving money through the network - I send money to someone I have a Lightning Network payment channel with, they send it to someone they have a channel with, etc, until it gets to you. The great thing about this is that I can prove everyone isn't cheating, and if they are, I can immediately reverse my transaction - I haven't lost any money. So the result of this is the creation of a network of payment channels which have very very low costs to process payments, aren't embedded in an industry that's difficult to get into (you or I could process payments just by joining the network), and have no ability to try and take a larger cut under the guise of a "points" or "cashback" system as you can easily switch to a different channel which takes a smaller cut.
  - basch 9y ago
    is that the exact opposite of a ledger of every transaction? off ledger transactions? it seems like its giving up some of the idealistic poetic beauty, even if it is practical.
    - vertex-four 9y ago
      The ledger of every transaction has only ever been a means to an end, that end being a cryptocurrency... and it's still necessary in Lightning Network as a way to resolve fraud and as a monetary backing, it's just not used in every single transaction. In practice, a ledger of every transaction that is copied to the hard drives of a sufficient amount of bitcoin users is a terrible idea. It doesn't scale, at all. We need better solutions. Lightning Network is one that's potentially viable in the short term - and we're seeing more people play with radically different cryptocurrency designs (e.g. Iota) in the long term.
vim_wannabe 9y ago
A bitcoin transaction costs me 2$. A credit card transaction costs me 2$ (which is used to provide me great service, including insurance against unauthorized use): Somehow this is a bad thing?
simias 9y ago
That's the definition of insurance. The problem with bitcoin, if you think that's a problem, is that there's no obvious way to implement this scheme. You'd have to insure your coins to a third party but then you'd probably have to give them some control over your wallet so that you can't just "steal" your own coins and make a claim. But clearly people want this type of guarantee so I think the cryptopunk dream of having every human being owning a bitcoin wallet aligns poorly with what real world human beings want. Everytime I read about long term adoption of cryptocurrency by the masses I always end up asking myself the same question: "Why would a random person for whom money is not a political statement care about any of that? What's the added value?" As far as I'm concerned I still haven't found a satisfactory answer to this question.
- kcanini 9y ago
  I can think of at least two real-world uses where cryptocurrency is a better choice than fiat: (1) sending money overseas with very low transaction fee, and (2) transacting on the black market.
  - root_axis 9y ago
    > sending money overseas with very low transaction fee Except that fluctuations in the conversion rate make this very touchy, especially if you're talking about a significant sum of money. Also, sending crypto anywhere outside of a handful of developed nations is fraught with difficulty because recipients need to be able to convert bitcoin into spendable money which often involves risky in-person meetups and gigantic markups on the conversion rate.
    - vinceguidry 9y ago
      These are market problems that are especially suited for developing nations to be able to solve themselves. I am forever impressed by the ability of local populations to work out collective solutions to scaling and trust problems. Also, having options is better than not having them. Sure, there's the international wire system, but it wouldn't hurt to give it some competition.
cyphar 9y ago
I don't believe that's accurate, cash-banks are inter-bank processes, and I know several vendors who do actually see a reduction in their bank account when a cash-back occurs. Yes, if the recieving bank won't honour a cash-back then it will come out of card processing fees, but that's more like insurance than anything else. I wouldn't say that insurance is without worth. Also, BitCoin has transaction fees. Except rather than being used for insurance, they provide a (very poor) profit motive for miners to continue keeping the network hashing rate high. The reason it's clearly a poor profit motive is that the popular markets around BitCoin are secondary markets (selling graphics cards rather than doing the mining yourself).
- dv_dt 9y ago
  Are you talking about a charge back? Vs a cash back credit card program that gives the credit card holder some cash on purchases periodically?
  - cyphar 9y ago
    Oh, yeah I was thinking about charge backs. Total brain-fart. ;)
root_axis 9y ago
As someone who ran a gas station convenience store for six years, I can tell you that this is not a universal truth. We did require a minimum purchase amount to accept cards, but we most certainly did not raise our prices in response to credit card fees.
- endless1234 9y ago
  So there's a party that takes n% of a big percentage of your purchases, yet that doesn't affect the prices? How?
  - gst 9y ago
    Because handling cash is expensive too, so the transaction cost was probably already priced in.
  - root_axis 9y ago
    The majority of purchases inside the store were cash because we required a $5 dollar minimum purchase for accepting cards. Most card purchases were used for gas which was already a loss leader most months out of the year, so it made more sense to keep posted prices competitive with stations in the area in order to bring people into the store rather than charge a few more cents in order to offset the cost of cards.
    - criddell 9y ago
      I thought minimum purchase requirements were against the terms of service for most credit cards. I've bought plenty of < $1 items with my credit card. I try to use it for everything to "earn" the rewards.
      - root_axis 9y ago
        Maybe it was a violation of the TOS and the owner was not aware (or he was and didn't care), but this policy never caused us any trouble during my time running the store, although its entirely possible that we were just lucky enough to fly under the radar.
bsurmanski 9y ago
But do they eliminate the middleman? At least for Bitcoin, it takes an hour for any confidence that a transaction is truly valid. I'm not going to wait around for an hour just to grab my morning coffee. So obviously there's going to need to be a credit backed middle man to guarantee your transaction so the seller doesn't get screwed by a double spend. Eth is slightly better, but it still takes something on the order of 10m to confirm a transaction, and it doesn't look like it can get anywhere near the speed needed for a coffee purchase.
- rtpg 9y ago
  Though I feel like a lot of BTCers are not interested in this, payment networks based on top of BTC would be very interesting. Essentially no barrier to entry, and some federation could happen. Of course, what you end up doing is creating banks, but hey they're not regulated by the government if you are behind 5 proxies? "Hobbyist bankers" might be fun. The ultimate frustration of bitcoin is that it can occupy the entire range of decentralization, but the community compares everything to the logical limits of "the Federal Reserve will defeat math and generate BTC" and "I don't even have to trust my own computer to do this transaction!".
- xur17 9y ago
  Eth confirmation is on the order of seconds: https://etherscan.io/chart/blocktime https://etherscan.io/chart/blocktime
  - saurik 9y ago
    That is the time to see it is in one block, not the time to feel truly confident in the payment.
    - xur17 9y ago
      But if you're buying a coffee, I think it's safe to only wait for 1 or 2 confirmations.
      - 9y ago
jonknee 9y ago
In this case the middleman actually provides a very valuable service--fraud protection.
gst 9y ago
> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction. Without more efficient means of off-chain transactions (such as payment channels) the cost of on-chain cryptocurrency transactions is typically much more expensive than credit card transactions (except for very large amounts, as credit card transactions charge a percentage, and cryptocurrency transactions have a fee not related to the amount transacted). For some of the cryptocurrencies those fees are currently somewhat hidden, as you don't directly pay them as transaction fees, but as miners get a block reward that contributes to inflation. If you include the miner revenue a Bitcoin transactions currently costs about $20 in average: https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction
- Macie45 9y ago
  My partner and i have made $16498 in one month by working from home. When My partner and i lost my office job 3 month ago, My partner and i was very upset and an unsuccessful try for any job hunt My partner and i was found this online job. and now My partner and i am able to earn thousands from home. Everybody can do this job and earn more dollars online by follow this link. . ...... ᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵwww.joinmate2.comᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵCOPY THE LINK.
deleted 9y ago
[deleted]
jdmichal 9y ago
Cash has transaction costs too. You have to store the cash in a local safe. You have to pay for counting and accounting of the cash. You have to pay for safe transport of cash from onsite to offsite. You have to pay for trust, because disappeared cash is generally unrecoverable. As long as there is no difference between the cash price and card price, it's rational for a customer to use a card with rewards. And I have never seen anything outside of gas with differential pricing. And you know what? I just avoid those gas stations as much as possible, because I can pay a similar price at another station and get my cash back.
xur17 9y ago
Having the sender pay the fee seems like an obstacle for consumer adoption. I agree that consumers are never going to use cryptocurrency vs. credit cards to pay if: 1) It costs them money to use 2) No cashback It would be interesting to test a cryptocurrency where the recipient payed the fee, and could optionally send cashback. I'm not exactly sure how this would work, but the incentive structure would more optimally aligned for everyone involved.
- detaro 9y ago
  You don't need a new cryptocurrency for that. Just lower your prices for people paying with BTC/ETH/... to adjust. (Doesn't solve the potentially bigger issue of insurance though, but I think that has to involve some third party)
  - xur17 9y ago
    You can definitely do that and the end cost for the consumer would be the same, but it would result in vastly different levels of consumer usage. edit: On second thought, you are probably right. With the right wallet ui you could just provide a simple discount or cashback that covers the transaction fee + % cashback at the point of purchase that's covered by the recipient via a contract, or via rules that the recipient publishes.
fma 9y ago
That is correct. My wife runs a retail service that charges monthly. The percentage the business pays depends on cards. Cards like Amex, and those high end one with good rewards - charge a higher percentage in fees, and Square passes it on. Right now she will only accept the first month payment by credit card. Cash, check, or ACH for recurring payments. ACH costs $.99. If everyone decides to pay credit card she will raise cost by $5 (almost 3% of the charge).
MicroBerto 9y ago
But at nearly every store, the price has been increased for everyone, even cash customers. So why not get my cash back if that's how it's going to be?
mikeash 9y ago
Seems to me that cash back is a way for card companies to compete on transaction costs. Directly adjusting the transaction costs wouldn't do it, because merchants won't pass the difference on to the buyer. By rebating part of the transaction cost to the cardholder, they effectively reduce the transaction cost, without having to get merchants to pass on savings. The beneficiary of this scheme, as with most schemes to lower prices to undercut the competition, is me.
dragonwriter 9y ago
> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction. Which is why so many of the business “accepting” cryptocurrency do so only through a middleman who converts it immediately back to national currency for the business, charging a fee for the service.
LeifCarrotson 9y ago
A few points: 1. The only party benefitting from the cashback scheme is, of course, the middleman. While prices will go up in the long term, consumers who use cash-back cards do benefit in the short term over those who don't. If you make a transaction in cash or with a debit card which you could have made with a cash-back card, you are leaving 3% on the table. I am extremely skeptical that an individual boycott will be effective. Maybe take your 3% and pool it to lobby for better banking regulations? 2. they entirely eliminate the necessity for such middlemen taking a cut - AFAIK, all cryptocurrency includes some sort of transaction fee.
ghostbrainalpha 9y ago
Slight adjustment... there is also a fair bit of wealth transfer between people who use cash, debit cards, or have credit cards but can't pay them off each month. So its an extra little 3% tax on the poor, or at least the less financially literate.
unityByFreedom 9y ago
> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut Only if you don't count the online exchanges as middle men. Right now I still pay 3-5% to convert fiat to digital money, depending on where my fiat comes from. The theoretical future where nobody needs to convert between digital coin and fiat isn't here yet.

seanalltogether 9y ago

davnicwil 9y ago
Yes. There is no such thing as a free transaction, because payment methods and networks take work to administrate. I mean, take cash. It's expensive to make, to process, to transport, to safely store. These costs are, obviously, passed on to the users of cash in the aggregate. Cryptocurrency transaction fees are just very direct, but it's the same deal. The difference is that clearly inefficient transaction costs, like centralised middlemen with limited competition skimming a cut from all transactions, can be eliminated. Remember that bitcoin transaction fees are a completely open market.
- resf 9y ago
  Centralized payment networks will always be cheaper to administer than blockchains. The only reason that Visa and Mastercard have such high fees is because it's a duopoly.
  - QML 9y ago
    Harder to get access to a centralized payment network though, right?
  - vkou 9y ago
    The only other reason they have such high fees is because those fees pay for dealing with fraud. Bitcoin makes the user deal with fraud, with predictable results.
- horsawlarway 9y ago
  But the price you pay for removing those middle men is forcing the network to perform a truly astounding amount of computational work to verify the same transactions. There's an efficiency trade-off here, and I think for at least many of the older crypto currencies, the amount of work to process transactions is literally unsustainable without some additional tech or service layer. Which often leads us right back to clearly inefficient transaction costs.
lucaspiller 9y ago
I paid ~$0.60 to transfer ~$900 of Bitcoin the other day. For that amount it's not too bad, but you'd pay basically the same if you are paying for a $3 coffee. The transaction fee is based on the byte size of the transaction, not the monetary amount, so in it's current form it doesn't make sense to use Bitcoin for low-value transactions.
- sqeaky 9y ago
  > fee is based on the byte size of the transaction Aren'y all bitcoin transaction really close to the same size? The amount being transferred doesn't change the size an integer contain 1 and another container 1,000,000,000 take the same amount of space (32 or 64 bits) because the spec says so. I thought transaction fees encouraged miners to include your block in a transaction.
  - droidist2 9y ago
    I think you're both saying the same thing
  - annabellish 9y ago
    Yes, but also no. The trick here is that if you're paying for your £1,000,000 space rocket by transfering the bitcoins from one address, it's a small transaction. If you're paying for your £3 coffee by transfering small amounts from many addresses, it's a big transaction. Address fragmentation happens when your coins are distributed across many addresses, and can be caused by things like spending coins, because all transactions actually spend everything at an address and just route the "change" elsewhere. Buy two cups of coffee too close to each other and your next transaction is going to cost twice as much in fees, whoops!
  - simias 9y ago
    The size of the transactions is mostly a factor of how many addresses are included. So moving 1BTC split across hundreds of addresses ("dust" in the jargon) is a lot more expensive than moving 1000BTC from a single address for instance. Unfortunately it's generally advised to use a new receiving address for every bitcoin transaction to make it harder to trace how much money you have and how you earn and spend it (most wallet craft a new address for every receive transaction) so it's very common to end up with your assets split up across dozens or even hundred of addresses.
vertex-four 9y ago
One of the big things in the next couple of years is the development of Lightning Network, which requires the upcoming SegWit patches. The basic protocol allows you to move bitcoins between two entities without putting every single transaction on the chain - only 2 blockchain transactions are needed for unlimited Lightning Network transactions. Then, on top of this, there's a framework for moving money through the network - I send money to someone I have a Lightning Network payment channel with, they send it to someone they have a channel with, etc, until it gets to you. The great thing about this is that I can prove everyone isn't cheating, and if they are, I can immediately reverse my transaction - I haven't lost any money. So the result of this is the creation of a network of payment channels which have very very low costs to process payments, aren't embedded in an industry that's difficult to get into (you or I could process payments just by joining the network), and have no ability to try and take a larger cut under the guise of a "points" or "cashback" system as you can easily switch to a different channel which takes a smaller cut.
- basch 9y ago
  is that the exact opposite of a ledger of every transaction? off ledger transactions? it seems like its giving up some of the idealistic poetic beauty, even if it is practical.
  - vertex-four 9y ago
    The ledger of every transaction has only ever been a means to an end, that end being a cryptocurrency... and it's still necessary in Lightning Network as a way to resolve fraud and as a monetary backing, it's just not used in every single transaction. In practice, a ledger of every transaction that is copied to the hard drives of a sufficient amount of bitcoin users is a terrible idea. It doesn't scale, at all. We need better solutions. Lightning Network is one that's potentially viable in the short term - and we're seeing more people play with radically different cryptocurrency designs (e.g. Iota) in the long term.

vim_wannabe 9y ago

A bitcoin transaction costs me 2$. A credit card transaction costs me 2$ (which is used to provide me great service, including insurance against unauthorized use): Somehow this is a bad thing?

simias 9y ago

That's the definition of insurance. The problem with bitcoin, if you think that's a problem, is that there's no obvious way to implement this scheme. You'd have to insure your coins to a third party but then you'd probably have to give them some control over your wallet so that you can't just "steal" your own coins and make a claim. But clearly people want this type of guarantee so I think the cryptopunk dream of having every human being owning a bitcoin wallet aligns poorly with what real world human beings want. Everytime I read about long term adoption of cryptocurrency by the masses I always end up asking myself the same question: "Why would a random person for whom money is not a political statement care about any of that? What's the added value?" As far as I'm concerned I still haven't found a satisfactory answer to this question.

kcanini 9y ago
I can think of at least two real-world uses where cryptocurrency is a better choice than fiat: (1) sending money overseas with very low transaction fee, and (2) transacting on the black market.
- root_axis 9y ago
  > sending money overseas with very low transaction fee Except that fluctuations in the conversion rate make this very touchy, especially if you're talking about a significant sum of money. Also, sending crypto anywhere outside of a handful of developed nations is fraught with difficulty because recipients need to be able to convert bitcoin into spendable money which often involves risky in-person meetups and gigantic markups on the conversion rate.
  - vinceguidry 9y ago
    These are market problems that are especially suited for developing nations to be able to solve themselves. I am forever impressed by the ability of local populations to work out collective solutions to scaling and trust problems. Also, having options is better than not having them. Sure, there's the international wire system, but it wouldn't hurt to give it some competition.

cyphar 9y ago

I don't believe that's accurate, cash-banks are inter-bank processes, and I know several vendors who do actually see a reduction in their bank account when a cash-back occurs. Yes, if the recieving bank won't honour a cash-back then it will come out of card processing fees, but that's more like insurance than anything else. I wouldn't say that insurance is without worth. Also, BitCoin has transaction fees. Except rather than being used for insurance, they provide a (very poor) profit motive for miners to continue keeping the network hashing rate high. The reason it's clearly a poor profit motive is that the popular markets around BitCoin are secondary markets (selling graphics cards rather than doing the mining yourself).

dv_dt 9y ago
Are you talking about a charge back? Vs a cash back credit card program that gives the credit card holder some cash on purchases periodically?
- cyphar 9y ago
  Oh, yeah I was thinking about charge backs. Total brain-fart. ;)

root_axis 9y ago

As someone who ran a gas station convenience store for six years, I can tell you that this is not a universal truth. We did require a minimum purchase amount to accept cards, but we most certainly did not raise our prices in response to credit card fees.

endless1234 9y ago
So there's a party that takes n% of a big percentage of your purchases, yet that doesn't affect the prices? How?
- gst 9y ago
  Because handling cash is expensive too, so the transaction cost was probably already priced in.
- root_axis 9y ago
  The majority of purchases inside the store were cash because we required a $5 dollar minimum purchase for accepting cards. Most card purchases were used for gas which was already a loss leader most months out of the year, so it made more sense to keep posted prices competitive with stations in the area in order to bring people into the store rather than charge a few more cents in order to offset the cost of cards.
  - criddell 9y ago
    I thought minimum purchase requirements were against the terms of service for most credit cards. I've bought plenty of < $1 items with my credit card. I try to use it for everything to "earn" the rewards.
    - root_axis 9y ago
      Maybe it was a violation of the TOS and the owner was not aware (or he was and didn't care), but this policy never caused us any trouble during my time running the store, although its entirely possible that we were just lucky enough to fly under the radar.

bsurmanski 9y ago

But do they eliminate the middleman? At least for Bitcoin, it takes an hour for any confidence that a transaction is truly valid. I'm not going to wait around for an hour just to grab my morning coffee. So obviously there's going to need to be a credit backed middle man to guarantee your transaction so the seller doesn't get screwed by a double spend. Eth is slightly better, but it still takes something on the order of 10m to confirm a transaction, and it doesn't look like it can get anywhere near the speed needed for a coffee purchase.

rtpg 9y ago
Though I feel like a lot of BTCers are not interested in this, payment networks based on top of BTC would be very interesting. Essentially no barrier to entry, and some federation could happen. Of course, what you end up doing is creating banks, but hey they're not regulated by the government if you are behind 5 proxies? "Hobbyist bankers" might be fun. The ultimate frustration of bitcoin is that it can occupy the entire range of decentralization, but the community compares everything to the logical limits of "the Federal Reserve will defeat math and generate BTC" and "I don't even have to trust my own computer to do this transaction!".
xur17 9y ago
Eth confirmation is on the order of seconds: https://etherscan.io/chart/blocktime https://etherscan.io/chart/blocktime
- saurik 9y ago
  That is the time to see it is in one block, not the time to feel truly confident in the payment.
  - xur17 9y ago
    But if you're buying a coffee, I think it's safe to only wait for 1 or 2 confirmations.
    - 9y ago

jonknee 9y ago

In this case the middleman actually provides a very valuable service--fraud protection.

gst 9y ago

> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction. Without more efficient means of off-chain transactions (such as payment channels) the cost of on-chain cryptocurrency transactions is typically much more expensive than credit card transactions (except for very large amounts, as credit card transactions charge a percentage, and cryptocurrency transactions have a fee not related to the amount transacted). For some of the cryptocurrencies those fees are currently somewhat hidden, as you don't directly pay them as transaction fees, but as miners get a block reward that contributes to inflation. If you include the miner revenue a Bitcoin transactions currently costs about $20 in average: https://blockchain.info/charts/cost-per-transaction https://blockchain.info/charts/cost-per-transaction

Macie45 9y ago
My partner and i have made $16498 in one month by working from home. When My partner and i lost my office job 3 month ago, My partner and i was very upset and an unsuccessful try for any job hunt My partner and i was found this online job. and now My partner and i am able to earn thousands from home. Everybody can do this job and earn more dollars online by follow this link. . ...... ᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵwww.joinmate2.comᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵCOPY THE LINK.

deleted 9y ago

[deleted]

jdmichal 9y ago

Cash has transaction costs too. You have to store the cash in a local safe. You have to pay for counting and accounting of the cash. You have to pay for safe transport of cash from onsite to offsite. You have to pay for trust, because disappeared cash is generally unrecoverable. As long as there is no difference between the cash price and card price, it's rational for a customer to use a card with rewards. And I have never seen anything outside of gas with differential pricing. And you know what? I just avoid those gas stations as much as possible, because I can pay a similar price at another station and get my cash back.

xur17 9y ago

Having the sender pay the fee seems like an obstacle for consumer adoption. I agree that consumers are never going to use cryptocurrency vs. credit cards to pay if: 1) It costs them money to use 2) No cashback It would be interesting to test a cryptocurrency where the recipient payed the fee, and could optionally send cashback. I'm not exactly sure how this would work, but the incentive structure would more optimally aligned for everyone involved.

detaro 9y ago
You don't need a new cryptocurrency for that. Just lower your prices for people paying with BTC/ETH/... to adjust. (Doesn't solve the potentially bigger issue of insurance though, but I think that has to involve some third party)
- xur17 9y ago
  You can definitely do that and the end cost for the consumer would be the same, but it would result in vastly different levels of consumer usage. edit: On second thought, you are probably right. With the right wallet ui you could just provide a simple discount or cashback that covers the transaction fee + % cashback at the point of purchase that's covered by the recipient via a contract, or via rules that the recipient publishes.

fma 9y ago

That is correct. My wife runs a retail service that charges monthly. The percentage the business pays depends on cards. Cards like Amex, and those high end one with good rewards - charge a higher percentage in fees, and Square passes it on. Right now she will only accept the first month payment by credit card. Cash, check, or ACH for recurring payments. ACH costs $.99. If everyone decides to pay credit card she will raise cost by $5 (almost 3% of the charge).

MicroBerto 9y ago

But at nearly every store, the price has been increased for everyone, even cash customers. So why not get my cash back if that's how it's going to be?

mikeash 9y ago

Seems to me that cash back is a way for card companies to compete on transaction costs. Directly adjusting the transaction costs wouldn't do it, because merchants won't pass the difference on to the buyer. By rebating part of the transaction cost to the cardholder, they effectively reduce the transaction cost, without having to get merchants to pass on savings. The beneficiary of this scheme, as with most schemes to lower prices to undercut the competition, is me.

dragonwriter 9y ago

> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut and driving up costs for the parties actually partaking in the transaction. Which is why so many of the business “accepting” cryptocurrency do so only through a middleman who converts it immediately back to national currency for the business, charging a fee for the service.

LeifCarrotson 9y ago

A few points: 1. The only party benefitting from the cashback scheme is, of course, the middleman. While prices will go up in the long term, consumers who use cash-back cards do benefit in the short term over those who don't. If you make a transaction in cash or with a debit card which you could have made with a cash-back card, you are leaving 3% on the table. I am extremely skeptical that an individual boycott will be effective. Maybe take your 3% and pool it to lobby for better banking regulations? 2. they entirely eliminate the necessity for such middlemen taking a cut - AFAIK, all cryptocurrency includes some sort of transaction fee.

ghostbrainalpha 9y ago

Slight adjustment... there is also a fair bit of wealth transfer between people who use cash, debit cards, or have credit cards but can't pay them off each month. So its an extra little 3% tax on the poor, or at least the less financially literate.

unityByFreedom 9y ago

> One of the hugely compelling benefits of cryptocurrencies is they entirely eliminate the necessity for such middlemen taking a cut Only if you don't count the online exchanges as middle men. Right now I still pay 3-5% to convert fiat to digital money, depending on where my fiat comes from. The theoretical future where nobody needs to convert between digital coin and fiat isn't here yet.