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There's this big wall between "buying illegally" and "buying anything". The only reason people are using it to buy things illegally is because they can't use no

There's this big wall between "buying illegally" and "buying anything". The only reason people are using it to buy things illegally is because they can't use normal methods like credit cards. It's strictly more annoying and higher friction to use than a credit card for non-illegal purposes. It's kind of like those free speech platforms. If you're a free speech anything goes platform, but everyone who isn't saying terrible things isn't encountering any problems on Twitter, then you end up with only people saying terrible things on the free speech platform even if that wasn't the original purpose. All this is to say, I think for Bitcoin or crypto to overtake credit cards, it has to provide massive benefits above and beyond credit cards to get people who have no problems with credit cards to switch to it. Right now, that's not the case.

andrewla 8y ago
I don't see it being higher friction per se; spending Bitcoin and most other cryptos is actually pretty easy (modulo fees, which I'll grant is a not great area right now). If you look at Bitcoin more as a cash replacement than a credit card replacement, then it works better, and there really is no "cash" alternative in online systems, which is fine, mostly, for consumers, but not great, mostly, for vendors. Credit cards are convenient because there are so many protections for consumers in terms of fraud, but that is an increasing burden on the consumer, as credit cards get rejected because of "unusual spending patterns", and dealing with credit card theft and arranging a replacement card, and having to answer questions like "did you spend $7.23 at MTG ENT LLC last Thursday". Consumers get the benefits of reward systems and deferred payment (which is a blessing and a curse for many consumers). For vendors the advantage is clear (except for the problems involved in storing bitcoin); in a hypothetical world where bitcoin's value is stable, they could offer substantial discounts for purchases made with bitcoin instead of credit cards, because of the diminished counterparty risk. All of that said, there's no reason that credit cards can't be offered for cryptocurrencies as the settlement currency, and offer many of the same benefits of existing credit cards; this more goes to the notion of Bitcoin as a settlement system. The biggest problem with adoption of Bitcoin as a spending platform is price volatility, which is a chicken-and-egg problem; if the supply chain is denominated in bitcoin, then that will make the price stable, but nobody will denominate their supply chain in bitcoin unless the price is stable. I've expressed the idea before that power companies in particular could charge for electricity in bitcoin very easily, because the conversion is pretty direct -- the price of electricity is the number of bitcoins you could mine for that amount of electricity, and the electric companies have a built-in solution if demand falls too low -- they can just mine bitcoin with the "unused" power. This is a little pie in the sky, though.
- na85 8y ago
  >The biggest problem with adoption of Bitcoin as a spending platform is price volatility Are you sure it's not the fact that nobody seems to be able to securely store bitcoin/other crypto, and that when your bitcoins get stolen there's zero recourse, unlike fiat currency where banks are regulated?
  - andrewla 8y ago
    I'm dubious but I can't dismiss this as a reason because all I have is anecdotal evidence; I've never had any stolen from me, and I've just used off-the-shelf wallets, including the gui client (bitcoinqt) at one point. The closest I came was I had some on deposit at MtGox, but I had luckily withdrawn to my personal wallet well before the collapse. I also came close with Bitfinex, but I had to withdraw because they decided not to allow New York residents to hold accounts, so I got lucky. I also don't know personally anyone who had any stolen either. The generally available wallets are fine; you just get a pass phrase that you write down somewhere. Paper wallets are fine for cold storage (though the barriers are higher for the casual user). And it's not regulation that saves banks, it's mandatory insurance. If the banks lose your money (through incompetence or theivery) the FDIC (in the US) will pay out (or national organizations through the EU). But this comes with built-in limits; the US maxes out at $250,000 but I don't think the insurance exceeds EUR 100,000 in any country in the EU.

andrewla 8y ago

I don't see it being higher friction per se; spending Bitcoin and most other cryptos is actually pretty easy (modulo fees, which I'll grant is a not great area right now). If you look at Bitcoin more as a cash replacement than a credit card replacement, then it works better, and there really is no "cash" alternative in online systems, which is fine, mostly, for consumers, but not great, mostly, for vendors. Credit cards are convenient because there are so many protections for consumers in terms of fraud, but that is an increasing burden on the consumer, as credit cards get rejected because of "unusual spending patterns", and dealing with credit card theft and arranging a replacement card, and having to answer questions like "did you spend $7.23 at MTG ENT LLC last Thursday". Consumers get the benefits of reward systems and deferred payment (which is a blessing and a curse for many consumers). For vendors the advantage is clear (except for the problems involved in storing bitcoin); in a hypothetical world where bitcoin's value is stable, they could offer substantial discounts for purchases made with bitcoin instead of credit cards, because of the diminished counterparty risk. All of that said, there's no reason that credit cards can't be offered for cryptocurrencies as the settlement currency, and offer many of the same benefits of existing credit cards; this more goes to the notion of Bitcoin as a settlement system. The biggest problem with adoption of Bitcoin as a spending platform is price volatility, which is a chicken-and-egg problem; if the supply chain is denominated in bitcoin, then that will make the price stable, but nobody will denominate their supply chain in bitcoin unless the price is stable. I've expressed the idea before that power companies in particular could charge for electricity in bitcoin very easily, because the conversion is pretty direct -- the price of electricity is the number of bitcoins you could mine for that amount of electricity, and the electric companies have a built-in solution if demand falls too low -- they can just mine bitcoin with the "unused" power. This is a little pie in the sky, though.

na85 8y ago
>The biggest problem with adoption of Bitcoin as a spending platform is price volatility Are you sure it's not the fact that nobody seems to be able to securely store bitcoin/other crypto, and that when your bitcoins get stolen there's zero recourse, unlike fiat currency where banks are regulated?
- andrewla 8y ago
  I'm dubious but I can't dismiss this as a reason because all I have is anecdotal evidence; I've never had any stolen from me, and I've just used off-the-shelf wallets, including the gui client (bitcoinqt) at one point. The closest I came was I had some on deposit at MtGox, but I had luckily withdrawn to my personal wallet well before the collapse. I also came close with Bitfinex, but I had to withdraw because they decided not to allow New York residents to hold accounts, so I got lucky. I also don't know personally anyone who had any stolen either. The generally available wallets are fine; you just get a pass phrase that you write down somewhere. Paper wallets are fine for cold storage (though the barriers are higher for the casual user). And it's not regulation that saves banks, it's mandatory insurance. If the banks lose your money (through incompetence or theivery) the FDIC (in the US) will pay out (or national organizations through the EU). But this comes with built-in limits; the US maxes out at $250,000 but I don't think the insurance exceeds EUR 100,000 in any country in the EU.