15 ms·

Why I'm Interested in Bitcoin

190 points by ckurdziel 13y ago

quack 13y ago
I used to believe that the reversibility of transactions was a major benefit of using cards, but it turns out that is really just a reversibility of liability. Credit cards are an outdated tool. They pass plain text data about a user to authorize a transaction allowing hackers to pull something off like the Target hack. One of the advantages of bitcoin is the ability to digitally authorize a transaction that cannot be reused. In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I expect a lot of online retail stores to start accepting bitcoin payments at large discounts to cash just for this reason.
- diminoten 13y ago
  As an online retailer, what do you do if someone reports fraud? Shrug your shoulders and tell them they should have been more careful with their wallet? If Bitcoin == cash, what does a storefront do if someone comes to them and says "my stolen cash was used to buy items here"? Usually nothing, yes? Is that what we're saying is the burden of responsibility for an online store with Bitcoin?
  - logicallee 13y ago
    what do you do if you're a real retailer and someone says : "Hey one of your customers last week paid you with cash that was stolen from me!" The answer is: "Well go report the stolen cash, we have no idea how to help you." It's just the nature of cash that it works that way. People need to / will learn the nature of bitcoin, whatever that is exactly.
    - dublinben 13y ago
      That's a significant reason why many people do not use cash for all their purchases. The consumer protection of credit cards is one of their primary benefits. Bitcoin takes away all of those protections.
      - thisosound 13y ago
        But the fees are a lot lower and it doesn't mean that those protections can't be added back on on a different layer. You can also do a lot more with Bitcoin than with CCs.
- mcfunley 13y ago
  > In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I currently work for a large online marketplace. A very typical fraud scenario (maybe the most common) is someone collecting payment for an item that they don't actually possess. This would only be harder to deal with and correct if the payment were disbursed to an anonymous seller in bitcoins.
  - Sambdala 13y ago
    Such an online marketplace should have an escrow included then if they wish to use Bitcoin as a payment method. I believe the Silk Road(s) have used such systems.
    - glesica 13y ago
      So now the online marketplace has to run an escrow service as well. If they're going to do that, why not run an escrow service for credit card transactions? You pay the marketplace, the seller ships the goods, you confirm that you got them (or the seller proves that the shipment took place), and then the marketplace pays the seller. I don't see how Bitcoin really provides any innovation that isn't already available in this particular situation.
      - Sambdala 13y ago
        If it's not a core competency (although for certain marketplaces, it may be), you can use a 3rd party escrow. You're already effectively using an escrow service when you provide a Credit Card payment option; you just don't get to choose who provides the service, you can't unbundle it from a larger product offering, you have very little control over it, it doesn't work well for certain types of goods & services, and it's built on top of a pull payment network instead of a push payment network.
        glesica 13y ago
        I agree that un-bundling the escrow from the rest of the stack would be a good thing. However, I think it is important to keep in mind that replacing credit cards with something less effective (for whatever definition of "effective" matters) than credit cards isn't a true replacement. The way I am thinking about it is sort of like those threads on HN where someone says "You can create a Dropbox clone in N lines of X and an external hard drive". That's NOT a Dropbox "clone", but rather something that could be used to replace Dropbox for some people some of the time. It would take much, much more to replace Dropbox, and maybe someone will get it right someday. Same goes for Bitcoin, it's fine to think of alternative financial networks (awesome, in fact, I hate banks!) but it's important not to get ahead of ourselves.
- gizmo686 13y ago
  There is no reason we cannot have credit card like things that do not pass plain text authorization. I believe some places have already switched to useing smart cards which leverage cryptography to proved identification without revealing the secret. I'm not sure exactly what crypto is used in practice, but as a proof of concept you can imagine this being done with normal public key chryptography.
  - Sambdala 13y ago
    The only reason is that credit card companies haven't implemented such a system. I'm actually shocked that we've been able to use our current pull payments system for so long without more problems than we've currently seen. One innovation I did like (which I only saw when I was using Bank of America) was a feature that allowed you to create new, internet-only, credit card numbers on the fly with a self-chosen credit limit that was tied to your checking account. I would have loved to see this implemented in a physical card so that you could just use a different cc# for each separate transaction and only authorize it (in perpetuity) for the exact amount of the transaction.
- sliverstorm 13y ago
  Magnetic stripes are outdated, but smartcards fix that problem. Reversable transactions moves the onus of security to the people who can really do something about it. A consumer can only chose "purchase or do not purchase", whereas a merchant can elect to use (for example) more secure payment methods and stronger identity verification.
- steveklabnik 13y ago
  Hi, I work for Balanced Payments, a payments company for marketplaces, YC W11. You can track our plans for cryptocurrency support here: https://github.com/balanced/balanced-api/issues/204 https://github.com/balanced/balanced-api/issues/204 > In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I'm not sure how you are getting this. Bitcoin is absolutely susceptible to various forms of fraud. Let's make this a bit more concrete: assume eBay accepts BTC. I could sign up for a seller account, make some auction listings, once some people buy them, never ship the goods, and disappear. I could set up a fake seller account, list some fake items, and then also make a fake buyer account, purchase the fake goods with my fake buyer account from my fake seller account, report that everything went well, and now I've laundered some money. That kind of activity can cripple a business. As a consumer, the irreversability of BTC transactions is a bug, not a feature. You only need to look at the incredible amount of fraud that's happened in the Dogecoin community to see how fraudulent activity can be rampant, and can harm consumer confidence. Consumers expect the ability to be able to initiate a chargeback when fraudulent activity happens. You can't do that with just plain old BTC. When I was home over the holidays, the local TV station ran a story about how you should be using credit cards rather than debit cards to purchase things online, specifically because the credit cards' chargeback policies are often better. "With a credit card, you'll have the money taken off your statement, but with a debit card, it could take over two weeks to get your money back." etc. Bitcoin is digital cash. Online stores don't allow you to mail them an envelope with $20 inside, because that would be kind of ridiculous for all parties involved. It's only when certain financial instruments are built on top of Bitcoin that have the same kinds of consumer protection and regulatory compliance built in.
  - minimax 13y ago
    Agree with everything you said. Credit cards have useful consumer protections baked in. What happens when you look at it from the merchant's perspective? Lets say someone buys something from me with a card, I ship it out, but then it turns out the card was stolen. Who takes the loss? The merchant or the credit card company? I guess what I'm trying to figure out is whether or not the irreversibility of a transaction might be a good thing for merchants dealing with fraudulent buyers.
diminoten 13y ago
I know this is completely off-topic, and I know this is a war I will lose, but must we call ourselves "bullish"/"bearish"? Anyway, Bitcoin may not save the world, but if it does anything like what this blog post says, it may very well save the Internet from the advertising platform it's become.
- taylorhou 13y ago
  let's change the jargon! if you're pro/bullish on alt currency --> bitish (B) if you're con/bearish on alt currency --> dolish ($) this is the internet. make it happen.
infruset 13y ago
This is refreshing. I suspect even though the libertarians are the most vocal among bitcoin adopters (and that's ok), a lot of people actually agree with this.
hippich 13y ago
The reason why people should get excited about Bitcoin is not a bubble or money, but rather a something completely new. Large group of people put financial rules into software and agreed that they are going to use these rules without external central entity and enforcement. If this continue to roll, same might be applied to many other areas I believe. It is just my random fantasy at this moment, but why we will need enforcement, if we will have guarantied income in bitcoins and laws system built same way as bitcoin (i.e. opensource and agreed to use by most people) and law enforcement as a function of guaranteed income amount.... Just random thought. or finally having AI which can exist on its own, buy components of its environment (i.e. machines, networks, etc) I believe what is emerging right now as a Bitcoin is much wider phenomena than just a way to avoid pay taxes and inflation.
- pron 13y ago
  But now you're putting a libertarian political agenda into Bitcoin again, and this is what makes many people (including me) very nervous. You see, many people think about the terrible pain and suffering the US experienced about a century ago when the economy and law were largely unregulated and unenforced. Much of the country became quickly enslaved to a small group of individuals; terrible exploitation and rampant poverty ensued. It was through a lot of hard work that Americans were able to place government regulation to free themselves from the tyranny of the robber barons. So when many people today hear the words "without external central entity and enforcement" the horrors of the gilded age flash before their eyes. Also, your ideas about an AI-directed or general-consensus utopia are nice but naive. People don't usually agree on what utility function you'd want to maximize, as there is no "right way" for a lot of things that matter to people. Would your Bitcoinish utopia allow late-term abortions? Or school prayer? Or same-sex marriage? Politics is a constant battle of values, many of them are deeply emotional. But Dixon's idea of Bitcoin as internet pocket-money is actually something I can live with.
  - waterlesscloud 13y ago
    There's nothing about what he's saying that precludes the rules of the network being decided by a representative democracy or what have you. Which is part of the beauty of the network. He's just saying that regulations can be implemented and enforced by the network itself. Different thing altogether.
minimax 13y ago
For all the people out there who are thinking about bitcoin as a payment technology: If you assume that customers get paid in dollars and that vendors will have to use dollars to pay their taxes, pay their employees and buy the raw materials for their products (reasonable assumptions, I think), then a payment consists of one conversion from dollars to bitcoins by the purchaser, and one conversion from bitcoins to dollars by the vendor. Those two transactions will have associated costs. Exchanges take out trading fees and the market makers on the exchanges will want to see some profit as well (you will see this reflected in the bid/ask spread). The total cost for the transaction will be 2x the spread + exchange fees. People keep touting the 2.5% charge for using credit cards, but they don't compare it to a similar value for bitcoin. It clearly is not 0%. Exchange fees alone are can be something like 0.5%. If we double that (two conversions, remember) that's 1% just in exchange fees. Unfortunately, I don't have good numbers for bitcoin / dollar spreads because I don't watch that market very closely. So we have 2.5% for credit cards and 1% + spread (unknown) for bitcoin. And with credit cards consumers at least get some protection in the case of fraud. Does anyone else have a better model for bitcoin transaction costs?
- Sambdala 13y ago
  ...currently. I don't think most people are interested in Bitcoin primarily because of the utility it currently provides and the infrastructure that has so far been built.
  - BlackDeath3 13y ago
    And that's unfortunate. It's interesting and somewhat satisfying to see the get-rich-quick people kind of people try to get into Bitcoin, and instead get burned. There is merit to the system, but a lot of people just don't care.
    - Sambdala 13y ago
      I'm not entirely sure what point you're making?
mbesto 13y ago
> Let’s say you sell electronics online. Profit margins in those businesses are usually under 5%, which means the 2.5% payment fees consume half the margin. That’s money that could be reinvested in the business, passed back to consumers, or taxed by the government. Of all of those choices, handing 2.5% to banks to move bits around the Internet is the worst possible choice. In other words, better wealth distribution? This is precisely what libertarians are fighting for, no? Playing the devil's advocate here - couldn't this argument be turned around to say something like "That’s money that could be reinvested in banks which hire the best people to find the best and most efficient use of capital."? (as opposed to consumers or small business owners who can't)
- sliverstorm 13y ago
  Payment fees typically go to Visa or MasterCard, I thought. And considering the financials of those companies, operating the existing payment networks must be costly- both companies are growing & profitable, but not nearly as much as you might expect if the payment networks were zero-cost to operate.
  - mbesto 13y ago
    Ya, agreed. I think this statement sticks out the most: Of all of those choices, handing 2.5% to banks to move bits around the Internet is the worst possible choice. Regardless of whether its a bank or a credit card processing company, why is it the "worst possible choice" to give it to them? Who are we to judge who gets $1 when we are the ones who chose to spend the $1 in the first place?
    - waterlesscloud 13y ago
      Currently our choice is to pay the fee to the banks for convenience they provide. If it's possible to provide the same convenience without the banks and with much lower fees, is that not an improvement?
      - sliverstorm 13y ago
iblaine 13y ago
This reminds me. Bitcoin is so complicated and controversial these days. I miss the days before 2013 when bitcoins were used almost exclusively on the deep web among nerds.
pacofvf 13y ago
In discussions I've read about bitcoin in HN, I've seen how some people call "leftie" to those who think like this, mainly by right leaning Americans, the funny thing is that they use that word as an insult, when in other rich countries you only have center-left, moderate-left and far-left flavors for political parties.
tomasien 13y ago
I know it's not quite "not relying on banks and credit card companies", but removing ONE of them from the equation (credit cards skimming fees) is what I'm working on now. This is how it works https://www.youtube.com/watch?v=QR5UTLxe5zA&feature=youtu.be https://www.youtube.com/watch?v=QR5UTLxe5zA&feature=youtu.be By removing them and decentralizing the banking process by centralizing it into a third party (which could be many third parties), I think we'll allow anyone who wants to start a bank of any size to compete for marketshare with the big boys by providing better services.
nicholas73 13y ago
I don't think Bitcoin will ever be a viable currency, at least not on the scale of national currencies. Despite all the flaws fiat currency has, it is actually backed by something - the power of the country's government to tax. Thus, any buyer of sovereign debt has a calculable probability of return. Despite America's printing of dollars, inflation has actually been mild so far. Bitcoin has nothing backing it but an artificial supply limitation. That in itself is not a solution because its monetary base cannot possibly grow at the rate overall goods do, and thus have a stable price point.
- pault 13y ago
  The inherent value of Bitcoin is that it allows one to conduct (some types of) business globally without a bank account (kind of). There are caveats, of course, but in my opinion this is its primary innovation and everything else is mostly noise.
- andrewla 13y ago
  I don't understand the argument that "the power of the country's government to tax" is a point in favor of a currency. I would say that it is pretty clear that the opposite is true for almost every significant tax; that a country collecting taxes in a currency would be a disadvantage of a currency. The fact that countries need to pass laws allowing taxation of non-local currencies seems to support that. For a limited class of taxes, namely, taxes directly denominated in a currency (like property taxes), the taxability of a currency adds to the demand for that currency. But for the most part, since non-local currency transactions and barter transactions are taxed at the effective exchange rate / fair value, the fact that taxes are collected in dollars would seem to neither hurt nor help the currency. That said, in summary, the "artificial supply limitation" applies to both Bitcoin and dollars, with dollars relying purely on trust that America will not increase the money supply unnecessarily. That inflation has actually been mild is a "bug" in the system -- the Fed is deliberately trying to spur inflation, and has not been having success, for reasons that nobody (including themselves) completely understands. The calculable probability of return that you refer to has been pretty reliable (just like MBS's in 2006, couldn't resist), so that is true, but I don't see that being related to the taxability of the currency so much as to the lack of apparent inflation compared to the nominal returns on sovereign debt. The monetary base argument also seems specious; M0, the "monetary base", is not generally considered (except by non-mainstream economists) to be all that significant compared to the higher-order money supply factors caused by dollar-denominated assets of varying liquidity. Once (or if) Bitcoin develops a credit market, then the medium-term effective money supply will grow and shrink as the market demands.
taylorhou 13y ago
me and my alt currency enthusiasts think of bitcoin as simply virtual gold. done.
- lingben 13y ago
  then it is clear you neither understand gold, currency nor bitcoin
jusben1369 13y ago
I too am fascinated by Bitcoin and still in learning mode. I think there's one important distinction to add here though. Credit cards can charge 2.5% because they're awesome Some guy in Arizona can set himself up online, sign up for Stripe, have no set fees, and accept a payment from someone in Germany (or NY or Australia) that afternoon. That's amazingly empowering and 2.5% doesn't seem to bad for the people running those rails to collect (fraud, global movement etc) So let's not come at it from "credit cards and payments are a bloated gouging industry" I'm not buying that and it also is too merchant focused (vs consumers who really decide what a merchant will do in terms of payments) Now, there are some really interesting fringe cases that Chris touches upon that can open the door for Bitcoin. Micropayments are broken when it comes to credit cards. It's not the %, it that's "+ 30 cents" that is brutal. So Bitcoin could play a roll there. There are disbursements and marketplaces. I suspect TaskRabbit would probably like to have the ability to move money from buyers on their platforms to the TaskRabbiter's with a reduced payment friction than today. There might be 5% margin businesses (Chris' example sounds like the founder of Dwolla) that really are motivated to drive you to Bitcoin. So what happens over time is Bitcoin focuses in on those areas where it has a strategic advantage over cards and ignores those where it doesn't. It uses that experience to become a legitimate, scaled set of payments rails. Solutions are implemented so that consumers are comfortable with using and paying with Bitcoin. Then at that 5 - 15 year mark it's ready to take on mainstream payments. Assuming issues like fraud and settlement and wild fluctuations are worked out. EDIT: I am definitely thinking out loud and on the fly so am ok with some serious rebuttals.
- Sambdala 13y ago
  "Some guy in Arizona can set himself up online, sign up for Stripe, have no set fees, and accept a payment from someone in Germany (or NY or Australia) that afternoon." Anyone can take payments using Bitcoin in less time than it takes to sign up for and implement the Stripe API (I would know; I've done both), and you don't have to have a bank account in an approved jurisdiction in order to do so. They can either do this by using the technology directly or using an intermediary such as Coinbase. "Bitcoin focuses in on those areas where it has a strategic advantage over cards and ignores those where it doesn't." Thankfully Bitcoin doesn't care what it's used for, and there will probably be people trying to implement a Bitcoin solution for all these areas; the ones that find a niche will survive, and the ones that don't will fail. Either way, we'll (in theory) end up with the services that Bitcoin is suited for, and the ones that it isn't suited for will continue to use more traditional methods.
saalweachter 13y ago
We don't know what the cost of transactions in Bitcoin will be yet. Bitcoin includes two methods to pay miners for the infrastructure costs of running the network: mining rewards and transaction fees. The idea is to bootstrap the network off of mining rewards, and then switch to relying on transaction fees in the future, as Bitcoin reaches its limit of 21 million coins. The problem is that mining rewards are currently very, very non-negligible, even if they're decreasing. In 2012, the Bitcoin supply increased by over thirty percent. In 2014 another 1.3 million Bitcoins will be minted and sold by miners to pay for the cost of operating the bitcoin network. At current prices, that's nearly a billion dollars. As mining rewards continue to decrease, that billion dollars a year is going to need to be made up through transaction fees. Mastercard takes in less than 8 billion a year, so those transaction fees are probably going to be substantial.
- modeless 13y ago
  You're assuming that mining revenue must never decrease, but there's no reason for that to be true. A more likely scenario is that as block rewards go away, instead of transaction fees going up, overall mining revenue goes down. Some miners will exit, but as long as there's money to be made there will still be miners. Bitcoin users and miners will adjust fees until they reach a compromise that's mutually acceptable.
  - Sambdala 13y ago
    Yeah, this is likely to be the case. Part of the genius of the block award being so top-heavy in the beginning is that it made the network much more secure than it would have been if it had relied on transactions from the beginning which will allow it to mature and stabilize before supply & demand determines what the market is willing to bear in transaction fees. In addition, it allowed a decentralized method of distributing the coins that isn't able to be gamed.
  - saalweachter 13y ago
    The problem with shedding hardware from the Bitcoin network is that it undermines the core of Bitcoin's security. Let's imagine that 2025, and we hit the fourth mining-rewards-halving. It's now unprofitable to mine given the existing numbers of miners, and users refuse to accept higher transaction fees, so 50% of miners exit, leaving half the profits to half the miners. This means that 50% of the Bitcoin hardware is now on the market, being sold on the cheap. What do you need to compromise the security of the Bitcoin network? Why, 51% of the hardware--
wsxcde 13y ago
How much of the 2.5% credit card fees goes towards combating fraud and enabling reversibility of transactions? I assume it's a significant fraction because you get a better rate if you use services like "verified by visa", no? Is there any reason to believe that fraud rates will be lower with bitcoin? And as far the programmable money idea goes, I'd like to see more compelling applications than M of N transactions or escrow. The examples I've seen so far seem rather unexciting. ed: Maybe cdixon's real point is that the technology behind bitcoin is disruptive to the financial industry? I can get behind this, and I'm waiting to see how the government-backed bitcoin clones fare.
- drcode 13y ago
  > Is there any reason to believe that fraud rates will be lower with bitcoin? Yes, the risk of fraudulent creation of bitcoins or of double spending of a well-confirmed bitcoin are essentially zero (assuming no major flaw in the current science of cryptography.) Also, the odds of stolen identities (name/address/birthdate/ssn) would be zero, since those are not needed for sending bitcoins. So yes, fraud will be a lot lower with bitcoin.
  - wsxcde 13y ago
    > Yes, the risk of fraudulent creation of bitcoins or of double spending of a well-confirmed bitcoin are essentially zero (assuming no major flaw in the current science of cryptography.) This is a pretty narrow definition of fraud. Credit card fraud isn't caused by double-spending or counterfeit currency. It's caused by people stealing your credit card information. This is akin to people stealing your bitcoin wallet, as has happened many times already and will probably become even more commonplace if bitcoin takes hold. And while cryptography seems to be strong mathematically, side channels aren't. What are the odds that if you have a mobile bitcoin wallet app, it would be resistant to all the myriad side channel attacks we know of today and so many more that are going to get invented in the future? > Also, the odds of stolen identities (name/address/birthdate/ssn) would be zero, since those are not needed for sending bitcoins. On the other hand, due to anonymity and irreversibility, there is nothing you can do about fraudulent transactions involving bitcoins. You probably don't even even know who took your money. So color me unconvinced me again. tbh, I can't tell if you guys are deceiving yourselves or trying to deceive me in an attempt to keep the bubble going.
neals 13y ago
There is so much unexplored territory when it comes to Cryptocurrency. I think people will find innovative uses and start amazing businesses with this. And to me, the great thing is, that there is no real reason to hate it. There's not company of brand that you can hate, it's just people and ideas.
MrBlue 13y ago
"... I’m a lifelong Democrat who supported Obama in the last two elections. I think the Federal Reserve plays an important function..." I stopped reading here.
- aggronn 13y ago
  Regardless of what any armchair economist thinks about the federal reserve, how can you love bitcoin as a currency if you think that the fed 'plays an important function'?
  - natrius 13y ago
    I think the Fed plays an important function, but I also think that paper money won out over gold only because it was much easier to spend and verify. Otherwise, gold's track record as a store of value is clearly better. I think Bitcoin could outcompete the dollar, and if it does, central banking will end regardless of how I feel about it.
    - aggronn 13y ago
      There is a third possibility: central banks come up with their own alternative to bitcoin.
maaku 13y ago
Given your more liberal leanings, have you looked at Freicoin[0]? It's a perishable currency that is meant to counteract the natural tendency of money to be a wealth transfer device in the hands of bankers. [0]: http://freico.in/ http://freico.in/
drinkzima 13y ago
One important fact that seems to be getting ignored with payment fees is that credit cards have much higher fees than debit/ATM cards. If bitcoin intends to be a cash-like currency, the more apt fee comparison would be swiping ATM cards, which are much closer to 1% (rather than credit card fees of 2.5%+).
possibilistic 13y ago
Kind of off topic, but I have some questions related to transaction fees. 1) Is there a "reference value" in terms of how much transaction fee you have to pay to make a payment from one bitcoin/altcoin address to another? 2) Is there a "message" payload that would allow us to include JSON or transaction details? I've read that it costs a larger fee for more bytes in a transaction, so I'm assuming you can add whatever you want to the transaction. 3) When I last made a transaction with an altcoin [1], it got "split" to two addresses. One of these addresses was not my target receiving account nor an address that I owned. Does anyone know why this other address got coins? Does this happen in many/all cryptocurrencies? 4) If I made a payment gateway that created a unique address for every user to send payments to, would it be unreasonably expensive to collect all of these funds into a single address later? (N user payment accounts * 1 outbound transaction => Large Central Account/Wallet) [1] http://dogechain.info/address/DLqfuYFwVmroo4oaiVU9oSGTjsEBvQ6yEE http://dogechain.info/address/DLqfuYFwVmroo4oaiVU9oSGTjsEBvQ...
- stuhood 13y ago
  1) Yes and no... the QT client has default/"suggested" transaction fees, but unless a block is completely full you're not likely to see any difference in processing time if you exclude a fee entirely [a] 2) As of recently [b], yes... you can add a small amount of junk data 3) When you send a transaction using input address(es) that don't add up to exactly the desired amount, there will be some "change", which needs to go to a new address. Thus, some of your change comes back to you at a new address. 4) Yes, that's possible. But you probably don't want to do that, since it leaks information [c] ---- [a] subject to some limitations: https://en.bitcoin.it/wiki/Transaction_fees#Sending https://en.bitcoin.it/wiki/Transaction_fees#Sending [b] https://bitcoinfoundation.org/blog/?p=290 https://bitcoinfoundation.org/blog/?p=290 [c] https://medium.com/p/7f95a386692f https://medium.com/p/7f95a386692f
suedadam 13y ago
Bitcoins are an amazing investment if you have the money;the only problem in investing into it is that there is absolutely nothing close to a guarantee that you will receive any sort of return of investment with profit (not that it's expected to with this type of unofficial currency);however, a problem with it is that you would have to bank wire the money into the place you purchase your BTC from such as BTC-E which would take a few days and for all you know;it could drop or rise at that time (most likely rise) in which you would then not have enough or you could just wait again for it to drop;if it ever were to.
abalone 13y ago
This is the same naive analysis everyone makes when they first look at the payments system. "Look at all that money. 2-3% on every transaction. A $500B tax. LOOK AT ALL THAT MONEY." The reality is this: Most of that money gets passed back to consumers via rewards, benefits and consumer protections. It's not a tax so much as an incentive for consumers to keep using their cards. And so it is considerably harder to come up with an alternative that is appealing to merchants without taking anything away from consumers. For example, the interchange on a Visa rewards card for a typical brick-and-mortar retailer is about 1.5 - 1.65%. (Processors mark that up, but that's the "wholesale" fee that goes to the card issuer.) But many rewards cards pay out at least 1% cashback, on top of other benefits. That leaves a much smaller margin to compete over. And remember, a new competitive option faces massive rollout and adoption costs that the entrenched system does not. Even the acts of changing behavior, upgrading POS systems and training staff are adoption costs. So your new alternative has to offer significant benefits for both merchants and consumers. Significant enough to overcome adoption costs. Oh, and there's one more thing: debit card interchange just got regulated down to almost nothing (0.05% + 21 cents) by the Durbin amendment. So there already is an alternative, low-fee option that merchants can steer consumers toward and that they already support fully. So that pretty much takes out the opportunity to offer a lower-fee, lower-consumer-benefit option. That already exists now. That leaves what? A higher-consumer-benefit option? Why would merchants adopt that? A same-benefit option but at a lower cost? But how much lower would the cost be while still matching 1-2% cashback reward programs and whatnot? But.. but.. LOOK AT ALL THAT MONEY. :-) (Btw, the digital cash for micropayments and garage sales and whatnot does sound interesting to me. My criticism is limited to the project of competing with Visa/Mastercard/banks.)
- dlubarov 13y ago
  If you compare interchange with rewards rates, they seem comparable, but most merchants pay much more than interchange. Direct relationships with issuers isn't feasible, even for the largest merchants. There are network fees and usually other middleman processors involved. Visa and First Data each make >$10B/year revenue, which is already 0.2% of US GDP, and none of that money goes toward cardholder rewards.
  - 13y ago
chaseadam17 13y ago
I think Bitcoin is an indication of a larger trend, similar to search in the early 90's and social networks in the early 2000's. Will Bitcoin emerge as the predominant online currency of the 21st century? Who knows? But it'll solve a lot of hard problems, and as a result, something will.
radicaldreamer 13y ago
Everyone here trades private currencies (often called credit) all the time. Those Visa bucks are not dollars- they are IOUs from Visa to the merchant accepting them. When the monetary system is functioning well, Visa bucks (or Chase dollars, Wells Fargo dollars etc.) trade at par with legal tenders (US gov. backed cash). Only in times of turmoil does the hierarchy of money reassert itself. In this paradigm, would you rather be holding US cash or bitcoins (or something else) if there was a political or economic crisis?

190 points by ckurdziel 13y ago

quack 13y ago

I used to believe that the reversibility of transactions was a major benefit of using cards, but it turns out that is really just a reversibility of liability. Credit cards are an outdated tool. They pass plain text data about a user to authorize a transaction allowing hackers to pull something off like the Target hack. One of the advantages of bitcoin is the ability to digitally authorize a transaction that cannot be reused. In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I expect a lot of online retail stores to start accepting bitcoin payments at large discounts to cash just for this reason.

diminoten 13y ago
As an online retailer, what do you do if someone reports fraud? Shrug your shoulders and tell them they should have been more careful with their wallet? If Bitcoin == cash, what does a storefront do if someone comes to them and says "my stolen cash was used to buy items here"? Usually nothing, yes? Is that what we're saying is the burden of responsibility for an online store with Bitcoin?
- logicallee 13y ago
  what do you do if you're a real retailer and someone says : "Hey one of your customers last week paid you with cash that was stolen from me!" The answer is: "Well go report the stolen cash, we have no idea how to help you." It's just the nature of cash that it works that way. People need to / will learn the nature of bitcoin, whatever that is exactly.
  - dublinben 13y ago
    That's a significant reason why many people do not use cash for all their purchases. The consumer protection of credit cards is one of their primary benefits. Bitcoin takes away all of those protections.
    - thisosound 13y ago
      But the fees are a lot lower and it doesn't mean that those protections can't be added back on on a different layer. You can also do a lot more with Bitcoin than with CCs.
mcfunley 13y ago
> In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I currently work for a large online marketplace. A very typical fraud scenario (maybe the most common) is someone collecting payment for an item that they don't actually possess. This would only be harder to deal with and correct if the payment were disbursed to an anonymous seller in bitcoins.
- Sambdala 13y ago
  Such an online marketplace should have an escrow included then if they wish to use Bitcoin as a payment method. I believe the Silk Road(s) have used such systems.
  - glesica 13y ago
    So now the online marketplace has to run an escrow service as well. If they're going to do that, why not run an escrow service for credit card transactions? You pay the marketplace, the seller ships the goods, you confirm that you got them (or the seller proves that the shipment took place), and then the marketplace pays the seller. I don't see how Bitcoin really provides any innovation that isn't already available in this particular situation.
    - Sambdala 13y ago
      If it's not a core competency (although for certain marketplaces, it may be), you can use a 3rd party escrow. You're already effectively using an escrow service when you provide a Credit Card payment option; you just don't get to choose who provides the service, you can't unbundle it from a larger product offering, you have very little control over it, it doesn't work well for certain types of goods & services, and it's built on top of a pull payment network instead of a push payment network.
      - glesica 13y ago
        I agree that un-bundling the escrow from the rest of the stack would be a good thing. However, I think it is important to keep in mind that replacing credit cards with something less effective (for whatever definition of "effective" matters) than credit cards isn't a true replacement. The way I am thinking about it is sort of like those threads on HN where someone says "You can create a Dropbox clone in N lines of X and an external hard drive". That's NOT a Dropbox "clone", but rather something that could be used to replace Dropbox for some people some of the time. It would take much, much more to replace Dropbox, and maybe someone will get it right someday. Same goes for Bitcoin, it's fine to think of alternative financial networks (awesome, in fact, I hate banks!) but it's important not to get ahead of ourselves.
gizmo686 13y ago
There is no reason we cannot have credit card like things that do not pass plain text authorization. I believe some places have already switched to useing smart cards which leverage cryptography to proved identification without revealing the secret. I'm not sure exactly what crypto is used in practice, but as a proof of concept you can imagine this being done with normal public key chryptography.
- Sambdala 13y ago
  The only reason is that credit card companies haven't implemented such a system. I'm actually shocked that we've been able to use our current pull payments system for so long without more problems than we've currently seen. One innovation I did like (which I only saw when I was using Bank of America) was a feature that allowed you to create new, internet-only, credit card numbers on the fly with a self-chosen credit limit that was tied to your checking account. I would have loved to see this implemented in a physical card so that you could just use a different cc# for each separate transaction and only authorize it (in perpetuity) for the exact amount of the transaction.
sliverstorm 13y ago
Magnetic stripes are outdated, but smartcards fix that problem. Reversable transactions moves the onus of security to the people who can really do something about it. A consumer can only chose "purchase or do not purchase", whereas a merchant can elect to use (for example) more secure payment methods and stronger identity verification.
steveklabnik 13y ago
Hi, I work for Balanced Payments, a payments company for marketplaces, YC W11. You can track our plans for cryptocurrency support here: https://github.com/balanced/balanced-api/issues/204 https://github.com/balanced/balanced-api/issues/204 > In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail. I'm not sure how you are getting this. Bitcoin is absolutely susceptible to various forms of fraud. Let's make this a bit more concrete: assume eBay accepts BTC. I could sign up for a seller account, make some auction listings, once some people buy them, never ship the goods, and disappear. I could set up a fake seller account, list some fake items, and then also make a fake buyer account, purchase the fake goods with my fake buyer account from my fake seller account, report that everything went well, and now I've laundered some money. That kind of activity can cripple a business. As a consumer, the irreversability of BTC transactions is a bug, not a feature. You only need to look at the incredible amount of fraud that's happened in the Dogecoin community to see how fraudulent activity can be rampant, and can harm consumer confidence. Consumers expect the ability to be able to initiate a chargeback when fraudulent activity happens. You can't do that with just plain old BTC. When I was home over the holidays, the local TV station ran a story about how you should be using credit cards rather than debit cards to purchase things online, specifically because the credit cards' chargeback policies are often better. "With a credit card, you'll have the money taken off your statement, but with a debit card, it could take over two weeks to get your money back." etc. Bitcoin is digital cash. Online stores don't allow you to mail them an envelope with $20 inside, because that would be kind of ridiculous for all parties involved. It's only when certain financial instruments are built on top of Bitcoin that have the same kinds of consumer protection and regulatory compliance built in.
- minimax 13y ago
  Agree with everything you said. Credit cards have useful consumer protections baked in. What happens when you look at it from the merchant's perspective? Lets say someone buys something from me with a card, I ship it out, but then it turns out the card was stolen. Who takes the loss? The merchant or the credit card company? I guess what I'm trying to figure out is whether or not the irreversibility of a transaction might be a good thing for merchants dealing with fraudulent buyers.

diminoten 13y ago

I know this is completely off-topic, and I know this is a war I will lose, but must we call ourselves "bullish"/"bearish"? Anyway, Bitcoin may not save the world, but if it does anything like what this blog post says, it may very well save the Internet from the advertising platform it's become.

taylorhou 13y ago
let's change the jargon! if you're pro/bullish on alt currency --> bitish (B) if you're con/bearish on alt currency --> dolish ($) this is the internet. make it happen.

infruset 13y ago

This is refreshing. I suspect even though the libertarians are the most vocal among bitcoin adopters (and that's ok), a lot of people actually agree with this.

hippich 13y ago

The reason why people should get excited about Bitcoin is not a bubble or money, but rather a something completely new. Large group of people put financial rules into software and agreed that they are going to use these rules without external central entity and enforcement. If this continue to roll, same might be applied to many other areas I believe. It is just my random fantasy at this moment, but why we will need enforcement, if we will have guarantied income in bitcoins and laws system built same way as bitcoin (i.e. opensource and agreed to use by most people) and law enforcement as a function of guaranteed income amount.... Just random thought. or finally having AI which can exist on its own, buy components of its environment (i.e. machines, networks, etc) I believe what is emerging right now as a Bitcoin is much wider phenomena than just a way to avoid pay taxes and inflation.

pron 13y ago
But now you're putting a libertarian political agenda into Bitcoin again, and this is what makes many people (including me) very nervous. You see, many people think about the terrible pain and suffering the US experienced about a century ago when the economy and law were largely unregulated and unenforced. Much of the country became quickly enslaved to a small group of individuals; terrible exploitation and rampant poverty ensued. It was through a lot of hard work that Americans were able to place government regulation to free themselves from the tyranny of the robber barons. So when many people today hear the words "without external central entity and enforcement" the horrors of the gilded age flash before their eyes. Also, your ideas about an AI-directed or general-consensus utopia are nice but naive. People don't usually agree on what utility function you'd want to maximize, as there is no "right way" for a lot of things that matter to people. Would your Bitcoinish utopia allow late-term abortions? Or school prayer? Or same-sex marriage? Politics is a constant battle of values, many of them are deeply emotional. But Dixon's idea of Bitcoin as internet pocket-money is actually something I can live with.
- waterlesscloud 13y ago
  There's nothing about what he's saying that precludes the rules of the network being decided by a representative democracy or what have you. Which is part of the beauty of the network. He's just saying that regulations can be implemented and enforced by the network itself. Different thing altogether.

minimax 13y ago

For all the people out there who are thinking about bitcoin as a payment technology: If you assume that customers get paid in dollars and that vendors will have to use dollars to pay their taxes, pay their employees and buy the raw materials for their products (reasonable assumptions, I think), then a payment consists of one conversion from dollars to bitcoins by the purchaser, and one conversion from bitcoins to dollars by the vendor. Those two transactions will have associated costs. Exchanges take out trading fees and the market makers on the exchanges will want to see some profit as well (you will see this reflected in the bid/ask spread). The total cost for the transaction will be 2x the spread + exchange fees. People keep touting the 2.5% charge for using credit cards, but they don't compare it to a similar value for bitcoin. It clearly is not 0%. Exchange fees alone are can be something like 0.5%. If we double that (two conversions, remember) that's 1% just in exchange fees. Unfortunately, I don't have good numbers for bitcoin / dollar spreads because I don't watch that market very closely. So we have 2.5% for credit cards and 1% + spread (unknown) for bitcoin. And with credit cards consumers at least get some protection in the case of fraud. Does anyone else have a better model for bitcoin transaction costs?

Sambdala 13y ago
...currently. I don't think most people are interested in Bitcoin primarily because of the utility it currently provides and the infrastructure that has so far been built.
- BlackDeath3 13y ago
  And that's unfortunate. It's interesting and somewhat satisfying to see the get-rich-quick people kind of people try to get into Bitcoin, and instead get burned. There is merit to the system, but a lot of people just don't care.
  - Sambdala 13y ago
    I'm not entirely sure what point you're making?

mbesto 13y ago

> Let’s say you sell electronics online. Profit margins in those businesses are usually under 5%, which means the 2.5% payment fees consume half the margin. That’s money that could be reinvested in the business, passed back to consumers, or taxed by the government. Of all of those choices, handing 2.5% to banks to move bits around the Internet is the worst possible choice. In other words, better wealth distribution? This is precisely what libertarians are fighting for, no? Playing the devil's advocate here - couldn't this argument be turned around to say something like "That’s money that could be reinvested in banks which hire the best people to find the best and most efficient use of capital."? (as opposed to consumers or small business owners who can't)

sliverstorm 13y ago
Payment fees typically go to Visa or MasterCard, I thought. And considering the financials of those companies, operating the existing payment networks must be costly- both companies are growing & profitable, but not nearly as much as you might expect if the payment networks were zero-cost to operate.
- mbesto 13y ago
  Ya, agreed. I think this statement sticks out the most: Of all of those choices, handing 2.5% to banks to move bits around the Internet is the worst possible choice. Regardless of whether its a bank or a credit card processing company, why is it the "worst possible choice" to give it to them? Who are we to judge who gets $1 when we are the ones who chose to spend the $1 in the first place?
  - waterlesscloud 13y ago
    Currently our choice is to pay the fee to the banks for convenience they provide. If it's possible to provide the same convenience without the banks and with much lower fees, is that not an improvement?
    - sliverstorm 13y ago

iblaine 13y ago

This reminds me. Bitcoin is so complicated and controversial these days. I miss the days before 2013 when bitcoins were used almost exclusively on the deep web among nerds.

pacofvf 13y ago

In discussions I've read about bitcoin in HN, I've seen how some people call "leftie" to those who think like this, mainly by right leaning Americans, the funny thing is that they use that word as an insult, when in other rich countries you only have center-left, moderate-left and far-left flavors for political parties.

tomasien 13y ago

I know it's not quite "not relying on banks and credit card companies", but removing ONE of them from the equation (credit cards skimming fees) is what I'm working on now. This is how it works https://www.youtube.com/watch?v=QR5UTLxe5zA&feature=youtu.be https://www.youtube.com/watch?v=QR5UTLxe5zA&feature=youtu.be By removing them and decentralizing the banking process by centralizing it into a third party (which could be many third parties), I think we'll allow anyone who wants to start a bank of any size to compete for marketshare with the big boys by providing better services.

nicholas73 13y ago

I don't think Bitcoin will ever be a viable currency, at least not on the scale of national currencies. Despite all the flaws fiat currency has, it is actually backed by something - the power of the country's government to tax. Thus, any buyer of sovereign debt has a calculable probability of return. Despite America's printing of dollars, inflation has actually been mild so far. Bitcoin has nothing backing it but an artificial supply limitation. That in itself is not a solution because its monetary base cannot possibly grow at the rate overall goods do, and thus have a stable price point.

pault 13y ago
The inherent value of Bitcoin is that it allows one to conduct (some types of) business globally without a bank account (kind of). There are caveats, of course, but in my opinion this is its primary innovation and everything else is mostly noise.
andrewla 13y ago
I don't understand the argument that "the power of the country's government to tax" is a point in favor of a currency. I would say that it is pretty clear that the opposite is true for almost every significant tax; that a country collecting taxes in a currency would be a disadvantage of a currency. The fact that countries need to pass laws allowing taxation of non-local currencies seems to support that. For a limited class of taxes, namely, taxes directly denominated in a currency (like property taxes), the taxability of a currency adds to the demand for that currency. But for the most part, since non-local currency transactions and barter transactions are taxed at the effective exchange rate / fair value, the fact that taxes are collected in dollars would seem to neither hurt nor help the currency. That said, in summary, the "artificial supply limitation" applies to both Bitcoin and dollars, with dollars relying purely on trust that America will not increase the money supply unnecessarily. That inflation has actually been mild is a "bug" in the system -- the Fed is deliberately trying to spur inflation, and has not been having success, for reasons that nobody (including themselves) completely understands. The calculable probability of return that you refer to has been pretty reliable (just like MBS's in 2006, couldn't resist), so that is true, but I don't see that being related to the taxability of the currency so much as to the lack of apparent inflation compared to the nominal returns on sovereign debt. The monetary base argument also seems specious; M0, the "monetary base", is not generally considered (except by non-mainstream economists) to be all that significant compared to the higher-order money supply factors caused by dollar-denominated assets of varying liquidity. Once (or if) Bitcoin develops a credit market, then the medium-term effective money supply will grow and shrink as the market demands.

taylorhou 13y ago

me and my alt currency enthusiasts think of bitcoin as simply virtual gold. done.

lingben 13y ago
then it is clear you neither understand gold, currency nor bitcoin

jusben1369 13y ago

I too am fascinated by Bitcoin and still in learning mode. I think there's one important distinction to add here though. Credit cards can charge 2.5% because they're awesome Some guy in Arizona can set himself up online, sign up for Stripe, have no set fees, and accept a payment from someone in Germany (or NY or Australia) that afternoon. That's amazingly empowering and 2.5% doesn't seem to bad for the people running those rails to collect (fraud, global movement etc) So let's not come at it from "credit cards and payments are a bloated gouging industry" I'm not buying that and it also is too merchant focused (vs consumers who really decide what a merchant will do in terms of payments) Now, there are some really interesting fringe cases that Chris touches upon that can open the door for Bitcoin. Micropayments are broken when it comes to credit cards. It's not the %, it that's "+ 30 cents" that is brutal. So Bitcoin could play a roll there. There are disbursements and marketplaces. I suspect TaskRabbit would probably like to have the ability to move money from buyers on their platforms to the TaskRabbiter's with a reduced payment friction than today. There might be 5% margin businesses (Chris' example sounds like the founder of Dwolla) that really are motivated to drive you to Bitcoin. So what happens over time is Bitcoin focuses in on those areas where it has a strategic advantage over cards and ignores those where it doesn't. It uses that experience to become a legitimate, scaled set of payments rails. Solutions are implemented so that consumers are comfortable with using and paying with Bitcoin. Then at that 5 - 15 year mark it's ready to take on mainstream payments. Assuming issues like fraud and settlement and wild fluctuations are worked out. EDIT: I am definitely thinking out loud and on the fly so am ok with some serious rebuttals.

Sambdala 13y ago
"Some guy in Arizona can set himself up online, sign up for Stripe, have no set fees, and accept a payment from someone in Germany (or NY or Australia) that afternoon." Anyone can take payments using Bitcoin in less time than it takes to sign up for and implement the Stripe API (I would know; I've done both), and you don't have to have a bank account in an approved jurisdiction in order to do so. They can either do this by using the technology directly or using an intermediary such as Coinbase. "Bitcoin focuses in on those areas where it has a strategic advantage over cards and ignores those where it doesn't." Thankfully Bitcoin doesn't care what it's used for, and there will probably be people trying to implement a Bitcoin solution for all these areas; the ones that find a niche will survive, and the ones that don't will fail. Either way, we'll (in theory) end up with the services that Bitcoin is suited for, and the ones that it isn't suited for will continue to use more traditional methods.

saalweachter 13y ago

We don't know what the cost of transactions in Bitcoin will be yet. Bitcoin includes two methods to pay miners for the infrastructure costs of running the network: mining rewards and transaction fees. The idea is to bootstrap the network off of mining rewards, and then switch to relying on transaction fees in the future, as Bitcoin reaches its limit of 21 million coins. The problem is that mining rewards are currently very, very non-negligible, even if they're decreasing. In 2012, the Bitcoin supply increased by over thirty percent. In 2014 another 1.3 million Bitcoins will be minted and sold by miners to pay for the cost of operating the bitcoin network. At current prices, that's nearly a billion dollars. As mining rewards continue to decrease, that billion dollars a year is going to need to be made up through transaction fees. Mastercard takes in less than 8 billion a year, so those transaction fees are probably going to be substantial.

modeless 13y ago
You're assuming that mining revenue must never decrease, but there's no reason for that to be true. A more likely scenario is that as block rewards go away, instead of transaction fees going up, overall mining revenue goes down. Some miners will exit, but as long as there's money to be made there will still be miners. Bitcoin users and miners will adjust fees until they reach a compromise that's mutually acceptable.
- Sambdala 13y ago
  Yeah, this is likely to be the case. Part of the genius of the block award being so top-heavy in the beginning is that it made the network much more secure than it would have been if it had relied on transactions from the beginning which will allow it to mature and stabilize before supply & demand determines what the market is willing to bear in transaction fees. In addition, it allowed a decentralized method of distributing the coins that isn't able to be gamed.
- saalweachter 13y ago
  The problem with shedding hardware from the Bitcoin network is that it undermines the core of Bitcoin's security. Let's imagine that 2025, and we hit the fourth mining-rewards-halving. It's now unprofitable to mine given the existing numbers of miners, and users refuse to accept higher transaction fees, so 50% of miners exit, leaving half the profits to half the miners. This means that 50% of the Bitcoin hardware is now on the market, being sold on the cheap. What do you need to compromise the security of the Bitcoin network? Why, 51% of the hardware--

wsxcde 13y ago

How much of the 2.5% credit card fees goes towards combating fraud and enabling reversibility of transactions? I assume it's a significant fraction because you get a better rate if you use services like "verified by visa", no? Is there any reason to believe that fraud rates will be lower with bitcoin? And as far the programmable money idea goes, I'd like to see more compelling applications than M of N transactions or escrow. The examples I've seen so far seem rather unexciting. ed: Maybe cdixon's real point is that the technology behind bitcoin is disruptive to the financial industry? I can get behind this, and I'm waiting to see how the government-backed bitcoin clones fare.

drcode 13y ago
> Is there any reason to believe that fraud rates will be lower with bitcoin? Yes, the risk of fraudulent creation of bitcoins or of double spending of a well-confirmed bitcoin are essentially zero (assuming no major flaw in the current science of cryptography.) Also, the odds of stolen identities (name/address/birthdate/ssn) would be zero, since those are not needed for sending bitcoins. So yes, fraud will be a lot lower with bitcoin.
- wsxcde 13y ago
  > Yes, the risk of fraudulent creation of bitcoins or of double spending of a well-confirmed bitcoin are essentially zero (assuming no major flaw in the current science of cryptography.) This is a pretty narrow definition of fraud. Credit card fraud isn't caused by double-spending or counterfeit currency. It's caused by people stealing your credit card information. This is akin to people stealing your bitcoin wallet, as has happened many times already and will probably become even more commonplace if bitcoin takes hold. And while cryptography seems to be strong mathematically, side channels aren't. What are the odds that if you have a mobile bitcoin wallet app, it would be resistant to all the myriad side channel attacks we know of today and so many more that are going to get invented in the future? > Also, the odds of stolen identities (name/address/birthdate/ssn) would be zero, since those are not needed for sending bitcoins. On the other hand, due to anonymity and irreversibility, there is nothing you can do about fraudulent transactions involving bitcoins. You probably don't even even know who took your money. So color me unconvinced me again. tbh, I can't tell if you guys are deceiving yourselves or trying to deceive me in an attempt to keep the bubble going.

neals 13y ago

There is so much unexplored territory when it comes to Cryptocurrency. I think people will find innovative uses and start amazing businesses with this. And to me, the great thing is, that there is no real reason to hate it. There's not company of brand that you can hate, it's just people and ideas.

MrBlue 13y ago

"... I’m a lifelong Democrat who supported Obama in the last two elections. I think the Federal Reserve plays an important function..." I stopped reading here.

aggronn 13y ago
Regardless of what any armchair economist thinks about the federal reserve, how can you love bitcoin as a currency if you think that the fed 'plays an important function'?
- natrius 13y ago
  I think the Fed plays an important function, but I also think that paper money won out over gold only because it was much easier to spend and verify. Otherwise, gold's track record as a store of value is clearly better. I think Bitcoin could outcompete the dollar, and if it does, central banking will end regardless of how I feel about it.
  - aggronn 13y ago
    There is a third possibility: central banks come up with their own alternative to bitcoin.

maaku 13y ago

Given your more liberal leanings, have you looked at Freicoin[0]? It's a perishable currency that is meant to counteract the natural tendency of money to be a wealth transfer device in the hands of bankers. [0]: http://freico.in/ http://freico.in/

drinkzima 13y ago

One important fact that seems to be getting ignored with payment fees is that credit cards have much higher fees than debit/ATM cards. If bitcoin intends to be a cash-like currency, the more apt fee comparison would be swiping ATM cards, which are much closer to 1% (rather than credit card fees of 2.5%+).

possibilistic 13y ago

Kind of off topic, but I have some questions related to transaction fees. 1) Is there a "reference value" in terms of how much transaction fee you have to pay to make a payment from one bitcoin/altcoin address to another? 2) Is there a "message" payload that would allow us to include JSON or transaction details? I've read that it costs a larger fee for more bytes in a transaction, so I'm assuming you can add whatever you want to the transaction. 3) When I last made a transaction with an altcoin [1], it got "split" to two addresses. One of these addresses was not my target receiving account nor an address that I owned. Does anyone know why this other address got coins? Does this happen in many/all cryptocurrencies? 4) If I made a payment gateway that created a unique address for every user to send payments to, would it be unreasonably expensive to collect all of these funds into a single address later? (N user payment accounts * 1 outbound transaction => Large Central Account/Wallet) [1] http://dogechain.info/address/DLqfuYFwVmroo4oaiVU9oSGTjsEBvQ6yEE http://dogechain.info/address/DLqfuYFwVmroo4oaiVU9oSGTjsEBvQ...

stuhood 13y ago
1) Yes and no... the QT client has default/"suggested" transaction fees, but unless a block is completely full you're not likely to see any difference in processing time if you exclude a fee entirely [a] 2) As of recently [b], yes... you can add a small amount of junk data 3) When you send a transaction using input address(es) that don't add up to exactly the desired amount, there will be some "change", which needs to go to a new address. Thus, some of your change comes back to you at a new address. 4) Yes, that's possible. But you probably don't want to do that, since it leaks information [c] ---- [a] subject to some limitations: https://en.bitcoin.it/wiki/Transaction_fees#Sending https://en.bitcoin.it/wiki/Transaction_fees#Sending [b] https://bitcoinfoundation.org/blog/?p=290 https://bitcoinfoundation.org/blog/?p=290 [c] https://medium.com/p/7f95a386692f https://medium.com/p/7f95a386692f

suedadam 13y ago

Bitcoins are an amazing investment if you have the money;the only problem in investing into it is that there is absolutely nothing close to a guarantee that you will receive any sort of return of investment with profit (not that it's expected to with this type of unofficial currency);however, a problem with it is that you would have to bank wire the money into the place you purchase your BTC from such as BTC-E which would take a few days and for all you know;it could drop or rise at that time (most likely rise) in which you would then not have enough or you could just wait again for it to drop;if it ever were to.

abalone 13y ago

This is the same naive analysis everyone makes when they first look at the payments system. "Look at all that money. 2-3% on every transaction. A $500B tax. LOOK AT ALL THAT MONEY." The reality is this: Most of that money gets passed back to consumers via rewards, benefits and consumer protections. It's not a tax so much as an incentive for consumers to keep using their cards. And so it is considerably harder to come up with an alternative that is appealing to merchants without taking anything away from consumers. For example, the interchange on a Visa rewards card for a typical brick-and-mortar retailer is about 1.5 - 1.65%. (Processors mark that up, but that's the "wholesale" fee that goes to the card issuer.) But many rewards cards pay out at least 1% cashback, on top of other benefits. That leaves a much smaller margin to compete over. And remember, a new competitive option faces massive rollout and adoption costs that the entrenched system does not. Even the acts of changing behavior, upgrading POS systems and training staff are adoption costs. So your new alternative has to offer significant benefits for both merchants and consumers. Significant enough to overcome adoption costs. Oh, and there's one more thing: debit card interchange just got regulated down to almost nothing (0.05% + 21 cents) by the Durbin amendment. So there already is an alternative, low-fee option that merchants can steer consumers toward and that they already support fully. So that pretty much takes out the opportunity to offer a lower-fee, lower-consumer-benefit option. That already exists now. That leaves what? A higher-consumer-benefit option? Why would merchants adopt that? A same-benefit option but at a lower cost? But how much lower would the cost be while still matching 1-2% cashback reward programs and whatnot? But.. but.. LOOK AT ALL THAT MONEY. :-) (Btw, the digital cash for micropayments and garage sales and whatnot does sound interesting to me. My criticism is limited to the project of competing with Visa/Mastercard/banks.)

dlubarov 13y ago
If you compare interchange with rewards rates, they seem comparable, but most merchants pay much more than interchange. Direct relationships with issuers isn't feasible, even for the largest merchants. There are network fees and usually other middleman processors involved. Visa and First Data each make >$10B/year revenue, which is already 0.2% of US GDP, and none of that money goes toward cardholder rewards.
- 13y ago

chaseadam17 13y ago

I think Bitcoin is an indication of a larger trend, similar to search in the early 90's and social networks in the early 2000's. Will Bitcoin emerge as the predominant online currency of the 21st century? Who knows? But it'll solve a lot of hard problems, and as a result, something will.

radicaldreamer 13y ago

Everyone here trades private currencies (often called credit) all the time. Those Visa bucks are not dollars- they are IOUs from Visa to the merchant accepting them. When the monetary system is functioning well, Visa bucks (or Chase dollars, Wells Fargo dollars etc.) trade at par with legal tenders (US gov. backed cash). Only in times of turmoil does the hierarchy of money reassert itself. In this paradigm, would you rather be holding US cash or bitcoins (or something else) if there was a political or economic crisis?