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How about the fact that the banking system charges huge fees for the use of their networks and technology? Do you mind paying 4% more for all your purchases bec

How about the fact that the banking system charges huge fees for the use of their networks and technology? Do you mind paying 4% more for all your purchases because the retailer has to take credit card fees into account? Do you mind paying $15 to send money to relatives overseas? Every time you want to transfer money from one place to another, it costs you way way way more than it actually costs because of marketing and profits. This is disruptive technology. Credit card companies and international money transfer companies are panicking right now.

srdev 13y ago
Credit card companies do not charge 4%. I worked in credit cards about a decade ago, so unless the marketplace is less competitive now than before, I assume this still holds true. Furthermore, the fees that do exist are not necessarily passed on the consumer, but taken out of profit. Prices can only be arbitrarily changed if demand is inelastic. None of the companies taking Bitcoin are taking it directly -- they are all paying fees -- and none of them are passing savings onto the consumer. Finally, no I don't mind paying a small percentage (1-2%) for paying with a convenient method that gives me 1% cash back and consumer protections like chargebacks. Its a service. > Do you mind paying $15 to send money to relatives overseas? I very rarely have to do this, and when I do $15 is a fraction of a percent. And certainly, its worth it in comparison to dealing with the Bitcoin ecosystem to get my money INTO Bitcoin and then out on the other side. So no, I don't mind. Now you may be saying "Well when everyone uses bitcoins in the future these problems won't exist, and furthermore..." Yeah but if bitcoins get market penetration then banks and other services can adjust prices to compete. > This is disruptive technology. Credit card companies and international money transfer companies are panicking right now. Everyone throws around the word "disruptive" on this site, but seldom is it really true. I keep an eye on the Bitcoin ecosystem because it is interesting, but I've seen literally nothing offered that appeals to me over existing services. When Bitcoin provides me with real, significant value, then I'll think about buying in. Also, its amusing how its advocates claim that traditional finance companies are "terrified." I've seen absolutely ZERO evidence of this. Its more of the Bitcoin community's lack of reality.
- vinceguidry 13y ago
  > "Well when everyone uses bitcoins in the future these problems won't exist, and furthermore..." Question: What would happen if literally everyone started using bitcoin? Could the system handle that much of a load?
  - srdev 13y ago
    As currently implemented, no, because network traffic and disk size scales at O(n) with the number of transactions. There is currently a 7 transaction/sec limit in order to avoid the blockchain ballooning in place. The fact that Bitcoin is really a decentralized, shared ledge means that scaling horizontally is difficult (and is not possible with the current implementation). There was a video linked on Hacker News about the scalability issues by a well-respected researcher a while back, but I can't seem to find it. I'm not intelligent enough or well-versed enough to say whether the issues are insurmountable or not. I do know that some very smart people are working on Bitcoin, so they very well may be. I'm only speaking to the current system.
- geminitojanus 13y ago
  > Credit card companies do not charge 4%. I worked in credit cards about a decade ago, so unless the marketplace is less competitive now than before, I assume this still holds true. Furthermore, the fees that do exist are not necessarily passed on the consumer, but taken out of profit. This isn't entirely accurate. Most credit card companies now tack on a 30c + 2.9% surcharge for processors that do fewer transactions than some arbitrarily defined limit, well known to most small companies as the "PayPal tax" because they started doing it first and the credit card companies realized they could get away with it too. And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too. Or haven't you heard about the recent record profits being made by Mastercard et al?
  - srdev 13y ago
    > This isn't entirely accurate. Most credit card companies now tack on a 30c + 2.9% surcharge for processors that do fewer transactions than some arbitrarily defined limit, well known to most small companies as the "PayPal tax" because they started doing it first and the credit card companies realized they could get away with it too. Wasn't aware of that. We charged flat percentage rate, and added to the processor I think it was 1.5% or so. But like I said, a decade ago, so maybe I'm just wrong on that point and forgot. > And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too. Is it actually proven that the costs are passed on (i.e. that the price would be lower in absence of credit cards)? Because, again, in theory that only works if the demand has enough inelasticity.
geminitojanus 13y ago
> How about the fact that the banking system charges huge fees for the use of their networks and technology? Yeah that sucks. But the only thing that's going to change this is regulation, not non-existent competition. > Do you mind paying $15 to send money to relatives overseas? Most of us don't have relatives overseas. And for the most part, if we did and we were sending money over seas, it'd probably be in denominations that make $15 a pittance. > This is disruptive technology. Credit card companies and international money transfer companies are panicking right now. This is hilarious and bullshit. Nobody's panicking. I doubt if most bankers even know what Bitcoin is. If they were scared, they'd go to their favorite lawmaker with a quarter billion dollars and tell them to make Bitcoin go away, and guess what? It would - "Silkroad"-style shutdowns would happen to all the Bitcoin companies, the value of bitcoin would plummet and this shanty economy would disappear overnight.
- ojr 13y ago
  Total Market Cap: $ 12,947,277,234 http://coinmarketcap.com/ http://coinmarketcap.com/ I think they're going to need more than a quarter of a billion...
  - dragonwriter 13y ago
    What does the market cap of bitcoin have to do with the cost of getting government to legislate so that it isn't viable?
    - ojr 13y ago
      nothing at all, cost doesn't matter security of the software is all that matters
  - geminitojanus 13y ago
    Good luck finding a congressman to buy who will accept bitcoin as payment.
skybrian 13y ago
As far as I can tell the payment industry is about hiding the fees. To consumers, credit cards seem not to have any fees because the merchants pay them. (This is why they can give you cash back.) Accepting Bitcoin is a different way of hiding fees. It's somewhat difficult to compare prices to USD because you have to do the exchange rate calculation yourself. Merchants could easily charge a small premium for Bitcoin transactions and consumers can't easily tell if the deal is slightly better or slightly worse. As a result, there's little incentive to give a discount for Bitcoin since it's unlikely to get more sales. The fees are still there; they're hidden in the bid/ask spread for exchanging bitcoin for dollars. So yeah, this is "innovative" and possibly disruptive but only in the same way as other financial innovations that seem to give you a good deal while actually charging more.
nly 13y ago
Bitcoin hash difficulty rises to ensure the block rate remains relatively stable at 1 block every ~10 minutes. Meanwhile the block reward falls exponentially. By definition then, it requires that other variables change such that mining remains profitable for someone to survive, otherwise all incentive of maintaining the blockchain collapses. Sure, you could argue that mining will reach a state of neutral ROI just to serve the public good... but guess what, there's a fee system in the protocol that will ensure that probably won't happen. The 'but banks charge fees' argument just doesn't hold water long term. Blockchain resources are finite, and all indications are solving Bitcoins long term scalability problems (in terms of number of transactions per second) is still quite hard. Unless the value of Bitcoin grows with hash difficulty and the inverse of block reward sizes, fees will rise in the Bitcoin network. It's naive to think it'll be a free ride payment network forever.

srdev 13y ago

Credit card companies do not charge 4%. I worked in credit cards about a decade ago, so unless the marketplace is less competitive now than before, I assume this still holds true. Furthermore, the fees that do exist are not necessarily passed on the consumer, but taken out of profit. Prices can only be arbitrarily changed if demand is inelastic. None of the companies taking Bitcoin are taking it directly -- they are all paying fees -- and none of them are passing savings onto the consumer. Finally, no I don't mind paying a small percentage (1-2%) for paying with a convenient method that gives me 1% cash back and consumer protections like chargebacks. Its a service. > Do you mind paying $15 to send money to relatives overseas? I very rarely have to do this, and when I do $15 is a fraction of a percent. And certainly, its worth it in comparison to dealing with the Bitcoin ecosystem to get my money INTO Bitcoin and then out on the other side. So no, I don't mind. Now you may be saying "Well when everyone uses bitcoins in the future these problems won't exist, and furthermore..." Yeah but if bitcoins get market penetration then banks and other services can adjust prices to compete. > This is disruptive technology. Credit card companies and international money transfer companies are panicking right now. Everyone throws around the word "disruptive" on this site, but seldom is it really true. I keep an eye on the Bitcoin ecosystem because it is interesting, but I've seen literally nothing offered that appeals to me over existing services. When Bitcoin provides me with real, significant value, then I'll think about buying in. Also, its amusing how its advocates claim that traditional finance companies are "terrified." I've seen absolutely ZERO evidence of this. Its more of the Bitcoin community's lack of reality.

vinceguidry 13y ago
> "Well when everyone uses bitcoins in the future these problems won't exist, and furthermore..." Question: What would happen if literally everyone started using bitcoin? Could the system handle that much of a load?
- srdev 13y ago
  As currently implemented, no, because network traffic and disk size scales at O(n) with the number of transactions. There is currently a 7 transaction/sec limit in order to avoid the blockchain ballooning in place. The fact that Bitcoin is really a decentralized, shared ledge means that scaling horizontally is difficult (and is not possible with the current implementation). There was a video linked on Hacker News about the scalability issues by a well-respected researcher a while back, but I can't seem to find it. I'm not intelligent enough or well-versed enough to say whether the issues are insurmountable or not. I do know that some very smart people are working on Bitcoin, so they very well may be. I'm only speaking to the current system.
geminitojanus 13y ago
> Credit card companies do not charge 4%. I worked in credit cards about a decade ago, so unless the marketplace is less competitive now than before, I assume this still holds true. Furthermore, the fees that do exist are not necessarily passed on the consumer, but taken out of profit. This isn't entirely accurate. Most credit card companies now tack on a 30c + 2.9% surcharge for processors that do fewer transactions than some arbitrarily defined limit, well known to most small companies as the "PayPal tax" because they started doing it first and the credit card companies realized they could get away with it too. And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too. Or haven't you heard about the recent record profits being made by Mastercard et al?
- srdev 13y ago
  > This isn't entirely accurate. Most credit card companies now tack on a 30c + 2.9% surcharge for processors that do fewer transactions than some arbitrarily defined limit, well known to most small companies as the "PayPal tax" because they started doing it first and the credit card companies realized they could get away with it too. Wasn't aware of that. We charged flat percentage rate, and added to the processor I think it was 1.5% or so. But like I said, a decade ago, so maybe I'm just wrong on that point and forgot. > And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too. Is it actually proven that the costs are passed on (i.e. that the price would be lower in absence of credit cards)? Because, again, in theory that only works if the demand has enough inelasticity.

geminitojanus 13y ago

> How about the fact that the banking system charges huge fees for the use of their networks and technology? Yeah that sucks. But the only thing that's going to change this is regulation, not non-existent competition. > Do you mind paying $15 to send money to relatives overseas? Most of us don't have relatives overseas. And for the most part, if we did and we were sending money over seas, it'd probably be in denominations that make $15 a pittance. > This is disruptive technology. Credit card companies and international money transfer companies are panicking right now. This is hilarious and bullshit. Nobody's panicking. I doubt if most bankers even know what Bitcoin is. If they were scared, they'd go to their favorite lawmaker with a quarter billion dollars and tell them to make Bitcoin go away, and guess what? It would - "Silkroad"-style shutdowns would happen to all the Bitcoin companies, the value of bitcoin would plummet and this shanty economy would disappear overnight.

ojr 13y ago
Total Market Cap: $ 12,947,277,234 http://coinmarketcap.com/ http://coinmarketcap.com/ I think they're going to need more than a quarter of a billion...
- dragonwriter 13y ago
  What does the market cap of bitcoin have to do with the cost of getting government to legislate so that it isn't viable?
  - ojr 13y ago
    nothing at all, cost doesn't matter security of the software is all that matters
- geminitojanus 13y ago
  Good luck finding a congressman to buy who will accept bitcoin as payment.

skybrian 13y ago

As far as I can tell the payment industry is about hiding the fees. To consumers, credit cards seem not to have any fees because the merchants pay them. (This is why they can give you cash back.) Accepting Bitcoin is a different way of hiding fees. It's somewhat difficult to compare prices to USD because you have to do the exchange rate calculation yourself. Merchants could easily charge a small premium for Bitcoin transactions and consumers can't easily tell if the deal is slightly better or slightly worse. As a result, there's little incentive to give a discount for Bitcoin since it's unlikely to get more sales. The fees are still there; they're hidden in the bid/ask spread for exchanging bitcoin for dollars. So yeah, this is "innovative" and possibly disruptive but only in the same way as other financial innovations that seem to give you a good deal while actually charging more.

nly 13y ago

Bitcoin hash difficulty rises to ensure the block rate remains relatively stable at 1 block every ~10 minutes. Meanwhile the block reward falls exponentially. By definition then, it requires that other variables change such that mining remains profitable for someone to survive, otherwise all incentive of maintaining the blockchain collapses. Sure, you could argue that mining will reach a state of neutral ROI just to serve the public good... but guess what, there's a fee system in the protocol that will ensure that probably won't happen. The 'but banks charge fees' argument just doesn't hold water long term. Blockchain resources are finite, and all indications are solving Bitcoins long term scalability problems (in terms of number of transactions per second) is still quite hard. Unless the value of Bitcoin grows with hash difficulty and the inverse of block reward sizes, fees will rise in the Bitcoin network. It's naive to think it'll be a free ride payment network forever.