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I like that this is at least opening up to the possibility of new, more efficient transaction methods. Marc Andreessen made me think about credit cards differen

by bsirkia 13y ago

I like that this is at least opening up to the possibility of new, more efficient transaction methods. Marc Andreessen made me think about credit cards differently after hearing him on a Freakonomics podcast: "And so one way to think about credit card fraud, is credit card fraud is a two-to-three percent drag on the entire economy. It’s an artifact of the fact that credit cards were never designed to be used the way that they’re being used today. Credit cards never anticipated online transactions. Credit cards, by the way, the credit card system, never anticipated malware running inside a cash register at Target. In the 1950s that was an inconceivable idea, which is when credit cards were dreamed up. And so if you have a payment system like Bitcoin where you don’t have the credential exchange, and you have no risk of identity fraud, and you have no risk of people being able to run transactions on your credit card after the fact, you can basically eliminate that entire category of fraud…"

wdewind 13y ago
On the other hand... The 2 to 3% drag needs to be corrected for increased liquidity, which is difficult to do. People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth. If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. The premise the article presents (essentially a different crypto currency for every business I interact with, as well as loan instruments built on top of btc) is actually not a preferable reality to the current one. Also his claim that you have no chance of identity fraud is really only relevant to the merchant (and is obviously worse for the consumer). But merchants have already done the calculation: even at 2-5% transaction fee and eating a lot of fraud, they are happy to process credit cards.
- bsirkia 13y ago
  Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. I also don't think the article is necessarily saying that we will have different crypto-currencies for each business, just that we already use a bunch of different payment methods (points, air miles, credit, etc.) and it will be faster and easier to choose which one you use.
  - wdewind 13y ago
    > Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. How?
- Xdes 13y ago
  >If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. Why? One way transactions cut down fraud. It's not inconceivable to have a hardware digital currency wallet that can be used similar to the modern credit card. Banks could issue credit that is spendable in the same way with additional automatic escrow. Why continue to have the fraud ridden system when the alternative exists?
  - wdewind 13y ago
    Huh? One way transactions cut down charge backs, they don't cut down fraud. It just moves the fraud risk to the consumer (and the wallets), instead of the merchants. Great for merchants, not great for consumers. Again, as merchants are already willing to take a cut to attract consumers via credit cards, it seems unlikely that consumers will be motivated to use bitcoin over credit cards.
- QuantumChaos 13y ago
  There is no logical relation between credit vs debit cards, and fraud. You could have a bitcoin based account with a borrowing limit, which could only make payments to registered identities (equivalent of merchants), creating a credit card-like account. And when you say that merchants find credit cards acceptable in spite of fraud, that doesn't imply that fraud isn't a huge drain on the economy, it just means that credit cards are still a better alternative than cash. But if we could get rid of the fraud, we would still save a huge amount.
  - wdewind 13y ago
    Can you explain the scheme in which a user would be authenticated and authorized under a credit-card-like-account that would not be open to the kind of fraud we see on credit cards currently? And you're right, what implies that fraud isn't a huge drain on the economy is that it comes from massively increased liquidity. Fraud is a biproduct of increased liquidity. I don't know how many times I have to scream this in this thread. If you aren't addressing the increased liquidity offered by cards you are missing a massive part of the equation.
- canvia 13y ago
  "people use credit cards because they do not have the extra money" So you think it's better for people to be able to spend money that they don't have and pay usurious interest rates and fees, decreasing the utility of their future income and locking them into perpetual debt? Maybe it would be better if credit were a bit more difficult to access so that people think about it more before utilizing it.
  - wdewind 13y ago
    False dichotomy.
  - dllthomas 13y ago
    If you borrow against money that you're going to have before the next credit card bill is due, you're not paying usurious interest rates and fees. We don't always have the liquidity to pay for what we charge when we charge it but that's not at all the same thing as not being able to afford it (if we didn't have credit cards available, we'd shift our assets to otherwise be more liquid).
- edanm 13y ago
  "People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth." That's not true everywhere. I'm not sure if it's US-only behaviour, but in other countries, the majority don't use credit cards for debt - just as a convenient payment mechanism.
  - surfmike 13y ago
    True, and fees are often way lower for debit cards as well. Not sure what it is in practice, but here's an example: http://www.cardfellow.com/blog/debit-card-charge-calculator-durbin/ http://www.cardfellow.com/blog/debit-card-charge-calculator-...
  - wdewind 13y ago
    > That's not true everywhere. I'm not sure if it's US-only behaviour, but in other countries, the majority don't use credit cards for debt - just as a convenient payment mechanism. Sorry to pull an HN special on you, but do you have any kind of source for that? I've never heard it, though I have heard that debit card usage is much higher in Europe.
    - edanm 13y ago
      No reason to apologise for asking for a source :) Always legitimate. Unfortunately, I don't have one. I do live in Israel though and I can tell you that here, at least, most credit cards are used like debit cards (as I understand them). We do technically buy on credit, but pay up at the end of every month. We do have one thing which, afaik, doesn't exist in the US, which is that we can "split up" a payment when paying for an item. E.g. you buy something for 100$, you can ask to pay in 2 installments of $50. That's pretty common, and usually doesn't cost anything extra for small amounts of installments.
      - gus_massa 13y ago
        It’s very similar here in Argentina, but we usually have a different plastic piece to use as debit card and as credit card.
- vvvv 13y ago
  >People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money I use my credit cards because they don't cost me any more than using cash (I pay off the full amount each month) and I get a lot of various perks in return, like cashback, airmiles and insurance. They are convenient and I use them whenever I can.
  - fixedd 13y ago
    Also decreased risk. Loose your cash and it's gone, loose your card and you just call in for another.
- sailfast 13y ago
  Great point. As for the questions below, let's talk real numbers for the US in 2014: Average household owes $7,115 on their credit cards. Average indebted household owes 15K+. http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ http://www.nerdwallet.com/blog/credit-card-data/average-cred...
- snarfy 13y ago
  What? I don't own a credit card, but I use a visa card all the time, because it's convenient. I'm pretty sure more people use their bank cards than their credit cards. It still the same crappy technology underneath.
tpeng 13y ago
Bitcoin doesn't eliminate security risks, it pushes the costs onto consumers. It's inconceivable to me that regular users can be trusted to maintain and secure their own wallets, so the only solution is an online wallet. But those businesses will need to be paid for their service, and face security risks as well, which under the current system are ultimately transferred to users. For bitcoin to work, we need a system that guarantees that consumers will not bear losses from fraud or hacking.
- vvvv 13y ago
  1) the only solution is an online wallet 2) those businesses will need to be paid for their service, and face security risks as well 3) government will regulate 4) some businesses will start wallets/vaults, which will enable you to open a wallet free of charge in exchange for depositing your bitcoins 5) those businesses will use the deposited bitcoins for lending, investments and speculation hello brave new world...
- hibikir 13y ago
  So, the short version is that for a digital currency to be popular and convenient, it has to not be like bitcoin at all

by bsirkia 13y ago

wdewind 13y ago

On the other hand... The 2 to 3% drag needs to be corrected for increased liquidity, which is difficult to do. People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth. If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. The premise the article presents (essentially a different crypto currency for every business I interact with, as well as loan instruments built on top of btc) is actually not a preferable reality to the current one. Also his claim that you have no chance of identity fraud is really only relevant to the merchant (and is obviously worse for the consumer). But merchants have already done the calculation: even at 2-5% transaction fee and eating a lot of fraud, they are happy to process credit cards.

bsirkia 13y ago
Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. I also don't think the article is necessarily saying that we will have different crypto-currencies for each business, just that we already use a bunch of different payment methods (points, air miles, credit, etc.) and it will be faster and easier to choose which one you use.
- wdewind 13y ago
  > Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. How?
Xdes 13y ago
>If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. Why? One way transactions cut down fraud. It's not inconceivable to have a hardware digital currency wallet that can be used similar to the modern credit card. Banks could issue credit that is spendable in the same way with additional automatic escrow. Why continue to have the fraud ridden system when the alternative exists?
- wdewind 13y ago
  Huh? One way transactions cut down charge backs, they don't cut down fraud. It just moves the fraud risk to the consumer (and the wallets), instead of the merchants. Great for merchants, not great for consumers. Again, as merchants are already willing to take a cut to attract consumers via credit cards, it seems unlikely that consumers will be motivated to use bitcoin over credit cards.
QuantumChaos 13y ago
There is no logical relation between credit vs debit cards, and fraud. You could have a bitcoin based account with a borrowing limit, which could only make payments to registered identities (equivalent of merchants), creating a credit card-like account. And when you say that merchants find credit cards acceptable in spite of fraud, that doesn't imply that fraud isn't a huge drain on the economy, it just means that credit cards are still a better alternative than cash. But if we could get rid of the fraud, we would still save a huge amount.
- wdewind 13y ago
  Can you explain the scheme in which a user would be authenticated and authorized under a credit-card-like-account that would not be open to the kind of fraud we see on credit cards currently? And you're right, what implies that fraud isn't a huge drain on the economy is that it comes from massively increased liquidity. Fraud is a biproduct of increased liquidity. I don't know how many times I have to scream this in this thread. If you aren't addressing the increased liquidity offered by cards you are missing a massive part of the equation.
canvia 13y ago
"people use credit cards because they do not have the extra money" So you think it's better for people to be able to spend money that they don't have and pay usurious interest rates and fees, decreasing the utility of their future income and locking them into perpetual debt? Maybe it would be better if credit were a bit more difficult to access so that people think about it more before utilizing it.
- wdewind 13y ago
  False dichotomy.
- dllthomas 13y ago
  If you borrow against money that you're going to have before the next credit card bill is due, you're not paying usurious interest rates and fees. We don't always have the liquidity to pay for what we charge when we charge it but that's not at all the same thing as not being able to afford it (if we didn't have credit cards available, we'd shift our assets to otherwise be more liquid).
edanm 13y ago
"People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth." That's not true everywhere. I'm not sure if it's US-only behaviour, but in other countries, the majority don't use credit cards for debt - just as a convenient payment mechanism.
- surfmike 13y ago
  True, and fees are often way lower for debit cards as well. Not sure what it is in practice, but here's an example: http://www.cardfellow.com/blog/debit-card-charge-calculator-durbin/ http://www.cardfellow.com/blog/debit-card-charge-calculator-...
- wdewind 13y ago
  > That's not true everywhere. I'm not sure if it's US-only behaviour, but in other countries, the majority don't use credit cards for debt - just as a convenient payment mechanism. Sorry to pull an HN special on you, but do you have any kind of source for that? I've never heard it, though I have heard that debit card usage is much higher in Europe.
  - edanm 13y ago
    No reason to apologise for asking for a source :) Always legitimate. Unfortunately, I don't have one. I do live in Israel though and I can tell you that here, at least, most credit cards are used like debit cards (as I understand them). We do technically buy on credit, but pay up at the end of every month. We do have one thing which, afaik, doesn't exist in the US, which is that we can "split up" a payment when paying for an item. E.g. you buy something for 100$, you can ask to pay in 2 installments of $50. That's pretty common, and usually doesn't cost anything extra for small amounts of installments.
    - gus_massa 13y ago
      It’s very similar here in Argentina, but we usually have a different plastic piece to use as debit card and as credit card.
vvvv 13y ago
>People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money I use my credit cards because they don't cost me any more than using cash (I pay off the full amount each month) and I get a lot of various perks in return, like cashback, airmiles and insurance. They are convenient and I use them whenever I can.
- fixedd 13y ago
  Also decreased risk. Loose your cash and it's gone, loose your card and you just call in for another.
sailfast 13y ago
Great point. As for the questions below, let's talk real numbers for the US in 2014: Average household owes $7,115 on their credit cards. Average indebted household owes 15K+. http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ http://www.nerdwallet.com/blog/credit-card-data/average-cred...
snarfy 13y ago
What? I don't own a credit card, but I use a visa card all the time, because it's convenient. I'm pretty sure more people use their bank cards than their credit cards. It still the same crappy technology underneath.

tpeng 13y ago

Bitcoin doesn't eliminate security risks, it pushes the costs onto consumers. It's inconceivable to me that regular users can be trusted to maintain and secure their own wallets, so the only solution is an online wallet. But those businesses will need to be paid for their service, and face security risks as well, which under the current system are ultimately transferred to users. For bitcoin to work, we need a system that guarantees that consumers will not bear losses from fraud or hacking.

vvvv 13y ago
1) the only solution is an online wallet 2) those businesses will need to be paid for their service, and face security risks as well 3) government will regulate 4) some businesses will start wallets/vaults, which will enable you to open a wallet free of charge in exchange for depositing your bitcoins 5) those businesses will use the deposited bitcoins for lending, investments and speculation hello brave new world...
hibikir 13y ago
So, the short version is that for a digital currency to be popular and convenient, it has to not be like bitcoin at all