6 ms·

"nearly everyone actually using it to exchange value is really just using it as a just-in-time proxy for some other currency" And this is fantastic! It demonst

by mrb 12y ago

"nearly everyone actually using it to exchange value is really just using it as a just-in-time proxy for some other currency" And this is fantastic! It demonstrates clearly that the payment processing aspect alone (without even arguing about the currency aspect) of Bitcoin is a killer application. Being able to receive international payments from any country, in a few minutes, 24/7 (no bank holidays), with extremely low fees, with zero fraud (thanks to transactions being irreversible) beats any current payment processing platform. Quite a few business and financial leaders have noted this. These are also the reasons why Bitcoin is starting to provide great competition to the remittance industry (eg. http://letstalkbitcoin.com/blog/post/in-depth-review-bitpesa http://letstalkbitcoin.com/blog/post/in-depth-review-bitpesa)

pjc50 12y ago
zero fraud (thanks to transactions being irreversible) These are not the same thing at all! Irreversible transactions just means you can't get a refund when you're defrauded. Bitcoin allows recipients to defraud senders at will. I suppose this is popular because the existing system with credit cards defaults to allowing the public to defraud the merchants, but it's not an improvement overall.
- venaoy 12y ago
  I strongly disagree. Bitcoin is an improvement for 2 reasons. 1. Fraud come most often from customers (who have nothing to lose), not from merchants (who need to maintain their reputation). As a matter of fact, fraudulent chargebacks cost more than $11 billion a year: http://www.dailyfinance.com/2014/03/20/friendly-fraud-costs-retailers-billions/ http://www.dailyfinance.com/2014/03/20/friendly-fraud-costs-... This is why merchant love Bitcoin's irreversible transactions. This fact alone cuts down most of the fraud that currently occurs with traditional payment systems. 2. In the extreme minority of cases where a merchant is malicious, credit cards are actually terrible. Handing over all your identity details (CC number, expiration date, CVS number, billing address, etc) allows the merchant to steal your identity and make fraudulent charges. Identity theft costs $25 billion a year: http://www.businessinsider.com/bureau-of-justice-statistics-identity-theft-report-2013-12 http://www.businessinsider.com/bureau-of-justice-statistics-... It is possible but a PITA (and still costly!) to recover from a serious identity theft accident... That's why Bitcoin is an improvement because a transaction authorizes merely a transfer of coins and nothing else, so the malicious merchant cannot cause further damages. On top of that, Bitcoin also allows you to completely get rid of this possibility of even losing coins, via cryptographic escrow systems: two-party trustless escrow (http://blackhalo.info/wp-content/uploads/2014/06/whitepaper_twosided.pdf http://blackhalo.info/wp-content/uploads/2014/06/whitepaper_...), or 3-party escrow but where the escrow does not even has access to the funds (https://bitescrow.org/ https://bitescrow.org/)! All this is completely infeasible with traditional payment systems. Surely, the practicality of such escrow systems will increase overtime. Don't judge Bitcoin based on its current imperfections, but envision what is possible.
  - eridius 12y ago
    > Fraud come most often from customers [...] not from merchants That only works if you're talking about a customer buying something from an established merchant. It doesn't help at all if the merchant is unknown (and therefore has no reputation to protect), or is in fact another person and this is a person-to-person transaction. This problem is why Bitcoin needs escrow services (which most fiat currency transactions don't need), which of course add extra work and fees on top of what should be a straightforward transaction. > Handing over all your identity details [...] allows the merchant to steal your identity and make fraudulent charges. Charges that the credit card company pays, not you.
    - venaoy 12y ago
      > That only works if you're talking about a customer buying something from an established merchant. True. However my point stands: Bitcoin reduces fraud overall, because most transactions happen with reputable merchants. > Charges that the credit card company pays, not you. That's incorrect. In the end it comes from the customer's pocket. Because credit card companies have to have higher CC processing fees to cover higher fraud levels, which indirectly causes merchants to raise their prices. Sometimes it is not obvious (eg. all prices are 1-2% higher in an industry, eg. supermarkets), but sometimes it is more obvious. There is a perfect example from a few weeks ago demonstrating my point: AirBaltic charges a 5.99 EUR fee when processing a CC payment, but not when processing a Bitcoin payment: http://www.coindesk.com/airbaltic-waives-controversial-bitcoin-transaction-fee/ http://www.coindesk.com/airbaltic-waives-controversial-bitco...
      - eridius 12y ago
        This only works in the utopian world where customers never have a need to issue a chargeback. It's not like chargebacks are some inevitable consequence of the credit card system; they're a feature that the credit card system offers as last resort for payers who cannot resolve their issue with the merchant any other way.
eridius 12y ago
> in a few minutes Only if you already have BTC. And a transaction takes more than a "few minutes" to confirm anyway. Speaking personally, I did not own any BTC, and I did not have an account with an exchange. If I want to buy a few BTC to use in a transaction with someone else, it takes over a week. A few days to confirm a bank account at an exchange, and then 3-4 more days for the ACH transfer to put funds into the exchange, before I can finally buy the BTC. This is also far from decentralized. Everyone accepting BTC as a just-in-time proxy for other currency are extremely reliant on the exchange they use to do the immediate conversions (e.g. Coinbase). Since you already need to trust some centralized entity, Stellar ends up being a much better model for this sort of payment, because trust can be distributed better (with BTC, Coinbase goes down and you can't accept BTC until it comes back; with Stellar, you can continue to use the appropriate credits for as long as the issuer is still trusted by people), and because you don't need to do any just-in-time conversions, you can just accept USD credit and hold onto that and exchange it for "real" USD at your leisure.
- cgjaro 12y ago
  ~10 minutes = a few minutes. BTC transfers are fast once you already have coins, and this is a reason why its adoption is increasing. People realize that having BTC on hand is useful, so they start holding it. There is a little friction to start adopting it, but once you use it, you truly appreciate many of its benefits! It is not true that BTC is far from decentralized. There are more than a hundred exchanges in the world as of today. And more and more exchanges open up, so it becomes more and more decentralized over time! It is also false you need to trust a centralized entity. Switching from Coinbase to BitPay is trivial (Overstock did their integration with Coinbase in about 2 weeks).
  - eridius 12y ago
    > ~10 minutes = a few minutes. 10 minutes? More like an hour. 10 minutes will get you one confirmation. But that's rarely good enough. 6 confirmations is usually considered a good threshold to protect against double spending, and that means you're waiting an hour. > People realize that having BTC on hand is useful, so they start holding it. "People" have been holding it ever since BTC launched, because a lot of people see it as an investment vehicle (albeit a highly volatile one). But BTC is still too volatile for most people to want to hold onto any for any real length of time. > It is not true that BTC is far from decentralized. I don't think you understand my argument. I'm not saying that there's a central point of failure that will take down the whole bitcoin network. Heck, that's true of Stellar too, despite the more centralized nature there. What I am saying is that all of the various gateways and exchanges and bitcoin services are still effectively centralized points of failure for the various services they represent. Yes, a company can switch from Coinbase to BitPay, but they won't be able to accept BTC for however long it takes them to move all their services over. Imagine if the company only accepted BTC, that would be a disaster! Similarly, people who use exchanges are taking on the risk of the exchange going under. This is largely due to the fact that people maintain balances with the exchanges, which means the exchange has actually issued them credit, and if the exchange vanishes, the credit is worthless. In that sense it's actually very much like Stellar. In fact, it's nearly exactly like Stellar, because Stellar has both the credit, and has the decentralized trustless currency STR, the big difference is with Stellar people are expected to trade credit, and with BTC, people are expected to redeem their credit with the exchange/gateway in order to trade BTC directly. Bitcoin does allow you to operate in a completely trustless, decentralized manner where you never leave the network, never deal in any currency except BTC, don't use any online services to manage this stuff (i.e. keep your wallet on your local machine, run the full bitcoin client, etc). But most people don't do that, because it's wildly impractical.

by mrb 12y ago

pjc50 12y ago

zero fraud (thanks to transactions being irreversible) These are not the same thing at all! Irreversible transactions just means you can't get a refund when you're defrauded. Bitcoin allows recipients to defraud senders at will. I suppose this is popular because the existing system with credit cards defaults to allowing the public to defraud the merchants, but it's not an improvement overall.

venaoy 12y ago
I strongly disagree. Bitcoin is an improvement for 2 reasons. 1. Fraud come most often from customers (who have nothing to lose), not from merchants (who need to maintain their reputation). As a matter of fact, fraudulent chargebacks cost more than $11 billion a year: http://www.dailyfinance.com/2014/03/20/friendly-fraud-costs-retailers-billions/ http://www.dailyfinance.com/2014/03/20/friendly-fraud-costs-... This is why merchant love Bitcoin's irreversible transactions. This fact alone cuts down most of the fraud that currently occurs with traditional payment systems. 2. In the extreme minority of cases where a merchant is malicious, credit cards are actually terrible. Handing over all your identity details (CC number, expiration date, CVS number, billing address, etc) allows the merchant to steal your identity and make fraudulent charges. Identity theft costs $25 billion a year: http://www.businessinsider.com/bureau-of-justice-statistics-identity-theft-report-2013-12 http://www.businessinsider.com/bureau-of-justice-statistics-... It is possible but a PITA (and still costly!) to recover from a serious identity theft accident... That's why Bitcoin is an improvement because a transaction authorizes merely a transfer of coins and nothing else, so the malicious merchant cannot cause further damages. On top of that, Bitcoin also allows you to completely get rid of this possibility of even losing coins, via cryptographic escrow systems: two-party trustless escrow (http://blackhalo.info/wp-content/uploads/2014/06/whitepaper_twosided.pdf http://blackhalo.info/wp-content/uploads/2014/06/whitepaper_...), or 3-party escrow but where the escrow does not even has access to the funds (https://bitescrow.org/ https://bitescrow.org/)! All this is completely infeasible with traditional payment systems. Surely, the practicality of such escrow systems will increase overtime. Don't judge Bitcoin based on its current imperfections, but envision what is possible.
- eridius 12y ago
  > Fraud come most often from customers [...] not from merchants That only works if you're talking about a customer buying something from an established merchant. It doesn't help at all if the merchant is unknown (and therefore has no reputation to protect), or is in fact another person and this is a person-to-person transaction. This problem is why Bitcoin needs escrow services (which most fiat currency transactions don't need), which of course add extra work and fees on top of what should be a straightforward transaction. > Handing over all your identity details [...] allows the merchant to steal your identity and make fraudulent charges. Charges that the credit card company pays, not you.
  - venaoy 12y ago
    > That only works if you're talking about a customer buying something from an established merchant. True. However my point stands: Bitcoin reduces fraud overall, because most transactions happen with reputable merchants. > Charges that the credit card company pays, not you. That's incorrect. In the end it comes from the customer's pocket. Because credit card companies have to have higher CC processing fees to cover higher fraud levels, which indirectly causes merchants to raise their prices. Sometimes it is not obvious (eg. all prices are 1-2% higher in an industry, eg. supermarkets), but sometimes it is more obvious. There is a perfect example from a few weeks ago demonstrating my point: AirBaltic charges a 5.99 EUR fee when processing a CC payment, but not when processing a Bitcoin payment: http://www.coindesk.com/airbaltic-waives-controversial-bitcoin-transaction-fee/ http://www.coindesk.com/airbaltic-waives-controversial-bitco...
    - eridius 12y ago
      This only works in the utopian world where customers never have a need to issue a chargeback. It's not like chargebacks are some inevitable consequence of the credit card system; they're a feature that the credit card system offers as last resort for payers who cannot resolve their issue with the merchant any other way.

eridius 12y ago

> in a few minutes Only if you already have BTC. And a transaction takes more than a "few minutes" to confirm anyway. Speaking personally, I did not own any BTC, and I did not have an account with an exchange. If I want to buy a few BTC to use in a transaction with someone else, it takes over a week. A few days to confirm a bank account at an exchange, and then 3-4 more days for the ACH transfer to put funds into the exchange, before I can finally buy the BTC. This is also far from decentralized. Everyone accepting BTC as a just-in-time proxy for other currency are extremely reliant on the exchange they use to do the immediate conversions (e.g. Coinbase). Since you already need to trust some centralized entity, Stellar ends up being a much better model for this sort of payment, because trust can be distributed better (with BTC, Coinbase goes down and you can't accept BTC until it comes back; with Stellar, you can continue to use the appropriate credits for as long as the issuer is still trusted by people), and because you don't need to do any just-in-time conversions, you can just accept USD credit and hold onto that and exchange it for "real" USD at your leisure.

cgjaro 12y ago
~10 minutes = a few minutes. BTC transfers are fast once you already have coins, and this is a reason why its adoption is increasing. People realize that having BTC on hand is useful, so they start holding it. There is a little friction to start adopting it, but once you use it, you truly appreciate many of its benefits! It is not true that BTC is far from decentralized. There are more than a hundred exchanges in the world as of today. And more and more exchanges open up, so it becomes more and more decentralized over time! It is also false you need to trust a centralized entity. Switching from Coinbase to BitPay is trivial (Overstock did their integration with Coinbase in about 2 weeks).
- eridius 12y ago
  > ~10 minutes = a few minutes. 10 minutes? More like an hour. 10 minutes will get you one confirmation. But that's rarely good enough. 6 confirmations is usually considered a good threshold to protect against double spending, and that means you're waiting an hour. > People realize that having BTC on hand is useful, so they start holding it. "People" have been holding it ever since BTC launched, because a lot of people see it as an investment vehicle (albeit a highly volatile one). But BTC is still too volatile for most people to want to hold onto any for any real length of time. > It is not true that BTC is far from decentralized. I don't think you understand my argument. I'm not saying that there's a central point of failure that will take down the whole bitcoin network. Heck, that's true of Stellar too, despite the more centralized nature there. What I am saying is that all of the various gateways and exchanges and bitcoin services are still effectively centralized points of failure for the various services they represent. Yes, a company can switch from Coinbase to BitPay, but they won't be able to accept BTC for however long it takes them to move all their services over. Imagine if the company only accepted BTC, that would be a disaster! Similarly, people who use exchanges are taking on the risk of the exchange going under. This is largely due to the fact that people maintain balances with the exchanges, which means the exchange has actually issued them credit, and if the exchange vanishes, the credit is worthless. In that sense it's actually very much like Stellar. In fact, it's nearly exactly like Stellar, because Stellar has both the credit, and has the decentralized trustless currency STR, the big difference is with Stellar people are expected to trade credit, and with BTC, people are expected to redeem their credit with the exchange/gateway in order to trade BTC directly. Bitcoin does allow you to operate in a completely trustless, decentralized manner where you never leave the network, never deal in any currency except BTC, don't use any online services to manage this stuff (i.e. keep your wallet on your local machine, run the full bitcoin client, etc). But most people don't do that, because it's wildly impractical.