Comment by Meekro | Hacker News Reader

Comment by Meekro | Hacker News Reader

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You're not an idiot -- the things you described are very real. I've heard about tons of scams and quite a few dead-end ventures. The 21inc thing sounds pretty bizarre to me as well, but there is more going on in the bitcoin world than just that.

I'm involved with a VPS hosting company called ChunkHost, and we've accepted bitcoin for many years. We're not criminals, and we don't tolerate criminals on our network, and nonetheless bitcoin has served us well as a means of payment. We've written on our blog[1] about how bitcoin payments are 20-30% of our revenue.

Another interesting company is purse.io -- they let you get something like a 20% discount on your Amazon purchases by paying in bitcoin. coffee.foldapp.com lets you get 20% off your Starbucks purchases by paying with bitcoin. Again, this is not a scam -- I use it and it works. Don't you think this is a real benefit that real people could appreciate?

I'm curious how long you've been following bitcoin. I've been interested in it since 2009/2010, and have seen the goalposts move a great deal: every time a goal is reached, the critics change it so they can declare bitcoin a failure. First it was that "you can't buy anything for it," which was true until a pizza was sold for 10,000 bitcoins in mid-2010.

Then it was "no store accepts it" -- which was true until a few months later when you could buy things like web hosting from tiny bitcoin-only companies. Then it became "no large company will ever accept it." That remained true for a while, but eventually Wordpress became the first large company to do so. Others like Newegg, Overstock, and even Microsoft followed soon after. "Nobody will ever pay with it" was another one, and that was shattered once those companies started posting bitcoin revenue which, despite being a tiny share of their overall revenue, showed that people were consistently spending their coins.

I'm not saying that grandma will be buying gas with bitcoin anytime soon (or ever) -- just that there is substance there: merchants accepting it, consumers spending it, and interesting things like purse.io that couldn't exist without it.

[1] https://chunkhost.com/blog/17%2Fbitcoin_revenue_in_2014

We at prgmr.com started accepting bitcoin recently via bitpay, and I think that a payment gateway like bitpay which allows you to accept bitcoin without actually having to hold bitcoins at any point make a huge difference. In the US, bitcoin counts as property which means you can have a capital gain or loss when it is exchanged later, which can become an accounting headache.

The reason we first started really thinking seriously about bitcoin was because existing customers weren't able to get very many US dollars anymore due to economic restrictions in their home country, and without offering bitcoin they couldn't pay us. As long as these sorts of economic constraints exist, there will be a market for bitcoin.

Economic restriction imposed by the government of the home country or imposed by Western governments?

Let me see if I can give some useful goalposts, ones commonly used with other technologies. Consider the classic technology adoption curve, which is the focus of industry classic "Crossing the Chasm":

https://en.wikipedia.org/wiki/Technology_adoption_lifecycle

Oversimplifying, the Innovators, a few percent of a market, will buy anything just because it's cool. An obvious example there is Google Glass. Or a personal example, I just bought an IR camera for my phone. [1] I have absolutely no practical use for this, but that stopped me for about three seconds before I clicked "buy".

The next group is the Early Adopters. They buy in because they have a significant need not addressed by existing technology and are willing to work hard and/or pay lots to solve the problem. Then after that, we have the Early Majority, the first half of mainstream purchasers.

Now the supposed market of Bitcoin is "people spending or transferring money", which is a large fraction of humanity. So my goalpost would be getting out of the 2.5% of the market that is Innovators and well into the Early Adopters. Let's say 10% of the total market. (I'd even be happy with 10% of some major submarket, but since the claim is that Bitcoin will change everything, I'm glad to run with 10% of everything.)

From that standard, the fact that somebody bought a pizza is not so interesting. Ditto your hosting company; what you folks take in via Bitcoin in a year is about 0.00015% what AWS takes in in fiat dollars, or about 47 seconds of their annual revenue.

Ditto the things you mention with purse.io. Either they are subsidizing that 20% Amazon discount or there are hidden fees; Amazon makes under 10% on what they sell. As we learned in Bubble 1.0, you can't evaluate a business by the amazing deals they are using to acquire customers.

My prediction is that Bitcoin will never get close to the goalpost of 10% of the market, because nobody has found a way to solve a significant problem. My current belief that Bitcoin is Segway for the wallet: a really cool technology that almost nobody actually needs.

[1] http://www.flir.com/flirone/display/?id=69324

Like most disruptive technologies, it's not quite clear why Bitcoin / blockchain are better than incumbents, namely credit cards / centralized databases.

At Purse, we use blockchain escrows to unlock value from Amazon gift card balances. This was previously impossible (gift card exchanges can't transact Amazon), and the liquidity premium powers the discount. Escrows and other complex transactions are difficult using traditional payment systems, and we believe that they can be applied more broadly to many other markets.

Ok, so if I understand you correctly, there are some people who have gift cards and want cash. They're willing to take a substantial hit to do that. And a quick Google search shows that there are plenty of people in that business. But your unique angle is that other exchanges can't handle Amazon cards. Could you say more about why, and how Bitcoin makes that different for you?

There is tons of anecdotal evidence that Purse.io exists primarily as a way to monetize stolen credit cards.

More like once out of 30k+ transactions. PayPal, AirBnB, and Raise all faced similar challenges.

purse.io's UI emphasizes the discounts you can get, by having a slider from 0% - 50% when you put in your wishlist. They claim they're just matchmaking with a buyer really interested in Bitcoin, but really, there's no way that 50% discounts on Amazon would ever happen, unless it's money laundering or CC fraud. And even then, 20% is really skeptical.

FoldApp seems to just be subsidizing purchases with VC money for adoption. It doesn't seem to be going well.

See also: Flooz, of which 20% of their transactions were fraudulent: https://en.wikipedia.org/wiki/Flooz.com

So the UI allows users to set a discount rate, similar to the way you set a limit order on etrade or Name Your Price on Priceline. I can place an order to buy AAPL for $100 or bid to stay in a 5 star hotel for $10. Doesn't mean they will get filled.

But they will be filled. By people who are very eager to cash out of some stolen credit cards or need some dirty money in someone else's hands. And, bonus points, in a way that makes the transaction irreversible.

Or, more likely, someone will jump in front of that request for 50% and ask for 45%. Then 40%, then 30, then 20 and then 8%. It's a market.

I do agree, though, that those very high discounts should be a red flag, if they're for any serious money. Stuff for $5 with a 50% discount is no big deal if someone just wants ot be rid of a card and doesn't mind losing a couple bux, which they'd end up paying in fees buying BTC anyway.

German police searched a house and seized stuff for months in one case[1], Amazon reversed gift credit in another[2].

Obviously this is no proof that fraud is rampant, but I still lean toward thinking fraud is too likely for me to want to be involved with using purse.io, especially if I wanted a good deal (big discount = more likely it's a carder cashing out a stolen card.) If nothing else these stories show there's a small chance you might get burned pretty badly. Has anything significantly changed to remove or lessen the risk?

[1] https://www.reddit.com/r/Bitcoin/comments/2po40d/since_my_ho... [2] https://www.reddit.com/r/Bitcoin/comments/2eqcnv/do_not_purc...

Restrictions on buyers (unverified users are limited, 6 levels), social verification, behavior analytics (sift science), among others. User was made whole, police dropped the case, and we introduced $10,0000 guarantee. Not an excuse, but we were a team of 2 when that transaction happened, and it was 3 months after we started while we were in an accelerator.

I have to admit, I asked the question rhetorically expecting that nothing has changed, but it's good to know some progress has been made.

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