Hacker News Reader

Comment by Meekro | Hacker News Reader

Despite the blockchain hype, "money" is the killer app for bitcoin and ethereum.

Before bitcoin, an online business would be taking a huge risk if it accepted a credit card payment from someone in Latvia. The fraud rate on such payments is probably 50%. With bitcoin, it's safe and fast. I own such a business (a VPS hosting company) and Bitcoin really has been a great solution for us.

Before bitcoin, a legal pot shop would have to deal with cash because no bank would give it an account. Having all this cash around creates a danger for the employees, not to mention the armored car drivers. Bitcoin is a tool that can be used to solve the problem.

View on HN

You've just shifted the risks from the business to the customer. As a customer, my credit card gives me significant protection from paying for a VPS from someone who intends to scam me.

Somehow, I suspect more people have had Bitcoin keys stolen by malware than have had their armored cars robbed.

"Money" is not a single app, it is three apps in one. It's used to store, transmit, and account for value.

And I would argue that cryptocurrencies do none of those things. What value is being stored? Owning some BTC just implies that someone at some point burnt some electricity and computing power to solve a rather insignificant crypto problem.

This is precisely what I don't get about cryptocurrencies. There is no intrinsic value, and they're not even backed by the full faith and credit of, well, anyone. I don't see why it's "worth" anything.

And, we don't need a digital currency. We already have a bunch of them (the US dollar among them). Most money in the world doesn't exist as physical coins, notes, gold/silver, etc. It's all bits in a computer, but those bits are backed by a sovereign entity. That's why we are able to use them as currency.

If anyone can explain the fundamentals of why BTC or any other cryptocurrency should have any value whatsoever, I would really appreciate that.

I think their intrinsic value is backed by their usefulness as a medium of exchange for the use cases described in the parent comment. Solving the crypto problem seems more like something that makes them useful for exchanging.

Solving the crypto problem is just part of the mechanism that ensures there's a limited supply of them. We could do the same thing by randomly assigning floating point numbers between 0 and 2.1x10^10 - 1 (corresponding to the 21M BTC that are ever allowed to exist).

The part that makes BTC relatively safe to transact with is the blockchain itself.

Exchange bitcoin with real money and ask yourself the same questions.

> And, we don't need a digital currency. We already have a bunch of them [...]

That's a bit enraging to me. I feel it's in the same class of arguments with things like earth is flat -- we don't want a round one, blacks are not humans -- they should be happy we grant them slavery. The status quo is our normality.

> backed by a sovereign entity

Which one? I had savings to buy several apartments but in a few years those savings were worth a lunch. That was a long time ago. But as of now my income depends on US, EU, Syria, Turkey etc crisis and hell knows what other stuff I don't even hear about on the news.

As a guy lacking both bitcoins and real money they both weight as a surprisingly similar amount of crap.

>It's all bits in a computer, but those bits are backed by a sovereign entity. That's why we are able to use them as currency.

I've always felt this argument is disingenuous. People traded goods and services prior to government-backed currency. Being backed by a government sure does simplify things and make more people value it but it isn't necessary. Government-backed money can turn into Monopoly money as well.

Lest you forget 1920's Germany [0].

[0] http://i.imgur.com/nk0CnNr.png

I definitely wouldn't say "fast". I can tap my phone with apple pay or insert my VISA chip card and it takes <5 seconds.

I agree though that for payments where the merchant can't be banked or VISA doesn't want to support them, Bitcoin or cash are the only other options.

the <5 seconds is not settlement. It's a 3rd party signalling to another 3rd party.

Bitcoin confirmations are just that, confirmations of transaction being approved by the network.

-blockchain is immutable -only gets written if valid -takes 10~60min to be confident of the reality -no chargebacks

As a user, <5 seconds is much faster than 10~60 minutes. And I have never had VISA mutate my transaction... that would be fraud.

Once every 200 transactions let's say, my card will be denied and I'll need to swipe it a second time. This is significantly less of an ordeal than having to rely on the inefficiency of the blockchain every single transaction.

It does not take 10~60 minutes to sign a bitcoin transaction... It doesn't even take a second. Maybe a slow PoS will need another second to actually verify the transaction, but this is still way faster than VISA.

I regularly spend more time than that on VISA transactions because I don't live at my billing address on another continent.

> It does not take 10~60 minutes to sign a bitcoin transaction... It doesn't even take a second.

Why are you only considering signing time? Signing a bitcoin transaction is not sufficient for the merchant to be confident that they can give you your goods. You must submit it to the network and the merchant must be reasonably confident that it will be accepted in a block as-is and that the block will not be orphaned.

Edited the comment to include verification almost simultaneously with your post :)

But yeah, obviously as the transaction value goes up the merchant will need to wait a few more seconds to counter doublespend attacks.

>You must submit it to the network

Not necessarily true, ideally the customer doesn't need internet connection and just transmits the signed transaction to the PoS.

>and the merchant must be reasonably confident that it will be accepted in a block as-is and that the block will not be orphaned

First of which can be verified very fast by a computer. I believe orphaned blocks are rare enough that they're mostly a non-issue.

I guess it's important to point out that in practice most Bitcoin ATMs I've used did 0-confirmation transactions up to 1000 euros after only a few second wait, so it's not like all bitcoin merchants suck.

The average confirmation time for a Bitcoin transaction was 400+ minutes recently (and is still around an hour even now). https://blockchain.info/charts/avg-confirmation-time?daysAve...

Yes, but you don't need more than 20-30 seconds to be confident that a transaction isn't a doublespend attempt.

After that it's only about checking if the fee is high enough.

> After that it's only about checking if the fee is high enough.

Which can take up to 72 hours, right?

No, you just check if the fee per KB is more than x. Where x is a fee that is likely enough to confirm. This is practically instant.

I'm not sure "likely enough to confirm" is going to go over all that well with many merchants, particularly when that chart shows the price-per-byte jumps all over the place rapidly.

physical mail through the post office still exists alongside e-mail.

Just like credit cards will exist alongside cryptocurrency. There already exists merchant processors like BitPay that allow for 0-conf transactions. I'm not saying that's ideal or the permanent solution, but because bitcoin/crypto is software, it will continue to be improved upon over time.

Is your argument that the VISA network is not software that is being improved over time?

Did you know that VISA has been able to process up to 56,000 transactions per second in 2014? It also sounds like they improved 20% from 2013 to 2014 [1]

If the past 8 years are of any indication, bitcoin is more like physical mail than VISA is in your analogy, in terms of performance, ease of use, and how fast it is improving.

[1] http://www.digitaltransactions.net/news/story/Visa_s-Test-Re...

One market is international peer-to-peer payments.

My US credit cards work well in most of the world if I want to buy from some kinds of business (ex. use a chip card to pay for gas, hotel, groceries, restaurant meals, etc. in Canada.)

If I want to send money to a bank account elsewhere in the world my credit union charges about $40, and most other banks charge about the same. This is not so bad if you need to move $100,000 but the fee is too much to move $100.

Bitcoin is not as fast as swiping a credit time but bitcoin and a wire transfer are on the same scale, and even if you pay a $5 miner's fee on a transaction that beats the wire transfer.

Remittances have been shown to not actually be better with bitcoin. [1] [2] [3]. I can send 2000 USD to India using TransferWise and they will only charge me 17.84 USD. That is a 0.89% fee using a reliable mechanism and I know my recipient will have their native currency in their bank account within a couple business days. Compare that with opening an account on a US bitcoin exchange, sending money there (time delay), buying bitcoin (exchange fee), opening an account in india (requires verification and linking a bank account), sending the bitcoin over (time delay), converting the bitcoin to rupees (time delay, exchange fee, volatility risk), then sending the money to the bank (another time delay).

[1] https://medium.com/cryptonight/bitcoin-doesn-t-make-remittan...

[2] https://bitcoinmagazine.com/articles/rebittance-startups-agr...

[3] https://www.saveonsend.com/blog/bitcoin-money-transfer/

Roll back.

A Bitcoin transation is not a credit facility. This is an important differentiation.

When you pay with a credit/debit card, the money isn't transferred right away.

Visa/MC check to see if they are willing to approve the transaction(see if you've breeched your limit)

if they are, they guarentee that you are good for the money, and the merchant approves the transaction.

A few days later, visa will settle with the merchant, paying your debt on your behalf.

You then pay visa on your monthly schedual.

Visa also act as an escrow of sorts, If there is fraud, or the transaction becomes void, Visa is equally liable to sort it (depending on country).

Bitcoin has none of these functions, it is just digital cash, with a public ledger. Whats worse is you need a credit function to allow quick purchasing of thing with bitcoin, because of the time needed for verification.

Without a relable and safe credit/escrow system digital currencies will just be limited to the brave or those who have a decent cradit facility.

> This is an important differentiation.

From the user's perspective, not really. Many people compare their credit card to Bitcoin even if the way these systems work are completely different (credit network atop fiat versus digital asset, as you say).

At the end of the day, all that matters is how fast, secure and reliable these things are to the user. If they can pay for their loaf of bread within 5 seconds and easily pay off their credit card once a month, and the Bitcoin alternative is using a crypto-exchange, exposing yourself to volatility risk, all for something that is slower and less reliable at the point-of-sale... Bitcoin is far behind.

Sure, if we had a credit system on top of Bitcoin, it would probably have an easier time competing with VISA credit cards, but the fact is that does not exist so cannot easily be compared today.

Maybe to be more precise "anonymous cash replacement" is better?

Electronic "money" in general has long been available through credit cards, PayPal, etc but at higher cost and loss of anonymity

Right, but it's more than electric money. The OP mentions it's electric money that:

1) has assured/immutable transactions (unlike CCs) - This may or may not be a good thing from a purchaser perspective on seller fraud.

2) is available to all individuals (unlike banks) - Again, which may or may not be a good thing if you're worried about money from/to the grey/black market.

Reply on news.ycombinator.com