Visa May Add Cryptocurrencies to Its Payments Network, Says CEO | Hacker News Reader

Visa May Add Cryptocurrencies to Its Payments Network, Says CEO

coindesk.com

160 pointslelf164 comments

Don't trust, verify. It makes sense to Visa since they are in the business of verifying trust.

Proof of transaction history (ie credit) is public and inherent to blockchain, apparently this is taking some time to realize.

Isn't the saying "Trust, but verify"

Yes and its a play on that phrase.

You don't need to trust people on a blockchain, you have to trust the protocol, and then verify the results.

same

Yep, the old Russian proverb that’s falsely attributed to Ronald Reagan [1].

Getting back on topic, that’s entirely Visa’s business in being a payments network. When I first heard about Bitcoin and cryptocurrencies, I wondered why Visa/MC/Amex/Discover and even (newer) real estate companies like Redfin weren’t looking at this seriously, since it could hypothetically be used to verify contracts and transactions in a decentralized way.

[1]: https://en.wikipedia.org/wiki/Trust,_but_verify

"Don't trust, verify" is crypto's slogan.

"Trust, but verify" is Reagan's slogan.

The crypto slogan is “In Tether We Trust For Some Reason”

The average person with a Visa credit card has no idea how blockchain works, just like they don't know how traditional payment processors work. Unfortunately, with the amount of bad press constantly generated by media companies that are inherently linked with existing financial systems, people's ideas of crypto are probably overwhelmingly negative. This a great step towards building trust with the public, IMO.

Visa is in the payments business. The US Federal Reserve ("The Fed") is going live with an instant payments service in 2023-2024 [1] [2]. What does that leave Visa with? Hence, the existential crisis (first, trying to buy Plaid, and now "Crypto!").

[1] https://www.frbservices.org/financial-services/fednow/index....

[2] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa...

Visa is left with a valuable rewards game system where people get cash back or points or whatever. Plus the liability protections that credit cards come with.

People can already use debit cards with no effort, and merchants can accept that at very minimal costs. But still, most merchants are hesitant to offer lower prices to purchases with debit card because they are betting people spend more with credit cards.

I don’t expect this to change when the Fed’s system comes into play. I would actually expect the Fed’s system to replace cash transactions more than credit cards.

I don't think their rewards system is as valuable on you might think. When the cost of visa transactions are ultimately pushed to the consumer (~3%), they will eventually realize, those rewards are not worth the cost.

Off course, this will probably take some time. But in my opinion, Visa's moat is thin and mostly reliant on the behavior of their users. For US, I expect Visa to still be dominant, but not so much in other countries in Europe and Asia where people are much more savvy with their money habits.

> they will eventually realize, those rewards are not worth the cost.

Debit cards in the US have been available and basically free to use for all merchants and purchasers for many decades. Yet, merchants willingly do not give people that buy with a debit card a discount. That seems like proof to me that merchants are betting that they earn more money from the use of credit cards, even after the fees associated with them, so I don’t see why another no or low fee purchase mechanism would change the situation.

Cash discounts are predominantly at gas stations in the US.

Not only is that not true, it's against the terms of service of credit card companies for a business to do that.

You might only see them in gas stations, but it is much more likely that those are the local businesses you go to the most, since those are the ones working around the credit card merchant contracts.

No, it’s not. It is not against the terms and conditions of any credit card network in the US for a merchant to offer a cash discount. Terms of service which prohibit that are illegal under 15 USC 1666f [1]. This changed a number of years ago (more than 5 but less than 10, I don’t recall which year, but I was working in the payments space at the time [edit it was the FBCA in 2013]).

For what it’s worth I believe cash discounts have never been against terms of service, specifically what was, were credit card surcharges, minimum transaction sizes and various other forms of discrimination against credit.

[1] https://www.law.cornell.edu/uscode/text/15/1666f

So they can’t have a surcharge, but they can just raise everything 10¢/gal then “discount” cash purchases. It’s the same thing, so why is one illegal but not the other?

Not to mention that many government services charge an outrageously large “processing fee” (in the multiple dollar amount) for card purchases. They literally would rather I write them a check and go in person than just go online and use a card. How does that work with the law you cited?

> So they can’t have a surcharge, but they can just raise everything 10¢/gal then “discount” cash purchases. It’s the same thing, so why is one illegal but not the other?

That was the case prior to 1666f. Now, both "credit surcharges" and "cash discounts" are permitted.

It was just a perspective thing, card brands didn't want to have cards feel "disadvantaged" relative to cash. Instead they had cash "advantaged" related to credit. It was never illegal to do either, this change just rendered terms of service which included them unenforceable.

Ah. I misread you. I thought you were saying card “discounts” were illegal, not that TOS against those kinds of clauses were illegal.

Yes, but that’s a small amount of all transactions. And small business restaurants/shops might do the same, but I don’t see any major business or retailer going with a discount strategy for debit cards.

And you can get a minimum 2% cash back on no fee cards, so unless the discount is at least that much, I don’t see a reason to not use a credit card.

The costs are all already pushed to the consumer. We just don't see it, because it was impossible to see the extra 1-5% gradually added to the cost of everything as inflation also lifted prices higher.

Visanet takes 0.1-0.2%, the rest goes to issuing banks to handle loyalty programs and loan origination and servicing. The value to merchants is a roughly 20% increase in average ticket size for card transactions, not having to handle risks associated with cash and crypto (theft and fraud respectively).

For what it’s worth the bulk of the spread between processing fees and origination is returned to customers in North America, certainly in the US with 2% cash back no annual fees like the Citi Double Cash.

In Europe interchange is capped at 0.2% for debit and 0.3% for credit and has been since 2015. I’m not sure off hand but I believe Australia has interchange caps too.

> I’m not sure off hand but I believe Australia has interchange caps too.

Australia had interchange caps since around 2006, with several subsequent changes forcing the rates even lower.

I was head of portfolio management for one of the big Aussie credit card companies at the time. Lower interchange fundamentally changed how loyalty products got funded. Annual fees for rewards programs had to be increased. The benefits were cut. High spenders were encouraged to move to products which still attracted higher interchange, etc, etc.

Do you know any good resources I can read up on this?

Visa doesn’t administer rewards programs - or loan origination for that matter - that’s handled by issuing banks. They are simply the payment rails. They also only collect a very small amount of the transaction, like the 0.1-0.2% range.

Yes, but I’m assuming the Fed’s payment system won’t offer rewards, so Visa would benefit from the existence of rewards’ schemes on their network versus others such as the Fed’s.

Once there’s an instant payment network live, you should expect regulatory cram down of interchange fees, killing rewards.

It’s definitely a hard sell currently, but once the rails are available cheaply to everyone, most of the arguments against it evaporate away.

I disagree; the value provided by credit cards is the 0% APR 1-month unsecured loan that pays your transaction. This creates an ton of flexibility and by definition the rewards cost is returned to the buyer.

3% transaction fee means 0.1-0.2% to visanet, 2% in rewards and more than likely a large portion of the remainder is the cost of originating and serving that loan.

The rewards cost is returned to some, and is an expensive tax on others. If cheap float is desired, deposit account providers can provide it directly (some forward fintechs already do this).

It’s a small tax on some, sure, but also consider that the interchange rates merchants pay in the US vary by card brand and type. They actually charge much less for cards without reward programs (which are few and far between).

I dug into the frbservices page and unfortunately many of the links are broken. Is the fed offering an alternative to consumers or banks (both?) I couldn't find anything about what the proposal was

With my understanding it's both. While it's a service that banks will hook into, consumers will have direct access to it through federally backed banks (ie all of them). Here's another link: https://www.federalreserve.gov/paymentsystems/fednow_about.h...

However, not with a central counterparty doing off chain transactions and settlement. It makes sense, really: the speed and energy consumption of bitcoin is far too bad for mass adoption of direct transactions, and there's no fraud prevention or recovery of accidental loss, so Visa can replace the inefficient blockchain parts with a nice central database that the few remaining people wanting to do purchases rather than speculation can use.

Don't trust visa/mastercard as they've used their muscle to censor views they dislike.

Have you used cryptocurrency for payments lately? Unless you want to pay $25 to wait 6 hours while your transaction is confirming, stick to venmo/zelle/paypal/etc...

Unless, of course, you use places like Coinbase that pool transactions or bypass the network altogether, but then... what's the point of cryptocurrency?

Ethereum definitely doesn't cost that much and take that long as of late.

I paid multiple $30 ethereum gas fees yesterday. I've seen them over $60

This will be addressed by EIP 1559 in the next year or so.

The point still stands. Any ERC20 transfer is going to cost a substantial amount of ETH if you want to confirm quickly and even after mined should only be considered confirmed after 10 blocks at least. It is not practical for payments.

Layer-2 does alleviate some of the issues though, and all those talking about Lightning Network should look into Raiden.

Have you looked into the bitcoin lightning network? Iirc, it has a much more bigger transaction per second rate than Visa network.

>Unless you want to pay $25 to wait 6 hours while your transaction is confirming, stick to venmo/zelle/paypal/etc

Those take much longer than 6 hours to "confirm", no? The sender can chargeback these transactions months after the money shows up in your account.

You don't even need to wait for confirmations unless the sum is huge. It's quite safe to accept most 0conf transactions.

> Have you used cryptocurrency for payments lately? Unless you want to pay $25 to wait 6 hours while your transaction is confirming, stick to venmo/zelle/paypal/etc...

Nobody forces merchants to stick to requiring block confirmations for e.g. Bitcoin transactions.

They just do it because that's the way it always has been.

Instead of that, for low price purchases, they could also monitor the network for how well-spread a transaction is and once it is sufficiently propagated assume that a double-spend won't be possible anymore because miners will refuse to accept a transaction which conflicts with the one they saw much earlier.

And "well-spread" would be typically the case within seconds because transactions are flooded to all network nodes as they appear.

> Miners will refuse to accept a transaction which conflicts with the one they saw much earlier.

At the very least there's no guarantee of that. If you send a conflicting transaction with a higher fee, a miner should (rationally) discard the older one. And last I checked (Ethereum, a few years ago), that was indeed what they were doing.

With Bitcoin you have to enable the "replace by fee" flag on a transaction to allow that. Merchants could check transactions for if it is set.

If miners did change their Bitcoin nodes to facilitate double spending even with RBF disabled, that would erode trust in Bitcoin and thereby de-valuate it, which is probably not in the interest of miners. They'd damage the thing they're heavily invested in.

There's probably a tragedy of the commons situation there though.

> With Bitcoin you have to enable the "replace by fee" flag on a transaction to allow that.

Description of the "replace by fee" mechanism you're mentioning: https://en.bitcoin.it/wiki/Replace_by_fee

This page mentions that it is a "node policy", and from your comment I think we both agree that nothing in the protocol (which roughly guarantees that Bitcoin is fine as long as 51% of the hashing power belongs to benevolent actors) ensures these rules are in place.

Now, you're saying there would be some reputational damage which leads to devaluation which is bad for Bitcoin, so bad for miners, so they wouldn't do that.

This will not happen until such payments represent a big share of Bitcoin transactions. In particular, if a few merchants were to start accepting transactions that are not mined and just propagated, they could easily be "victims" (again, it's economically rational for miners) of double spending and there would be no impact on the valuation of Bitcoin.

That's the trick, Visa won't do cryptocurrency payment, they will do "fiat currency" payment indexed on cryptocurrencies.

For example, you buy 0.1 BTC using euros, you then pay a merchant asking for 0.1 BTC, which he will withdraw as dollars. Noticed that neither the buyer nor the seller manipulate bitcoin. No address, no transaction on the blockchain. It shows bitcoin on your account but in reality, it was a euro to dollar transaction.

Most likely you will be able to have a bitcoin account too, but again, dollars in, dollars out. If bitcoins raises in value, you get more dollars, if it crashes, you get less, but you never get actual bitcoin.

Edit: And BTW that's the reason why most people are using cryptocurrency for, as an index like gold. Besides criminals, few people use it to make payments.

On your last point, I think it only applies to things like bitcoin where the resource cost for mining and validating is high. Litecoin and BCH are quite different and result in far lower transaction costs, but they aren’t as popular yet.

There’s every reason to think in the longer term there will be some cryptocurrencies with higher costs that behave more like a custodial store of value like gold, some that behave like a cheap medium of exchange, and some that have other purposes like hedging against fiat currency or operating some smart contract based app / game / service.

The valuation model would be different for each.

> If bitcoins raises in value, you get more dollars,

You have to pay taxes on that gain.

There is also the problem that people are unlikely to spend a deflationary currency if they can avoid it.

have you used fiat investment apps lately? if you dont want monolithic hedge funds close trading and sell your assets without your concent and then wipe any negative speech of the fact from the app store, stick to cryptocurrencies

This is FUD. I've never waited more than 5 min and paid pennies to transfer funds for a variety of cryptocurrencies.

Cryptocurrency continues to gain more ground but I still have my reservations about it being the currency of the future.

If by design, cryptocurrency has a finite volume of transferrable currency, do early adopters have an unfair advantage that could potentially make the currency unusable? I don’t see how it could possibly be fair when earlier mining yielded currency more quickly.

Isn't this kinda inherent in all currencies in a way? Those born in rich families "yielded currency much more quickly".

In currencies which are not subject to maximum limits, no.

Managed currencies tend to devalue over time. Rich families must invest and risk capital to keep growing their fortune, not just sit on it.

And in the early days the cost of 1 Bitcoin was abysmal. The idea is that the harder it gets to mine the more expensive it becomes.

Not all cryptocurrencies have finite volumes by design. Ethereum, for example, currently doesn't have one. It also uses a proof-of-stake instead of proof-of-work for consensus, so even early owners of hardware don't maintain an advantage.

Has ethereum actually switched to PoS? It was still in the pipeline last I heard.

afaik still PoW

ETH 2.0 is operational and is PoS but the main Ethereum is not Proof of Stake just yet. 2ish years (Vitalik time = Valve time, so probably 3+ years).

> cryptocurrency has a finite volume of transferrable currency

This is true of Bitcoin. Others, such as Ethereum, have a known inflation schedule, which would help alleviate the issue you mentioned as being a currency of the future. Furthermore, it is looking like the "currency of the future" may (at least in the short term), look more like a cryptocurrency that is worth $1 and is 1:1 backed by a dollar in a bank account. These are known as stablecoins and are an in-demand topic right now for central banks around the world.

Bitcoin has a property of having a known, fixed supply. This allows it to serve as a store of value. It can and is used for day-to-day transactions, but there may need to be more advancements to make these types of transactions viable long-term (such as the lightning network).

Couldn’t a government just destroy a stable coin by seizing the currency backing it? Isn’t the point of a cryptocurrency supposed to be that it’s not controlled by any government?

Hasn't panned out that way for Tether... So far...

I don’t know if a government today could just seize crypto, but the USA did so with gold in the past. Imagine owning a whole bunch of gold, and then waking up one morning & finding out it’d been replaced with US Dollars.

https://en.wikipedia.org/wiki/Executive_Order_6102

A stable coin doesn’t necessarily have to be backed by fiat, DAI is backed by crypto assets and those assets can fluctuate and sometimes need to be increased during volatility.

I think the point of fiat backed stable coins are more for getting around regulations (eg Tether) and a fiat on-ramp for getting into the ecosystem. Certainly if the government seized a large portion of Tethers assets then that could affect other assets, but this actually has already happened with (a small portion, not large) Tether and nothing catastrophic happened.

Ethereum doesn't have a known inflation schedule. It has an arbitrary inflation schedule that is decided by the Ethereum developers.

The idea of cryptocurrency is to replace fiat currencies, with an engineered system instead of a political system. There's no benefit in a cryptocurrency that's backed by a fiat currency. It's like building a stone house on a swamp.

Fiat currencies will probably always exist.

Digital crypto assets like Bitcoin or Ethereum will exist alongside them. Bitcoin can be an asset like gold, of which users keep a portion of their networth to protect from economic uncertainty.

Its deflationary policy may make it less usable as a currency, but at least crypto gives people choice.

> Digital crypto assets like Bitcoin or Ethereum will exist alongside them. Bitcoin can be an asset like gold, of which users keep a portion of their networth to protect from economic uncertainty.

Seems improbable, as it is far less stable than Gold. From what I see, it is almost never used as a currency, and almost always as a speculative asset. The main indicator for me is that Bitcoin is always measured in Dollars (or some other fiat currency), instead of having some value that it taken to be it's own. Have you ever heard someone say "This bike cost me 0.63 Bitcoin"?

And how do you measure the value of gold?

How much gold only exists on paper? Once people realize there is more in paper than in vaults that stability may evaporate. The Germans move their physical gold out of the US for a reason

The issue is apparently way worse with silver

Gold is also almost never used as a currency. BTC's product market fit is store of value, not medium of exchange

Gold was a currency. It evolved from rocks in the dirt, to gold coinage, to paper coupons, to whatever the hell instrument it is today.

You stored your gold in a bank, and the bank gave you paper coupons to redeem it. People traded the coupons because it was easier than trading the gold. This is the birth of modern day banking.

How is gold stable? Have you seen it in the last year? The last ten? Hardly stable IMO.

You're not protecting from uncertainty with a currency whose value fluctuates against the dollar by 10% daily on a regular basis.

Do you think volatility will be the same 10 years from now? 20 years?

If so, why? I think volatility will down as volume and scale increase.

i think there's a high chance it will be worse ie. some competitor tech crushing bitcoin's value entirely in 10 years

I think the fact that no one controls Bitcoin is actually a major downside. The Fed does a lot of work to keep USD stable (alongside being part of a a stable government). I trust the USD as long as I trust in the institution.

Everyone trusts their government when things are going good.

When you stop trusting the USD/central bank, what will you turn to?

I don't think there are good reasons to use bitcoin, and I think much of the existing interest is a demand for volatility, in the same way as people are piling into GameStop.

I was having this discussion with a friend recently, arguing over what the actual use cases are for crypto, and I came to a similar conclusion.

In terms of facilitating payments, cryptocurrencies are worse in almost every way I can think of compared to existing systems. They are (currently) slow, have high transaction fees, but most importantly the non-refundability of crypto transactions is a bug, not the feature crypto proponents suggest.

However, as a store of value (e.g. "digital gold"), I think crypto has real potential. There is a reason crypto is very popular in places with hyper-inflationary monetary systems like Venezuela and Iran. And compared to actual, physical gold, crypto is almost better in every way: it is much more easily transferred and stored, and the ledger means establishing "provenance" is not an issue. Yes, it's obviously currently extremely volatile, but it's not hard to imagine that volatility lessening over time.

> Yes, is obviously currently extremely volatile, but it's not hard to imagine that volatility lessening over time.

I feel like I’ve heard this every year since 2015. I think it’s going to be hard to shake the majority perspective that it’s a speculative asset.

An interesting thing you might do in an overinflationary state, however, is buy a large portion of something like the USDC, the USD Coin, which maps to exactly US$1 all the time. While you are tied to another country's fiat whims, you still have the value add of crypto mentioned above: provenance and distance from the hyperinflated currency of your home state.

I think this is one of those things where people overestimated how much things would change in the short-term, but will grossly underestimate how much they will change in the longterm.

5 years is a pretty short window in the grand scheme of things when talking about the adoption of technologies.

Gold has been in use for hundreds of years and yet it's still very volatile. If Bitcoin is digital gold that doesn't really solve the volatility problem.

I don't think people are arguing bitcoin will be less volatile than gold, but BTC is currently still an order of magnitude more volatile than gold.

Point being that even with gold's volatility it is still seen by pretty much everyone as a viable store of value, and I think BTC will be similar.

>They are (currently) slow, have high transaction fees

This is only true for bitcoin and ethereum.

Which ones are fast, with low transaction fees?

LTC comes to mind, as well as sidechain technology like the Lighting Network.

What if a bunch of countries peg their currency to crypto like Bitcoin and it becomes so valuable that one day jobs return to America due labor being cheaper in the US because we were to stubborn to chain our policy? Lol is that a thing that could happen?

Deflationary policy makes it more usable as a currency. It means that you don't have to spend the money instantly, but you can save it for later.

Deflationary policy means that if you spend it today you lose out on future gains, so preferably you just don't spend it, ever.

Fiat currencies will still be replaced by stablecoins like USDC or USDT

The original holders will die, and their heirs will sell. The original holdings will diffuse to the richest as with any asset, give it 100 years

> If by design, cryptocurrency has a finite volume of transferrable currency, do early adopters have an unfair advantage that could potentially make the currency unusable?

> I don’t see how it could possibly be fair when earlier mining yielded currency more quickly.

If by design, fiat currency has an infinite volume of transferrable currency, do governments have an unfair advantage that could potentially make the currency unstable?

I don't see how it could possibly be fair when just printing it yielded currency more quickly than properly earning it.

That doesn't even make sense. For a start governments don't earn money. Secondly, a managed currency controlled by a central bank under the control of a democratic government is a good thing.

> For a start governments don't earn money.

Build infrastructure = provide a service.

Get paid taxes for usage of said infrastructure = earn money for properly providing a service.

> Secondly, a managed currency controlled by a central bank under the control of a democratic government is a good thing.

That is a tautology, you merely rephrased the claim without providing any argument.

Currency supply to the economy and the amount of services a government supplies are orthoganal issues.

I didn't provide a reason, but it's not a tautology. I would accept "bland assertion".

> Get paid taxes for usage of said infrastructure = earn money for properly providing a service.

Taxes and provision of services are completely separated. Citizen did not get their money back when schools closed because of the pandemic.

There is no reason that limited supply need be an inherent mechanism to a crypto currency.

Yeah, I'm sure people would be happy to transact in a crypto with 1000% inflation \s

Historically people have been willing to use currencies with inflation like the US Dollar. The point is that any government could build a out a crypto version of their currency if they so wished and have the same inflation policies they use with paper money. The crypto part doesn't imply a specific monetary policy. Crypto just means you can use it peer to peer over the Internet without an intermediary.

Not all coins have limited supply, e.g., Ethereum does not.

Is it? I mean it's certainly gaining value, but are people using it to pay for stuff?

In the earlier days of bitcoin there where ATMs near me, and bars that accepted bitcoin.

Not necessarily. Dogecoin has no fixed cap on the amount of Đ in existence. Rather, it expands at a rate of Đ5billion/yr, much to the chagrin of several currency pumpers.

https://github.com/dogecoin/dogecoin/issues/1674

I did not know this. Thanks for the information. So do this make a currency like Doge more attractive as a long term solution? Will BitCoin be a one hit wonder per se?

Looking at Doge's price-history, it's relatively stable, and its inflationary nature prevents it from becoming an asset to invest in. The enduring popular meme also gives it some intrinsic value that other Cryptos don't have.

I'd like the coin to take off as an actual currency, and of the coins I've looked at, I think it has the most potential for adoption in that respect.

But I don't think it's got the ecosystem to support that right now. A metamask-style doge wallet would do wonders for this.

Also, knowing little to nothing about the backend (or other crypto backends, tbh), other than that it's derived from Bitcoin - I have concerns about scalability wrt transaction settlement times, power consumption, and ease-of-entry with self-hosted wallets.

The initial distribution is not fair. This is a disadvantage but it doesn't matter much. It was similar with Gold. The more time passed, the better it became distributed.

Isn't that true of everything? If you were an early adopter of America you could get free land that today could be worth hundreds of millions.

That's a great analogy

Thanks :)

I mean I don’t disagree with you but it still makes my stomach turn a bit.

That's a valid analogy but also on a much longer time frame. Bitcoin increased in value orders of magnitude quicker than the value of land in the US. If somebody who bought a house 5 years ago was selling it for 100 times today, you bet your ass people would be mad.

Like Tesla stock? In the past year Tesla has gone parabolic, which looks very much similar to Bitcoin. How are they different?

Do they have any greater claim to being mad though? It makes you see it more clearly but I do not think it makes it worse. Besides, for most people they just were not alive when it was possible to claim land and nobody left them any. You could have seen crypto you just didn't, in most cases. I think that makes people more mad but once again I do not think it makes it more unjust, just the opposite.

Quite the opposite.

Bitcoin was the first fair currency, where everybody who had a computer could get it.

There wasn't any currency created a more fair way.

Even now everybody can look at it and evaluate how well its design resonates with his or her philosophy.

> Bitcoin was the first fair currency, where everybody who had a computer could get it.

Even if it was correct, that would be an extraordinarily bizarre definition of "fair".

Sure, you're right, but the other option is to be a banker...there are much more people with computers than with banking license.

Why? You could easily mine the currency on an average computer with no special hardware. Just because you didn't notice, doesn't mean it wasn't fair.

I didn't want blockchain. I didn't want anonymity. I just wanted a way to instantly move money (the same money anyone might use to buy bread with) between myself and another person, without banking fees or delays or even legislative limitations.

And instead I got cryptocurrency.

https://global.strike.me looks to address that use case. See https://jimmymow.medium.com/announcing-strike-global-2392b90... for more context / backstory.

p.s. thanks for your work on Ardour

You're welcome.

You don’t pay for things from your brokerage fund by cashing out your QQQ shares.

You don’t pay for things with the gold in your home safe.

You don’t keep funds in a foreign currency in your home country for everyday purchases.

There is no use of bitcoin for which this seems well-suited.

For what it’s worth you could (read: not should lol) thanks to an InteractiveBrokers debit card which borrows against your margin :) then settle by selling at the end of the month to cover your debt.

> There is no use of bitcoin for which this seems well-suited.

All the things you listed are not identical to the new, very different asset class that is Bitcoin, so how can you deduce facts about Bitcoin from them?

E.g. they can't be transferred as easily as scanning a QR code with your smartphone, you can't store them in your brain, they can be de-valuated by governments, and so on.

> how can you deduce facts about Bitcoin from them?

The first thing is a speculative asset.

The second is a store of value.

The third is a currency.

I did not mention that bitcoin is taxed as a commodity in the US.

Bitcoin is easy to transfer - but you still need to wait for a transaction to get stored in a block and processed by miners, and wait for the odds of a double spend reducing to near zero. Venmo is just as easy, with different risks.

Note that I am not entirely bearish about bitcoin. It’s cool tech! But it has some real limitations and there seems to be no upside to paying with it through Visa of all things.

I wonder if this is one of these dot-com bubble-esque articles that we'll look back on and think, "What an interesting time."

We may look back on this as more of a "Netflix expands online business instead of DVDs" moment.

People have been expressing that sentiment for nearly 10 years. At what point do you accept that you were shortsighted? 20 years?

Honestly, ten years ago was a better time for cryptocurrency as a currency. You could use it to pay for pizzas, there were online casinos, even some businesses selling actual hosting accepted it as a matter of course. Right now, it's this weird speculative asset that lots of people are interested in trading on, because it's a well-traded asset, but there seems to be zero interest in any of the fundamental principles of decentralization or divergence from fiat. Even longstanding businesses accepting it as a currency have stopped. It's closer to digital beanie babies than any sort of serious currency.

> It's closer to digital beanie babies than any sort of serious currency.

And then he flushed any possibility for a good faith argument away. What, are keeping your powder dry on the tulip mania line? I'm long past the evangelical phase on bitcoin, but back when I was doing that (when it was trading in the double digits) - I heard the exact same thing. Merchants would adopt and then quickly abandon, money transmitters would welcome and then ban... and banks would just ban. I was de-banked before it was cool. I mourn the opening of crypto trade desks at the likes of Goldman Sachs more than most, because my first exposure to bitcoin was on the cypherpunks mailing list, but that doesn't mean that bitcoin failed. The comparison to beanie babies is laughably moronic.

It's absolutely failed as a currency because nobody actually wants to accept it as payment for services. Digital gold? Sure, complete with late-night advertisements -- and nobody actually owning actual gold. The fundamentals of bitcoin are completely orthogonal to its current purpose as a speculation vehicle.

Oops, that is the other one - "digital gold". The litecoin people really latched onto that one, declaring themselves to be silver. There was already a digital gold a few year before bitcoin (something about an eagle, or the Liberty Bell...), it was a gold backed paypal that was quickly destroyed by the feds. So no, bitcoin isn't "digital gold".

According to Hayek fed wont ever allow such thing as long as they have power over it, so I'm not suprised. Maybe they don't have enough power over bitcoin?

They definitely don't, and it is no accident that they've maintained a state of uncertainty. After the B-cash hardfork created a potential taxable event, the IRS refused to release any kind of guidance or warning for how they'd classify things - and there is a massive difference between short and long term capital gains tax. But they can't outright ban it, because development would continue outside the country. It would be a crippling self inflicted wound, because there will be a strong need in the near future for what bitcoin provides. In a world of autonomous software agents (short of self aware AI), meat space money won't work - due to clawbacks and human deceit. They'll eventually try a push for some kind of Fedcoin, but that will turn out the same way it did when the Canadians tried it. Until then they'll continue mounting their resistance at the fiat interface points.

Are there any crypto projects that allow chargebacks? I religiously avoid using my debit card except at bank ATMs to avoid that once every few years when someone skims my credit card.

That and rewards are the main value-add of a traditional payment flow at the moment.

This to me is the barrier that prevents the adoption of crypto everywhere. There are substantial advantages to centralized control.

You can centralize on top of BTC if you want that. Nothing is stopping you from offering a chargeback solution on the blockchain network (though this is much more likely to exist on top of Ethereum's network).

There are no chargebacks for cash, for example, yet it underpins the Visa/MC network.

Bitcoin allows transactions in the future. Thats effectively the same as a chargeback, since the sender of the money can decide at any point up to the time of the actual transfer to send the money elsewhere.

You could theoretically design a hardware wallet (like a credit card) to only sign transactions three days into the future. That would give you three days to 'charge back' anything you don't like.

Not sure merchants would be happy to accept that though...

That's not really the same thing. A chargeback is mediated by a trusted third party, and the merchant knows that if they are reputable and do what they're supposed to, they'll get (usually) paid.

Future (possibly reversible) payments don't really give the merchant the same risk cap that a credit card authorization does.

That can be done with bitcoin too. Just send the third party the money to forward on or send back after 3 days.

You can build more complex schemes where the third party can't just keep the money for themselves too.

Lots of things can be done. The fact that this is or is not technically possible with the protocol doesn't explain why precisely nobody is actually using it in this way.

It's possible to provide customer protection as a third-party service. Chargebacks shouldn't exist on the base layer of money.

That's what I was asking about, though. If there are any crypto projects that provide this given that the traditional payment flow [0]. Chargebacks seem to be conflated with escrow a lot while also simply pinning chargebacks to an oracle problem. If it really is that trivial, there should be a team that someone is aware of offering this?

From what I can find around current crypto "credit cards", it seems they are in reality just debit cards.

[0] Not money, but Visa - though this was ambiguous as written

Why?

The goal of a currency system is to provide a tool that makes buying and selling easy, trustworthy, and efficient. Being able to get money back after a failed transaction punishes bad actors and improves the trust factor for buyers.

The ability to build it into the base layer of the currency is an interesting breakthrough. We say "cash or gold is not reversible", but it's less because it's a desirable feature, and more that there's no way to implement it.

The thing I'd be interested in would be if the right model is "reactive" reversal of disputed transactions, or some sort of "proactive" escrow model-- paying people with money that doesn't activate until the customer has confirmed they got the promised goods/services, or at least until a window for refund has passed.

About the volatility of cryptocurrency.

Shouldn't this even out when mining becomes too expensive and enough people adopted a cryptocurrency?

Like, aren't we simply too early for making sense of it all?

I actually do not want VISA involved. That smacks as they thinking they can control it in the future.

visa is likely trying to get a meme stock bump because of the crypto hype

"May" means the same as "May not"

So this is how they are going to regulate it now.

Can you explain exactly what you mean by that?

Great, let’s all accelerate climate change even faster.

I hear this argument a lot and have a genuine question.

How does Bitcoin electricity usage compare to something that achieves a similar goal?

A good example is gold—many people compare Bitcoin to gold. What are the relative electricity costs of the two, and does that justify the cost of either asset? This would take into account the electricity costs of mining, labor, supply chain, storage, etc.

It's easy to quantify with Bitcoin, less so than gold. Transportation, security, all those things lead to gold being an inefficient store of value. At least with cryptocurrencies, many are being actively worked on that contribute much less to energy expenditure.

Bitcoin is in the same league as all datacenters in the world combined.

Datacenters use about 205 TWh/year.

https://www.networkworld.com/article/3531316/data-center-pow...

Bitcoin uses about 75 TWh/year.

https://digiconomist.net/bitcoin-energy-consumption

Visa operates out of just two datacenters. They are famously secretive about their operations so I don't know how much power they use. The most I've found is that they have 'multi-megawatt' datacenters, which means they probably use more than three megawatts and less than 100.

https://youtu.be/fpmS0JYyCGs?t=66

Bitcoin uses about 8.5 gigawatts. Clearly it uses at least a few orders of magnitude more electricity than Visa. It can process four transactions per second compared to about 25,000 for Visa, so the energy per transaction is even worse by a few more orders of magnitude.

The inefficiency of Bitcoin is truly mind-boggling. If I were trying to write a hit piece, I wouldn't have the guts to make up numbers as bad as the reality.

What about all the cascading costs to run all non-crypto financial systems? Not just data centers, but everything related like infrastructure, real estate, credit card readers, point of sale systems, office furniture, salaries, etc... The list goes on and on. If crypto was used globally, much of these costs and energy waste would disappear.

Also, some currencies like Ethereum are moving to proof of stake, which requires less energy.

the difference is gold has an actual physical usecase so it's hard to compare these assets

I think we should consider the possibility that Bitcoin greatly incentivizes saving and disincentivizes consumption, at least while prices are increasing as quickly as they are.

If people are unemployed or underemployed and you save regardless that waste of productive work doesn't reappear through magic in the future. It's just gone.

Electricity can be generated from dirty sources or clean sources.

We are trending towards clean, renewable energy as it gets cheaper. And hopefully taxing/limiting dirty fuels.

https://www.coindesk.com/the-last-word-on-bitcoins-energy-co...

The second most popular cryptocurrency, Ethereum, is making progress toward adopting proof-of-stake, which will obsolete the need for mining and therefore be much more eco-friendly. Hopefully other cryptocurrencies will do this too as PoS becomes more understood and proven.

Stellar Lumens don't require proof of work - that was one of the key design decisions.

There's a finite volume of the things now, so presumably (fiat equivalent) value per Lumen will slowly increase.

Either way, 'they don't cause climate change'.

[1] https://www.stellar.org/lumens?locale=en

Bitcoin mining is good for the environment https://pomp.substack.com/p/bitcoin-mining-is-good-for-the-e...

I got paywalled, what's the TLDR on it?

This is an innovation other payment procerrors are steadily adopting. Square and paypal are already there. Visa doesn't want to miss out and have to acquire these companies just to survive some paradigm shift.

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