Why BitcoinStore is going to bring an end to a Decade of PayPal
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I think it is more likely that Congress will dismantle the military industrial complex.
Most Bitcoin Processors give confirmation fairly quickly. The customer doesn't have to wait 10 minutes.
Taxes shouldn't be too big of an issue. They just get reported like accepting any other foreign currency.
As for line of credit... you should check out Ripple.com
By selling at a loss. We are not talking about a startup that outprices Amazon by actually doing something technically superior to cut costs, we are talking about a startup that is trying to use a loss leader strategy. Nothing to see here, it's a well known tactic.
"Most Bitcoin Processors give confirmation fairly quickly. The customer doesn't have to wait 10 minutes."
Last I checked, it was 10-30 minutes. More importantly, isn't using a payment processor defeating the whole point here? What advantage does Amazon get from using a BTC payment processor over Visa? Were we trying to avoid convincing Visa to become a Bitcoin processor?
"Taxes shouldn't be too big of an issue. They just get reported like accepting any other foreign currency."
Bitcoin is not a foreign currency. In all likelihood, Amazon would have to report taxes on BTC transactions as if they were barter transactions, which basically means reporting the dollar value of the goods being sold. That means that either Amazon has to adjust the prices of goods on a day-by-day basis to account for Bitcoin prices, or take the risk that they will wind up losing money as Bitcoin fluctuates (and without a futures market on Bitcoin, there are few ways to mitigate that risk, except the immediately convert the BTC they receive back into dollars -- so again, why bother with the extra complication?).
As for lines of credit, the point is this: issuing a loan in a deflationary currency is a massively bad idea. Deflation makes loans harder to repay over time, and at an accelerating rate. Amazon would have to keep adjusting their interest rate on BTC lines of credit to stave off the possibility of a disaster, which would only make the credit more difficult to utilize. This is widely understood by economists, and it is among the more important reasons that governments work hard to prevent their currencies from deflating.
In an ideal circumstance, you'd average five minutes for a confirmation anyway. Blocks are usually generated every 10 minutes or so.
Also, "ideal circumstances" do not happen in the real world. IF you want to convince Amazon to adopt Bitcoin, you need to impress them with typical and realistic circumstances.
I'm sure anyone spending more than $750 on amazon is probably happy enough waiting for two or more confirmations.
Maybe, but if I can do it without waiting by just sticking with credit cards, why wouldn't I?
"Given that double spends are reasonably expensive"
I see this being tossed around quite a bit. I am not entirely sure where this idea came from. Can you prove it, the way that ECDSA (on which Bitcoin is based) can be proved secure as a signature system? When I hear this sort of statement, it sounds a lot like, "Nobody has published any way to double spend cheaply, and I cannot think of one; therefore it must be an expensive thing to do!"
I do not mean to be insulting with that, I really would like to know why people think double spending attacks are necessarily expensive. On top of that, how do we know that a double spending attack would be more expensive than the payoff -- especially when you are dealing with a complex marketplace, where a double spending attack may be just one component of a larger scheme. Maybe the point will just be to deny another person the ability to buy something, by double-spending until the merchant is sold out of the item, or as shills in an auction to try to inflate the price (should Amazon revive its auctions system).
This reminds me of the sort of argument I had with Hushmail users back before the infamous DEA incident. Your secret key is sitting there, on their servers; they could read your mail if they wanted to or if someone had a gun to their head. People said it couldn't happen, that the key would only be in RAM for a split second, that using their Java applet solved the problem, etc. Then the DEA turned up in court with a mountain of decrypted email from Hushmail (and then, as if the entire world just wanted to aggravate me, people starting saying that PGP had security problems). Cryptography tends to be black-and-white when it comes to security: you are either secure, or you are not secure, and there is rarely anything in-between (with multiparty computation, that might be changing; people are now talking about the "covert model" and "one-bit leakage" notions of security, which are in that middle area).
> Can you prove it, the way that ECDSA (on which Bitcoin is based) can be proved secure as a signature system?
I'm not experienced in any form of crypto, so not personally, no.
How can you? If a credit card transaction can be charged back, it effectively never clears (or doesn't clear as long as the chargeback is possible, if there's a time limit on chargeback). So in any situation where you would be willing to take a possibly chargeback-able, you should be willing to take an unconfirmed bitcoin.
"Nobody has published any way to double spend cheaply, and I cannot think of one; therefore it must be an expensive thing to do!"
The fact that nobody published a cheap way to double spend is strong evidence that it's difficult and expensive to double spend.
Also it doesn't really matter if there is some obscure method to cheaply double spend, since because of its obscurity it would only affect a small number of transactions (and presumably once it is used it will be detected and made public, at which point it can be fixed).
Nonsense. Bitcoin is only a few years old. It is not nearly well-studied enough to claim that there is any good evidence that double spending is costly. Keep in mind that in the first few years of RSA, people thought that 128 bit public keys would be sufficient for centuries. Bitcoin has not received anything close to the attention RSA received from the research community, or even that attention given newer ciphers like AES.
"Also it doesn't really matter if there is some obscure method to cheaply double spend"
That is kind of like saying, "It does not really matter if there is some obscure method to crack RSA quickly."
"since because of its obscurity it would only affect a small number of transactions (and presumably once it is used it will be detected and made public, at which point it can be fixed)."
Or it might turn out that there is no fix and that the attack would work no matter what you did to Bitcoin. Maybe not confirming transactions is an inherently insecure way to do business. It is equally possible that cheap double spending attacks are impossible due to some property of Bitcoin. Right now there is no clear answer; you just have to shrug and hope for the best if you neglect to wait for confirmations.
A double-spend is costly, a chargeback has no cost. One would think the number of double-spend frauds would be lower than chargeback frauds simply because these are more difficult.
> only a fool would issue a line of credit in a currency that has built-in deflation.
Is backwards. Deflation is bad for borrowers, not creditors. This should be self evident; in periods of deflation, one unit of currency can buy more tomorrow than it can today. As a borrower, you are paying a second interest rate.
Further, deflation and inflation are only damaging when they occur unpredictably. Predictable amounts of either can easily be built into the interest rate of the transaction.
"deflation and inflation are only damaging when they occur unpredictably. Predictable amounts of either can easily be built into the interest rate of the transaction."
The problem here is that as the economy expands, the rate of deflation increases if no new currency can be added to the system (as is the case with Bitcoin). As the economy contracts, issuing a loan is risky due to the economic contraction. Expansions and contractions of an economy are basically unpredictable; there are a few vague patterns here and there, but in general predicting economic booms and busts is difficult (if you could do it, you would be very rich very fast).
Issuing a loan in a deflationary currency is asking for trouble.
I honestly wish that Nakamoto had consulted an economist before creating Bitcoin. A system with a modest rate of built-in inflation makes far more sense than Bitcoin's deflationary issue scheme.
Probably the most practical way to actually change the policy is to create an alternate 'bitcoin-2' network with a better (inflationary) policy. You could even allow transactions from the old network into the new one thus allowing people to carry their wealth over. If everyone agreed it was better, it would happen. The challenge is more social than technical.
For now though, it doesn't matter since the current bitcoin 'fiscal policy' is fairly expansionary (bitcoins are still being generated) and will be for years, and anyway the effect of 'fiscal policy' on bitcoin value is currently dwarfed by the effects of speculation and the increasing demand for bitcoins.
Second, our economies have always grown so far, but this is not a law of nature. Our population is stabilising, and much recent growth is effectively a loan (a deflationary one?) from the environment that our kids will have to repay. It's possible that our current economic woes may even be "peak economy".
In which case a currency that cannot be inflated whenever a government/populace gets lazy might be just what we need.
Really? I've always paid with credit card.
> Questions about how to pay their taxes
A "business as enormous as Amazon" probably has a horde of accountants to answer those questions.
> what taxes should be paid on BTC transactions
The same as on any other transactions in non-USD currency perhaps?
Transaction times would be irrelevant for Amazon as they could tell customers their order is placed with zero confirmations (a few seconds), and then check for more confirmations before shipping. There is already a delay of hours or even days between when a customer orders and when they pay because credit cards are charged when the order ships.
>and what taxes should be paid on BTC transactions
I would guess the same taxes paid on other non-USD transactions. Amazon already deals with many non-USD currencies.
>Amazon issues lines of credit to their customers
I don't think this applies to most orders/customers. Amazon could choose not to offer lines of credit in BTC.
More fraud equals more cost. As the conventional alternatives continue to grow they'll face more and more fraud. Bitcoin has no chargeback fraud. It never will.
No one wants to buy anything with bitcon, and no one wants to go through the trouble of selling anything with bitcoin.
Chargebacks enable WAY more fraud than they stop.
It's been just growing steadily lately, but a seller can always convert to their local currency on the spot using a BTC payment processor.
> Bitcoin takes quite a while for a transaction to happen
100% false. Every time I've used it, transactions take less than a second. Stop spreading FUD aka bullshit.
> and there are waits and fees involved in exchanging money from USD and back to USD
Yep... for now. I think the point is that at some point you won't have all your monetary holdings as USD.
> Bitcoin doesn't allow chargebacks, an important consumer protection mechanism, therefore helping to perpetuate fraud.
That's a funny thing to say, given that chargebacks are the very source of fraud these days. BTC is attractive to merchants precisely because you can't chargeback. If you have a problem with a merchant, bitch about them elsewhere and their reputation will suffer.
Are you bothering to wait for confirmations? Last I checked, waiting for confirmation of a transaction was a 10 to 30 minute process.
100% true, at least for vendors, since they'll be waiting for confirmations. Otherwise they're facing double-spend scams and things like that. Fear, uncertainty, and doubt aren't bullshit, but it's cute that you deflect a real argument with an acronym.
There won't be a time where any intelligent person would have all their holdings in Bitcoin, because it is nothing more than a proposal that got out of hand. The guy who came up with it even said it'd be stupid for someone to use it like a real currency. Furthermore there will still be transaction fees, since those are what's planned to support the network operators after coins are mined.
Regarding chargebacks, having a currency forbid them is not the appropriate answer to fraud that involves them. No consumer would have any faith in the system without some basic protection in case their stuff gets stolen. For all the problems caused by banks, it sure is nice to have someone who is regulated provide some kind of security in case I lose my wallet.
So there you have it. Bitcoins are bad for merchants, as well as consumers.
Edit: I love the quip about how a bad merchant's reputation will suffer. That doesn't work. If you want proof, just look at the bitcoin talk forums. Tons of scammers. If they get a scammer tag, they just come back under a different name. Reputations may matter face to face, but they're worthless here.
That's just not true. I wouldn't have any issues buying from a reputable merchant without the option of chargeback. I've never bought anything thinking 'well, if the guy is a scammer I can just chargeback'. So at least some consumers do have faith in the system without chargebacks.
As to bitcoin scams: yes, if you buy from an unknown person because their offer is too good to be true, you should know their offer is probably too good to be true.
Reputations can only help you if you trade with reputable people. But it's much more often the case that it's the seller that's the reputable party, not the buyer.
Your other two points are laughable. First, you employ the whole 'Buyer Beware' mantra, except not all scams come with such dead giveaways. What happens, for example, when an up-til-now reputable seller takes a ton of order money and bails(a pump-and-dump scam)? Second, you go right back to that faulty reputation argument, even going as far as to say that it's the seller who's more trustworthy than the buyer. Why is that? I've never seen anything to back that up.
All of your points put so much control in the hands of businesses. It's almost like you want to absolve them by default if the consumer gets screwed over. Where do they go for help? Bitcourt?
As a fun aside, there actually was a 'bitcourt' of sorts. It was a pretty screwed up system, and only survived up until the point where the judges ruled against the creator of the 'court.' Then he shuttered the entire thing.
That's beside the point. You claimed no one would buy if not for availability of chargebacks. This is simply not true, not because I did not ever do a chargeback, but because I never even considered whether I can chargeback or not before performing a transaction. I doubt I'm in any way special in this, so there definitely are people who would buy even without the chargeback option.
What happens, for example, when an up-til-now reputable seller takes a ton of order money and bails(a pump-and-dump scam)
You lose some money, they must close their business. You and the other screwed customers report the case to the police. Just as in any other fraud case?
it's the seller who's more trustworthy than the buyer. Why is that?
Because a vast majority of transactions are between a user (buying) and a company (selling), not two users. Which one do you think is more trustworthy, a random amazon customer or amazon?
All of your points put so much control in the hands of businesses.
No, they put some control in the hands of the seller, making the situation more fair. A seller and a buyer still can arrange a transaction that's safe for both based on bitcoin. That's simply not possible using paypal, because there is no way to prevent the buyer from taking his money back.
Where do they go for help? Bitcourt?
Where does the seller go for help now when a buyer charges back? Paypalcourt?
2. For smaller sums of money (e.g. coffee) you can pretty much assume the transaction to be confirmed once you see it on the network. To be really, really sure the transaction is confirmed and money is yours, you have to wait about an hour.
3. Indeed, Bitcoin fluctuates, you need to peg it to your expenses which is usually your local currency. That doesn't mean you must convert it to that currency. You can incorporate this into your payment button. But yes, this is a downside.
You have absolutely no idea what you are talking about.
- There are at the very least 5k+ merchants selling products & services for bitcoins - a small fraction of them is listed on https://en.bitcoin.it/wiki/Trade - and this is increasing every day
- BitPay alone signed up 1500 businesses accepting Bitcoin: http://finance.sfgate.com/hearst.sfgate/news/read/23400142/w...
You are not a Bitcoin user and have no idea how successful it is, that is fine, but do not spread lies. Obviously you have no idea how quickly the number of buyers and sellers using Bitcoin is rising...
If you want to tell people that they need to get a clue, you could at least try to give them a clue in the process.
You can look at the USD volume traded on the top Bitcoin exchanges which went, over 1 year, from $200-300k to $1.0-2.5M per day: http://blockchain.info/charts/trade-volume
You can look at Silk Road, who went, over 2 years, from zero to $2 million/month of Bitcoin revenues: http://arstechnica.com/tech-policy/2012/08/study-estimates-2...
A Bitcoin casino went, over 6 months, from zero to $0.5 million profits (in bitcoins): http://arstechnica.com/business/2013/01/bitcoin-based-casino...
Bottom line, all the indicators point to increased Bitcoin spending.
Still just about anyone not doing business below the table is going to prefer USD, or some other state-backed currency.
It is not, who said that it is? We have known how to make secure digital cash systems since the 1980s.
There is no way Bitcoin will ever displace Paypal without serious, fundamental changes.
Would you place much trust in a platform when you have absolutely no idea where it came from or what the motivations behind it might be?
But third parties can still verify is security.
Bitcoin was created by "some guy" that, if anybody knows them, nobody's talking. Illegal, underground money lenders are more above-board than this.
You need to use the same care with bitcoin as we used to use with cash. Credit cards are far more forgiving, thanks mainly to the charge-back mechanism (which incidentally is a US thing - in most countries it is un-heard of).
My biggest fear for bitcoin is that governments will kill it, because they have no control over it. They've been delighted to see cash fading away, but I predict that if bitcoin ever does get traction with the general public, we'll see a deluge of "bitcoin is the currency of the terrorists and child-molesters" propaganda which will make copyright scaremongering seem quaint.
Buyers can perform fraud. Sellers can perform fraud. Sometimes they're the same person. None of this is easy. But articles like this pretend it is.
That's the beautiful thing about Bitcoin, it isn't just any startup, it's an open source project. If one exchange can't get a banking license, another one will. Everyone can use it and no one can shut it down at a centralized location.
I would also advise, to anyone who can make it, going to Sacramento on March 11:
If I didn't have jury duty I would be there. I hope you can shed some light on these guys. Can I expect another post with updates? :)