Paypal President: We're thinking about adding Bitcoin (2:50) [video]
bloomberg.com
bloomberg.com
I see Bitcoin becoming the underlying infrastructure on which companies like Paypal, Square, Banks and other financial institutions trade.
If Paypal does invest in adding Bitcoin, it would be right step ahead for Bitcoin and for Paypal.
You won't end up in walled garden situations where a single vendor controls with massive fees and restrictions, but you have no choice but to use them, because hey, that's all everybody accepts and uses.
If an online wallet service/paypal/visa is gonna keep your business, they have to make what they offer be worth their fees.
for example: "Since your funds are transferred only between other PayPal users, PayPal can always reverse a fraudulent transaction."
Then you would have a veritable roach motel of bitcoins.
Really because bitcoinoffers low fees this sort of service would be of benefit to the buyer only.
Alternatively PayPal could use bitcoin as their backend for transferring money internationally. If i want to pay someone in USD but only have EUR then they could exchange EUR for BTC then BTC for USD and pay the USD to whoever I was paying.
(* Well, within the known limits of how far Paypal can be trusted. )
what about Bitcoins being lost? perhaps we should also consider coins that are not used in the past five years also "lost".
At some point, the rate of loss may overtake the rate of new coin creation.
> perhaps we should also consider coins that are not used in the past five years also "lost".
Maybe, but be prepared for some of those to someday be spent, they may merely have been hoarded. I have dollars that have been in my possession for more than five years, they aren't lost as far as I am concerned.
Interestingly, though, while (some) seigniorage is a good thing for a debt-based like the dollar, it's a bad thing for Bitcoin.
I think assuming that Bitcoin will be (for practical purposes) eternally deflationary is the safest bet that could be made today. The world economy has been growing by triple digits every century. Not even now we're nowhere near a global Star Trek post-scarcity future. So it's misleading to say that Bitcoin is deflationary "based only on a presumption". Somewhat like saying that physics is just "based on the presumption of Newton's laws".
My understanding is that regardless of how inflationary or deflationary Bitcoin is, there will be no effect on the availability for anyone to buy and sell.
Adding extra zeroes after the decimal point for money already in circulation leaves the total supply the 'same' but could also be viewed as increasing supply 10-fold, without disadvantaging anyone currently holding the currency.
Its never happened before, so I'm not sure many economists have thought about it
What inflation does in an economic sense is much bigger - it changes who has relatively more or less wealth or debt over time. If you take out a loan for $10,000 and inflation makes both your prices and wages go up 2x, then you now have half as much debt.
Deflation does the opposite and makes debt more and more expensive. This is why most economists are against it - debts that grow more expensive will trap people. Historically, debts were forgiven by decree (a jubilee) because the system kept breaking.
If Bitcoin was a predominant part of an economy borrowing a loan in it could be very bad. In a predominantly Bitcoin based economy everyone could have abundant wealth and there would be no need to be a debt slave.
But seriously, PayPal and Bitcoin are by nature rivals. If PayPal wanted to have a crypto-currency, it would develop its own, not validate and boost value of another one gaining nothing in the process.
All PayPal does right now is help you get dollars from point A to point B, and in the process they take a cut. They could do the same thing with bitcoin. I don't think it would be competition with bitcoin, it would be promoting it to mutual benefit.
I would be afraid of them providing this service without allowing you to export your data, however, which seems like the kind of thing PayPal might like to do. If your bitcoins were trapped in their system you're always in danger of having your account frozen as has been a problem up to now. Part of the purpose of bitcoin is to be able to avoid that, so I'd hate for PayPal to bring that whole problem to the bitcoin world.
But if they approach it properly, bitcoin could be a great opportunity for PayPal, instead of a threat.
You cannot collect profits from a transaction between 2 Bitcoin users like PayPal does right now with "real" money. If the world adopted Bitcoin, it would be the end of PayPal's business model. If PayPal were ready to replace their business model with something way less profitable, but more future-proof, it would still make no sense for them to adopt bitcoin. It would only make sense if they owned significant amount (50%) of the existing bitcoins and had the code base under at least indirect control. What would happen if this were true and the bitcoiners found out? ...too many ifs.
That said, Bitcoin will never become a commonly used currency in its current form. The built-in deflation is a fatal flaw, which makes it unusable for normal buyers or sellers. It is only appealing for "get-rich-quick" investors, which is a shame, 'cause we really need a good solution (0% fee & safe) for online payments.
Average Joes who don't want to bother having to understand bitcoin may find this tradeoff acceptable if PayPal makes it worth it by providing a very simple and secure bitcoin interface that is better than everything else out there.
Whether you think bitcoin itself is doomed to failure due to deflation and all that is a different topic entirely.
It may sound as if I am a PayPal lover and bitcoin hater, which is NOT the case. I just do not see them cooperating sensible.
That is exactly what happens today on the real world. If you make it convinient for me to use your "credit card", I will use it, and because of that, vendors pay the 4% fee. All paypal needs to do is to make it easy (at non bitcoin vendors for example) for me to spend my bitcoins and I will use it. Vendors will fall in line because they want my business.
The above said.. IMHO, there is no way in hell that "the man" will allow bitcoin in its current form to prosper (at least not without a heck of a fight), as to much visibility & control would be lost.
Ever wonder why Arco is the cheapest gas?
(Technically, every Bitcoin transaction has a script in a Forth-like, non-Turing-complete bytecode which specifies the conditions needed for the transaction to be valid. It supports m-out-of-n signature requirements, among many other fun things.)
> a third party acting as an arbitrator
Can you please share some references? I'm looking to implement exact scenario, but couldn't find any references yet.
A multi-signature transaction is one where a certain number of Bitcoins are "encumbered" with more than one recipient address. The subsequent transaction that spends these coins will require each party involved (or some subset, depending on the script), to see the proposed transaction and sign it with their private key. This necessarily requires collaboration between all parties -- to propose a distribution of encumbered funds, collect signatures from all necessary participants, and then broadcast the completed transaction. [0]
One way to implement them is by allowing a more generic 'script execution per transaction' (not sure of wording) mechanism, proposed in BIPs 16 and 17. [2] [3]
Also see bitcoin.stackexchange question about multisig TXes. [4]
As I understand it, if you're a developer wanting to implement arbitrated bitcoin transactions, you'll have to wait. Correct me if I'm wrong though.
[0] https://en.bitcoin.it/wiki/BIP_0010
[1] https://blockchain.info/wallet/escrow
[2] https://en.bitcoin.it/wiki/BIP_0016
[3] https://en.bitcoin.it/wiki/BIP_0017
[4] http://bitcoin.stackexchange.com/questions/3718/what-are-mul...
Yeah, I mean, gold didn't work as a currency all those hundreds of years. /sarcasm
Disclaimer: I believe bitcoins are tulip bulbs.
This happened with gold, and also would happen if we saw a true bitcoin bank rather than bitcoin wallet -- they'd pay a bit of interest, and in return would pool their deposits and use some fraction of them to generate revenue through other channels.
Unless you are using them to do something different then currency.
The result of all this is that gold supply has grown with the economy over the past 500 years. It may be deflationary relative to fiat currency, but it is nothing like the deflationary profile of bitcoin, not at all.
Actually, it didn't. Gold was almost never the exclusive currency, usually wasn't the most common currency, was rarely a significant direct currency (rather than backing for currency) when people actually used currency for most transactions, and when it became the exclusive backing for currency, only "worked" because the actual circulating currency supply became increasingly disconnect from the gold notionally backing it.
Gold, as a currency, works tolerably well much of the time (though still can break an economy with unexpected surpluses or shortages) in the way it was actually used -- the high-value-density one of several commodities used in currencies in systems where most transactions using currency don't use gold, and most transactions don't use currency at all, but not even tolerably well outside of that domain.
For PayPal and BTC - even in the best scenario for BitCion, there's going to be a very long transition period, and PayPal has a very good position to profit from being an intermediate in that period. And once all centralised currencies are gone, true, PayPal's current business model is irrelevant, but by then, they'll have world-class expertise on BitCoin and can probably keep in the game as wallet operators or makers of hardware for casual transactions or whatever.
Also: Developing a new currency is hard, and inherently antagonistic with other governments. BTC, on the other hand, is basically tolerated for the time being.
Where are you observing that it's a common request? Could it be a common request because it's easy to rip off the seller, in the same way that assistance transferring a dead relative's funds out of Nigeria is a common request?
Unless your account is frozen...
I could forgive this if their support seemed even remotely cognizant of these changes, but every time I get in touch with them it's like they're hearing about it for the first time.
It's still widely used because everyone knows about them and they're well-established. It's often hard to talk clients out of using PayPal because the barrier to entry for setting up an account is so low, despite the arbitrary terms and the relatively high fees and limits.
This could potentially be a bid to impress the IT crowd, which would be a good move for them if they actually follow through (it certainly won't affect my view of them, but that hardly means anything).
In total they can end up taking $12 on a $100 purchase.
But you're right, most of that probably goes to the credit card company.
Besides, with bitcoin, why use paypal? Is paypal going go try to act as an exchange between btc and usd?
If you have a bunch of Bitcoin money but need to do business with people who will only accept fiat currencies, you need some kind of exchange service. I suspect that is what Paypal will do.
Remember that in the gold rush you got rich selling pickaxes. WU and Paypal stand to profit from bitcoin with very little risk if they play it right.
A lot of people want to purchase bitcoins with their PayPal accounts, and since PayPal is already licensed as a MSB, this just requires technology. They can build or buy (Coinbase), and make a pretty significant revenue on conversion fees. They could also charge a small fee for bitcoin transactions over a certain amount, in exchange for convenience, or, for example, transaction insurance, which can be underwritten, eliminating the risk.
PayPal can do a lot for Bitcoin, and vice versa. If Bitcoin continues to be successful, PayPal can continue to have a significant portion of the online transaction pie.
I mean, they're the 800 lb gorilla of online payments. They'd be smarter to invent their own thing than to use someone else's if they can.
Bitcoin is used and has value. The same could most likely not be said about a hypothetical currency created by Paypal, specially considering one of the most important assets Bitcoin has is its decentralized and unregulated nature.
It's weird to see Paypal and Bitcoin in one sentence on the domain bloomberg.com... Bloomberg is one of the biggest financial companies and entirely against Bitcoin. I can't rhyme this; what are they saying about it?
You say this as if it is fact. Care to expand on why you feel this way?
I might still be wrong of course, perhaps I should have made more clear that it was my opinion and not really a fact. To me it was like a fact, but now that you make me think about it more objectively, I realize that I can't really say for sure.
http://www.bloomberg.com/video/bitcoin-is-gold-for-nerds-con...
Not a bad idea, but it seems they're thinking too small.
Today the Bitcoin network is restricted to a sustained rate of 7 tps by some artificial limits. These were put in place to stop people from ballooning the size of the block chain before the network and community was ready for it. Once those limits are lifted, the maximum transaction rate will go up significantly.
Of course, a significant increase from 7tps still might fall well short of what is required for real commerce. If you look at this graph of the daily transaction rate, you can see that the actual performance of the network is somewhat less than 1tps:
http://blockchain.info/charts/n-transactions
For comparison, there are probably more than seven transactions per second going on in any small to medium sized city, let alone worldwide.
Paypal transactions are reversible because there's a delay between me confirming the order with a merchant and the funds appearing in their account.
Paypal bitcoin would be similar; I deposit BTC with Paypal, and a week or two after I approve sending to a merchant, the merchant gets BTC in their Paypal account.