Another major retailer!
It's funny, all of the "Bitcoin is dead! Bitcoin solves a non-existent problem! Bitcoin.....etc" posters have vanished.
It's funny, all of the "Bitcoin is dead! Bitcoin solves a non-existent problem! Bitcoin.....etc" posters have vanished.
It's also important to realize we're in the very very early days of bitcoin. This is really like 1994 for the Internet.
What's going on here is the retailers are forking the "risk" of Bitcoin off to Coinbase - they bill Coinbase in USD, Coinbase bills the customer in BTC and hopefully the BTC market doesn't turn against them in the interim and that Coinbase manage to keep enough USD on hand to keep cashing out Bitcoin.
Which is where the problem lies: for Coinbase to operate, the have to be selling huge quantities of Bitcoin for USD to people who want to buy Bitcoin. And they need to hope the price keeps going up to cover their position.
2. If you want to try dealing with Bitcoin, step zero is to allow people to pay in it. Then, if you happen to have more suppliers whom you can pay in BTC directly, you can keep some part of your cash in BTC. But making the first step is your competitive advantage - you already attract target audience and learn how the thing works.
Its that simple. Really.
I own BTC, but I'm still wondering what's going to want me to spend it instead of my AmEx for my next purchase.
This is one of the appeals of paper money and credit cards over bitcoins at the moment. You have all the tactile experiences with money and credit cards. With BTC, people can't grasp the algorithm or the fact you can print out the promissory note, but its not the same.
That is called change. You either adapt or die.
There are still people who take printouts of their emails because they prefer paper.
Those clauses were recently struck down due to a class-action lawsuit. Retailers are now pretty much free to set different prices for any payment option as they see fit.
http://vizant.com/news-item/vizants-perspective-on-new-rules...
Because they may decide in the intervening time not to bother buying it at all.
1) Flooz was billed as magic Internet money, but provided no benefits for effecting transactions in Flooz versus transacting them with credit cards, which Internet merchants had begun to accept. Flooz' primary customer acquisition strategy was giving people free money. That was pretty popular, but also costly, and -- unlike Paypal -- Flooz never successfully convinced meaningful numbers of customers to transition from "spending free money" to "spending their own money."
2) Flooz had far insufficient transaction volume to justify the ongoing engineering and operation costs of keeping it around. At the peak, it was generating "thousands" of dollars of transactions a day. You can do the math on that: $200k volume per month times the pick-your-teeth-with-them margins in payment processing means you can't pay even a single engineer to keep the lights on.
3) Flooz, like most early payment processors, got their pockets picked by fraud to the tune of millions of dollars. Their merchant processor responded by requiring a $1 million rolling reserve. This caused a cash-flow crunch which was the proximate cause of their bankruptcy.
4) Flooz could have postponed death if they had access to the capital markets but the dot-com crash happened and, as a consequence, nobody wanted to throw more money at an e-commerce company whose core line of business was selling fake money for real money.
But bitcoin is, as you say, decentralized.
[Edit to add: I'm being a bit unfair there. Bitcoin has several advantages over Flooz. One is that Bitcoin, considered as an entity, awarded free money via seigniorage to early adopters and never had to back that free money with actual cash. Another is that Bitcoin structurally encouraged the creation of a widely distributed self-coordinating Internet boiler room to act as Bitcoin spokesmen and salescritters, via the aforementioned seigniorage and tapping into pre-existing networks among people with complementary political opinions regarding e.g. banking, self-government, privacy, etc. A third is that Bitcoin was, happily for Bitcoin advocates if not expressly hoped for, actually an improvement in the state of the art for small-scale drug smuggling, a business which turns out to be quite lucrative and underserved by other payment processors. This lead to people who had acquired essentially free bitcoins getting paid actual money by folks who wanted to buy very-much-not-free contraband, which helped provide a bit of kindling for the speculative bonfire.]
That's an interesting observation.
Another problem: my landlord and I are both Wells Fargo customers, but I can't even pay my rent electronically because WF arbitrarily limits electronic ("SurePay") payements to $2000/month. Instead we have to use plain old checks. This is an aberration for the 21st century... With Bitcoin, nobody dictates me I can only send $X/month.
How about the underbanked with no ability to receive payments from remote friends/family?
How about Chinese dissidents getting their financial accounts seized by an evil government?
And so on... Bitcoin can solve numerous societal and economic problems. Too often people are blind to them because we have always lived with these problems.
Deflation encourages hoarding and rewards people who sit on piles of cash. It also values work yesterday more highly then work today.
Bitcoin, as a currency model, creates lots of problems.
A) Inflation promotes careless, immediate spending.
B) Deflation promotes saving, which is good. Why derogatorily call it hoarding?
C) The average lower and middle class person is a bad saver and bad investor unable to find and trust investment vehicles beating inflation.
Then add A+B+C and realize why deflation would promote healthier financial habits (having savings) and might just particularly help the lower and middle class...
b) Saving is really only good when the money is put to work for other people, rather than just sat on
c) The average lower and middle class person is in debt
Deflation would not promote healthier habits, it would limit cash supply and create incentives for people to limit it further. Money is a medium of exchange, find something else if you want a store of value.
There is no sharp boundary between a +0.1% inflation rate and a -0.1% deflation rate where suddenly all hell breaks loose. The importance of changes (bad or good) vary gradually along the line. And if the Bitcoin economy stabilizes to representing a fixed fraction of the worldwide economy (be it 1 or 10 or 100%) then the rate of deflation Bitcoin will endure would be equal to the rate of growth of the economy. So we are talking about 1-4% only (average OECD world GDP growth for last few years).
Why should it be worth the same? If you farm vegetables they don't stay the same forever, nor do they appreciate in value.
Inflation is a tax on the cash-rich. This does not describe the poor, who are typically in debt.
I imagine banks and other bitcoin service venders will solve the charge back issue or 3rd party arbitrators will be common with this: https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_d...
This is disruptive technology. Credit card companies and international money transfer companies are panicking right now.
> Do you mind paying $15 to send money to relatives overseas?
I very rarely have to do this, and when I do $15 is a fraction of a percent. And certainly, its worth it in comparison to dealing with the Bitcoin ecosystem to get my money INTO Bitcoin and then out on the other side. So no, I don't mind.
Now you may be saying "Well when everyone uses bitcoins in the future these problems won't exist, and furthermore..." Yeah but if bitcoins get market penetration then banks and other services can adjust prices to compete.
> This is disruptive technology. Credit card companies and international money transfer companies are panicking right now.
Everyone throws around the word "disruptive" on this site, but seldom is it really true. I keep an eye on the Bitcoin ecosystem because it is interesting, but I've seen literally nothing offered that appeals to me over existing services. When Bitcoin provides me with real, significant value, then I'll think about buying in.
Also, its amusing how its advocates claim that traditional finance companies are "terrified." I've seen absolutely ZERO evidence of this. Its more of the Bitcoin community's lack of reality.
This isn't entirely accurate. Most credit card companies now tack on a 30c + 2.9% surcharge for processors that do fewer transactions than some arbitrarily defined limit, well known to most small companies as the "PayPal tax" because they started doing it first and the credit card companies realized they could get away with it too.
And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too.
Or haven't you heard about the recent record profits being made by Mastercard et al?
Wasn't aware of that. We charged flat percentage rate, and added to the processor I think it was 1.5% or so. But like I said, a decade ago, so maybe I'm just wrong on that point and forgot.
> And it's usually passed completely on to consumers, because eating it as a business owner with a low-margin business is pretty damned hard, and because the little guys are doing it, the big guys get away with doing it too.
Is it actually proven that the costs are passed on (i.e. that the price would be lower in absence of credit cards)? Because, again, in theory that only works if the demand has enough inelasticity.
Go buy something at your local No Name Shoppe and compare it to what you were paying 3 years ago. Adjust for inflation. Be shocked by the random ~3-4% cost increase.
My best personal example is the place where I play Magic the Gathering increasing the price of packs to adjust for the processing fees (and struggling to do that for fear of sending the regulars back to buying packs online, which would shutter their business permanently).
That wouldn't give actual data though, just anecdote. I'm interested if theres anything out there with a bit more rigor.
Furthermore, the claim is that prices were passed on across the board, not just at small businesses. Was there a 4-5% increase universally, or just at Ye Ole No Name Shoppe?
> My best personal example is the place where I play Magic the Gathering increasing the price of packs to adjust for the processing fees (and struggling to do that for fear of sending the regulars back to buying packs online, which would shutter their business permanently).
Doesn't that support what I said? They had difficulty raising the price, because people could just buy the cards elsewhere.
Anyway, I'm interested to further have this conversation, but getting back to the original argument, I think the only way Bitcoin could actually solve this problem is if the merchants dropped credit cards en-masse. Most credit card agreements stipulate that you cannot give discounts if they do not use a credit card. Then the question becomes if enough customers would be willing to forgo their cards for Bitcoins to make it a good value. Even at a theoretical 4%, I'm not sure I'd be willing, unless the Bitcoin ecosystem DRAMATICALLY improves.
Question: What would happen if literally everyone started using bitcoin? Could the system handle that much of a load?
There was a video linked on Hacker News about the scalability issues by a well-respected researcher a while back, but I can't seem to find it. I'm not intelligent enough or well-versed enough to say whether the issues are insurmountable or not. I do know that some very smart people are working on Bitcoin, so they very well may be. I'm only speaking to the current system.
I would say it probably is since Walmart, etc, al just won a class action lawsuit saying Mastercard and Visa were violating federal anti trust laws
http://www.nacsonline.com/Research/FactSheets/IndustryIssues...
Retailers said these actions caused merchants to pay excessive fees for credit and debit transactions. As a result, card companies settled the case and agreed to pay back damages, temporarily reduce fees and establish clear and distinct visual as well as electronic markers for identifying a credit from a debit card carrying a Visa or MasterCard logo.
>the fees that do exist are not necessarily passed on the consumer, but taken out of profit.
buhahaahaaaaha. That is so laughable.
Have you been to a gas station in the last couple years? There isn't a single one in a 2 mile radius of me (out of at least 5) that doesn't charge more for paying by credit card.
http://www.forbes.com/sites/beltway/2012/05/09/gas-station-o...
The card fees gasoline retailers pay are staggering. They are on average the second-highest operating cost for gas retailers (higher than rent on their stores). The fees were more than $11 billion last year – 87% higher than the entire industry’s profits. That makes six years in a row that the industry paid more in card fees than it made in profits. Those fees add an average of 7 cents per gallon to the price of gasoline sold in the United States and the fees have been exploding. Between 2004 and 2011 while the price of gasoline went up 80%, card fees increased 180%
http://www.nytimes.com/2013/12/20/business/an-easing-of-rule...
Currently, many businesses do pass on to consumers so-called “swipe fees” — which are said to generally range from 1 to 3 percent of the transaction — by building them into the price of the goods and services they sell. That means all customers pay, a system that some contend amounts to poorer consumers subsidizing affluent holders of premium rewards cards.
“To maintain the fiction that Amex and other issuers offer free rewards, retailers had no choice but to inflate the prices they charge to all customers,” said Gary B. Friedman, the lead lawyer for the plaintiff companies in the American Express case.
http://www.sltrib.com/sltrib/opinion/56143496-82/fees-card-c...
Ask any business owner who accepts credit cards about swipe fees and you'll get an earful. Every time a customer pays with a card, up to 4 percent of the sale goes back to the banks and credit card companies. Considering that the average profit margin for most retailers is 1-2 percent, these fees drive up prices and make it harder for small businesses to expand, hire more workers or even stay in business.
Merchants can't comparison-shop or negotiate swipe fees the way they do for other expenses. It's a take-it-or-leave-it deal and every bank agrees to charge the same thing. If merchants accept cards, they have to accept the fees, which can be raised at any time.
In fact, credit card swipe fees have more than tripled in the last 10 years even with new technology that should be driving costs down. And, swipe fees in the U.S. are higher than anywhere else in the world, even though we have the highest volume of card transactions.
In 2011, merchants paid more than $50 billion in swipe fees. For many retailers, these fees are their fastest-growing expense and their second-highest operating cost after labor. Business owners have no choice but to build some of these fees into their pricing, making everything consumers buy more expensive no matter how they pay.
To make matters even worse, merchants have no idea what the fee will be on any transaction until their bank statement comes at the end of the month. Visa has more than 60 different fee categories, and Mastercard has more than 240, but the fee isn't printed on the card.
http://www.nj.com/times-opinion/index.ssf/2013/03/opinion_hi...
Opinion: Hidden credit cards swipe fees are costing consumers, businesses billions
Yeah that sucks. But the only thing that's going to change this is regulation, not non-existent competition.
> Do you mind paying $15 to send money to relatives overseas?
Most of us don't have relatives overseas. And for the most part, if we did and we were sending money over seas, it'd probably be in denominations that make $15 a pittance.
> This is disruptive technology. Credit card companies and international money transfer companies are panicking right now.
This is hilarious and bullshit. Nobody's panicking. I doubt if most bankers even know what Bitcoin is. If they were scared, they'd go to their favorite lawmaker with a quarter billion dollars and tell them to make Bitcoin go away, and guess what? It would - "Silkroad"-style shutdowns would happen to all the Bitcoin companies, the value of bitcoin would plummet and this shanty economy would disappear overnight.
The 'but banks charge fees' argument just doesn't hold water long term. Blockchain resources are finite, and all indications are solving Bitcoins long term scalability problems (in terms of number of transactions per second) is still quite hard.
Unless the value of Bitcoin grows with hash difficulty and the inverse of block reward sizes, fees will rise in the Bitcoin network. It's naive to think it'll be a free ride payment network forever.
Accepting Bitcoin is a different way of hiding fees. It's somewhat difficult to compare prices to USD because you have to do the exchange rate calculation yourself. Merchants could easily charge a small premium for Bitcoin transactions and consumers can't easily tell if the deal is slightly better or slightly worse. As a result, there's little incentive to give a discount for Bitcoin since it's unlikely to get more sales.
The fees are still there; they're hidden in the bid/ask spread for exchanging bitcoin for dollars.
So yeah, this is "innovative" and possibly disruptive but only in the same way as other financial innovations that seem to give you a good deal while actually charging more.
Everyone who has ever dealt with a bank has a problem that Bitcoin can solve, even if they don't realize it yet.
http://www.peaktopeak.org/modules/groups/homepagefiles/cms/9... (1 MB .PDF)
The reality is that this was a very poorly implemented and marketed attempt on Chase's part to herd its business customers into accounts with higher fees. But who has time to deconstruct their bank's motivations when they decide to jerk their customers around, with or without a government mandate to do so?
http://www.bbc.co.uk/news/business-25861717
But yeah, you're probably right, I'm sure it's always going to be somebody else's problem.
I think we're roundly into stage 2 now.
Also, bitcoiners are not even in the same ballpark as Ghandi.
Are these two struggles similar in severity, importance, or necessity? No, of course not. Do they need to be, in order to reference that quote? No, of course not.
Why is it not necessary that these two situations be equivalent, or even similar, in that respect? Because he was not saying that the effort to get bitcoin widely accepted is as important as Indian independence.
I don't agree; instead, I'd call it "an effort".
It would be "a struggle" if people were risking going to jail, or being executed, or otherwise suffering non-voluntary consequences (like losing money for having speculated in BTC) for their participation, or were somehow barred from enjoying the same benefits as everyone else because of some imposed inability to participate.
As it stands, absent other, already specifically illegal activity (like the proscribed forms of tax evasion I suspect a great many Bitcoinophiles engage in, or using their cryptolucre to buy controlled substances), the greatest risk BTC owners face is selling at a lower exchange rate than they bought at — or maybe having their wallet stolen.
IMO, to call that "a struggle" devalues the word for the other things we call struggles, like independence movements, overthrowing tyrannies, civil rights, or marriage equality.
There doesn't have to be; that quote applies to a lot more things than just the Indian independence movement.
There's also a lot of things it doesn't apply to, and its pretty much impossible to tell which things it does and does not apply to a priori. Its pretty much why the quote is stupid when uttered by anyone other than Ghandi.
Even if I thought bitcoin was doomed to fail, I would do this in the short term to get more business from coin miners.
Cryptocurrency is awesome. There just isn't a well-designed one yet that uses actual, sound economic principles instead of Austrian School ramblings.
Did those posters ever exist? I certainly haven't seen them on Hacker News.
I still don't think bitcoin is a good currency and will probably fail in the long term, but it has enough momentum at this point that there's no productive discussion to be had.
I still monitor Bitcoin news. Nothing surprising. Bitcoin is still a greedy rotten fruit, and only time will prove anyone wrong.