Coinbase Raises $75M from DFJ Growth, USAA, NYSE, and More
blog.coinbase.com
blog.coinbase.com
Doesn't necessarily imply anything about future bitcoin business models, or even current ones that still fly beneath the mainstream investor radars.
It currently costs $40+ for a comparable fiat service (wire transfers).
[1] https://freedom-to-tinker.com/blog/randomwalker/the-low-tran...
Transferring value in the form of maintaining electronic accounts isn't comparable to wire transfers of fiat where the funds are made available in local currency. Banks don't just track numbers in accounts: providing liquidity and ensuring those numbers actually mean something is not trivial. If bitcoins were globally accepted it would be a more competitive service, but even then there would be the issues of fraud protection and compliance with money laundering legislation that bitcoin doesn't handle well.
It's free for most people in Europe. And fast.
The block size limit is in the process of being changed, but there isn't a rush since blocks are not being filled. If they do get filled, transaction costs will go up and tiny (0.01 USD) micro-transactions won't be viable until the block limit is increased. So the only thing that might happen is transactions of a few cents are temporarily not viable (the transaction cost is larger than the amount sent).
I mean we can argue semantics, but if you want to send $100 from the US to the Philippines, bitcoin is generally a lot faster than your bank, even when you have to buy bitcoin and sell it in the Philippines because of international transactions taking much longer than local ones.
As for capacity, bitcoin's 'Chief Scientist' just wrote a blog post on scalability: http://gavintech.blogspot.de/2015/01/twenty-megabytes-testin...
To make a long story short, thousands of transactions per second (Visa averages about 2k) is certainly possible. I'd be more worried about bitcoin adoption (from an interest/tech/growth point of view) as a limit than technical scalability issues as a limit, especially with things like sidechains. (Look at Blockstream's Sidechains for example as a solution, just got a $21m investment.)
It's generally held that it can scale, whether it can grow and become popular and well used remains to be seen (I think it's likely but it's far from certain).
They aren't a storage company, they are a company who facilitates transactions and like any other bitcoin business needs to securely store their btc.
The original comment was about them being similar to a bank which just isn't true at this point, it isn't what their business is about.
I don't get how you see a bank? As a storage company or money that just sits there doing nothing? Or as a company that facilitates transactions not unlike Coinbase?
They're very much like a bank in that regard. And yes they do also put a big focus on storage, it's not their only thing but they have one of the most popular wallets (2 million), claim to hold the most amount of bitcoin for users, more than any other company in the world, have a multi-sig product, have a vault product, have an insurance on their wallets, have mobile wallets, an SMS wallet, a web wallet.
This idea they're not about storing bitcoin (as well as other things) is ridiculous.
Are they a bank? In some ways, sure. Is that bad? No. A bank just offers financial services, and that's awesome.
And if you offer those financial services in a currency that can't be forged by criminals or printed and debased to fund an illegitimate military adventure, on a network that can't be blocked, is open to all, transparent and requires no permission, and offer products like a multi-sig wallet that put 100% of control with the user and 0% control with Coinbase as a choice to the user, that's awesome.
That may be a bank in that they offer financial services, but it's a lot better to me.
That's quite simply wrong; they are the most popular online wallet there is. You simply cannot make this claim, it's patently untrue.
Wrong. There's a reason they call one of their services a "wallet" - because they hold other people's bitcoins. And guess what, they now have a USD wallet too, for storing other people's USD (http://avc.com/2015/01/feature-friday-us-dollar-wallet/)
And as gnaritas said, they are not an exchange, they have a broker service.
The original post was about them being like a bank, which is not true in the context of their business model.
Yet. Like the OP said, "Next up they'll probably offer interest and loans/mortgages". Who knows what else they'll divert their attentions to (hint: it's probably where the money is).
Coinbase seems to be going for the Payment Processor route, now with the USD wallet who knows if they'll offer you a CC just like Xapo. Guess who else offers you CCs?
but usd wallets are definitely something novel (bitstamp also allows you to hold usd, but not for the use cases that coinbase is enabling)
So how do they make money from it? By stealing your assets, like most Bitcoin wallet companies?
Mere possibility of running a node on your own and sending money directly alters the dynamic. You can use a third party service if you like. You have to use a third party to transfer dollars over the Internet.
I'd say most money lives in banks. Most cash is out in the world.
A downside of having someone else hold onto your BTC on a website is that you can't spend it in the ways that are supposed to make BTC powerful.
On the other hand, you do still reap the benefits of the rock-solid wealth-storage device that is BTC. And where could be a safer place for your BTC than a website on the Internet? Those things never get hacked.
The interesting thing here is that it's build on an open protocol rather than on legislation and so this I believe will at least give the opportunity to create all sorts of interesting solutions that are currently impossible to do within the current banking system because technology moves faster than legislation.
So even if we are talking centralization or clustering as I like to call it, we are not talking exclusion.
I think there is a real risk that we'll see bitcoin processing completely swallowed up by these big players.
Email's a great example. You could set up your own email server, but doing so in such a way that you don't harm your ability to get emails into people's inboxes is problematic in all sorts of ways: you've got a good chance of being classified as spam. So even though the system is decentralized, the fact that most users are centralized within a few big players means that those parties can unilaterally impose rules that cut off users who don't participate in the centralized ecosystem.
In short: if Coinbase becomes sufficiently large, they could have the de facto power to disadvantage people who choose to use bitcoin outside of major centralized services.
This isn't to say that a system can't tend more or less to centralization: sure, it can, and Bitcoin could have a strong tendency to make unilaterally enforced centralization hard. But even good technical solutions are vulnerable to social forces, and social forces can be very powerful.
Git is decentralized, that means I can quit Github any time I want and use another service to host my repositories.
Bitcoin is the same: I'm not locked into Coinbase, I can switch them for another service, personal wallet on a phone, a hardware wallet, or a combination of them. Move my coins to a company in another jurisdiction etc.
Just the very fact of how easy it is to switch, creates a pressure on your provider and makes them work harder.
US banking is not decentralized. I cannot simply take dollars out to some other service or wallet. Moving them takes a lot of time, there is no privacy, there is suspicious reports and interrogation everywhere, civil forfeiture laws and for another jurisdiction, I have to sell dollars for another currency which incurs fees, risks etc.
In short: Bitcoin is like Git, fiat money and banking is like CVS.
Luckily, with Bitcoin, it's trade what you can lose. Keep the rest by yourself. Yes, there were some losses, but it's a trading platform. Somewhat expected.
If you don't believe me research what happened with the Swiss Franc recently. It has closed a lot of FX trading platforms from sheer losses [1].
This isn't limited to bitcoin — that's a naive and ignorant point of view.
[1] http://www.bidnessetc.com/32853-swiss-franc-shock-highlight-...
Apparently Coinbase now offers a multi-signature feature, so people could do the same.
You could move your open source project away from GitHub, but if GitHub is sufficiently popular that most people don't understand how the patch system works in git, and hence don't know how to contribute without using the affordances that GitHub offers, then you will incur a cost by doing so.
The point I'm making is that if the majority of people using a decentralized system via a centralized wrapper, and if interaction with those people is a priority, then it is possible for the provider of that centralized wrapper to make it harder for you to interact with their customers without yourself using the centralized wrapper. The more they do so, the less value there is to you (the decentralized user) in the millions/billions of people using decentralized service X through centralized wrapper Y, because they're effectively unreachable unless you also use said centralized wrapper.
This can happen by continuing to use the decentralized infrastructure, but penalizing participants who aren't accessing the infrastructure through a popular system. Alternatively, it can happen by having the decentralized infrastructure co-opted, so even though the service to some extent interacts with it, most user interaction actually exists entirely within the centralized system.
I mean, it doesn't seem crazy for me to imagine a world in which (eg) as a Coinbase user there's some monetary advantage to receiving payments from Coinbase members vs the wider Bitcoin world. At which point maybe merchants want you to pay via "Coinbase Send" (or w/e this hypothetical service is called) rather than pure Bitcoin transactions. At which point, sure, Bitcoin is the underlying unit of value, but no-one is actually using Bitcoin transactions (Coinbase is just moving around their internal accounting DB records), and hence the fact that things are counted in Bitcoin is basically a historical artifact.
I have no idea what will happen. My argument is just that I don't think that it is impossible for decentralized systems to be functionally neutered when people mostly interact with them through centralized wrappers.
If a sufficient number of businesses integrate coinbase into their sales, it's not just a matter of the paying customer going elsewhere to process the payment: the entity selling the goods also has to move away from coinbase.
Sure, you can still send coins over the network - but given a large enough foothold that doesn't mean you'll be able to pay for the goods you want, at the merchant you want.
The reason some banks take so long to do transfers is not because USD is somehow analog, it's for institutional reasons that are entirely rectifiable - which is why it's not true of all banks or often, true outside the US.
One is that the paradox of bitcoin adoption is that it can't take off without a normal banking system. And if you had a decent banking system, you wouldn't need bitcoin in the first place.
That is, fraud is a big issue in online retail. You buy product X online and then you 'charge back' your transaction and end up with a free product. Merchants then have to solve this by starting legal cases and provide evidence that a product was supplied blablabla. Sometimes this costs more than it's worth. Bitcoin faces a lot of these problems, too. How do you acquire bitcoin? You can't through Paypal because of this fraud, everyone charges it back and Paypal mostly ignores evidence that bitcoin was indeed supplied. As a seller you can't really make a case and win.
So you end up with these big companies that act a bit like banks. They require you to verify your identity, your residence, bank account etc. All to prevent fraud. And of course all of that has costs, so they charge you 1%. And then you pay them not through a credit card, that's 2.5% in fees which doesn't work if you pay $100 to get $100 of bitcoin. So you pay through ACH, which takes a few days but is cheap.
So you end up with a service that sells you bitcoin for 1% that takes a few days. Why? Because there's no way to safely send money cheaply and instantly without fraud, which is what bitcoin allows you to do and solves.
So the paradox is, if everyone had bitcoin, it wouldn't be a problem. But they don't, so we need banks. But if banks worked well, we wouldn't need bitcoin.
Over time this becomes less of an issue of course. This is what made Coinbase big, not its storage, but its exchange function for US customers. As a wallet, it's not the biggest, Blockchain.info which does not see your private keys (it's a software layer) has almost a million more wallets. So it's big for its exchange function which has little to do with centralized or decentralized storage of money.
The second part is centralized storage. This is a function of culture and software sophistication. In the early days most bitcoin software wasn't user friendly and not very well written. Today we're seeing changes. In fact, Coinbase has a multi-sig product, which is a software solution allowing you full autonomy over your money, and Coinbase none. That's not centralized storage, users retain full control over their private keys and Coinbase offers the software to facilitate it, much like how an Excel sheet facilitates your personal data analysis but doesn't award Microsoft ownership of your data. Over time we'll see products like this emerge more and more and people will have a choice to move away from centralized storage, and culture may shift towards that, too.
In short though, bitcoin wasn't about 'never use a centralized company'. It's about a protocol layer that's not proprietary, with a currency that can't be forged or printed to fuel political agendas (like militaristic foreign policy). The fact that centralized and decentralized solutions become available on top of that layer is both fine. Much like how a decentralized internet would be awesome despite the fact it would still see centralized repositories of data like Facebook, it's not about which services become most popular as long as the underlying network remains free and open.
Every inflationary currency system suffers from the same problem. At least bitcoin has a hard cap on the total number of units that will ever be available.
[That was the argument made anyway]
You say that as though it is a good thing. Do you really think the US would be better off with QE? It seems to me it'd look more like the Eurozone.
Increase in money supply != inflation, FWIW.
For one we have the transaction numbers (again just count transactions on the blockchain) for the past 24 hours. It's been averaging about 100k the past few weeks. (averaging about 70k for 2014 for context).
We also know that every 10 minutes a block is mined and 25 bitcoins are rewarded with a value of $200 per coin. So in 24 hours that's $720k.
In short this puts the average supply of bitcoin at $7 per transaction.
In short, you can't call it a 'cost per transaction' because it's not a marginal cost. i.e. if zero transactions were made, there'd still be a supply of 25 bitcoins every 10 minutes up to $700k per day. Same with if 1 trillion transactions were made. In other words, this is simply a supply function, not a per-transaction cost function.
To put this into perspective, here's an example. e.g. if you build a bridge for $1m and you have 1 million users, the average cost per user is $1. But if only 1 person uses the bridge, it's not like the cost of a bridge is $1 million per user. That would be ridiculous. If we went about reasoning like that nobody would build a bridge at that cost, especially not in places where you get many users because you'd get insanely expensive bridges (1 million users costs 1 million * 1 million!)
Now it's true that someone has to pay for all this hashing which secures the blockchain. But that cost is not to secure each individual transaction. It's a cost to secure the system, a systemic cost. A bit like the cost to build a bridge, a global cost, not a marginal one (i.e. it doesn't cost extra to let 10 persons instead of 1 person to walk over the bridge)
The bridge is a poor example because you can't get unlimited people on the bridge. (there is some marginal cost, i.e. there is a cost difference to building a bridge to move 100 people per hour versus 100 thousand people per hour). In bitcoin this difference is trivial. It's like asking what the cost of a tweet is on twitter's bandwidth or storage, it's very tiny like a tiny fraction of a penny. This cost is paid for in transaction fees.
So to return to the systemic cost, you need to come up with enough money to incentivize miners to act honestly. And we can do that by rewarding them with bitcoin. Today that comes from block rewards, but it doesn't have to be like that. In 10 years, if bitcoin is popular, we can see millions of transactions per block, and if each transaction costs a penny then you can easily cover today's block rewards.
For some example numbers: current security costs about $5k per block, and we've just heard bitcoin's Chief Scientist report on tests that he did with large blocks. His tests showed he can power 200 megabyte blocks on his 2012 home PC. That's enough data for more than 400k transactions, meaning that with 0 block rewards you could get transactions as cheap as 1.2 cents, nothing close to the $7 figure I stated before.
And this ability grows at Moore's, Kryder's and Nielsen's law (cpu, storage, bandwidth) meaning that the ability to power larger blocks grows by 80x every decade or so. If you then fill those larger blocks with 80x transactions, then each transaction can get 80x cheaper. Within a decade we could get to fractions of a penny per transaction.
Then combine that with the fact that 1 transaction can carry a ton of data. i.e. you can send bitcoin to thousands of people with 1 transaction if you wanted. Or you could use bitcoin as a settling system for offchain or sidechain systems, meaning you can settle thousands of trades with only a few transactions making the cost of transactions even cheaper.
So these 'cost' figures look a lot scarier than they are. I wrote a similar bit as above about what that all means here: https://news.ycombinator.com/item?id=8922262
In short bitcoin really is very cheap and its cost will not be its downfall. It might fail for other reasons, but I don't perceive costs to be one of its obstacles, rather it's one of its competitive advantages.
And that cost is dropping. Money supply is just inherent to bitcoin's design to kick it off, but it's dropping to near zero within a few decades, unlike systemic costs of printing fiat which remain endlessly.
The long-term reward are transaction fees, and those are certainly quite cheap. You can move millions of dollars with pennies of fees, or you can make one transaction with thousands of outputs, also for mere pennies. Those fees can stay low as when you get 1.000x more transactions, you can pay for the same security with extremely small fees per transaction. (i.e. securing the system is expensive, again it's a systemic cost, but securing each individual transaction isn't, that's just a cheap process of verifying a signature and storing 1/10th the amount of data of a tweet. So if you get enough transactions going, securing the system can be funded by very many very cheap transaction fees. And if you don't get many transactions going, then bitcoin isn't popular and well used anyway and who cares then if it doesn't work? It's like saying Myspace has technical flaws, nobody cares if it already failed to become popular that it would also have failed for technical reasons.
Bitcoin is imo unlikely to ever let you buy a cup of coffee using a single blockchain transaction (I mean, you can now, I'm talking sustaining this over the long term). Instead, it'll be used as the value network on which financial systems are built that will allow you to do this. Whether that's sidechains or offchains, they'll all use bitcoin's blockchain as a settling mechanism, without forcing low-value transactions on a permanent global ledger.
Your identity is already verified for tax purposes. It's a straight up facilitator.
As a shameless plug, the other reason is savings. We've implemented splitting your paycheck up into multiple accounts to incentivise savings, and it's working really well.
Credit card fraud is incredibly rampant and the security measures in place by banks and sites is so over the top it becomes difficult to even use them. Use ghostery? Your transaction won't go through with an unknown error. Use a VPN? Your transaction won't go through with an unknown error. Paying from a different computer? A different IP? Using a different address? All these things are a recipe for being on hold with your bank for 45 minutes when you all you wanted to do was order $50 of stuff from NewEgg.
My card was also stolen once (someone copied the magnetic stripe). Once this someone did a transaction on the other side of the country I immediatelly got a call from Amex which proceed to refund that transaction and to send me a new card. IIRC a replacement card arrived in the mail on the next day. In the mean time I just used my debit card to pay for things.
Specifically the lack of fraud protection is obviously advantageous for merchants (who often are the ones, not the banks, paying out in the case of fraud) but for the consumer its distinctly worse.
For all intents and purposes, people having money in mtgox was the equivalent of people holding money in a crappy (security or fraud-wise) bank.
1. to take (the property of another or others) without permission or right, especially secretly or by force:
(http://dictionary.reference.com/browse/steal)
Note that the definition does not take into consideration whether you think the victim should have done more to protect themselves, just as the fact that every year thousands of criminals are successfully prosecuted for stealing even in cases where homeowners did not have dogs, 24x7 security guards, etc.
Also the analogy that other person raised ("Your stuff can't be stolen. Period. A different thing is that you may suck at protecting your house") is a good one too.
However, we're talking about different things here.
When do bitcoins really get "stolen"? When terrible things happen, like if people install malware or trojans by accident, or don't apply security updates to their systems.
This, to me, is the equivalent of leaving the door of your house wide open. Not simply not putting an alarm system, you know.
That is, if you want to use bitcoin, have some common sense and minimal computer knowledge, first (minimal includes knowing how to keep your operating system updated, not be a certified sysadmin).
In that case, you should think more carefully about the problem because you're conflating two unlike things. Even ignoring the fact how many bitcoins have been stolen were compromised by previously-popular third parties, your current position is the equivalent of hearing about someone's house being broken into and saying “Oh, your stuff wasn't really stolen – everyone knows that you shouldn't buy a Kwikset lock/ever invite guests over/forget to arm your alarm”.
Designing a system which assumes humans will perfectly follow the best operating procedures is the security equivalent of hawking a perpetual motion device. In the real world, people delay updates or get let down by an unreliable updater, get hit by zero-days or suckered by scammers, etc. Anyone serious about building a financial system needs to plan for that and build in layers of safety precautions.
I get that you really want Bitcoin to succeed but the way to do that is by taking problems seriously and working to fix them rather than pretending them away.
Wrong. In many cases he is responsible.
Scenario #1: 60 days (typically) after the transaction, the customer has no recourse to report fraud. You were browsing your credit card statements and notice a $50 charge 2 months ago that you never authorized? Tough luck.
Scenario #2: When the card was physically present during the transaction, and when a pin code was used, the customer is always (edit: I meant "typically") held responsible unless he can prove he and his authorized users were definitively not present.
I think you ought to fact check on Scenario #2 (at least in the US), The merchant is responsible for confirming the identity of the customer matches the one stated on the card - the customer does not need to prove anything.
Link (re pin number use): http://www.occ.gov/static/news-issuances/memos-advisory-lett...
As for Scenario #1 - the 60 day limit is quite reasonable. What kind of investigation of unauthorized usage could a bank possibly conduct 60 days after an unauthorized $50 payment?
Regarding scenario #1, it is irrelevant if the amount is $50 or $1000. My point is, you have no recourse. Credit cards won't protect you from fraud in this case.
Anyways, debating the effectiveness of consumer fraud-protection is quite beside the point, since Bitcoin offers absolutely no fraud protection and very circumstantial utility (i.e. the ability to make anonymous or pseudo-anonymous payments).
"If your Password or PIN is used in such a transaction, you will be liable for the full debt, including interest arising from such use" Source: http://www.scotiabank.com/ca/common/pdf/borrowing/revolving_...
In other words, if a thief somehow steals my PIN, I will be liable as a customer. If you still don't believe me, read any of the stories reported by journalists explaining how banks reject fraud claims when the PIN was used: http://mymoneycounselor.com/card-fraud-blame-shift Merchants may be responsible for verifying the customer's identity, but often they don't. This is why credit card fraud is prevalent.
> debating the effectiveness of consumer fraud-protection is quite beside the point
On the contrary, this is important in this debate. You can't use "zero-liability" as a reason why credit cards are superiors to Bitcoin when I prove to you customers are actually held liable in many cases.
Bitcoin can be superior to credit cards, because when the wallet is properly secured (for example a passcode-protected hardware wallet), theft and fraud becomes increasingly unlikely, whereas credit card fraud continues to become a bigger and bigger problem, and banks increasingly shift the liability toward customers as I documented above.
I'd rather have my credit card stolen, which I'm not liable for if I report it promptly, instead of just being out of the funds permanently.
I have. It was pretty inconvenient, but after a call to the bank, the stolen card was cancelled and the unauthorized transactions were reversed. If your bitcoins are stolen, the money is gone forever without any possibility of recovering the funds.
> Have you ever had it frozen and not been able to spend your own money?
No, that's never happened to me. I have once had a very large transaction automatically declined in the past, which was also inconvenient at the time, but the bank called me about it within 60 seconds of the transaction and I was able to resolve the issue right there. Reflecting on it later, I decided I liked the fact that my bank sought additional verification before authorizing a very large and unusual transaction.
> Credit card fraud is incredibly rampant and the security measures in place by banks and sites is so over the top it becomes difficult to even use them.
This is not an issue for me or anyone I know. I've never had a bank card payment rejected because of ghostery or an IP address or my VPN. Besides, even if I did, there is no reason why a business could not use identical signals for rejecting a bitcoin payment, especially since the consequences of bitcoin fraud or much more severe for the consumer.
For the vast majority of consumers, bitcoin as currency, offers almost nothing in the way of advantages over bank cards; that's just the reality. This isn't to say that bitcoin is useless or that banks always have their customer's best interest at heart, but there's really no denying the fact that banks are safer and more convenient than bitcoin for most people.
At least 3 times. It didn't cost me a cent. Chase sent a new one over 2 day air.
Have you ever reversed a bitcoin charge because of a fraudulent seller?
Other than the last part, which was meant as, "Apply Pay is easier to use than Bitcoin."
Cause man, it is.
This suggests you haven't tried paying with bitcoin. Sure, you lose all those things you get with creditcards, but for me some advantages that bitcoin offers over credit cards (and yes I'm a consumer too) are more important, such us:
- I'm not afraid that any of the providers where I have bought things gets hacked, because my identity and payment details is not kept by them.
- Paying with bitcoin is so much easier, I don't need to copy stupid numbers from a card with my keyboard ever again.
- I don't need to check my bank account from time to time to see if I had charges that don't correspond to things I didn't buy.
- I'm not afraid of bank commissions that especially take place when I pay for things abroad.
These are the little things that will make a universal-worldwide-digital-coin succeed. Could be that this coin is bitcoin, or other one.
Aren't you just trading the risk of the merchant being hacked and stealing payment details (which with credit cards, can be fixed by simply issuing a new card) for the risk of someone getting access to where you store your bitcoins (where you effectively have zero recourse)?
That seems like an unbalanced tradeoff from my perspective.
Likewise, a PIN-protected Bitcoin hardware wallet is reasonably pretty secure. You would need a thief with professional equipment to decap the secure chip to access data in the EEPROM that would otherwise be PIN-protected. I would trust this any time over the merchants systems which routinely get hacked over and over.
Also it's quite common for people to give their pin to thieves it happens at ATM stick ups all the time. The difference there is in cases where they are forced to withdraw money they aren't liable(it's considered the bank being robbed not them) and in cases where the thief takes the info and runs they can call the bank cancel the card and not be out anything.
As to liability, I have pointed out in this HN thread multiple instances where customers are in fact held liable (60-day rule, stolen PIN).
Your 1 example requires the person to not check their statement for 2 months. That means there is a 2 month safety window. Do you have numbers on how many people actually have that problem vs the numbers for the ones it works fine for? I would put money on the former being less than a hundredth of a percent
Your second one has been debunked where you originally posted it
Uh no. I gave sources to prove it: https://news.ycombinator.com/item?id=8920067
> What happens if I forget my pin then?
It could be handled the same way as when you forget your credit card PIN. Contact the company who sold you the hardware wallet and who verified your identity when you purchased it, and they could reset it: each wallet could have a rescue passcode that only the company knows. You see, Bitcoin is flexible enough that it lets us develop whatever infrastructure we want on top of it. Even though this service does not exist yet, if it is something people want it will likely be created.
So if your friend Bob wants no one to know his rescue passcode or his identity for ideological reasons then he would himself be responsible for safeguarding the rescue passcode. But if you, sanswork, don't trust yourself to memorize the passcode, buy a hardware wallet from such a company. Either way, you or Bob have a choice of having a wallet work the way you want it to work.
> Your 1 example requires the person to not check their statement for 2 months.
Not necessarily. There are other tactics that scammers use to defeat chargeback protections. For instance they will delay the shipment after you purchase. They will claim multi-weeks long delays due to depleted warehouse stocks. They will ship to a "wrong" address. They will ship the "wrong" item and take time to re-ship the correct one. During all this time they will be all nice and apologetic to make it look like these are simple honest mistakes. After the 60-day limit passes, they cut contact with you, you realize it's a scam, you try to charge back, and you realize you can't! You were not aware of the 60-day limit. The scammers have your money. You are screwed.
I'll take the CC please!
You CAN and SHOULD use the legal tools at your disposition (lawsuit, small claim court, FTC/BBB complaints...) if you get scammed after paying in bitcoins. You definitively have a chance of recourse. These tools work, that's why we have them.
For example the U.S. Securities Exchange Commission successfully prosecuted Trendon Shavers (he was running his scam denominated in bitcoins).
The consequences of failing to secure a merchant system are that I have to get a new credit card and maybe click the "dispute" button on my bank website a couple times.
Things may have changed, and this is by no means a critique of Bitcoin as a protocol, but I've had the opposite experience so far.
For online purchases at best, in order to make a purchase, I've needed to copy the address to send payments to, log into my wallet, paste the address, go back and copy a code from the website and paste that in the memo, and enter the correct payment amount. At worst, it's required multiple emails because things were broken.
For online credit card purchases, it's been as easy as clicking a single button (Saved CC info), and having everything simply work. Entering the CC info is a little more work, but I wouldn't say its significantly easier than the Bitcoin experience.
In person purchases are slightly easier, but it still requires some form of taking a picture of a QR code and waiting a minute or two for the payment to go through. With a credit card its as easy as making a swipe and sometimes signing.
I have hope that one day paying with bitcoin will be easier, but so far I haven't experienced this.
1) http://money.cnn.com/magazines/moneymag/money101/lesson9/
Basically splitting the functionality of PayPal into two: 1) payment processing and 2) dispute resolution.
http://www.gallup.com/poll/168668/americans-rely-less-credit...
In order to replicate the credit card payment process you have:
prebuy bitcoins. Not only is this a bitch to deal with, but it costs money. Transaction fees, hidden or not. Sure you can buy on an exchange but that has a small fee plus the risk they'll steal or lose your coins. Buying from an ATM or broker has a fee. Even if it isn't explicit they'll get you on exchange rate spread.
Some sort of escrow service. If Amazon doesn't ship me my TV, I can cancel the charge on Visa. Either you forgo this or you pay for it. This will have a fee.
There is volatility risk.
Then the merchant still has some fees. They have to pay Coinbase their fee.
When accounting for all the risk I doubt it's cheaper.
That isn't even considering that confirmation time is like what? 10-30 minutes?
Bitcoin will be the silk road currency but not much else.
Volatility risk is inherent to every single currency. The swiss franc just had a 30% change in value. Bitcoin's volatility is going down every year, look at the charts, and it makes sense, too. Deeper markets are harder to move. There's nothing particularly unique about bitcoin that makes it volatile except its youth and nascent ecosystem. Over time its predictable supply curve makes it less volatile than most of the world's currencies for most of the world's population that don't live in stable OECD economies with decent currencies. There are numerous countries with 10-20% inflation and wild swings.
Is bitcoin any better? Well again, its volatility is going down every year. But already you can go to Bitreserve and lock in the price to a dollar or euro or gold or yen or whatever value. So if you're in Kenya, instead of 10% inflation, you just keep your money according to the dollar rate if you want, enabled by bitcoin.
Merchant fee? Bitpay offers 0% processing for all. Their most recent merchant taking bitcoin through Bitpay (at 0% fees) was Microsoft.
Transactions are instant, confirmation time can be mitigated as it's a function of risk. Cup of coffee needs no confirmation time. Amazon needs no confirmation time. (if the customer double spends it, you simply cancel 15 minutes later and the item supposed to ship the next day won't arrive.) Xbox Live needs no confirmation time. (account gets shut down after 10 minutes of trying to set up a multiplayer game of Halo, xbox gets fingerprinted and it and the ip gets blacklisted for fraud. Remember only the owner of bitcoin can double spend through careful effort, meaning you can be near certain fraud was intentional.) In short, virtually all of online retail has no real confirmation issues long term. And software solutions are in progress, there was one posted just last week, can't find it atm.
Escrow: it's just an insurance service, no reason there won't be a company offering it. In fact escrow with timelocks and multi-sig already exist. It's a bit of a long discussion but look into Mike Hearn's presentations and articles on this, the short story is that with bitcoin you can get much better and fairer and more specific expert escrow services to fit your particular niche. Paypal and Amazon's systems aren't adequate and allow too much fraud and require too many costs.
Whether the customer or the merchant pays isn't relevant, the customer ALWAYS pays, it's not like the merchant will pay extra fees from his money-tree in his backyard. The customer pays. So if you have an expensive escrow system that screws over merchants and lets criminals chargeback lots of transactions stealing products essentially without paying and the merchant has to pay for expensive processes to get their product/money back, or let it slide, then the company will raise prices to make up for the losses or go out of business. Customers pay.
Same with creditcard theft. Oh you don't have to pay if your CC gets stolen and someone spends $1k of your money? You still pay. Mastercard isn't giving you $1k. They're either taking it from the merchant (see above), or they're paying you money out of revenues. Surprise, in both cases, you're the source of revenue. Banking isn't cheap, there are enough articles on this online just check 'm out. A checking account averages about $200 a year? Credit is hugely overpriced? Paying 15-20% a year on credit when if I put money in a savings account I can barely get 0.5%? That's obviously because there's no peer-to-peer lending, if there was you'd both pay/get 10% and be better off by 10%. But people accept crazy rates on creditcards, why? Because the regular use is free or insured or promoted. All of those things you think are 'free' or 'cheap' are only such because you're getting screwed in other areas of your financial services.
In short, creditcards are a 1950s invention that are hugely unsecure: people walk around with plastic cards with their freaking entire password (doubles as an account number) printed on it. And everytime you want to pay, you show your password. It's insane. And then if something goes wrong, you charge it back. All of this costs money, there's a ton of theft and fraud with this system and the customer ends up paying for it. You're deluding yourself if you think that's cheap, it's like getting a free razor and being oblivious to the fact you're paying a shit ton on the blades.
> Volatility risk is inherent to every single currency.
Except for the currency that's native to your country. I do not have "volatility" risk holding USD, purchasing things with USD. I do have volatility with BTC, even sans the export to fiat, as BTC is only valued based on it's worth relative to other currencies.
> There's nothing particularly unique about bitcoin that makes it volatile except its youth and nascent ecosystem.
So, you're saying a decentralized, pseudonymous digital currency whose scarcity is not derived from policy mandates and whose trade value is not backed by anything beyond what someone is willing to buy it for in another currency, that can only be acquired by purchasing said currency from a third-party, has no properties that are particularly unique to it that would influence volatility?
> Over time its predictable supply curve makes it less volatile than most of the world's currencies for most of the world's population that don't live in stable OECD economies with decent currencies.
See above.
> Merchant fee? Bitpay offers 0% processing for all. Their most recent merchant taking bitcoin through Bitpay (at 0% fees) was Microsoft.
BitPay offers a 0% processing charge and makes money on the spread. Also, that's basically a "for now" situation. Third, even if you remove that fee, there are miner fees involved with any transaction you'd like to actually have verified in a decent chunk of time (they are tiny, but there.)
So "0% merchant fees" is a completely disingenuous statement.
> Transactions are instant…virtually all of online retail has no real confirmation issues long term.
So, transactions are instant but aren't instant, but that's OK because for most things they don't need to be instant, but it's important that transactions be instant (which they aren't).
Gotcha.
> Escrow: it's just an insurance service, no reason there won't be a company offering it. Paypal and Amazon's systems aren't adequate and allow too much fraud and require too many costs.
So, instead of placing escrow responsibility on the shoulders of the merchant and banks, we should place it on the shoulder of the consumer, and make them pay for it, because that's a great idea.
> Whether the customer or the merchant pays isn't relevant, the customer ALWAYS pays, it's not like the merchant will pay extra fees from his money-tree in his backyard.
The assumption here, and it's so hilariously common I have zero words for it, is that merchants, if you pay with BTC, will discount their products to reflect the 1-3% fee they're saving.
Just like how, when you pay with cash today, people commonly discount things by 1-3%.
> Same with creditcard theft. Oh you don't have to pay if your CC gets stolen and someone spends $1k of your money? You still pay. Mastercard isn't giving you $1k.
Correct, almost, but not at all!
Mastercard isn't actually paying, in many, many cases. More often than not, they simple reverse the transactions and make the merchant deal with absorbing the cost. Otherwise, you're right. MasterCard pays out their revenues, which are funded by interest on debts and merchant fees.
So, I pay a fee to MasterCard for letting me borrow money I don't have, and merchants pay a fee to MasterCard so they can take get money people don't have, and to you, this is a bad arrangement?
> Credit is hugely overpriced? Paying 15-20% a year on credit when if I put money in a savings account I can barely get 0.5%? That's obviously because there's no peer-to-peer lending, if there was you'd both pay/get 10% and be better off by 10%.
In what universe did you find this magic 10% statistic, and how can we borrow money from it?
People pay high interest rates on credit because it's risky to give them credit. If it's not risky, you pay next to nothing.
Peer to peer lending will not magically solve the rate issue. There are peer to peer lenders out there now, and their rates are actually worse than banks in many cases. But they're also willing to loan to a riskier customer base. Huzzah!
> In short, creditcards are a 1950s invention that are hugely unsecure: people walk around with plastic cards with their freaking entire password (doubles as an account number) printed on it. And everytime you want to pay, you show your password. It's insane.
You're absolutely. That's why the CC industry is working very hard to derive new transaction methods which are more secure. Chip and Pin, Apple Pay, etc.
But yes, by all means, let's abandon all the wonderful, painless, things about our current banking structure so that we might bask in the warm glow of an unregulated, barely-beta quality piece of software.
Because there's absolutely no way our banking system can get better, except for all the ways its gotten better for the last 100 years.
They actually can't, since it's forbidden by the payment networks. In fact, there was a classe action lawsuit initiated by thousands of merchants in part due to those restrictions: http://en.m.wikipedia.org/wiki/Payment_Card_Interchange_Fee_...
Regarding Coinbase I would assume they are convincing their investors that the company has a huge value and expertise even assuming total Bitcoin collapse / switch to another digital currency.
Personally, I think BTC is going to be OK because there's already a decent ecosystem growing around it. Enough people are keen on it succeeding that it'll do something useful. The real question is whether it'll be a multi-trillion dollar industry that replaces money or a multi-billion dollar industry that's used for secure value transactions or proof of work or something, not than whether or not it'll fail entirely and disappear.
Exactly. I am personally convinced it will succeed, but I don't know in which way. It could be anything that benefits of proof of work.
Are there actually libraries, or clients which create a P2P network, that is generic? I mean the client synchronization is the same as in BTC, but the data exchanged is generic.
That's a violation of California B&P code section 17538. (http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&gr...)
(d) A vendor conducting business through the Internet or any other electronic means of communication shall do all of the following when the transaction involves a buyer located in this state:
(1) Before accepting any payment or processing any debit or credit charge or funds transfer, the vendor shall disclose to the buyer in writing or by electronic means of communication, such as e-mail or an on-screen notice, the vendor's return and refund policy, the legal name under which the business is conducted and, except as provided in paragraph (3), the complete street address from which the business is actually conducted.
Some of those institutions are obviously signs of opening BTC to stock exchange or more hedge founds, and traditional investments assets.
Would have been nice to hear more of where they see/want to put bitcoin in the future.
It is gaining momentum.
http://ecorner.stanford.edu/authorMaterialInfo.html?mid=3369
I don't know how much everybody knows about him (I'm pretty sure his Wikipedia profile won't tell the entire story), but this finance executive has a bad reputation. Pre-financial crisis, he was COO Morgan Stanley, and later went off to create a hedge fund 100% based on hyped market bluffs. He sold the fund to Citigroup ($800m) in 2008* as a condition for him joining as interim CEO of Citigroup... and just a few months later, Citigroup wrote-off the entire fund. As per his role at Citigroup, I'll let you do the research and news digging.
I sometimes don't understand the tech's sector hypocrisy: tech wants to become a solution to the problem, and they go on to finance and advice themselves with the problem. I really don't get it.
* edit from 2007 to '08
This is something a company like Coinbase desperately needs, if it wants to have a say in future Bitcoin regulation that will inevitably be introduced at some point in the future.
I can personally see the value of having someone like that on board.
Only if it can be assured to make them money in the process. Besides, you can't paint with such broad strokes, the "tech sector" can't be guilty of hypocrisy, only individuals can, and from where I sit, it's all pretty clearly about money.