The rhetoric around explanations of the utility of cryptocurrency has changed a lot in the past few years.
These days, the major emphasis is on circumventing the fees/processes associated with banking (as opposed to the libertarian and/or anonymity rhetoric, which dominated a couple years ago). As a witness, this landing page.
And I think the rhetoric has converged to the strongest argument -- political ideology aside, the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry.
But then, this makes Bitcoin mostly a cottage industry taking advantage of technology to side-step banking regulations. I see two likely outcomes -- regulations are extended to BC and BC companies start charging as much as banks to compensate for the inherent riskiness of the business, or banks push for regulatory reform while making their services significantly cheaper and faster.
I hope for the latter, because if fiat -> fiat transaction is your only goal, cryptocurrency is just an inefficient hack. If I just want to transfer some cash to someone, I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it. There's no reason to broaden the attack surface and add yet another middle-man (I mean, entrepreneur).
In reality, I expect a combination of the two former scenarios will cripple BC, and that a new era of internet cash transfer services will serve this market instead.
The real benefit is time of transfer. ACH is infuriatingly slow. If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior.
BTC could (theoretically) make daily payroll possible. The net benefit to society could be substantial. Payday loan activity would drop considerably. Some, but not all, credit card use would drop. All of the instruments that help "time shift" money could become far less necessary, along with the substantial fees associated with it.
> If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior.
Right. It'd love to see BC companies do well and then die off, so that we get reforms in banking without the unnecessary cruft of an intermediate currency intended for nothing except standing in-between fiat transactions. OR the inherent risk to consumers which comes with lack of regulation.
> The real benefit is time of transfer.
To what extent does this benefit come from not being subject to regulation? (edit: not rhetorical; I've no idea)
> If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior.
But the check still arrives on Friday, so the benefit is really to the business rather than the employee. This negates the employee-centric benefits you mention in the next paragraph (pay day loans, credit cards, etc.)
That is, unless the business is giving advances on payroll. But I think that's something companies don't do for reasons unrelated to choice of currency and transfer time. (edit: I suppose another alternative is that you could pay your employees more often because the process is cheaper and faster. That would be a big win. But I think other cash flows would in some cases prevent this from happening unless everything is done in BTC.)
edit: Die off is a bit harsh? I don't want fiat->btc->fiat because it's just silly, but of course if btc causes reforms in the banking industry I sincerely hope btc companies make a huge amount of money in the process :-)
>It'd love to see BC companies do well and then die off, so that we get reforms in banking without the unnecessary cruft of an intermediate currency intended for nothing except standing in-between fiat transactions.
>If I just want to transfer some cash to someone, I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it.
You've made that point twice in different comments, and I feel it has to be addressed. Firstly, the inefficiencies you've alluded to here are inefficiencies of the traditional banking system. Secondly, and most important, bitcoin IS money, it does not always have to be converted to something else.
Bitcoin is not necessarily an 'intermediate' currency. For example, if a person receives bitcoin and a store they want to use accepts bitcoin, then there is no need for an additional wasteful conversion step. And what if the store's suppliers also accept bitcoin or some of their staff are paid partly in bitcoin? What if these people are in different countries? Goodbye foreign currency exchange fees, remittance fees, bank charges.
This goal may be unattainable, and the current situation is certainly far from it, but each time a company like Dell or Newegg announces it accepts bitcoin payments or a company like Bitwage builds some other part of the ecosystem, bitcoin becomes a little more useful.
I don't think being paid 100% in bitcoin will be a good idea for most people any time soon, because they would just have to convert the bulk of it back to fiat currency. However, receiving a small percentage in bitcoin is quite practical in some places. A person who receives Bitcoin in the US actually already has a huge variety of products and services available, without converting to fiat. For example, have a look at https://spendabit.co and try searching for random products.
edit: TL;DR: I think the only interesting non-technical discussions about Bitcoin start with a specific use case. We should latch on to technological solutions because they solve problems, not because we agree with the dominant ideology of early adopters. Setting aside politics, if the problems Bitcoin solves are easier and cheaper to solve with a simpler solution, then we should use the simpler solution.
> Bitcoin is not necessarily an 'intermediate' currency
I mean, I started my post acknowledging these claims exist.
So, you can interpret my comments as "suppose that the only justification for bitcoin is its utility as a transfer medium..." and leave political discussions in other threads.
edit: also, this is totally appropriate for this thread, because in most states of the US, actually paying employees in bitcoin would not be legal and employees would need to convert back to usd to pay taxes, rent, food/bar tabs in most situations, etc. So, USD -> BTC -> USD is pretty clearly the intended use case for this product...
> if a person receives bitcoin and a store
The problem with foreign currency conversion isn't small amounts of cash for consumer transactions, at least in my experience. I can convert currency by using an ATM without thinking about it at a reasonable exchange rate, and the fees are often lower than what I would pay in the U.S.
Ditto for online services, but even more so.
The problem is larger amounts of cash, or transfers to third parties you won't visit in person. Queue discussion below.
> A person who receives Bitcoin in the US actually already has a huge variety of products and services available, without converting to fiat.
> or a company like Bitwage builds some other part of the ecosystem, bitcoin becomes a little more useful.
I suppose this is all great if you want to use bitcoin because of your political persuasion.
I'm -- and I suspect most people in the world are -- more interested in the actual underlying pain points than broad-stroke discussions which invariably ground-out in political, ideological discussions about monetary policy.
Ostensibly, personal opinion on national and international monetary policy isn't the best of standards for choosing a payroll provider. edit: also, that's where companies are focusing. For the obvious reason that political selling points, aren't.
And more importantly, that's not how this product sells itself. Nor should it.
>> or a company like Bitwage builds some other part of the ecosystem, bitcoin becomes a little more useful.
>I suppose this is all great if you want to use bitcoin because of your political persuasion.
I expect so. It's also great if you believe that the legacy financial system is inefficient and may improve if it is threatened by external competition. From your comments here, you do believe that, I think?
As you've said, casting this as a discussion of politics or monetary policy distracts from the practical issues. So let's avoid that. Your comment, which I cited above, seems to be assuming that my interest in this is political or ideological. It's not.
In fact, based on that comment, you appear to be assuming that anyone who 'supports' Bitcoin does so purely for political reasons. Is that really how you feel? I think that is far from the truth, anyway.
To be honest, I know very little about Bitwage. I replied to you because I think you've made some very broad assumptions about cryptocurrencies, which differ from reality somewhat. As I have used cryptocurrencies extensively, I've tried to explain how I think reality is more nuanced than these assumptions.
> From your comments here, you do believe that, I think?
I think bitcoin-as-exchange-medium is reasonable.
I think bitcoin-as-a-currency or bitcoin-as-money per se is not workable, or at the very least is a solution in search of a problem.
> Is that really how you feel?
If it were, I simply wouldn't read bitcoin stories.
> I think you've made some very broad assumptions about cryptocurrencies, which differ from reality somewhat.
What are the material advantages to using bitcoin for anything other than as an exchange mechanism?
All of the pain points of the modern banking system you and others have proposed are mostly about currency conversion and sending money across international borders, and my original post addresses what I believe the likely outcome for this use case is (although, see the thread with baddox as well).
I didn't claim you cannot use bitcoin in other capacities. I just stated the extra intermediate currency doesn't make any sense because there's no competitive advantage to existing (safer) mechanisms. Maybe I'm missing something?
> I've tried to explain how I think reality is more nuanced than these assumptions.
What would really convince me to let go of this assumption is a compelling reason to use bitcoin as money.
>If it were, I simply wouldn't read bitcoin stories.
Then your statement, 'I suppose this is all great if you want to use bitcoin because of your political persuasion', doesn't fully represent your actual point of view about the topic you were referring to (the growth of the bitcoin ecosystem)?
This one of several issues that I'm finding quite confusing. You've said you personally would love to see bitcoin have some limited growth because that might force improvements in the existing financial system[1], but then you've dismissed all other people's possible pleasure at bitcoin's growth as being purely politically motivated[2]. These two positions seem to contradict each other.
>What are the material advantages to using bitcoin for anything other than as an exchange mechanism?
I could give a trivial example, but do you mean the material advantages for you, or for some other person? I wouldn't be so presumptuous as to insist that bitcoin must be good for you personally. It's quite possible that it's worse than useless for you in its current form.
Please do, because this thread is hard-to-read deep and the only examples you've given were discussed at length in other subthreads before you even posted them.
> but do you mean the material advantages for you, or for some other person?
I would prefer "here is a problem" and then "here why bitcoin is the best available solution to the problem".
Rather than the more common "here is a problem" and "here's a way that bitcoin could solve the problem", and then completely ignoring hundreds of other less-complicated, safer and some-times even already well-established solutions.
Or solutions that are actually just ways to circumvent regulation, and probably aren't legally sustainable or financially scalable (see post #1).
> I wouldn't be so presumptuous as to insist that bitcoin must be good for you personally.
If you re-read my original post, my reasoning is explicitly selfish. The reasoning goes "I want X to happen because that's best for me."
> but then you've dismissed all other people's possible pleasure at bitcoin's growth as being purely politically motivated[2]
Um, yeah. In the post I'm responding to, you started with the assumption that bitcoin is good, and then reasoned from that assumption that we should use bitcoin in specific circumstances while ignoring arguments that it's not the best technology for addressing those specific problems.
But this reasoning is really silly. Because then every time I point out there's a better technology for solving problem X, you say "yeah, but Bitcoin solves lots of problems! So if we use it as the solution for X, then there's more adoption and we solve all these other problems."
But of course the only "other problems" you've mentioned all have better alternatives. And if even a significant portion problems have much better alternatives, then your argument falls apart and becomes "use bitcoin for X because bitcoin is inherently good", which is a political judgement and not a pragmatic judgement.
I work for clients in countries A, B and C, who pay me in bitcoins. I subcontract some parts of this work, such as design, coding, or translation, to workers in countries X,Y and Z who also accept bitcoins. I spend the majority of the bitcoins I earn on various products and services, but I keep a proportion long term. (I also do a lot of work that is paid in USD and other currencies).
The advantages that bitcoin offers in this situation are:
Much lower transaction fees than any other payment method. About 5 cents per transaction of any size (Though maybe fees could increase in the future)
No foreign currency exchange fees at all.
All fees are known in advance. This is a big advantage. We never know what fees banks are going to charge. Even the banks can't tell us before they route an international transaction via intermediate banks. So people may get underpaid several percent, and this causes dissatisfaction, and additional fees to make up the missing amount. With Bitcoin we know the upper bound for the fees, so we can account for them easily, and the fees are insignificant, as well.
We know the money will arrive immediately. With banks or paypal, even this is uncertain. International transactions, especially involving developing countries, are often frozen for opaque reasons, for unknown lengths of time, with limited recourse. If their payment doesn't arrive, subcontractors may stop work and the project stalls. Frozen payments are trapped in the system and they cannot be returned back to the sender on request. So we don't even know where the money will go. It depends on the opaque internal review. It could be returned, or it might continue on its journey to the next bank, or it may remain locked up for weeks. The uncertainty of delivery makes everyone reluctant to send large amounts in a single transaction. So they often split the payments into smaller amounts for safety. This raises the fees and time required.
Zero chance of chargebacks, clawbacks or advance fee fraud. I find that other people never understand how major this issue is, if they haven't experienced it themselves. The lack of confidence is a very significant problem with credit cards, paypal, checks and etc. Under the traditional payment systems used by small businesses, you usually need 2 way trust, but with bitcoin, 1 way trust is OK. Trust is expensive. Bitcoin makes it a lot simpler to work with new clients, or to accept payments from higher risk countries, because it deletes that uncertainty. In this case I take payment in bitcoins in advance, and then I know that I have the money, permanently. There's no chance that the funds will be suddenly get removed from the account weeks later.
Ability to work with people who don't have a healthy banking situation. For example, we can quickly and easily pay money to a subcontractor in China or India or the former Soviet Union who has difficulty receiving international remittances to their bank account due to high fees or bureaucratic issues. In reality, I don't know if some of those guys have regular bank accounts. (Apart from saving money overall, fees are currently low enough to provide the useful option of sending regular small payments during the course of the work, which some subcontractors prefer).
tl;dr Having bitcoin as one payment option significantly reduces costs and hassle. I prefer to use bitcoin if the other party will accept it. The benefit is only a small percentage of revenue (a greater percentage of profit of course), but implementation costs have been negligible, so why not take it? It also gives us access to a wider pool of clients and subcontractors.
Disadvantages of bitcoin in this situation:
As we're holding some money in bitcoin, bitcoin's price volatility is the most serious issue. Over the last two years, the long term price rise has been so profitable that short term volatility fades into insignificance as a percentage of profit, but past performance is not any guarantee of future results.
My own options for spending the bitcoins I earn are fewer than I would like. There are many things I need to buy that I cannot buy with bitcoins at a reasonable price. This puts a limit on the quantity of bitcoin-paid work I can accept, because I want to spend bitcoins instead of getting overexposure to the price volatility risk. There's been a big increase in the number of places to spend bitcoins during the last year, though, so now I have more options for spending, which allows me to accept more bitcoin-paid work than before.
Some of my subcontractors have it worse than me, I'm sure. They have very few places they can spend bitcoins. They may need to convert them to other currencies, at an additional cost. Some are keeping a lot of the bitcoins they earn and hope the price increases, I think. That is risky, of course. If the price fell too much in future, maybe some would even stop accepting bitcoins.
Clients who require the security of chargebacks will not use bitcoin. There are a few bitcoin escrow services, but they aren't useful, because they are too new and too small to be trusted. I need to use other payment methods if I want to work with these clients. (It has turned out that the knowledge that a client wants the ability to chargeback is a useful factor when making a decision about working with them. It can be a sign that the client has not clearly planned out reasonable requirements and goals for the project. I think these clients tend to communicate badly and they are far more likely to require work to be amended or redone).
There has been a lot of growth, but only a very small proportion of clients and subcontractors understand or use bitcoin. The potential market size in which bitcoin can be used is 50 or 100 times bigger than in 2012, but still it is a very tiny niche.
I'm not advocating for large banks, and even specifically mention non-bank fiat->fiat cash transfer companies as a viable and even more likely alternative to BTC.
> There is no reason why banks cannot use BTC
Yes! Exactly! Bad Things Done By Banks is only an accidental benefit of BTC.
If BTC becomes regulated and banks are the better equipped to deal with these regulations, then BTC becomes dominated by banks or de jure criminals.
Financial scandals and banking reform are primarily a social and legal problem, and cannot be solved by technology.
Yes, it does. For the same reason that any other mechanism for transferring arbitrary sums of money across international borders needs regulation.
(It's also worth mentioning that I "bank", even international, with a small local credit union. So your choice between huge abusive banks and BTC is false.)
>The real benefit is time of transfer. ACH is infuriatingly slow. If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior.
In the UK we have a thing called the Faster Payments Service [0]. It has (for now) ten participating banks which cover probably 95% of PAYE UK employees - all the big high street banks are on the scheme. I see my salary in my account in sometimes less than 30 minutes after the company payroll has been run.
I realise there will be edge cases such as employees who work offshore as I did for three or so years, but I kept my UK bank account and that bank's Visa Debit card pretty much works everywhere in Europe (it certainly wasn't a problem in the Republic of Ireland).
The only other caveat to the above is that I work for a SME (Small to Medium sized Enterprise) and SME's do tend to be a bit more agile and run their payroll in-house. Realistically, you probably wouldn't expect to see large enterprises such as BT or Vodafone choosing BitCoin.
I'm not dissing the idea of Bitwage, but in the UK it'd be solving an edge case problem.
> The real benefit is time of transfer. ACH is infuriatingly slow. If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior.
Ya, this isn't true. the ACH spec does say 3 business days, but 2 of those days are for redundancy. In all normal cases a transaction submitted today can and will post tomorrow. Your bank may not allow this for individual transactions, but it isn't because ACH can't accommodate it.
Source: I run a payroll company doing $1B annually in ACH transactions.
> I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it
I'd rather do that too, but it's unlikely to ever happen; not for international transfers between any country. There is a tangible economic cost (trust, through all the financial institutions involved in each country, and the work required in meeting the regulatory requirements that protect that trust, and in fact the work required in creating and maintaining those regulations) to transferring cash internationally under the current paradigm which has been solved more efficiently in the Bitcoin network.
I agree with you that Bitcoin is far from perfect, but I think calling it a cottage industry is extremely short-sighted. I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds or the Bitcoin economy will come of age outside of the existing financial industry, at least as the transport layer for fiat exchange.
> which has been solved more efficiently in the Bitcoin network.
Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them. There's a huge difference, and I don't think ignorance is sustainable at scale.
> There is a tangible economic cost
I actually lose a couple hundred usd a month right now. So, I really do sympathize.
> I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds
Maybe. That would be fine with me. I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist in order the address the problems with international transfers and have been around a lot longer than bitcoin.
> I think calling it a cottage industry is extremely short-sighted.
I mean cottage industry in the most literal sense of the term, and was referring to the present and historical situation. And I think that's fair -- very few people are employed full-time doing BTC-related work, and I don't imagine the profit margins are insanely high (or even non-red in some cases).
> Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them.
Very odd statement. Bitcoin (and related cryptocurrencies) is the only way any two peers on the planet can transfer funds electronically without a trusted third party. That's a fundamental shift from what was possible before. It solves the biggest part of the problem; what's left is reputation systems to facilitate transactions between people who don't know each other personally and enabling technologies that make the whole thing more accessible to "normal" people. (Nobody is ignoring those problems, either, FWIW, but they aren't Bitcoin's to solve.)
> I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist
Maybe that's where we're talking past each other. Those processes don't need to exist with Bitcoin anymore. With Bitcoin, Bob's tiny credit union in Albuquerque can transfer $100 to Alice's credit union in Thailand for free. The credit unions don't need to negotiate with anyone or depend on anyone except for each other. In fact, the credit unions don't even need to factor into the equation at all; they just provide a convenient interface for consumers to access the system (and potentially a hedge for fraud, etc). It is enormously more economically efficient than the current model. It's the difference between express post and email. (Right, leaky analogy, I get it. It's a paradigm shift, is what I'm trying to say.)
> Maybe that's where we're talking past each other.
I think we are :-)
I was referring to legal regulation and oversight, which is there for very good reasons and is the primary reason most banks/cus have someone whose job includes handling international wires. But also, talking with someone who really understands the legal and financial landscape before firing a few grand off to another country is enormously helpful (but not worth the $60 per xfer!).
I agree there's fat that could be trimmed, as well as just unnecessary charges for the sake of making money off of market position. But for me, the best case scenario is getting rid of that without the extra intermediary. But really, I suppose if the crypto currency is mostly used for bank-to-bank, I don't much care about the back end as long as it works and it's cheap.
edit: I'm not sure what got touched, random bits needed improving.
Bitcoin basically replaces steps 2-4. A bank just needs to get the Bitcoin address of the receiving bank in a reliable manner (ie. instead of IBAN/BIC) and then the transaction can be made and verified. The regulations are still important, because they hold each end accountable (so if Bob's bank can prove that they sent the money to Alice's bank, which they can, then the regulations make sure Alice gets her money) but right now there are a whole lot of unnecessary regulations for the middle part (steps 2-4 on the Wikipedia page). More importantly, using Bitcoin greatly reduces the number of international regulations and agreements that are required, and those are probably the fattest of all.
So yeah, I would love to see Bitcoin replacing SWIFT/Fedwire etc, but I doubt it will ever replace banks (although it might make it easier for smaller banks to compete). Realistically Bitcoin will probably need to replace credit cards before it can replace SWIFT, though, and we're still a ways off. (You may be interested in this article, if you haven't seen it yet: https://stripe.com/blog/bitcoin-the-stripe-perspective)
Bank fees are due to the cost of fraudulent operations and chargebacks which doesn't exist in Bitcoins since transactions, once confirmed are not reversible. Instead you can use escrows while paying with Bitcoins.
Secondly the Bitcoin network is much more efficient in terms of economic resources used for make transactions possible so you can expect that fees will be smaller as well.
> transactions, once confirmed are not reversible.
Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else.
My point was that this business model exposes everyone to unacceptable risk, and therefore isn't sustainable with or without regulation.
> Instead you can use escrows while paying with Bitcoins.
Escrow is not a competitive advantage.
> Secondly the Bitcoin network is much more efficient in terms of economic resources
Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient?
There are two sets of reasons.
The first are essential -- insurance, regulation, etc.. My claim is that BC's competitive advantage in these settings will evaporate with scale.
The second set is inessential -- banks got lazy and greedy. Again, at scale BC has no advantage over lean cash transfer startups or even just banks cutting the fat when BC becomes anything close to a threat.
For me, the best-case scenario is that BC startups are successful, force banks to reform, and then languish in obscurity since the extra step of indirection isn't necessary for fast/safe/cheap cash transfers.
>> Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else.
There is no reason why the payment processor can't implement some security in case of errors. What is more, with credit cards you are handing out your details every time you do a purchase. Have you ever heard of stolen credit card data? When you transfer BTC your don't need to send all your private details that would permit an unwanted second purchase.
>>Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient?
In a BTC economy there is no need to do the conversion.
> There is no reason why the payment processor can't implement some security in case of errors.
Sure, and banks already do that. A lot of it, in fact.
My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either.
It's just that BTC is really small right now, and so the cost + difficulty of addressing these problems at scale isn't yet apparent.
> with credit cards you are handing out your details every time you do a purchase.
(1) No one makes payroll with a credit card; (2) BTC transfers -- especially at scale -- aren't as fast as CC transfers without someone assuming some risk; (3) CC companies basically exist to assume that risk and mitigate; (4) if you're going to design a new payment processing technology appropriate for POS transactions, creating a new currency is absolutely not necessary.
> My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either.
I think the advantage is that alternatives to the traditional banking system introduce competition in the banking and financial services industry. Obviously, overhead doesn't magically go away, but I would expect competition to result in an increase in efficiency.
edit/justification: given the length of this thread and other interactions, I think this 'agree' post is a non-trivial recognition of consensus on a point rather than a non-contribution.
Yes. Like everyone else in the US, I have zero fraud liability on my credit card. Stolen credit card data is quite simply not my problem, nor is it any consumer's problem.
It is if it increases the cost for each transaction. Specially now that Visa and MasterCard are being sued for preventing retailers from "steering customers to cheaper payment forms"[1].
You don't even have to defend Bitcoin - in my country, we have a sane push-style payment system (implemented by the banking system) and it's much cheaper, especially since it only has a fixed fee.
The only reason you could not care about this problem is because Visa and MasterCard have been using their size to get other customers to subsidize card-paying ones, but that seems to be ending.
Okay, but if I use Bitcoin I'm still paying a price that has credit card fraud baked into it, while putting myself at unnecessary risk because I can't chargeback. It's giving free money to the retailer.
Do you really think merchants are going to lower their prices? Wouldn't it make more sense to just pocket the difference?
Do you really think merchants are going to lower their prices? Wouldn't it make more sense to just pocket the difference?
They already sued and own for the right of giving lower prices to other customers (or actually, charge more to card users), so there's no reason to think otherwise.
Is it a regional thing? I have never seen any retailer offer a cash discount or a credit card fee. Some businesses are cash-only, but I've never seen anyone actually exercise this right.
And cash is actually free, whereas BTC they're still paying small transaction fees and Coinbase's cut when converting back to USD.
> So if I (as a customer or as a service) make a mistake I'm completely hosed.
In other words, the costs of making mistakes is internalized. I think externalities are a bad thing.
> And since the service isn't insured (yay no regulation),
Insurance and regulations (and by that, I assume you mean government regulations) are not the same thing. There is a lot government regulation unrelated to insurance, and a lot of insurance unrelated to government regulation.
> a mistake on one customer's account can harm everyone else.
How's that?
> Escrow is not a competitive advantage.
What do you mean by that? I think escrow is a great idea, but I don't know what you mean by saying that it's not a competitive advantage.
> In other words, the costs of making mistakes is internalized. I think externalities are a bad thing.
"undo" is a pretty important, nearly mandatory feature for a transfer mechanism. Especially if you're talking about large sums. And we've known how to do it at scale since the 70's.
> Insurance and regulations (and by that, I assume you mean government regulations) are not the same thing.
Both create transaction costs, and those costs become significant at scale. edit that's why I group them together.
> How's that?
Firm holding my BTC or handling my transaction makes a mistake, is hacked, etc. If my money is tied up in their system when this happens, too bad for me.
> What do you mean by that?
Only that escrow is not unique to bitcoin, and you can escrow other currencies (or anything). One of your grandparent comment's argument only makes sense if escrow is unique to bitcoin.
Escrow isn't unique to BTC, and how many Mt. Gox users wished they had FDIC insurance?
Other than extreme early adopters and libertarians, most people aren't going to use bitcoins because of the lack of anti-fraud, which creates overhead that is passed to the users as transactional costs.
It seems to me less that the "rhetoric" has changed, than that the set of people who use bitcoin has simply greatly expanded to individuals with increasingly less revolutionary ways of interpreting the currency. The people in it from 3 years ago still have the same beliefs. The people in it from 3 months ago are digging it because it's more popular among their colleagues, and they have to justify it somehow. "Lower fees" is the only thing they can come up with.
That's an interesting hypothesis about why the dominant rhetoric has changed.
I think another one is that people are starting to use bitcoin for real-world use cases, and finding and addressing specific pain-points is far more likely to generate revenue than trying to convince others of your take on monetary policy.
I remember thinking this a few years ago... that cryptocurrency would be to banking what Napster was to records. This is particularly going to be true on the international scale.
I'm a believer that fiat state controlled currency is fundamentally flawed and destructive for societies and economies. And bitcoin is a global phenomenon - China can do all it wants to block it, and the market rebounds just fine. It can work without the US as well, albeit there will always be black markets.
But bitcoin is a step towards approaching the ultimate forms of value exchange. It eclipses its predecessors in every regard, especially considering anything one might find "lacking" in btc can be solved by businesses built on top of it (chargebacks and instant confirms at coinbase, etc).
But centralized currency will always have the implicit inefficiencies of central planning. I don't think bitcoin is necessarily the right algorithm for a money meant to replace the day to day currency of an economy (peercoin or doge are much better equipped to do so, with either reduced blockchain maintenance / size, or increased monetary base expansion without a finite limit) but the concept, money backed by cryptography, is the best solution we have to provide universal exchange semantics between human beings. Nothing else even comes close, and like others have said, that is no more apparent than trying to buy or sell goods or transfer funds outside your fenced in economy running in some local state currency.
It's uninformative to conflate monetary policy with the underlying material/technology used for currency. The two are totally and entirely unrelated. It's like claiming that changing from paper to (still fiat) coins is good because this would cause a fundamental shift in the nation's purportedly destructive monetary policy and also paper rips which is a bummer. So coins > paper, clearly.
Which is to say, you are really making two totally independent claims. One is at least plausible and the other isn't.
The first is that bitcoin provides a viable alternative to current methods for exchanging fiat currency. This is probably the most sensible argument for cryptographic currency, and I think is worth discussing. The discussion below delves into some specific arguments on this issue.
Your second claim is that decentralized cryptographic currency will or ever could/should replace state-backed fiat currency. I don't think this is a particularly useful point to discuss, since informed prediction is impossible and the prescription mostly amounts to political persuasion.
edit: but also, the US could switch to a cryptographic currency with all of the practical benefits of bitcoin, and still retain basically the same amount of control over its currency. Technology can never solve big political problems.
I'm not conflating them, they go together. Digital money is better than dead trees, or metal discs. Cryptographically secure algorithms are better than goons with a printing press. Bitcoin and other crytocurrencies enable both.
I also recognize the vast majority of fiat is now tied up in digital forms. The actual amount of physical paper money is negligible. But the overhead induced by the entire system being based upon dead tree leaflets, is that it is irrevocably slow and the discretization makes no sense in a digital medium.
> Cryptographically secure algorithms are better than goons with a printing press.
Again, technology cannot solve political problems.
There are two scenarios: the government provides a cypto-currency to provide its practical advantages, or a private currency overtakes usd.
If the government proves a crypto-currency (not terribly likely, but the more likely of the two alternatives), then probably it would retain the same amount of control it has now. Technology cannot solve political problems.
The latter presupposes the government wouldn't shut down the currency and that there's political will for your preferred monetary policy anyways. In which case technology didn't solve a political problem, politics solves a political problem.
Anyways, I prefer my democratically elected "goons" to an algorithm chosen by a small group of people.
> the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry.
I see that as pretty much synonymous with the traditional libertarian rhetoric, considering that the banking industry is considered (at least by libertarians, and probably a lot of other people too) as essentially one with government.
These days, the major emphasis is on circumventing the fees/processes associated with banking (as opposed to the libertarian and/or anonymity rhetoric, which dominated a couple years ago). As a witness, this landing page.
And I think the rhetoric has converged to the strongest argument -- political ideology aside, the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry.
But then, this makes Bitcoin mostly a cottage industry taking advantage of technology to side-step banking regulations. I see two likely outcomes -- regulations are extended to BC and BC companies start charging as much as banks to compensate for the inherent riskiness of the business, or banks push for regulatory reform while making their services significantly cheaper and faster.
I hope for the latter, because if fiat -> fiat transaction is your only goal, cryptocurrency is just an inefficient hack. If I just want to transfer some cash to someone, I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it. There's no reason to broaden the attack surface and add yet another middle-man (I mean, entrepreneur).
In reality, I expect a combination of the two former scenarios will cripple BC, and that a new era of internet cash transfer services will serve this market instead.