[netcan]

As far as I understand bitcoin (very very little) is mostly being bought/mined by people who like the idea as an investment/experiment. That makes it a kind of goofy commodity at the moment.

I think to get some stability and potential longevity bitcoin needs to be used more like a currency. IE be used for buying and selling stuff. That's a difficult piece of this puzzle. I can't think of any possible catalyst for it.

Can anyone explain to me how bitcoin might become something that a large number of people use to buy & sell goods and services?

[pemulis]

Basically, it's great for the black market. For the US, that means primarily drugs and gambling. That's why the price shot up after the Wired article about Silk Road: A whole bunch of people wanted to get Bitcoins to buy drugs online. In some countries the black market is even more important, because it's the only way to get certain necessities. The fact that bitcoins are being used as an investment vehicle right now is depressing, since the world desperately needs a form of digital cash.

[Tichy]

It's much more convenient to use than existing methods of money transfer. Once you already have some BTC, that is - getting BTC might be a bit too cumbersome at the moment.

For example I bought some T-Shirts at SquareWear.biz. Upon checkout I get told a bitcoin address I enter into my client to transfer the required amount of BTC. A couple of seconds later squarewear knows I transferred the BTC and all is done. No registration with a payment processor required.

Another example: in my blog I once offered 0.1 BTC to the first five commentators on a blog post. Try that with other payment methods. Maybe money wires would work, but then not internationally without high fees.

[netcan]

Do you think a bitcoin based payment processor where you can pay with bitcoin or with credit card (processor converts to bitcoin behind the scenes) would have any advantage? Would it be enough of an advantage to incentivise bitcoin use (eg avoiding conversion costs)?

[pemulis]

You would have to offer a discount for paying with bitcoins for this to work. I know a lot of merchants (in real life, not online) that offer small discounts to people who use cash so that they don't have to pay credit card transaction fees.

In any case, if you accept online payments via credit card, there wouldn't be much point to converting them to bitcoins after the fact, unless you actually prefer to hold BTC instead of USD. You've already paid the transaction fees.

[netcan]

The point (in my mind) is to make it entirely bitcoin from the merchant perspective. They can set prices in bitcoin, buy stock in bitcoin, etc.

The other option is the less radical add a bitcoin payment option. This is basically just using bitcoin as a payment method rather than a currency.

[Tichy]

Maybe a useful service would look like this: send BTC to any address, pay by credit card. That way shops could go BitCoin only, and people who don't want to bother setting up a bitcoin wallet could simply use that service to pay by credit card.

[netcan]

The question then becomes 'why would/ what would make merchants want this?'

If merchants are using btc themselves, it becomes trivial for people to want to use btc to trade with them. Are there any non shady reasons for preferring btc though? Why would you want to accept a volatile new currency when all your expenses are in a different currency?

The more I think about it the more I think that btc will need to bootstrap from some sort of tangent: goofy investment medium, payment processing technology, gray markets...

Might become the currency of the underworld.

[Tichy]

For example because you could accept BitCoin right now. No hassles with trying to get some payment provider to accept you as a legitimate business. Fees might be lower, too.

[netcan]

I could if I wanted bitcoin and if my customers had bitcoin. Realistically though it's going to amount to my customers buying bitcoin to pay me and then me converting immediately back into hard currency. So, we'd both pick up some fees along the way. Prices would nominally be set in some other currency, probably the same currency as my expenses.

That's not really a currency. It's a payment processing service.

I guess it has to go through this sort of thing while its small.

[Tichy]

I suppose making it easier to user bitcoin would incentivise it's use. At the moment accepting BitCoin payments probably has the advantage that lots of people are eager to spend BTC on real things. That effect might not last, though.

[DrewHintz]

> A couple of seconds later squarewear knows I transferred the BTC and all is done.

How do they get confirmation in a couple of seconds? I thought you had to wait for a new block to be generated/mined in order to have a confirmation?

[Tichy]

I am not 100% sure, to be honest. I think there is a difference between getting to know the intent ("a payment has been triggered") and the actual confirmation (kind of like showing a printout of the money wire). The intent can spread arbitrarily fast through the network ("A has triggered a payment to B"), but only the miners can compute the actual confirmation, which takes longer. As long as the miners haven't confirmed it (by computing a block), there is the risk of double spending. I suppose those merchants simply accept that risk. They don't have to actually ship before they get the real confirmation anyway.

[Devilboy]

The transaction show up immediately as 'pending' and will get 'confirmed' after about 10 minutes. Squareware can choose to conditionally accept the 'pending' transaction on the spot because they can simply wait for the transaction to be confirmed before shipping out your stuff.