[battani]

"Second, because convert-transmit-unconvert still bypasses many of the painful aspects of other money transfer mechanisms."

Using a credit card online or 1-click checkout isn't painful.

"Both buyer and seller only interact with entities they trust (coinbase and their bank)"

Pretty sure most people trust the bank that issued their credit card.

"no credit cards (and associated fees, chargebacks, and headaches)"

No chargebacks may be good for merchants, but not for consumers (no protection). Most of the CC fees are reimbursed to the customer in the form of rewards. In France for example, usual debit card fees are 0.5%, and credit cards with rewards are 2%-4%. In Australia, the government intervened and all card fees are < 0.5%. This was good for merchants but customers now don't get rewards/cashback/points on their card.

"the transmission process in the middle uses bitcoin in lieu of ACH or similar (avoiding many potential risks, reversals, and the various Bad Things that can usually happen if you pay directly from a bank account)"

Not sure what those "many bad things" are. I recently received subpar merchandise from a merchant; called my bank that morning, the transaction was reversed, almost no questions asked. There was a follow-up "investigation" that was in my favor. The fact that I can reverse transactions gives me peace of mind, otherwise known as consumer protection.

It's just seeming more and more to me that companies in the bitcoin merchant space are trying to find infinitesimally small optimizations they want to address in the current credit card system using bitcoin. It seems that they're trying to find (or sometimes create) a problem to fit bitcoin, instead of using bitcoin to solve an already existing problem.

I think they'll slowly find out, as Coinbase may be with this new feature, that bitcoin is actually not a good currency to be used directly, but rather as an efficient value transfer mechanism, under the hood. In other words, that the real value is in the blockchain, not in bitcoin itself. But I may be wrong.

In any case, I'm sticking to my credit card (and soon, tap-tap mobile wallet). Bitcoin doesn't really solve a problem for consumers in consumer-to-merchant transactions; mainly because, well, there really isn't a problem to solve to begin with.

[abc123xyz]

We made close to €20,000 EUR last month via bitpay

The cost .... $30 USD!

Then our bank charged about €24 to receive those 25 or so transactions, Bitpay pay the next business day to the bank account, its really really nice!!

Fraud rate? 0%

Chargeback rate? 0%

Not having to worry about all sorts of middlemen and fraudsters trying to rip me off and waste my time

PRICELESS!

Now if only my suppliers accepted bitcoin then wouldn't even have to withdraw some of the bitcoin back to fiat!

[polshaw]

But the point is that there isn't a bit coin economy-- your suppliers don't accept it. So you have to pay fees to convert it into local currency, which you have ignored. (And the customer also has to pay to convert from local currency)

[Atroxide]

Or he could promote the use of bitcoin in hope that one day his suppliers do actually accept it.

[sanswork]

What is your business? At €20K per month you must be close to or in the top 5 bitcoin merchants in the world.

>The cost .... $30 USD!

All you've done is move the fees to the customer side through their cost of acquisition and the spread bitpay adds to your charges.

>Fraud rate? 0% >Chargeback rate? 0%

This doesn't matter until you stop accepting credit cards completely.

Also no denying bitcoin has benefits for merchants. The problem is the complete lack of benefits for customers.

[rowyaboat]

> The problem is the complete lack of benefits for customers.

Costs of acquisition and spread will decrease as bitcoin adoption rises as it is a competitive market. And then low margin merchants will actively encourage bitcoin usage with discounts.

[sanswork]

Why would they encourage bitcoin usage with discounts? They want people to use bitcoin to improve margin so why would they turn around and immediately cut into that?

Also with cash back on so many cards now the discount would have to be >2%. Probably more like 3-5% for people to switch. The savings from not accepting credit cards won't make up for that.

Side note. Why did you create a throw away account just to comment on this topic?

[pmorici]

"Using a credit card online or 1-click checkout isn't painful."

I've heard this from a number of people as an argument for why Bitcoin isn't needed. It only holds true for a very limited world view though. That being people who are well off and have a credit card.

Consider that something like 30% of _Americans_ don't have a credit card. How do you suppose they buy things on Amazon in 1-click? What happens if you live in a area known for high rates of credit card fraud so merchant's refuse to send credit card orders to your address? There are an infinite number of scenarios where credit cards don't work for people Bitcoin solves a lot of them. Bitcoin is like the long tail of financial products.

[mpyne]

> How do you suppose they buy things on Amazon in 1-click?

Have you tried going to a gas station, Wal-Mart, or convenience store in poor America? They sell pre-paid credit cards that are usable (with a few extra hoops) for online banking.

Of course, pre-paid cards are, like all things used predominantly by the poor, susceptible to poor regulation of fees and penalties, but then the 30% of Americans without credit cards are also not the ones able to keep a wallet.dat secured...

[maxerickson]

How do you suppose they are buying Bitcoin? I expect the ones doing transactions with Amazon are mostly using debit cards or buying prepaid cards somewhere.

It's a nice hypothetical use of a distributed transaction system, but it's not how the people you are talking about are accessing the financial system, they are much more likely to either not buy things from Amazon or to get a prepaid card at Walmart.

[pmorici]

That's the point. Accepting bitcoin opens up new markets an online business that weren't accessible before because of deficiencies in the available payment systems. If you have a history of financial difficulty then you probably can't get a credit card or debit card let alone a bank account. Have you ever looked at the fees on a pre-paid card? Many if not most are highly exploitative.

[battani]

Yes I agree that bitcoin could be useful to the unbanked or in high inflation countries. I don't have enough knowledge of those markets to elaborate.

I was answering the author who was advocating bitcoin's ease of use as compared to credit cards.

Credit card use is not a limited world view though. Credit card networks are pervasive all over the world. And in the areas they aren't, I don't think a volatile digital asset is at the forefront of people's minds when it comes to payments. A lot of innovation is being put in place to eliminate card use and opt instead for the mobile phone/wallet, connected directly to a bank account in fiat, government-regulated currency.

It would be useful to know why those 30% of Americans don't have a debit/credit card. Is it an infrastructure problem? Is going online and buying things part of their day-to-day activities?

And for those areas of high credit card fraud, what do merchants do now? Accept checks, cash, ACH? And what do consumers do if they receive subpar merchandise? Etc.

[pmorici]

"And for those areas of high credit card fraud, what do merchants do now?"

Nothing, they lose out on the sale.

"It would be useful to know why those 30% of Americans don't have a debit/credit card."

Typically because of past financial difficulties. If you've got a bad credit record, or have a history of over drafting your bank account banks will refuse to work with you.

As an aside if you subscribe to the idea that Bitcoins transaction mechanism is the valuable aspect of it then the value of a Bitcoin is going to have to rise enough to handle the value of the transactions that pass through it. It can't be worth zero and still work.

[aianus]

Using a credit card online isn't painful but it's more painful than using Bitcoin. For one, I don't need to memorize an arbitrary 16 digits + CVV2 + Expiry Date. Nor do I have to enter my billing address for virtual goods or deal with chargebacks and replacing my card if the merchant loses my card information. One time my bank just canceled my card without giving me any reason besides 'security' and mailed me a new one. What would I have done if I were traveling at the time or needed to buy something in the meantime?

Besides that, if you've ever tried doing anything online besides the straight purchase of a good or service (think forex trading, gambling, remittances) you'd agree Bitcoin is light-years ahead of the prevailing payment methods.

[mpyne]

> One time my bank just canceled my card without giving me any reason besides 'security' and mailed me a new one. What would I have done if I were traveling at the time or needed to buy something in the meantime?

What would you do if your wallet.dat were obtained, unlocked and emptied out while traveling? Being able to call your bank while you're traveling to get stuff sorted out is a feature, not a bug.

Of course, you'd probably just point out that you're not dumb enough to use a simple passphrase and that you can protect your wallet.dat.

But that's not going to apply to the majority of people who currently shop online, which is why the current system, where merchants and banks cooperate to detect fraud in many cases even without consumer help, is so important.

You can't do that at all when running your own Bitcoin payments, and if you use an exchange to do so on your behalf then you leave yourself liable to being irreversibly MtGox'ed.

Bitcoin certainly didn't invent fraud and embezzlement but it doesn't make people immune from that either, and Bitcoin-using schemes which fail to account for that are dead-men walking.

[battani]

Yeah I mean those are some problems but they're 1) not huge and 2) I don't think creating and adopting a volatile virtual currency is necessarily the best solution to those problems.

"I don't need to memorize an arbitrary 16 digits + CVV2 + Expiry Date"

Most times, you enter that information once (1-time mental cost) and the platform saves that info for you. Think Uber, Amazon, Venmo, and others. Also soon with your mobile wallet, the experience will only get more streamlined.

Also, if you think about it, how do you pay using bitcoin today? First you set up a wallet (with Coinbase, Bitpay, or someone else). Then you get verified. Then you purchase bitcoin, hoping to get it at a good price.

Then you browse the web hoping your merchant integrates with Coinbase/Bitpay. If not, they'll display a bitcoin address, that you'll then have to paste into your wallet, enter the correct amount, etc.

Even if we do argue that this will only get better, it's not gonna get much better than tapping "Buy" on your mobile wallet, that's already connected to your bank account/card. User experience is not an area where bitcoin adds value.

"deal with chargebacks and replacing my card if the merchant loses my card information"

Chargebacks are a form of consumer protection. Eliminating them benefits the merchant, at the expense of the consumer.

"One time my bank just canceled my card without giving me any reason besides 'security' and mailed me a new one. What would I have done if I were traveling at the time or needed to buy something in the meantime?"

Yes, that sucks. But how often does that happen? How big is this problem? And is adopting bitcoin (already a huge cost: mental adjustment, buying bitcoin, etc.) really a good solution to this problem? Or is it just switching to a bank with better customer service? Simple, BOA (in my experience), etc.

"Besides that, if you've ever tried doing anything online besides the straight purchase of a good or service (think forex trading, gambling, remittances) you'd agree Bitcoin is light-years ahead of the prevailing payment methods."

Yes, forex trading and gambling are absolutely fantastic to do with bitcoin. But this reinforces the argument that bitcoin is a speculative financial asset, rather than a currency used in day-to-day activities.

The remittance market is ripe for disruption, but a gateway model such as the one offered by Ripple would better fit this problem, in my opinion.

[aianus]

> Chargebacks are a form of consumer protection. Eliminating them benefits the merchant, at the expense of the consumer.

I wouldn't have to do any chargebacks or get my card replaced if I'd made my purchase with Bitcoin instead of sending my credit card details to a merchant which subsequently gets hacked. Also, competitive merchants would have to pass on the cost savings.

> Yes, that sucks. But how often does that happen?

Seems to happen pretty often. Target, Sony, etc all pretty recent.

> Yes, forex trading and gambling are absolutely fantastic to do with bitcoin. But this reinforces the argument that bitcoin is a speculative financial asset, rather than a currency used in day-to-day activities.

I don't mean trading or holding bitcoin. There are many people who trade forex (like oanda.com) and gamble on sports or poker (like betfair.com) every day. The current payment methods make it difficult and expensive to deposit and withdraw on those types of sites because of VISA and MasterCard's rules and duopoly.

[battani]

I guess your argument is then about security. Your funds are as secure as whoever is holding them, whether it be in bitcoin or regular fiat through CC.

If you place your bitcoin on Coinbase, Bitpay, an exchange, or even on your own local wallet/cold storage, and one of these gets hacked (e.g. a hacker gets access to your private key), your funds are gone forever.

If you give your credit card info to a merchant and they betray your trust and charge you, you will 1) not lose your funds because you'll just charge them back, 2) they will be blacklisted by their credit card provider if chargebacks are too high. So this incentivizes merchants to not charge you illegally if they want to stay in business.

The Target, Sony hackings were indeed unfortunate, but they are exceptions rather than the norm. And they can also be likened to the many exchanges and wallets that have been hacked in the bitcoin world. Except in the latter case, consumers could not get their money back.

"There are many people who trade forex (like oanda.com) and gamble on sports or poker (like betfair.com) every day. The current payment methods make it difficult and expensive to deposit and withdraw on those types of sites because of VISA and MasterCard's rules and duopoly."

Yes I agree with this. Trading and gambling is really easy to do with bitcoin. And yes it's a nightmare with fiat. But I think most of these issues are due to government regulation (which is expected for these activities).

[icebraining]

The Target, Sony hackings were indeed unfortunate, but they are exceptions rather than the norm.

No, they're just the high-profile. Credit card hacks are happening constantly. A quick Google search shows crafts store Michaels (3 million CCs), White Lodging Services and Creathe Group (5 million CCs), all just announced since March. Last year, Adobe lost more than 100 million CCs.

There was $11 billion in CC fraud just in 2012!

And they can also be likened to the many exchanges and wallets that have been hacked in the bitcoin world.

Exchanges are not comparable, the only people who need to keep money there are traders.

As for wallets, that's true, but the difference is that there's only a single place with the data, instead of dozens or even hundreds of retailers each with a copy of a single CC. You'll probably never have a single wallet service with dozens of millions of accounts, such as Target, Sony and Adobe had.

Except in the latter case, consumers could not get their money back.

Anyone who thinks that comes for free is naive. You're paying, alright. Just indirectly.

---

This doesn't mean Bitcoins are the answer. For example, here in Portugal, we have had sane push-based payment mechanisms for years, and requiring credit cards is thankfully rare. But I've never seen such a service work internationally.

[sanswork]

The difference is people stealing all those credit cards could only use a very small number of them before they were all cancelled/replaced.

If someone broke the security on a wallet hosting service they could clear out every customer completely instantly with no recourse.

>You're paying, alright. Just indirectly.

And so are bitcoin users that shop in most stores that also accept credit cards. It's priced in for everyone.

[untilHellbanned]

Bitcoin solves the microtransaction problem with credit cards. Due to high fees, one can't buy things on the internet for less than $0.50 using a credit card.

[battani]

True. But a lot of merchants are moving away from this model anyway because it turns out consumers hate micropayments online. http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.ht...

Many are moving to a subscription model per month (simple and predictable pricing) — think Spotify, Wall St Journal, etc.

But curious, what kind of things would you like to buy at 50cents or less online and that you really can't right now (either as part of a larger bundle or a subscription)?

Also, the blockchain is not particularly good at managing micro-payments. First because of miner fees and second because micro-payments without fees open the door to blockchain spam. Most of the bitcoin micro-transactions done today are centralized off-the-blockchain transactions.

[untilHellbanned]

Your article is from 2000. Consumer behavior and internet technology have changed massively since then.

Subscriptions can be ok but many don't want to pay $10/month for something they don't use $10 of (true of pretty much all services besides Netflix and spotify).

All digital content can make use of Bitcoin micropayments. Off-chain works too as there are still essentially no fees (again compared with the prohibitive $0.30 + 3% fee with credit cards).

Why watch an ad for 30sec when you can pay a fraction of a penny in Bitcoin and watch instantly? Onarbor, https://onarbor.com proposes exactly this.

[battani]

There are many more recent articles on the same topic — internet technology may have changed a lot, but consumer behavior hasn't. Consumers still want simple and predictable pricing.

When's the last time you paid at a paywall? It's just that the mental cost of calculating how much I'm spending when I'm spending loads of fractions of pennies everywhere is pretty big. To cancel your ads, just pay the monthly $10. It's simple, predictable, and covers you for all ads all the time.

[robryk]

Isn't a large part of the problem with micropayments that they are complicated for the user with the current state of online transactions? I've read the article and it does posit other reasons, but it seems to be purely hypothetical.