
Bitcoin Risk Management Study Spring 2014 - ca98am79
http://www.scribd.com/doc/221502374/Bitcoin-Risk-Management-Study-Spring-2014
======
battani
The document makes valid points, but fails to emphasize the biggest risk to
bitcoin: lack of consumer adoption. It's not about merchant adoption. It's not
like consumers are just dying to find a way to spend their bitcoin. They
obviously aren't, because well they already have a system that works very well
for them in most cases (the CC system).

Bitcoin, like many new innovations before it, may "die" in the chasm.
[http://www.linuxjournal.com/files/linuxjournal.com/linuxjour...](http://www.linuxjournal.com/files/linuxjournal.com/linuxjournal/articles/066/6629/6629f1.jpg)

Not because it's not being adopted by _merchants_ (merchants couldn't care
less about bitcoin, they receive fiat currency), but because it doesn't solve
a problem for _consumers_. Consumer adoption is the real metric we should be
keeping track of. And seeing that transaction volume is stagnant or even
declining, that metric is not in good shape. Merchant adoption is just pure
marketing at this point, and I believe that companies such as Coinbase and
BitPay that are pursuing merchant adoption aggressively are in the wrong
business.

Bitcoin is really, really struggling to find a relevant use case, especially
with consumers. Regular consumers have absolutely no reason to use bitcoin.
The "1-click" payment and 1% price discount are not appealing enough to the
average Joe who already gets 1-2% cash back, airline miles, and consumer
protection on his credit card (and 1-click checkouts on many e-commerce
platforms). And more regulation isn't helping the "crypto-anarchist"
decentralization angle either.

Bitcoin is great, for _merchants_.

But payments is a two-sided market. A winning product must appeal to both
sides, the buyer and the seller. Bitcoin appeals to the seller at the expense
of the buyer. Even if the blockchain technology overcomes all of its flaws, we
would have bootstrapped a value exchange system that does not offer greater
benefit over the one that exists today.

Many are making the flawed and simplistic analogy of comparing
bitcoin/blockchain technology to the early days of the Internet... That
analogy is not valid. When it comes to money, consumers actually want a
central authority. They want to be insured and cuddled and protected and not
run the risk (however small) of being criminally liable for transactions and
have someone to speak with if they make an erroneous transaction or have their
card stolen. And they can already do all that, which makes it tremendously
difficult to compel them to change the habits they've had in forever to adopt
a system that does not provide them with significant advantages.

I've been in bitcoin since 2011 and used to be a big believer, but I don't see
bitcoin or blockchain technology gaining traction with consumers, because it
simply doesn't solve a problem for them.

It could be destined to eternally remain a store of value (like gold) or find
targeted applications (like machine-to-machine payments). The underlying
blockchain technology could be of more use if adopted by the banking system,
for example, but that is still far in the future.

~~~
quack
Well drugs. As much as people want to dismiss drug culture because it's
illegal (not necessarily meaning that it's immoral). Even if you dismiss the
use case of drugs, it's hard to deny how successful these sites are at
pioneering nearly p2p marketplaces compared to something like Amazon.

There is also the case of having a safe storage of funds. The seizures of bank
accounts in Greece and the actions some governments are taking to stop capital
flight speak to the use of bitcoin as a way of storing value.

Gambling is another huge use case. Anyone who has a lick of experience dealing
with deposit/withdrawal from gambling services know how inconvenient it is to
actually move money around.

Online sales are another use case. It's far easier to verify buyer information
and funds. You also save the 10%+ in fees that you would pay using a service
like ebay.

~~~
battani
> Online sales are another use case. It's far easier to verify buyer
> information and funds. You also save the 10%+ in fees that you would pay
> using a service like ebay.

Do you mean using the blockchain as an escrow service? True, but that's not
"bitcoin the currency", it's the blockchain.

The rest of the use cases run a huge regulatory risk.

