
Bitcoin: the Stripe perspective - gdb
https://stripe.com/blog/bitcoin-the-stripe-perspective
======
napoleond
This is my favourite article about Bitcoin to date, and properly describes one
of the main ideas I wish Bitcoin detractors would come around to. Bitcoin has
a lot of problems as a unit of account and as a store of value, but _that is
not primarily what Satoshi was building_
([https://bitcoin.org/bitcoin.pdf](https://bitcoin.org/bitcoin.pdf)). Bitcoin
is, and has always been, a medium of exchange first and foremost. It still has
_some_ shortcomings in that regard, but it is the closest thing we have to
solving the trust issues of peer-to-peer exchange in a purely technical
fashion.

Comparing Bitcoin addresses to the IP layer of the internet is brilliant.
Something that the Bitcoin community has been a bit slow to accept is the idea
that "peer-to-peer exchange" may be occurring at the _corporate_ level rather
than at the individual level for most people--it's hard to imagine a world
where that isn't true due to the points outlined in the "Comparison to the
card networks" part of this article. _However_ as long as the corporate
implementation is done in such a way that anyone _could_ jump in as an
individual if they wanted to bear their own risk, then we are still miles
ahead of how the traditional financial system currently works ("net
neutrality" for money).

~~~
rsp1984
Let me ask a dumb question: If money exchange is the main problem that Bitcoin
solves, then why isn't the problem of money exchange attacked directly
instead, i.e. through some other less volatile classical stores of value like
gold or stock? Why is money exchange a problem anyway and why couldn't a
classical wire transfer solve the problem?

The article doesn't say _anything_ about these things and the underlying
principles other than that it's "suprisingly difficult". Instead it goes right
into proposing a solution based on Bitcoin and making big picture comparisons
with network protocols that probably sound very smart to the right audience.

Given the amount of agreement and hype that the article has received so far, I
feel a bit like an outsider right now questioning what is proposed. I think I
just don't get it. Is everybody just a lot smarter than me or does the
community miss to address some basic questions here?

~~~
Bakkot
The answer to basically all of your questions is that to transfer money, you
need to _move money_. This can be basically a promise of money, as with wire
transfers, or physical, as you'd do by transporting bullion or cash.

The problem with using a promise to move money is that you have to trust
whoever's promising. That works alright if there's a central authority, like a
bank, but less well if you don't want to trust the authority, don't have
access to the authority, or are unable to comply with the rules of the
authority. Also it's kind of a shitty experience, as is. (You wouldn't pay for
all of your Amazon purchases with wire transfers, I'd imagine.)

The problem with moving physical money is that it's difficult to do over long
distances or en masse.

In order to solve the problems with existing money transfer, then, bitcoin
needs to be able to do without a central authority and without using a
physical representation of money. Which it accomplishes by allowing you to
store money - not just a representation or promise thereof - digitally.

~~~
rsp1984
Thanks for your answer. However I still don't fully understand the problem I'm
afraid. How is the trust required to move money cross borders different to the
trust required to have an account with money at your bank? That acct is just a
"promise" of money as well isn't it?

Also, according to your response a domestic money transfer would suffer the
same problems but these seem to work just fine (at least much better than
international transfers).

Why does a mechanism that works just fine in between bank and customers and
generally domestically just break down when country borders are involved?

~~~
Bakkot
> Also, according to your response a domestic money transfer would suffer the
> same problems but these seem to work just fine (at least much better than
> international transfers).

Certainly they work better, but "just fine" is a much stronger claim and one
I'd disagree with. I don't find myself spending money by wire transfer hardly
ever, eg, and when I do it is a _much_ larger affair then using cash. See also
andrewla's comment here [1].

> Why does a mechanism that works just fine in between bank and customers and
> generally domestically just break down when country borders are involved?

Because banking systems and the regulations surrounding them are different in
different countries, basically, and that adds lots of complications to an
already extremely complex system. The bitcoin protocol is not different in
different countries.

[1]
[https://news.ycombinator.com/item?id=8066251](https://news.ycombinator.com/item?id=8066251)

~~~
XorNot
This is absurd. I spend money by wire transfer all the time. A good 80% or so
of my ebay shopping would be wore transfers to merchants in Hong Kong via
Paypal. This is a big enough issue in Australia that we've had retailer
associations complain about it on occasion. Overseas money transfer is not at
all difficult on a consumer level.

~~~
elithrar
> This is absurd. I spend money by wire transfer all the time. A good 80% or
> so of my ebay shopping would be wore transfers to merchants in Hong Kong via
> Paypal.

It's worth noting that EFTs (Electronic Funds Transfers) between domestic
banks in Australia is nearly always free, and that in your case you're not
transferring money overseas at all.

You are transferring money to PayPal Australia, who is then communicating to
PayPal Hong Kong that all is well - so that PayPal Hong Kong can pay the
merchant. Both entities can transfer to/from local bank accounts because they
have explicitly set up B2B interfaces (and met regulations) that allow them to
do so.

In this case, PayPal is the bank, and they are a bank seeking to specifically
facilitate money transfers between countries. You could not, for example,
transfer money to a merchant in (e.g.) Siberia - they wouldn't be able to get
that money _out_ of PayPal into their regular bank account, because PayPal has
no local presence/connection to the banks there.

~~~
XorNot
This is _the exact same thing_ involved in Bitcoin funds transfer.

~~~
ncallaway
The article explicitly notes that PayPal is offering a very similar service.
They argue that the open nature of Bitcoin is a competitive advantage to the
network in the long run.

From the article: "This would not, of course, be the first global payments
network. One obvious comparison is with PayPal. The fundamental advantage a
Bitcoin gateway ecosystem has over PayPal is that it’s open".

~~~
sida
I can't reply the comment below so I will reply to this one.

XorNot: Please correct me if I am wrong.

USD is not a relevant comparison. What matters here is how money gets moved.
When money is transferred within the country, a central bank (Fed Reserve,
Bank of England, Reserve Bank of Australia) keeps an account for each local
bank. Which means that when 'Alice' of Wells Fargo sends money to 'Bob' at
Chase, the central bank actually debits and credits the banks. And then
several times a day the banks will settle with each other and net out the
differences.

But this is not possible internationally, that means banks must each other
have direct bank relationship and have an account with each other. And if 2
banks don't have direct relationship, then they have to go through
intermediary banks which they do have a relationship.

Enters Bitcoin, what bitcoin provides is not a reserve currency, what it
provides in this context is a global ledger. Instead of the Commonwealth bank
of Australia (CBA) needing to have a direct account relationship with Wells
Fargo (WF) bank. CBA can just simply send bitcoin to WF.

There is a bit more about the underlying transfers here:
[http://gendal.wordpress.com/2013/11/24/a-simple-
explanation-...](http://gendal.wordpress.com/2013/11/24/a-simple-explanation-
of-how-money-moves-around-the-banking-system/)

Although here is my question:

Why doesn't international transfers just go through the VISA network. The VISA
network is essentially the global central bank

~~~
XorNot
Internationally banks simply have to be able to acquire sufficient foreign
currency holdings. Which is trivially easy because every competent reserve
bank on the planet has _enormous_ foreign currency holdings.

But this is all irrelevant to Bitcoin - which is marketed by its advocates a
consumer currency, not an international system of exchange between
institutions. Institutions have no need nor desire for such a thing - it is a
saturated marketplace, with literally thousands of avenues of exchange, of
which Bitcoin is a particularly poor one.

Which circles back to my original point: foreign currency transactions are
very simple for anyone ranging from consumers to medium or large size
businesses, barring tax issues (like not paying a lot of it). Bitcoin does not
solve a problem not already solved for centuries by the banking system - this
is literally the thing that got it started way back with the Knights Templar.

~~~
sida
I have a feeling that international remittance is not as simple acquiring
FOREX reserves. Often times you see international transfers from an Australian
bank to a US bank taking 4 hops in between over peering banks. The process is
complex.

Because unlike domestic transfer where the central bank helps keep a ledger
between banks, there is no "global ledger" internationally. So banks have to
resort to "correspondant banking" which is why you see so many hops in
international transfers.

Bitcoin provides such global ledger. I don't think FOREX is the issue here.

Instead of going through correspondent banking (many hops), 2 banks can simply
send bitcoin to each other and immediately net off.

Could you clarify if my understanding is incorrect?

EDIT: Here is a document on how VISA handles international payments

[http://www.bis.org/publ/cpss53p16.pdf](http://www.bis.org/publ/cpss53p16.pdf)

2.3.3 Clearing and settlement procedures ... Settlement is not carried out
through Base II; Visa merely provides the data to allow settlement to be
carried out. For settlement in US dollars, Chase Manhattan Bank, New York,
acts as the settlement bank. For multicurrency settlement, Chase Manhattan
Bank, London, acts as the settlement bank. All members may hold their own
settlement account with any other financial institution, such that all
requests for funds or payments are ultimately settled through the
correspondent services of domestic clearing and settlement systems. ...

------
nlh
This is one of the best posts on the "state of the Bitcoin economy" I've read
yet. They nail a few key points that shows they get it in a real-world sense.

* Mass-consumer adoption of Bitcoin is a tough sell in developed countries (USA, etc.)

* Bitcoin the Network may ultimately be more valuable than BTC the currency

* "No chargebacks!" is a pitch to merchants for BTC, not consumers. Consumers like chargebacks & trust.

* BTC the currency may end up being a behind-the-scenes player so long as traditional currencies do their job.

This says to me that Stripe's position is ultimately to be the Visa of Bitcoin
or the SWIFT of Bitcoin. And that's could indeed be a huge opportunity.

~~~
brg444
> * Bitcoin the Network may ultimately be more valuable than BTC the currency

This is a fundamental misunderstanding of Bitcoin. Because each and every
Bitcoin function as a sort of "token" that provides access to this payment
network, their value is closely tied to the value of the network. For Bitcoin
to become an international payment gateway system, liquidity requires every
Bitcoin to be worth a lot.

~~~
nlh
I guess I mean "valuable" in the intrinsic sense, not the financial sense. If,
for example, in the model that Stripe outlines, the Bitcoin network ends up
powering the Bank-to-Bank side of things (away from the consumer), only a
handful of counterparties are going to be involved on the BTC side of things.
Millions of consumers may use Stripe/whoever to send $$ to millions of other
consumers, but that might all be handled by a (relatively) few BTC flying back
and forth in batches on the back-end, which doesn't necessarily require a
large per-BTC price.

I know not a perfect example but that's my gist.

~~~
brg444
I understand but I'm afraid you are being misled by the article.

While I believe it is an interesting scenario. I do not envision something
like that will happen. The only reason it might is for its "consumer
protection" value.

I appreciate that Greg realises some of the promises of Bitcoin but the true
value for "billions of people" is not an optimized "clearing house". I expect
Bitcoin to scale to a point where the store of value and liquidity concerns
are non-existent.

At this point, high-inflation economies will turn to Bitcoin, and not gateways
that will convert their already worthless currencies to USD or whatever. This
provided value will ultimately catch on over here at which point some will
find it largely preferable to hold BTC and not their "normal currency. Hell,
some already do.

------
aeturnum
>However, Bitcoin has huge potential as a way to transport value. It’s
surprisingly difficult to move money today, and the experience of paying for
something online is just about the only part of the internet that hasn’t
changed dramatically in the past twenty years.

Based on my very limited understanding, the difficulty in moving money has
nothing to do with technical limitations of money (it's not like we lack the
technology to transfer dollars electronically) and everything to do with
regulation. Does bitcoin only offer a "reset" button for regulation? The
restrictions on money transfers exist because stakeholders in the finance
system want them there - why wouldn't they implement the same restrictions for
*coin?

I suppose you could try to exploit the semi-anonymity of bitcoin to avoid
regulation, but that doesn't seem attractive to most businesses.

~~~
badbaguette
The appeal of bitcoin in this respect is that it disrupts the idea of money
"being" in a certain place and thus having to "move" across borders. As a
worldwide distributed ledger, it's unclear that sending someone bitcoins
amounts to a value transfer across borders.

I don't see this as a loophole so much as radical redefinition of what a store
of value means. It's clear that whatever future regulations look like, they
can't mirror the status quo.

~~~
kaonashi
Not really a ledger, bitcoin is only an asset, never a liability.

~~~
badbaguette
Point taken, but I think that a long list of all accounts and their balances
is essentially a ledger even if those balances are constrained to be positive.

A ledger is almost certainly a better model for thinking about the blockchain
than, say, a bunch of people with cash under their mattress.

------
flavor8
It's not quite as simple as that, though. To, for example, send money from the
US to Kenya via bitcoin, you need somebody in the US who is willing to sell
you their bitcoin in exchange for dollars, and somebody in Kenya who is
willing to buy your bitcoin in return for shillings (which are then paid to
the destination seller). Creating the technology that makes this relatively
transparent is quite doable, but you still need an active bitcoin market in
both financial markets. If the general pattern of value transfer is
unidirectional (e.g. remittances) then there needs to be a viable flow of
bitcoin out of the destination country (i.e. your Kenyan bitcoin purchaser
needs to regularly make purchases from foreign markets in bitcoin); that's
tricky to establish.

On top of this issue, big banks charge only cents to send large amounts of
cash internationally (according to somebody I talked to a couple months ago,
Citi charges 10c per international ACH transaction assuming you have $250k on
deposit) so the volume in the bitcoin market has to be built from small
transactions -- there's no real upside to doing large transactions over
bitcoin vs international ACH.

~~~
mrb
_" big banks charge only cents to send large amounts of cash internationally"_

This is utterly false. The entire reason the remittance industry exists
(Western Union, etc) is because banks don't offer cheap ways of sending money
internationally, and/or recipients often don't even have bank accounts. In
fact, remittance fees are so high[1] that this is _precisely_ why many
analysts see Bitcoin's potential to disrupt this industry[2].

[1] Average remittance cost in the world: 8%. Average to Africa: 12%! Nigeria
to Ghana: 22%! Source: [http://www.irinnews.org/report/99977/remittance-rip-
offs](http://www.irinnews.org/report/99977/remittance-rip-offs)

[2] [http://www.businessweek.com/articles/2013-10-08/will-
migrant...](http://www.businessweek.com/articles/2013-10-08/will-migrant-
workers-drive-bitcoins-mundane-future)

~~~
sanswork
You missed out on the word large. Remittances are generally very small.

Also the cost of remittances isn't in moving the money it's in having lots of
people in the destination country that your family can go to and get cash
from. There is no indication that bitcoin would make that cheaper.

~~~
mrb
The most blatant way Bitcoin can make remittances cheaper is if the recipient
can directly spend the bitcoins. So no more Western Union = no middle man
pocketing remittance fees!

~~~
sanswork
Yes, but people can't so it doesn't.

~~~
mrb
Yes they can, and here is one more example: according to the World Bank the
lowest remittance costs to send 140.00 EUR from Italy to China are 12.00 EUR
(this is 8.6%!) see
[http://remittanceprices.worldbank.org/en/corridor/Italy/Chin...](http://remittanceprices.worldbank.org/en/corridor/Italy/China).
However thanks to Bitcoin exchanges existing in both Europe and China, and
with their low fees of typically <1% (so <2% total), the costs with Bitcoin
would be less than 2.80 EUR, which is much lower than 12.00 EUR.

So do not say that Bitcoin "would not" make remittance costs cheaper. It does.

~~~
sanswork
The world bank includes a very small number of possible remittance services
and basically ignores any of the small grey networks most people actually use.

[http://www.cabel.it/media/documents/cemla_slides.pdf](http://www.cabel.it/media/documents/cemla_slides.pdf)
has an example of a remittance service that offers fees of 1.15%(See page 7).

So that service would cost 1.61 EUR.

With bitcoin the process would be:

Transfer money to BTC-E which is 1% + the payment source fee so we're already
over and we haven't even gotten our bitcoin yet.

ok lets try another one since that didn't work out and I'm sure we can find
cheaper.

Kraken is free for SEPA deposits. I can't find any example fees for SEPA
transfers from Italy to Germany but lets say 0.10.

Trading fee: 0.28 Withdraw fee is in btc(0.00050) so hard to say but currently
around 0.31 then there is the bitcoin fee to deposit on the chinese side in
okcoin which is another 0.06 then luckily its free to trade at ok coin and
only 0.4% to withdraw in CNY which is 0.56

Total cost: 1.31

So assuming no slippage(which there would be since any country receiving a lot
of remittances like this would be a buyers market) you can go through 3 extra
transfers and save yourself 0.30 EUR on your 140EUR transfer. This also
assumes my SEPA fee is right which I think it might be quite low for reality.
Italian banks tend to have very high transfer fees even nationally.

~~~
mrb
I was tempted to reply that your unknown service, mentioned on page 7 of some
slide deck written by some obscure tiny Italian financial holding company
probably does not even exist, because it is referred to as a future potential
project ("The company will be working...") so it probably means you were
unable to find proof of its current operations.

But you would miss my main point. Even if it existed, you are wrong: most
people actually use Western Union/Moneygram/etc. This is why they are
companies worth hundreds of millions of dollars and not some footnote on a
slide deck. At best, if you tried to support your side reasonably by bringing
Hawala in the discussion, know that even Hawala represents a minority share of
the total remittance market. And Hawala has fees typically higher than 1-2%
anyway.

So, you did demonstrate my point that Bitcoin can make remittance costs
cheaper for MOST people.

~~~
sanswork
The people that use western union/moneygram etc do so because they need their
family on the other side to be able to stop by a location near their house and
get the money and they probably need the same on their side too.

Bitcoin isn't going to help those people at all at any lower costs. Since it
is the person on the other side with a shop that is the reason for the higher
fees not the transmission of funds.

Edit: and the people on this side. Bitcoin ATMs average around 5% at the
moment. LBC is the same or worse depending on supply in your area.

~~~
mrb
I point you back to my 1st example: this overheard (offices, employees) is
what Bitcoin makes unnecessary if users can spend the coins directly, or
exchange them directly for cash with friends/family/people in their community,
or use a Bitcoin ATM (ATMs cost less to operate than a full blown WU-type
office so they would lead to lower fees - anything below the average worldwide
remittance costs of 8.5% is better.)

You say Bitcoin WOULD (conditional tense) not make things cheaper, but if
adoption continues (the condition we are talking about) it WOULD. Perhaps you
do not communicate clearly and meant to say WILL instead of WOULD. In other
words you don't believe in its adoption? But then your statement becomes
obvious ("if Bitcoin's adoption fail it will not make things cheaper", duh).

~~~
sanswork
Yes but again they can't. If you used local bitcoins or a bitcoin ATM to buy
and sell bitcoin it would cost you more using almost any ATM around.

It wouldn't make things cheaper. The people with the money on the other side
to run the western union shop are the same people with the money on the other
side to buy the ATM or the liquidity to give you cash for your bitcoin. They
have no incentive to lower the price just because you use bitcoins instead of
their traditional services.

Side note:

Overstock released their Q2 results today. So now we can say for sure if it's
just a case of them having a slow second quarter which is leading to the
dropping bitcoin revenue! Turns out their revenue is up for the second
quarter. It's just bitcoin sales that are down.

Unless you want to argue that bitcoin sales are detached from normal sales and
operate on an offset cycle I think you have to admit that you were incorrect
there.

~~~
mrb
_" they can't"_

Yes they can. I already gave you the Italy->China example. I already said
Bitcoin ATMs have fees lower than the worldwide remittance average of 8.5%.
You initially said if the Bitcoin infrastructure and services are available
that it "would not" make remittances cheaper. I am showing you it does. I gave
you hard evidence. You gave me footnotes about a hypothetical service on a
slide deck.

 _" are the same people"_

No they are not. Do you not understand the market dynamics? A WU competitor
who installs a network of Bitcoin ATMs has lower operational costs and
overhead than WU (who has offices + employees staffing offices all day),
therefore they have an incentive to compete and beat WU's costs.

Overstock: no you still have to wait longer before concluding anything.
Bitcoin sales are somewhat detached. For example we _know_ there was a spike
of Bitcoin sales in Q1 because this is when they started accepting it, so a
initial surge of Bitcoin enthusiasts purchased stuff in Q1 (I bought a $150
kitchen bin from them, haha).

~~~
sanswork
You gave me an example of someone with a bank account on both sides. What I'm
saying is most remittances where price is an issue don't have that benefit.

> I already said Bitcoin ATMs have fees lower than the worldwide remittance
> average of 8.5%

And you were wrong since most bitcoin atms charge 5% per side.

>I am showing you it does. I gave you hard evidence.

Where? You haven't shown any evidence of a comparable service that is actually
cheaper.

>No they are not. Do you not understand the market dynamics?

Do you not understand economies of poor towns or that the country receiving
the remittances would be a buyers market because of the high sell pressure and
low buy pressure causing the spread to be huge?

>A WU competitor who installs a network of Bitcoin ATMs has lower operational
costs and overhead than WU

No they don't. They still need someone to watch the ATM and help people use it
and it is almost certainly stuck in a store somewhere like every other bitcoin
ATM. Hell even the one in Vancouver has to pay someone to sit next to it all
day to help people use it and scare off people trying to undercut them.

>Overstock

No we really don't. Bitcoin sales have negatively diverged from their real
sales and the divergence is continuing. Even 2 months ago the CEO said on
Reddit that bitcoin sales were nothing and he's a huge bitcoin supporter.

Anyhow it's clear we'll never agree and I'm getting bored of going back and
forth on the same 2 or 3 points. So I'm going to stop now. Good luck with your
investment.

~~~
mrb
_" You gave me an example of someone with a bank account on both sides"_

Wrong. I was assuming one side would purchase Bitcoin cheaply on an exchange
(eg. the migrant worker in Italy) and the other side (eg. China) would sell on
a Bitcoin ATM. So 1% (or less) + 5% of fees which is still less than the 8.5%
average of remittances. This is more evidence (again!) that Bitcoin can and
does make it cheaper.

 _" No they don't."_

Even banks would disagree with you. Running an ATM (even staffed by one guy
sitting next to it) is cheaper than a branch office (which needs employees
too). The office has higher costs on all aspects: rent (more square footage),
employees (likely more than 1), other utilities, etc.

You look very silly, and alone, to argue that Bitcoin cannot make remittances
cheaper. Virtually everybody would disagree with you.

Overstock: come back after they have done 1 year of sales, we will see.

------
VexXtreme
The beautiful thing about bitcoin is that it's an open system, an open
currency if you will, that will allow a nice app ecosystem to be built on top
of it. That aspect will allow many non-technical people to interact with
abstractions that hide away all the complexities (such as Stripe), but it will
also allow experts and hackers to still tap into the network directly with
their own wallets, nodes, private keys etc.

I think that bitcoin is currently in its early infancy when it comes to user
adoption and still has a very long way to go before it reaches its potential.
It's not completely off base to compare it with the way the internet was back
in the early 90s.

------
nemo1618
It worries me to see people describe Bitcoin as the "IP layer of payments." I
have serious doubts about Bitcoin's ability to scale to a global audience.
Transactions are too slow, the blockchain is too heavy, etc. I see Bitcoin in
a very similar light to IPv4 and JavaScript: a good idea that escaped into the
wild too quickly. And so we wind up piling hacks upon hacks to make up for the
lack of a solid foundation, and it only gets harder to replace the current
standard with a better alternative.

~~~
natrius
Transactions are instant unless the sender double spends. Wait ten minutes for
anonymous senders. Trust known senders, then blacklist their identity for
instant transactions if bad behavior is detected. This is effectively what any
merchant who accepts credit cards does today. Credit card transactions look
instant, but can be rejected weeks later.

If the blockchain is too heavy, why are miners willing to process transactions
for tiny fees? Bitcoin creates a competitive market in transaction processing.
If the blockchain becomes too heavy (as measured by the transaction fees
miners demand), alternatives will arise or the protocol will be changed to
stay competitive.

~~~
ceallen
Individual transaction fees are being heavily, heavily subsidized by block
rewards currently. Just eyeballing the current numbers:

~400 transactions per block, 25 btc reward, ~500 usd / btc gives a transaction
cost of 31 dollars each.

What happens to fees when mining rewards taper off? Just authoritatively
stating "it'll be fixed" blindly pushes these problems into the future.

~~~
Natanael_L
Transaction count will go up, and nothing says the value given to miners must
stay the same. It is fine if some miners leave due to unprofitability.

------
berdario
> There are a few walled gardens with great payment experiences (the App
> Store, Amazon)

I'm of a different opinion: Amazon is much stricter than other online
merchants, and they don't give you meaningful errors when something goes wrong
with your billing. When I was back in europe, I had to rely on a relative's
credit card to make a payment, since my debit card was being refused.

Now that I'm travelling in the US, the situation is even worse: they locked my
account 2 times already, and they request information that (due to the privacy
laws in my home country) can't be easily accessed and returned by my bank.

Apparently there're differences with credit cards, debit cards and atm
cards... but as long as you have enough money/credit on your account, I cannot
see how the payment process should be different, and no one has been able to
explain it to me yet (an interesting blog post about how things can go wrong
when paying in person with a card is this one btw:
[https://blog.flameeyes.eu/2014/04/my-time-abroad-chip-n-
pin](https://blog.flameeyes.eu/2014/04/my-time-abroad-chip-n-pin) it deals
with "Cardholder Verification Method" which I never even heard of before
reading it)

Trying to pay for an order on Lenovo is even worse: they don't accept non-US
issued cards (unless it's an american express) and my bank doesn't let me do a
wire transfer to the US online (you have to phisically go to their desks and
ask for the wire transfer to be sent)

It's mind boggling the amount of manual work and custom e-mails sent back &
forth needed for payments. It's almost like being stuck in the early 20th
century.

OTOH, the few times that I used bitcoin to pay for something online, the
process has been flawless, and due to its utter simplicity I can vaguely
understand the whole process of sending money on bitcoin... unlike with
systems like banks, paypal and amazon, which are mostly huge black boxes of
which I cannot even audit their source code.

------
jarin
Taking this a step further, when using it as a pure transport medium, the
cryptocurrency itself doesn't matter. It could be Bitcoin, Litecoin, Dogecoin,
2304293f20983uf2089j2f3coin, or whatever, as long as it's liquid enough to
convert back and forth.

What we really need is a gateway system that will intelligently convert
between your local currency -> the cryptocurrency with the best
liquidity/exchange rate -> the destination currency.

Interestingly, I could see this leading to automatically generated
cryptocurrencies, as various popular cryptocurrencies fall below liquidity,
transaction time, and/or exchange rate thresholds. Over time, I'd expect to
see some interesting competition and arbitrage between cryptocurrencies going
on behind the scenes, all computer controlled.

~~~
Taek
I see the future of cryptocurrency as being a bunch of behind-the-scenes
transactions where the currency you are using isn't relevant at all, because
everything will be hyper-liquid.

You pick you favorite currency (or portfolio) as a store-of-value, and then if
you need to trade with other people, your client and portfolio negotiates with
their client and portfolio to arrange an acceptable exchange. Then you use a
decentralized network of exchanges to restore any ratios you want to maintain.

This allows people to create their own currency and enforce it's particular
use, backing it explicitly. For example, you could crate 'SoylentCoin', which
can be cashed in for 1 month of Soylent shipped by a certain date. You sell it
for some price that keeps you in business, but then the market is free to
trade it at-will and you can hit more efficient price points for your product.
Sometimes you might find that your product is worth a lot more than you are
selling it for.

Or in a decentralized example, you could do proof-of-resource sale that sells
coins directly transferable to a type of resource. In example of disk storage,
you provide storage to the network in return for disk-coins. To get the
storage, you need to buy disk-coins. This isolates the disk-coin price to the
supply and demand of disk storage precisely. Anyone can participate, and upon
buying or selling the disk-coin, they can immediately convert to or from
whatever portfolio of coins they personally maintain.

~~~
Natanael_L
Most of those examples lead to counterparty risk, unfortunately, where there
must by some direct trust in the issuer on some level.

------
abalone
The last section on trust & protection cuts to the heart of what it will take
for general consumer adoption. But it leaves unstated the fundamental tension:
the very nature of bitcoin is that of anonymity and finality. Whereas card and
even ACH transfers can be reversed, bitcoin cannot.

The essay hints that it will take a central trust provider to regulate and
police transactions to control for fraudulent activity. That's true. The key
question is whether they'll be able to sustain the promised cost efficiencies
of bitcoin by the time they build in this capability.

If the technical differences melt away and it just becomes another competitor
to Visa/Mastercard, minus the billions of dollars of marketing and POS
infrastructure over decades that have gone into cementing that network, then
we really have to scrutinize whether "openness" and "unbundling" present a
serious enough benefit to warrant the cost of a consumer global payments
network rollout.

And couldn't a central trust provider work against this openness and
unbundling? That's the whole point of a central entity, right?

------
tomasien
One thing I'm glad they didn't focus much on is the fees associated with
Bitcoin. Too much is made out of the fee reduction of BTC (I think because
it's easy for regular folks to understand) - but that's only a major factor
for why you're able to develop on top of it. Bitcoin is SO much more than
fees, and really the fees themselves aren't "set in stone" \- others will
charge on top of BTC anyway, so we have no idea what the fees will be
eventually. Coinbase charges 1% for interchange, which seems reasonable, and
that's just the start.

The card "network" itself wouldn't have to have the fees it has, it's Visa and
Mastercard, the banks, and especially Amex that DECIDE to make the fees
higher. Another example is ACH, which is essentially free to transact, and in
some countries has wide adoption.

Fees should NOT be a major driver in BTC adoption for consumers or businesses.
If you want low fees, let's work on ACH (and we are). But Bitcoin has a TON of
other benefits, and those are phenomenally well documented here.

------
pat2man
Stipe is hitting on a bunch of the key points here. The big one is that
bitcoin alone is not going to solve all our money problems, it will be the
network of companies that build products on top of bitcoin. Its the reason we
are seeing so much money going into these companies instead of investors just
buying and holding Bitcoin.

------
throwaway2274
One problem with the current system that the article did not mention is that
having a central party handle all the global financial transfers creates a big
handle for nation states to put leverage on.

We saw this very clearly when the US government put pressure on VISA and
mastercard to reject donations going to WikiLeaks. I remember watching that
whole episode in disgust. With bitcoin, this is pretty much impossible.

~~~
wcummings
This is a great example, since iirc Wikileaks started accepting BTC donations
shortly thereafter...

------
mfringel
Bitcoin is to payment system as git is to source control system.

It's an interesting toolbox that _can_ be used on its own, but gains a ton of
power once tools are built on top of it.

~~~
wcummings
I would say 90+% of git's utility is out of the box

------
doctorpangloss
> First, the resulting ecosystem is technologically open. Open ecosystems have
> a way of getting better much faster than their closed counterpart.

Unless you are specifically in the business of making financial institutions,
it would seem that Stripe (and for that matter, nearly every payment provider
that a computer can interact with) is open in all the ways that matter to a
normal person.

> There are a number of cryptocurrencies which already have gateways baked in
> at a protocol level (such as Open Transactions and Ripple). However, there
> are huge network effects in any financial system, and to date these other
> systems have failed to win the necessary user support.

So you agree with the above—that as far as history is concerned, just being
open doesn't get you adopted. :)

Bitcoin's crazy volatility and speculation drives "user support." It's ironic,
because (1) the volatility is what makes Bitcoin unsuitable as a currency from
the perspective of everything that matters economically (like your example,
value storage) but (2) the volatility makes Bitcoin phenomenally successful as
a currency from the perspective of user acquisition.

I don't know why it's so hard to promote transaction systems. Maybe there's
some rule out there that no one competes on the basis of transaction fees, and
those who do are shut out of the cabal. That's not a conspiracy that I
subscribe to. Maybe the minimum transaction fee to make things economically
viable is 2.9% of every transaction. So people do make platforms with lower
transaction fees, but then they can't afford to tell you about it, or they
don't manage to enrich themselves enough to make it worthwhile.

But Bitcoin, it managed to lie and tell us, "the lowest possible transaction
fees;" while technically true, you just pay for the economic cost of promoting
the platform and enriching its owners through its volatility.

In that sense, Bitcoin has been a terrific failure as a payment system. It's
much worse to buy Bitcoin at the wrong time than to pay 2.9% on every
transaction. But as a payment platform, as far as venture capitalists are
concerned, it's fabulously successful. The early buyers of Bitcoin did enjoy a
fabulous return.

User acquisition with negative cost to the platform's owners? Brilliant.

~~~
Cyther606
First, Bitcoin resembles MLM / network marketing more than any one traditional
financial instrument.

Second, that the State would want to allow a free market currency of fixed
supply to compete with their own digital currency that can be whimsically
inflated and used to fund endless warfare and welfare just doesn't fit the
historical record.

Never, in the past hundred some odd years, has any competing currency been
adopted by the banking system because of innovative features.

Bitcoin is innovative because it gives people control over a form of globally
accepted currency which cannot be debased or manipulated. Bitcoin can be sent
and received by any person in the world, in any amount, at any time, for any
reason. That's why Bitcoin is important. Bitcoin is _not_ important if it just
compliments the existing banking system's functions, or makes it cheaper. It's
important because it frees humanity from the arbitrary clutches of the State.
It gives power back to the individual at least in matters of money and
finance, and everything else can follow from that.

~~~
rooneel
>Society can't make progress if progress hinges upon the diktates of a
corruptible few.

Not being sarcastic here, but come again? Isn't that also the argument
_against_ bitcoin? The extension of that argument being: would people rather
they get to _elect_ the corruptible few, or that the select few be just that
because they are rich (family, etc) (eg. VC's dumping their money into
bitcoin).

~~~
Cyther606
It doesn't matter what some politician thinks, or even what a rich VC thinks:
there will never be more than 21,000,000 bitcoins.

Once you invest in Bitcoin, you have a vested interest in the system
maintaining and appreciating in value.

I'm not worried about Bitcoin being debased by VCs.

Politicians and bankers do concern me, however, because they can do whatever
they want to my fiat currency: inflate it, deflate it, confiscate it, freeze
it

and they can always hold those things over my head in order to compel me to
take an action against my will.

Mainstream institutions have proven time after time to be more interested in
accumulating and preserving their own power, than acting in the public's best
interests.

I no longer trust this system, and I actively seek out ways in which to
protect myself from its whims. I would never hold any more of its money than I
absolutely had to, and I look forward to building a free economy on top of the
blockchain.

That's what Bitcoin's about. It's not about being PayPal 2.0.

------
flatline
Great article. The only problem I had with it was an IP address being
analogous to a bitcoin public address. Stripe.com is vouchsafed by a
certificate authority, so when you go to the address either by typing or by a
link, you have some reasonable, if sometimes tenuous, assurance that you are
dealing with the real stripe.com and not some typo-squatting fraud or MITM.
Using friendly addresses for payment removes the statistical uniqueness of
public keys from the equation. As long as the friendly identifier is not the
_primary_ one, there is no issue, but I see nothing wrong with establishing
identity through copy/pasting a bitcoin address from a known trusted source or
scanning a QR code.

------
mcs
What about a voting system? With little keychains given out with only the
voting system having the public key for, and any third party can validate the
votes. "Coins", or voting credits can be distributed back to voters without
transaction fees.

~~~
marcosdumay
It has the same problem of every cryptographic (and not cryptographic - see
paper) voting system. It's impossible to create a system that assures both a
correct result and voter anonymity.

Paper assures none, but has quite strong guarantees on both. I'd settle on
some system that assures the result, and has good guarantees of anonymity,
what one can create with pseudonyms, but at that point it's a political
debate, not a technical one.

~~~
mcs
People don't have to share their name to their public key in the blockchain.
So the anonymity is about the same as a social security number, and but
confirming the identity is much stronger and doesn't need to reveal private
information or their private voter's token keychain. Transparency is giving
out tokens to known voters, since there is already registration at least in
united states elections. What it does give is a strict list of keys that
should correlate with registered population.

~~~
mcs
Accountability in the ballots themselves is just as important as accurately
tracking the votes.

------
driverdan
This is a very good article and highlights what I also think is Bitcoin's
biggest strength, its use as a medium of exchange. Whenever someone asks me to
describe why they should be interested in Bitcoin I always focus on using it
to transfer money. I use an example of sending money to someone else easily,
cheaply, and quickly without using shitty services like Paypal. This resonates
more in the USA than Europe since our banking system is terrible and doesn't
have easy, free transfers baked in. It also makes a lot of sense for cross
border / currency transfers.

------
Symmetry
They copied my blog post! [1] Ok, that's actually extraordinarily unlikely,
and I'm glad that other people think we need to look at Bitcoin through the
medium of exchange/unit of account/store of value trichotomy and I'm glad that
they seem to be going forward with using bitcoin as the basis for an
electronic money system without denominating anything in bitcoins.

[1] [http://hopefullyintersting.blogspot.com/2014/07/thoughts-
on-...](http://hopefullyintersting.blogspot.com/2014/07/thoughts-on-
bitcoin.html)

------
jcr
> _" what might a Bitcoin that's useful for the mainstream look like?"_

Great article, and the extremely familiar line above made me smile.

------
billyarzt
Potentially dumb question: if there are 21 million bitcoins (and therefore 21
million bitcoin addresses), would that limit bitcoin's efficiency as a medium
of exchange? Ie wouldnt there be potentially billions of transaction moving
through a financial system powered by bitcoin daily? (Apologies in advance for
any flawed assumptions).

~~~
nathan7
The flawed assumption is "and therefore 21 million Bitcoin addresses".
Generate an RSA keypair, and give out the hash of the public key (encoded in a
Bitcoin-specific way). Anyone can send you Bitcoins there now.

------
k-mcgrady
Good piece. If you're reading this expecting something new from Stripe though
you'll be disappointed:

>> "So what role will Stripe play here? We already provide Bitcoin acceptance,
and we're actively investigating other functionality. We'll have other updates
on this front before too long."

------
jheriko
What if banks compete and start providing a reasonable quality of service?

It wouldn't be hard.. they just don't bother because there is no return for
the investment right now.

Bitcoin scares the crap out of me. It looks too much like a criminals dream
for me to have any trust in it and the network yet...

------
ChuckMcM
If you had a large enough transaction base where you could simultaneously
convert in and out of bitcoin chunks such that the transaction didn't suffer
f/x creep (or if it did, it was tolerable via transaction costs) that would be
a pretty interesting thing indeed.

------
ahtomski
This post does a very good job of explaining clearly why Bitcoin could be huge
in a way that someone not familiar or excited by the technology could
understand. And I think the meta-point here from Stripe is, by the way 'we
want to be the next Visa'.

------
webmaven
Money isn't the only relevant unit of account. Even in stable economies,
stocks, bonds, and the like are _very_ high friction, and there is a lot of
room for disruption and innovation.

------
jtanner
This article is genius, Greg Brockman has figured this out.

Does NameCoin have all the needed features to make this happen right now?

------
GmeSalazar
Unrelated question: are there any formalization of the Bitcoin protocol out
there?

------
aburan28
There is too much venture capital money behind bitcoin for it to fail. EDIT:
Don't underestimate the stubbornness of investors.

------
edpichler
Very good article. Great times are coming.

------
freedom123
Bitcoin, no matter how you word it or rationalize it will always have a root
problem and inherent risk...it is backed by nothing. Users today think its
usage gives it market value and it can but to a limit. Money (USD) originally
(the dollar bill) worked because it was back by gold. A metal that worked
because everyone on the planet wants it. That dollar bill was a "check" or
agreement stating, this dollar bill represents this much gold thus the value
of money. The USA today does not have gold backing its money-- so as you can
see we already have a bitcoin and the USA will not allow you to complete with
its money - enjoy

~~~
drcode
If gold wasn't used as a store of value its value would be very maybe a
hundredth of what it is now: Gold-plated jewelry in our modern era is
essentially indistinguishable (even at the level of a physics lab using
scales/xrays/etc if need be) from solid gold jewelry.

Gold, for all intents and purposes, is also "backed by nothing".

~~~
freedom123
Aluminum was more expensive than gold until a cheap way to purify it was
developed. Now we wrap our food in it. Gold is only valuable until the first
metallic asteroid is placed into high Earth orbit. Not tomorrow, but probably
sooner than you think. reply << Has nothing to do with Bitcoin being back by
nothing. Even if gold did lessen in value other forms of metals/currency can
take golds place. Gold is specifically a variable for anything however it is
"some thing". (the root point).

 __

If gold wasn 't used as a store of value its value would be very maybe a
hundredth of what it is now: Gold-plated jewelry in our modern era is
essentially indistinguishable (even at the level of a physics lab using
scales/xrays/etc if need be) from solid gold jewelry. Gold, for all intents
and purposes, is also "backed by nothing". << again has almost nothing to do
with Bitcoin being back by nothing. Gold is the item of value it doesn't need
to be backed, it is the back'er.

~~~
brg444
I suggest you return to your economic and history books. Gold has no intrinsic
value as you would probably call it. It is only because of some VERY
distinctive properties that are not found in other metals that gold was
ultimately selected as the better store of value available. Its only value
comes from a market agreement.

Bitcoin is essentially the same as it replicates the same properties of gold
while having a more predictable supply and features that allow it to be used
more commonly as a currency, unlike gold.

~~~
freedom123
Gold has intrinsic value because 1: Its rare 2: Its tangible 3: People want
it. Look at history and you will see gold wrapped around everyone's neck and
fingers. As mentioned before, a currency has to be back by something. Bitcoin
is backed by nothing - nothing cannot be something - no matter how much you
exclaim - that is the risk of investing any time with Bitcoin. Just because
you like the utility of of bitcoin almost has nothing to do with it being a
currency. Example - You can have 50 coins of solid gold or 50 zeros on a
computer.

~~~
XorNot
Also, unlike Bitcoin, gold remains gold without the need for a constant supply
of electricity or technology. It's an element, and part of the reason it
worked as a store of value was because "ooh shiny" and zero upkeep.

------
dcc1
I am not sure why anyone would want to accept Bitcoin via Stripe

Same can be accomplished with Bitpay, who take 0% in fees with a 30$/month
package (1% otherwise), they also pay into the bank the next business day
unlike Stripe. And they are also alot more open as to the types of businesses
they accept.

Or hell one could directly accept bitcoin with bitcoind running locally or
using the blockchain.info api and then converting bitcoins with Bitstamp (or
just using the bitcoins to buy things, every day more and more places accept
them!)

It is great seeing Stripe actually embracing new technologies but imho their
current bitcoin "offering" is not great and they are picky as to who they do
business with.

edit: ah typical HN fanboyism, vote down anything negative said about Stripe
instead of addressing the points raised.

~~~
_puk
Bitpay, bitcoind et al may technically be better offerings, but if you're
already using Stripe to take card payments then woohoo, you can now take
Bitcoin.

If Bitcoin wants to play with the big boys then the likes of Stripe getting on
board are nothing but positive.

Having to have a separate system to handle Bitcoin vs Visa, MasterCard etc
just seems archaic.

