Oh dear. I hope that was said with tongue firmly in cheek, because anyone who truly believes that their Bitcoin Visa card being cancelled is a form of "oppression" needs a reality check.
On the spectrum of actions that goes from "supportive" on one side through "completely irrelevant" in the middle and "oppressive" on the other side, this action lies on the oppressive side.
1. There are very few issuing banks for crypto <> fiat debit cards. Internationally there has been 1 WaveCrest; which as of a few months ago decided to discontinue support.
2. Even when a bank will sponsor a crypto <> fiat debit card into one of the payment networks, the company offering the card will face constant pressure from their own bankers.
3. This happening is from my perspective just a quick look behind the curtain of the Digital Currency infrastructure problem as it exists today. There is no good way in, or out of digital currency at the moment, and the ones that exist are tenuous at best. The base truth is that Traditional banks are not capable of supporting new methods of value transfer. That means that the companies that build and provide infrastructure for those methods are currently at the mercy of a partner who basically wont help them.
I always try and make the charitable assumption about the motives of others and my take on the banking <> digital currency relations is basically this: Banks have a business model that has worked well for generations; they do a little fractional reserve, they extract as many fees as they can invent, and they centralize the control of wealth. The promise of digital currency is that everyone will have the capability to do that for themselves. So, its not surprising to me that it is hard for them to work with those of us who are building bridges and on/off ramps between the two systems.
With all of that being said, I am sorry for all of the debit card users who are currently without an off ramp, and I can assure you that the folks at BitPay, Xapo, and all of the other companies that lost access to the EU are working as hard as possible to bring those programs back online.
1) Think from their perspective. They have very little upside for integrating with cryptocurrency platforms. It adds nothing to the bottom line. If anything, it subtracts from their bottom line, due to the added compliance work required to prevent crypto money launderers.
2) Stop saying crypto is decentralized. The vast majority of cryptocurrencies are mined by a small minority, and most participants have zero say in the direction of each currency. Yes, you can have a "decentralized" architecture, but not "democratization". Crypto-space ended up with an oligarchy.
#2 is way off. By definition crypto is decentralized. Currencies that currently have the highest market caps (read: most popular) also tend to be open source -- anyone can contribute, and anyone can run a node and perform PoW/PoS contributions.
There are exceptions (XRP), but for the most part your comment reflects a misunderstanding of "crypto-space".
If you read my #2, I basically acknowledge that crypto is decentralized. What I argued is that decentralized does not mean what the vast majority of people thinks it means, which is that it makes financial system more democratic. Many including myself are taking exception to that misconception.
The irony of making it difficult to exit crypto means traditional banking will long-term be on the losing end as people who buy into crypto (even as novelty) won't want to "cash out" due to difficulty while realizing how convoluted the fiat process is when viewed from the outside. They'll find ways to stay in crypto and get things done.
When you find that you can't sell your tulips for dutch guilder, you don't set up a mirror economy that uses tulips for currency. Instead, you find tulip prices collapsing, and yourself broke.
Why would my landlord, who is not vested in crypto, want to exchange goods and services for bitcoins that he can't cash out to pay his contractors, taxes, etc? Nobody wants to be paid in illiquid assets, what on earth would possess him to get into that horror show.
Your comment adds nothing to the discussion and only serves as an attempt to disregard every point without any reason or fact, and simply because you prefer not to face the facts.
It adds a datapoint (my own behavior) that contradicts the parent's claim of what people will do.
I think what you really mean is "your statement does not contribute to my argument," not "your statement does not contribute to the discussion." There are arguments besides your own, and I am living proof that they live in people.
I'll take your crypto as payment though. And so will other people. Maybe not everyone, but as long as enough people do to make it a currency it has value.
You can pay tax with a shift payments visa card via coinbase. In general, you pay through an intermediary that swaps it for you, or cash out just what you need to pay tax when you need it.
Surely this is only true if the point of cryptocurrency for those people is to get things done. If it's mostly speculation, as it seems to be right now, not so much.
As someone who's been transfering quite a lot of money through various banks and into crypto I'd imaging the biggest issue is the money laundering type regulations. For transfers much over $20k normal banks want documentation where it came from and all your normal transactions can be viewed by the government for tax enforcement purposes. Once you're in crypto that's all out the window - I've been trading on Kucoin which is kind of based in HK or China but no one quite knows where, doesn't keep much in the way of records, if you were transfering crypto out for drugs or tax purposes no one would know. So I can see how Visa would be worried about being party to that kind of thing and then fined or prosecuted for it.
By the way re "no good way in" I've found coinmate.io pretty good once you get the money to them but it has to come from a bank account in your own name and those can be funny about letting you transfer to them. Also it's kind of slow - once your money arrives you have to wait a day or so for a human to process it.
> 3. This happening is from my perspective just a quick look behind the curtain of the Digital Currency infrastructure problem as it exists today. There is no good way in, or out of digital currency at the moment, and the ones that exist are tenuous at best.
What country do you live in? This has not been true in US or EU for years as Coinbase and Kraken are two excellent options to get in and out. Bitcoin debit cards are a bit of novelty, not some central infrastructure.
I haven't used kraken, but I can say that I would not qualify Coinbase as good... it as at best "usable".
Unacceptably poor customer service, significant markup when buying bitcoin, sometimes a week or more delay between purchase and fulfillment, arduous verification process for new customers, being arbitrarily (from the customer's perspective) flagged for a verification even though you already sent them a photo of your passport 3 months prior, banning customers for sending coins to certain addresses, and did I mention unacceptably terrible customer service? Sometimes just never even responding to a customer ever?
I can't say it's not usable... I have bought bitcoin from there and I did receive it, but the experience has been very far from good.
Comparing Coinbase to ETrade I'd have to disagree. If you want to make small (sub-$1000) transactions, sure Coinbase and Kraken are good enough, but $10k or $100k or $1MM is a totally different story.
I wonder why this happened. Visa is primarily a technology company - not a financial institution. It's incentivesed to keep fraud on visa cards low (so that merchants continue to accept it) and keep its ecosystem of issuers + acquirers happy.
If I'm not missing anything, I believe this must have happened because of unusually high levels of fraud on Bitcoin visa cards. Certain acquirers might've complained about abnormal amounts of "shady" volume from WaveCrest BINs.
Alternatively, Visa might have seen a settlement risk on WaveCrest's end. I.e. Visa might be worried that fluctuations in BTCs price would put WaveCrest in a position that they wouldn't be able to settle funds with Visa (and consequently the acquirers + merchants).
Any other ideas on what could've prompted this? I think if this was anti-BTC regulatory action, the prompt to turn off these cards would've come from WaveCrest's banking partners and not Visa.
In that case it wouldn't have been WaveCrest itself that was dropped. They don't touch the Bitcoin, it's their partners that do (the ones that have their names printed on the card). WaveCrest sells pre-paid cards in general. In the Reddit thread someone pointed to new financial regulation in Gibraltar that took force January 1st but so far they haven't communicated themselves in the matter so it's mostly all speculation.
Bitcoin competes with Visa. It's in Visa's interest to cut it off, while giving only vague "reasons" why, so that we all assume that it's because Bitcoin users have high fraud.
Exactly. The SEC has said they consider crytpos securities. That would mean the fraudulent price manipulation in the crytpo space (Bitfinex treating tether as USD and pushing up the bid) is securities fraud. This is probably why Wells Fargo stopped clearing Dollar transactions for Bitfinex.
I am an insider in the Bitcoin industry, and within 1 day of opening a new bank account we started seeing fraudulent wires flooding in. When we dug deeper, it was shocking to see how many Americans' bank credentials have been hacked. It takes almost no effort for a EEU/RUS hacker to send a wire from a hacked bank account.
Once the fraudulent wire is sent, rest of the wire transfer system is tediously manual. So wire network participants simply choose to block bank accounts that receive repeated bad wires. This is why Wells Fargo cut out Bitfinex and Visa has decided to stop working with Bitcoin companies.
ACH fraud is even more rampant because you can pull money from someone's account without their consent (as long as they don't notice/contest within certain number of days). Coinbase profit margin is 0.5% per trade, so they need to keep their ACH fraud rate below that number to not lose money. ACH fraud rate is well over 1% industry-wide. This is why I strongly believe that Coinbase has to be losing massive amounts to ACH chargebacks.
> "If some nefarious actor has the users credentials (e.g. username / password) won't they then be able to circumvent both of those checks?"
They would. However, typical ACH fraud entails pulling money using only the routing and account numbers, which can be found on all paper checks; this mechanism prevents that.
Regarding CB ACH, They had/have a huge exploitable hole in their ACH system that a friend discovered by accident. Long story short, they credited them for a large sum that they never took from his/her account. I won't put the exact detail of how to trigger the error but suffice it to say it was shocking to learn how a system that deals with large sums of real money could fail in such a way (and likely in a repeatable manner although my friend didn't try as repeating it would likely be seen as stealing).
It's really quite shocking how a ecosystem that touts decentralization has a glaringly centralized failure point - the fiat exit exchanges. When one or two of them goes, it will bring down the whole house of cards. And given how shitty CB's software was (or maybe still is) I just hope I can get my gains out before the whole thing comes crumbling down.
So your friend is benevolent enough to not trigger the bug again because it would be wrong, but not benevolent enough to report the bug to Coinbase? Right...
Coinbase code is still horrible. I have found couple of bugs/failure points in their code, but Fred Erhsam was a jerk to me so I don't feel like reporting these issues to CB.
This seems like a pretty sensible decision though, since most cryptos don't really work like a currency they work more like an investment. Especially now that the transaction fees are so high, and the transaction processing time takes so much longer than debit cards, credit cards, paypal or other electronic transfers.
Yes. For example, they've said that you could use a blockchain to keep track of book borrowing in a book club, where people expect to use the blockchain to get books and not to get rich.
I do think this is pretty reasonable, but it sounds like you meant something else.
In addition to those sorts of uses I specifically mean "currency," since in their Dec. 11 statement the SEC says "there are cryptocurrencies that do not appear to be securities."
WaveCrest seems to be the card provider for all major crypto debit card offerings. Its actually so popular among top searches for 'btc debit card' that I'm starting to think they are actually running the show and just have a few different front ends.
Initially, they only closed visa cards for holders that were outside of EU, but now it seems to include everyone. The issue seems specific to EU-based Visa issuers. US ones seem unaffected, for now.
I have always classified Monaco as one of those ICO projects where they don't even plan to actually implement the business model. Because why would you when you can just party 10 years in Ibiza with the raised ICO funds?
Time to start ScamCoin. Every transaction on the network will be considered a donation of which you may or may not receive some worthless ScamCoins in return.
Seems like it was a very bad business idea in the first place, and I'm surprised it wasn't cancelled sooner. Before you downvote me consider the business model of credit card processors, and how volatility and rapidly deflating currency would effect their cash flow.
> how volatility and rapidly deflating currency would effect their cash flow.
Not at all? You obviously don't understand what a bitcoin debit card is. It's just like a normal debit card, but you fund it with bitcoin. The company you get the card from sells your bitcoin for fiat currency at the time you make a purchase (or at the time you top up the card, depending on how they do it).
The properties of bitcoin are completely irrelevant to the mechanics of the card.
The liquidity to sell to fiat is drying up after many are realizing the valuations for crypto are completely fraudulent. There is an astronomical amount of centralized crypto printing going on that has corrupted the entire crypto ecosystem. Tether just wrote in their legal terms that as a of January 1st tether can't be redeemed or used by Americans even though it backs USD. Corrupt exchanges inflated the prices and issued worthless tokens to buy bitcoin then sell it to main street. This is Bernie Madoff x 10,000.
This is not true. Liquidity in these markets is steadily increasing. It is easier now to sell large amounts of Bitcoin than it was two years ago, and it was easier then than two years prior.
Have you tried to sell millions of dollars worth of bitcoin to USD? As soon as there is a down day the exchanges shutdown and stop people from trying to withdraw. The money to cash out billions doesn't exist. All these headlines of founders being billionaires is false. $1.5 billion fake USD pumped crypto. Good luck to anyone holding millions of dollars trying to cash out when the market turns downward. This is adult musical chairs. There will be millions of bag holders and rich exchange criminals.
Moving the goalposts, are we? The question here was if "liquidity is drying up", which is the opposite of what's happening. While you probably couldn't move a billion, you never could and that's not a sign of anything drying up.
A million dollars perhaps used to be problematic, but is now a drop in the bucket on any exchange's daily volume. A normal bank transfer will suffice, but check with your bank if you aren't moving those amounts regularly. For bigger volumes there is a quite functional OTC market as well.
It's easier than ever to sell for other cryptocurrencies, including Tethers. In a fire, though, it's not the size of the trading floor that matters, but the size of the exits.
The liquidity is increasing because of the current gold rush. People who have no business getting into this kind of investment are buying in, thus increasing liquidity. I can no longer count the amount of acquintances who have bought 5-10K USD worth of BTC or Litecoin or Ripple or whatever, without having even a cursory understanding of the mechanics behind it.
These types of investors also panic easily, once the bank run starts, nobody will be buying. In fact, I bet most exchanges will simply close up shop.
>The properties of bitcoin are completely irrelevant to the mechanics of the card.
On what planet? If the price fluctuates the way bitcoin has been, Wavecrest could literally be bankrupt before Visa even knew about it to pause any further transactions. At which point VISA is responsible, you think they're going to risk billions of dollars on a currency that is clearly a bubble at this point?
1.) Wavecrest assumes absolutely no exchange rate risk as they don't deal with the BTC, a company like Xapo does
2.) Xapo make a very big margin on the bitcoin sale
3.) The companies that perform the sale at topup time rather than purchase time work out how many GBPs you get after they've sold your BTC, so they assume no risk at all, and the companies like Xapo that perform the sale at purchase time structure their operations to minimise the risk of losing money, and they're aware of the risk, and they're far from the first company in the history of the world whose operations require them to adequately manage risk.
Is Wavecrest not exposed to the risk that Xapo will not be able to fulfill its obligations, for example if an orderly market in bitcoin-USD conversions breaks down?
No, Wavecrest has a stored value account which their payors must top up ahead of time in order to be able to fund payments.
This is identical to Paypal, or any other payment rail in the industry. Payment companies don't in general make loans to their customers (though anything is negotiable in principle).
> Not at all? You obviously don't understand what a bitcoin debit card is
I don't really know if that kind of condescension is called for. I know enough about BTC and general credit/debit card mechanics. I know, for one, that credit cards have very low margins as a percentage of volume processed. I figured that the mechanics of a BTC transaction would be similar to a standard forex conversion, which I would not expect to be 1:1 with actual transactions, but from a hedged reserve (which I assume would be very very difficult to accomplish with BTC volatility, but also possibly inevitable given BTC network transaction rate limitations, as card transaction rates scaled up). Also, though debit and credit differ, wouldn't you have to take some degree of fraud and chargeback risk into account on both sides of the transaction? It's not that these are technically insurmountable, but - back to my original point - it seems like a bad business given the overhead and peoples' expectations around transaction fee rates.
Unrelated. You pay the card issuer with bitcoin and they sell it for eur. As far as they're concerned they only have to pay a one-time fee for transferring the received bitcoin to an exchange and selling it there.
Whenever the cardholder makes a payment, that payment is processed against the fiat-equivalent that they have with the card issuer; the card is funded by bitcoin you send in yes but it's backed by the currency they converted the bitcoin into the moment you sent it their way.
It's sad you have to say this because HNers abuse their downvote privileges. You have an opinion and you express why. Voicing it allows us to see what other HNers are thinking, and as a result, it contributes to discussion.
Well, I really was hoping to get some good faith feedback - even though I had a definite position - in a topic that can lapse into a more adversarial stances. To be fair, I was really happy at those who took the time to reply, and ... paraphrasing Taylor, downvoters gonna downvote. I did get at least 4 downvotes, for the record. I'll say no more of it. It's an interesting meta discussion for me, but this is off topic/being a bad guest in posting guideline adherence enough already.
Their later communications say "We've been working with a new card issuer for a few months and will be ready shortly" which, while not mutually exclusive to their previous "we had no warning" communications, at least _implies_ that they had some inkling this was in the works and either were playing the bluff / negotiation game and got called, or had hoped it would all go away and so hadn't communicated the possibility to their customers.
This is how anyone dealing with money transfer deals with:
1. Unacceptable levels of fraud.
2. Governments changing the rules/clarifying the rules.
3. Discovery of immense counterparty risk.
Since #2 did not happen, I'm assuming that #1 was at play. Given that this is bitcoin, #3 is present, but it's not clear that VISA would go digging for it.
Bitcoin is currently not what Bitcoin was when it was created.
Slow peer-to-peer transactions and high processing fees.
Average fees are hovering around 30 dollars. That's an average. Unconfirmed transactions has been at over 100k for months. The mempool is also hovering around an ATH. The Bitcoin is crippled. Sentences like "store of value" are now the term used to describe Bitcoin. Very far from what the Bitcoin used to be.
I think there is a real possibility of a "death spiral of the blockchain". Fees will increase and it will become impossible to move coins on the blockchain besides the upper 10% of bitcoin holders.
For traders on exchanges bitcoin seems fast; because no transactions are taking place. When you actually decide to move your bitcoins to a wallet you own you'll pay high fees... if not your transaction could take months to clear or never actually clear.
No wonder Visa cards are being cancelled.
The fork that occurred on 1st August created Bitcoin Cash. This fork is much closer to what the Bitcoin was. Bitcoin Cash is this today. Removal of the segwit code (which hasn't solved anything), disabling of RBF (replace-by-fee) enabling 0-confirmation transactions again. A new DAA (difficulty adjustment algorithm). Finally increase the block size to 8MiB.
The Bitcoin has been crippled on purpose by Blockstream deep in the pockets of bankers and insurance companies. Blockstream is the main contributor to the Bitcoin development. Look at the sponsors; https://www.blockstream.com/about/#investors
Now all of this has led to a complete divide and clusterfuck of the community. It is an very ugly and toxic environment and is sad to look at. On top of that we now have thousands of alternative coins and blockchains.
"death spiral of the blockchain" or death spiral of Bitcoin? There's an army of alt coins waiting to take its place. A lot of them are garbage, most are OK, but a handful of them are brilliant.
Bitcoin was the proof of concept and it was very successful in that light, but as a consumer product it is quite flawed. The survivors of the current bubble will be the ones that change the world. I'm not sure Bitcoin will be among them.
All coins built upon PoW suffer the same scaling issues as bitcoin. Since Bitcoin is the most popular, it hit the limitations first. Second layer technologies such as Lightning Network and Rootstock do solve various problematic use cases. Bitcoin is the most widely held cryptocurrency and is the only cryptocurrency with second layer technologies being rolled out into production as we speak.
Bitcoin effectively froze when Blockstream decided against increasing block size. The way I see it, bitcoin only stands as the flag-bearer, as (much like bitcoin cash) the transactions are too slow and still cost money. As the ecosystems grow and stabilize I imagine we'll be having some of the more full-featured, specialized cryptos carve out a spot within their specific domains (Dash or Raiblocks effectively taking over the "currency" use case for example).
I agree that the environment between the bitcoin and bitcoin cash communities is extremely toxic but I downplay how much that matters for a simple reason: bitcoin has been steadily losing dominance in the space and bitcoin cash is completely useless feature-wise, when compared newer-gen cryptos and even older ones like Litecoin. So sure, it's a nasty environment but it's one that I suspect we can just let die quietly in the corner.
> Bitcoin effectively froze when Blockstream decided against increasing block size.
You mean when the Bitcoin Core implementation of the Bitcoin protocol decided decentralization was an important feature of the currency and transaction compression should be the prioritized means of scaling.
That's the "glass is very half-full" way of putting it :)
They could've easily gone both ways: block size increase to 2mb, segwit and lightning network. Hell, Litecoin is well on its way to becoming the de-facto transfer currency between exchanges because it iterates so much quicker (and those 2.5 minute blocktimes sure help).
> Average fees are hovering around 30 dollars. That's an average.
No, they're not. Exaggerating your numbers makes your entire argument less strong.
I made a transaction yesterday and the price was only ~$19 if I wanted it confirmed fast (in <2 blocks). The price was about the same last week when I did the same thing. You also have the option of paying a much lower fee if you don't care how fast it transfers. If you're trying to buy a coffee, don't use BTC. If you're transferring 5-6 figures to an exchange, paying $19 to get the money there in minutes is far and away superior to the ETF system, which typically takes days.
> If you're trying to buy a coffee, don't use BTC.
Isn't this sorta what we were hoping to do one day? A proper digital cash replacement? This Bitcoin scalability problem seems like a much bigger deal than most seem to realize. And it's only getting worse.
to pay coffee, you can use any other altcoins, monero, dash, ether has low transcation fees etc. We're past the idea of one crypto rules them all and going to a world where each coin rules in one area. Bitcoin as a store of value, ether for dapps, monero for secure/private transactions, ripple or stellar for international banking etc.
If your vision of the future is individuals carrying a balance of dozens of cryptocurrencies in order to do business, then congratulations: you have managed to reinvent barter, with cryptography as sheer overhead.
Cryptopay pronounced:
"Unfortunately, our card issuer instructed us to cease all Cryptopay prepaid cards starting January 5th, 2018. All funds stored on cards are safe and will be returned to your Cryptopay accounts ASAP. Sorry for all the inconvenience caused, we’re working on the solution!"
I can't imagine they wouldn't be. There's a lot of gray/black money in bitcoin, and it has to get on the grid somehow. A debit card you can spend anywhere is a dream come true for that.
That's not correct. There is always some amount of fraud that manage to go through all the checks. That doesn't mean it's intentional. And that certainly doesn't mean that any financial service can stop doing any verification and become a paradise for fraudsters.
They’re also not payment networks. In any case, that lawbreaking occurs is not sufficient evidence that the banks don’t care about AML. By and large, AML procedure is generally well enforced. (The penalties are draconian.)
Payment networks should be even less concerned, at least in the US, because they are excluded as MSBs (money servicing businesses) and the regulations that apply to MSBs
Also, FWIW none of us make any money on offering these debit card products. We actually do it to give people that have digital currency a quick off ramp. Here is how the programs technically work:
1. Infrastructure company pre funds an account with an issuing bank.
2. User sends digital currency to infrastructure company to add to their card.
3. Infrastructure company receives that currency, and alerts bank to debit their account for fiat.
4. Infrastructure company has to find an exchange to trade OTC as often as possible to protect against as much volatility as possible, while keeping in mind the minimum OTC trade size is generally $250k USD.
5. Infrastructure company has to wait 3 days for a wire to then add more funds to the pre funded account.
> Infrastructure company has to find an exchange to trade OTC as often as possible to protect against as much volatility as possible, while keeping in mind the minimum OTC trade size is generally $250k USD
One can loosely think of an appreciating cryptocurrency as a short-term loan. You're out cash up front. Later, and only later, you get it back plus a little more.
The infrastructure company in your example is thus, by turning cryptocurrency's promise of cash tomorrow into cash today, providing maturity transformation [1]. This is one of the core services of a bank. It is also an inherently risky business on account of the asset-liability mismatch.
> Speculating on currency prices is a business; it is not however the business that digital currency infrastructure companies are in
Yes it is. It may not be how they market themselves. But it's the principal risk they take and, directly and indirectly, the principal determinant of their profitability.
I am literally the CEO of LitePay, I know the CEO's of the other infrastructure companies, and it is NOT what our business are doing with the Debit Card product.
We take the risk as a service to the community, and the product is a cost center.
> We take the risk as a service to the community, and the product is a cost center
JPMorgan Chase could just as well say it issues mortgages and accepts deposits as a service to the country, that its retail operation is a cost centre for the real business of this or that. (It was popular, before the crisis, for banks to claim mortgages were simply a cost centre for winning wealth management and investment banking business.)
The business you're in is the business from which you earn profits and in respect of which you hold risks. Railroads and trucks [1], McDonald's and real estate [2]...this is an adage in business as old as commerce.
I wonder if this affects Monaco. I was interested in their value prop, especially the ability to receive a low foreign transaction fee while traveling.
Just noticed WaveCrest is based out of Gibraltar. It seems quite easy to start a company based in Gibraltar. What are the advantages or disadvantages? Just curious.
I think this will be good in the long run. If VISA (and Mastercard) end up allowing Bitcoin affiliated payments through their platform, then merchants will end up not providing native support for crypto payments, as they can just use their current infrastructure.
If we want to destroy these payment monopolies in place of a (more, but I understand not completely) decentralized system, we need to encourage merchants to just implement payments directly.
edit: typical hackernews. any pro bitcoin comments result in downvotes.
From what I understand one seriously thinks about bitcoin as a currency anymore.
Think of it as gold for the digital space almost literally (it's expensive to mine, exist in limited quantity and expensive to keep secure)
People keep talking about high volatility but any currency can be exposed to high volatility and there was a time when currency was that. Now we have central banks but they have their own problems with systemtic bubbles.
Bitcoin will be a kind of contract ledger perhaps between countries or large organizations.
I didn't see it that way, more like advocating the development of some kind of open, permissionless payment network. Bitcoin could be it but it has ridiculous network fees, which opens the possibilities for challengers. If everything works very fluently with the traditional payment infrastructure, there is no big demand for that kind of payment network, and no incentives to develop it.
Is it possible to have something that does not use obscene amounts of electricity? Or would that be captured immediately by someone who can use more ressources = electricity?
I don't see this happening for bitcoin, though (or maybe for online orders, which don't need to be instant).
Two years ago, I got sick of banks whose services I found of lesser and lesser quality, and tried a bitcoin/VISA debit card, just to see if it was working. The idea was this: I make a bitcoin transaction to add bitcoins in card provider wallet, and when transaction is complete, I could exchange it for fiat that I could use with my card.
"when transaction is complete" is the culprint :) I needed to have fiat in the card so that payments to a cashier was instant. If you remove that step, transaction delays make it not realistic for buying stuff while outdoor, especially given current delays (but even two years ago, it wouldn't do).
So, for bitcoin to work without VISA (or alike) as third party, bitcoin will first need to find a way to make transactions instant.
The alternative, obviously, being to use it for purchases where transaction delay doesn't matter (like online purchases), or to use an other cryptocurrency for that.
For online payments instant payments are actually not that important requirements. The process needs to happen just fluently from customers perspective. If the merchant is dispatching physical items, he can just wait for the transaction to confirm and dispatch the items after that. The customer won't see much difference because the biggest issue is the shipping time.
For online payments bitcoin works quite well. Still credit cards are often better for the consumer, because of the consumer protection (chargebacks).
Indeed, didn't think about it, but fees are a problem as well. Also, if bitcoin had to manage the throughput of VISA (or even a fraction of it, at this point), capacity issues would probably worsen dramatically.
It's probably best to stop hoping it will be a currency altogether (unless some radical changes occur). Best shot would be to see it as saving/investment accounts, with smart tricks like prepaid visa cards as a mean to tap into it (I want to buy a car, I charge my prepaid card and pay with it at car dealer, fast transfer compared to a wire transfer, no "weekly withdraw limit" issue and still as convenient as a debit card).
Lightning Network exceeds the throughput of VISA. The scaling problem is being addressed -- just not in the naive "let's throw away decentralization and increase the blocksize" way.
I've heard mentions about the lightning network quite a lot in previous years, but never got what the implementation was. I get it it's "offchain transactions", but how does it relate to bitcoin, exactly? Is it "sidechains", like lisk (each third party managing its own blockchain), or is it simply "outsourcing" money and transactions and waiting for a general report from the trusted party to engrave it in the blockchain?
It seems to work by setting up channels of funds between entities. To create a channel and fund it requires a bitcoin transaction. Payments from the fund to the recipient can then proceed off-chain to a maximum of the fund amount, then another on-chain transaction settles it.
This sounds somewhat cumbersome, but AFAICT the gains apparently come from routing between channels, so if A wants to pay B, and channels exist from A->C and C->B then payments can route that way, without the need for more on-chain transactions.
To me this sounds really quite complex, and also like it's going to involve intermediary 'hubs' which will process off-chain transactions and... well it sounds like banks and centralisation again, something the BTC crowd apparently hate.
I see, thanks for the explanation. As is, it kind of seems to defeat the idea of the blockchain, dropping it to do a meaningful amount of transactions. But it's well over my head, I'll wait and see how it plays out.
> For online payments instant payments are actually not that important requirements.
When the exchange rate fluctuates as much as it does, instant payment is an important requirement.
Suppose BTC is worth $15,000 today. I want to buy a widget for $150.
I want to see 0.01 BTC deducted from my balance. The merchant wants to get paid $150.
If the transaction happens instantly, everyone is happy.
If the transaction does not happen instantly...
Let's say I transact 0.01 BTC to the payment processor. It will clear tomorrow. The merchant will get paid when it clears. Tomorrow... The payment processor has 0.01 BTC in their possession.
... Except that by then, BTC went down to $13,000. The merchant still expects to be paid $150. The payment processor has 0.01 BTC on their books, which is worth $130... and a debt of $150.
That's the problem with using BTC as a currency. You either need to pay through the nose for fast confirmation, or you expose yourself to volatility risk.
This is, incidentally, why Steam has stopped accepting Bitcoin. You can't use it as a currency. [1]
Many people who tried to buy stuff on Steam with bitcoin seem to disagree. In fact Steam recently stopped accepting bitcoin since they apparently couldn't make it work.
VISA most likely cares above all else about making money for VISA. Likewise, Steam probably doesn't care how people pay for their games : they just want to be paid. If they move away from bitcoin, it's probably because they deem it unviable / unprofitable / too much of a pain in the ass.
Not everything is a grand ideological battle, and there's no need to go looking for complicated explanations when the simple and naive interpretation makes eminent sense.
It's part of the general problem that bitcoin isn't really fungable for goods. Maybe it was back when the value was more stable or grew slowly, or the transaction fees were cheaper. But you're totally right. Currently it's barely worth the effort compared to traditional payment system in many contexts.
Or watching it collapse under its own weight: why does Visa even need to care as long as their transaction rate is 4-5 orders of magnitude better and their fees aren’t a whole multiple of most transaction amounts?
… and perhaps that'll work out but a huge business like Visa isn't going feel threatened by an untested marketing pitch. A very small percentage of people are ideologically committed to cryptocurrencies but everyone serious is going to be looking for proven yes answers to “Does it work at production-level volumes?”, “Is it cheaper than a credit/debit card?”, and “Can my customers use it?”.
For Bitcoin, the answer is no for all three but even if the first and last question were true for something else, the real question is whether #2 could be true: Visa is making a lot of money at 2-3%. If something else started making a serious play, what are the odds that they'd a) give up and go bankrupt or b) lower their fees and be slightly less profitable?
Imagine that you are a business that operates in Bitcoin and pays employees in Bitcoin. How does Lightning solve that? It doesn't. Lightning falls apart if the graph has heavily asymmetric connections, and the only solution is to have banks, which is what these crypto enthusiasts want to get rid of in the first place.
> Imagine that you are a business that operates in Bitcoin and pays employees in Bitcoin.
Then you use a single, non-Lightning transaction with an output for each employee, and the fee for that transaction is most likely less than half a percent of the total amount being transferred[1].
[1] Actually just 0.35% ($170 fee / $48k wages) assuming a fee of 520 satoshis/byte, 34 bytes per output, 140 bytes of fixed overhead, $15k/BTC, 60 employees, and an $800 after-tax biweekly paycheck per employee ($20k/year). The ratio improves for higher wages since the fee is unaffected by the amount being transferred.
You've ignored how the business got the Bitcoins to begin with. Its customers have to pay the transaction fee to send the Bitcoins to the business. The business's wallet is therefore fragmented, so the number of bytes in its transactions to pay its employees is higher than your estimate.
Or they could pay you via the bank and accept payments through their bank like every other business. Then the transaction fees are negligible. The Lightning network did not help at all in this scenario.
Oh dear. I hope that was said with tongue firmly in cheek, because anyone who truly believes that their Bitcoin Visa card being cancelled is a form of "oppression" needs a reality check.