It's not a bad idea for Square to add it, since some people have bitcoins obtained through speculation, mining, cheap money transfers, and so forth. But even so, they would be a little better served paying by card, due to the extra consumer protections they'd enjoy.
Where bitcoin makes more sense to me is in replacing cash. But that mostly makes sense to me in the real world where you can inspect goods and whatnot in advance of cash payments. (There's maybe some potential for it online in the form of micropayments, where trust and protections don't matter so much.)
But for online sellers that already accept cards, I have yet to hear why bitcoin reflects a better choice than cards for the consumer. Anonymity maybe? For the average consumer, not worth the tradeoff in lack of ripoff protection.
Sellers would be better off, sure, but don't forget it's a two-sided market and consumers are heavily incentivized to use cards. Most of those "high fees" are funneled back to the consumer's pocket in the form of benefits and rewards. It's a form of lock-in to the CC system.
There are other vendors that I do trust and do repeat business with. For these vendors, I detest paying what is effectively a protection surcharge, when I don't need it. This is particularly the case for high value purchases where there is some percentage difference, rather than a small fixed amount. I appreciate the reason the payment purchaser must charge a fee; I just don't want the (protection) service provided.
In this case, I accept that I would take some additional risk, but I feel well enough protected by my country's legal system, when I am confident in the vendor's identity and that the sale would fall under my country's jurisdiction. This is not dissimilar to paying for something expensive by bank transfer to save on costs. This arrangement isn't quite that unusual in the UK, where UK-to-UK bank transfers for consumers are generally free. But this arrangement carries extra admin for the vendor in trying to match up transactions.
So a credit card is useful for some purchases (in particular, international ones, ones where I am not confident about the vendor's identity, or ones where I am not confident in the vendor's reputation). But for other transactions, I prefer to have the option of going direct. Bitcoin would be perfect for that, if it were more widely accepted.
But the risk involved varies depending on the situation. In cases where I consider the risk low enough, I would appreciate having the option of not paying the protection premium, and going without.
I think security would be an obvious answer.
Credit cards are like symmetric cryptography: there's only one secret (a number), which you must share with everyone you ever want to send or receive money from. Any malicious actor who gets that number can then use it to extract money from your card. Sure, it's probably FDIC insured, but they still make out with some of your money.
With Bitcoin, you only ever share your public key. It operates entirely on public key crypto. You can safely share your Bitcoin account public key with anyone and everyone to send and receive funds. Plus, anyone can verify any time you send or receive a payment very quickly. That way you can't lie and say you paid when you didn't (no checks in the mail). You also can't do chargebacks or otherwise recall your funds, like you can easily do to scam with credit cards or Paypal.
All cards offer protection against theft and fraud including a means of disputing and getting refunds (chargebacks). Definitely not the case for bitcoin wallets.
Here's why. Cards may have weaker authentication but they have an intermediary party involved in governing the transaction. Bitcoin has no intermediary party, which places a heavier burden on authentication, and no recourse in case anything goes wrong.
So, the only way for bitcoin to increase protection against fraud is to ratchet up the level of security around authentication. Two factor, cold storage, all that. All things that are significant inconveniences for consumers. You can point to them and say "it's safer than card numbers" but that's missing the other tier of protection. Overall it's less safe, because if fraud does happen there's no recourse, and the more you inconvenience the consumer the less likely they are to secure things properly not to mention use the thing in the first place.
For everyday commerce, the two-tier level of protection that cards offer is much more amenable: a "decent" level of security at the time of the transaction that's still very convenient for the consumer, and the safety net of chargebacks.
By the way, you mentioned the lack of chargebacks as a security benefit.. but you're confusing merchant benefits (they don't like chargebacks) and consumer benefits (definitely benefit from the ability to dispute fraudulent charges and defective goods).
Actually, you lose none of your money. The credit card company completely refunds you. Someone once stole my card and got some gas with it, and the next day I got the transaction refunded and a new card issued within 10 minutes.
Bitcoin is far less secure than a credit card. The best way to lose thousands of dollars is to invest it into bitcoin and then trust any webservice to hold onto your coins for you. It's what happened to me. If I had experienced credit card fraud instead of bitcoin fraud, I'd still have my money. Now I don't.
What you're describing is security for a merchant. Preventing chargebacks sounds great... for merchants. But security for consumers is obviously more important, because consumer adoption is the single most important factor.
It is not in the credit card companies best interest to even acknowledge this type of theft, because they have no way except machine learning to protect you from it.
On the other hand, it IS useful for them to acknowledge huge security breaches at corporations, because they can point to them and say: and look at how we protected you! (after their dumb security system endangered you in the first place)
Closely. In fact, I get an email every time a transaction is made. Any fraud would be detected immediately: an email would arrive saying I've been charged, and I'd call up the credit card company and get it refunded in 10 minutes. So it seems to me that siphoning of funds from my credit card can't happen.
I needed protection from bitcoin fraud, not credit card fraud. The best thing for the bitcoin ecosystem would be to learn from credit card companies rather than villify them.
Also, people go to prison for many years for credit card fraud, whereas the legal system is still adjusting to bitcoin. I haven't heard of any bitcoin-related prosecutions yet. So bitcoin fraud is far less risky.
And this is all done with a system that is very convenient for consumers to use correctly for everyday use, without significant risk of a total loss due to getting hacked or having their password or other security factors compromised.
No, that's only the direct loss for credit card issuers.
It's not surprising that the companies that control the system limit their own losses as much as they can, by passing on the costs to others. The losses to merchants, etc are far greater.
In fact that figure understates even the card issuers' total losses, because it doesn't include billions of dollars in "fraud solutions expense, IT, staffing, outsourcing, and outside data/investigation expenses"
The report from which 0.07% was taken indicates immediate losses that are about 15x higher. In other words, around 1%
The report makes it extremely clear that the 0.07% figure is a severe underestimate of the real costs. In fact, that is really the main topic of the report. It's unfortunate that all that research has been ignored and the almost meaningless number has been cherry picked for Wikipedia.
Link to the report (PDF) which is the source of the 0.07% figure: http://web.archive.org/web/20091229101826/http://www.sas.com...
Given that a restaurant would face serious problems if they did this, it seems both low risk and not too hard to monitor.
Correction here: There IS a credit card cost, but it is billed to the merchant and passed along to the consumer by being built into product prices. The fact that you think it is "none" when it is merely "hidden" speaks volumes.
In any case, even if there is an increase, unless merchants offer differentiated pricing by payment type (they generally favor simplicity) then what I'm saying holds: there is no additional cost to using cards.
Oh and of course they'd have to offer a discount to Bitcoin purchasers since they're covering the additional CC fee cost anyways if it's the same price.
The Blockchain is definitely NOT anonymous. There was a misconception in the early days that Bitcoin was a anonymous given there is no certificate authority that ties you to particular addresses.
However, this may or may not hold as various entities pop up (e.g. Coinbase, Bitstamp) who may be subpoena'd
Mixing also doesn't work because you can apply taint analysis. Further, do you really want to mix your address with other dirty addresses? Who knows what they've been up to!
You'd be much better off using something like the blockchain.info wallet while traveling. As long as you have web access, you have access to your wallet.
As for the inconvenience of getting a false positive fraud flag.. that's extremely rare, usually resolvable with a phone call, and probably an overall vastly more convenient way of protecting you than more inconvenient up-front authentication steps for each transaction.
Or maybe create a new wallet and have your wife send you the coins instantly. Lots of possibilities.
And as rare as you claim false positives to be, it happened to me on my last trip. Happens to me every time I buy something on a foreign website.
This is better for the consumer because they have an increased variety of entertainment options that they can have the satisfaction of supporting, and it's better for the person receiving the bitcoin because of lower fees.
And in a way the customers too since the seller has to factor in the card fees when selling a product however they may be able to give you a better price if you pay with bitcoin.
Your assumption that any fees the seller pays do not affect the price of the product are flawed.
It's simple business you need to pay more fees you need to sell your product at a higher price to make a profit.
How does that work in a practical sense? "Thank you for ordering, please take a seat a and we'll give you your purchases as soon as your transaction is confirmed."
After a majority of the nodes have seen a transaction it becomes relatively safe to accept it as valid before 6 confirmations. You wouldn't want to do that for high value transactions, but I think it's fine up to a couple BTC (read: $1000 or less).
The Mycelium wallet implements transaction confidence:
http://www.reddit.com/r/Bitcoin/comments/1xqh51/new_mycelium... and http://www.cryptocoinsnews.com/2014/02/13/the-mathematically...
Mycelium's "transaction confidence" feature is well intentioned but it is a disaster waiting to happen.
It also looks like most 'Square Market' purchases take more than an hour to deliver/ship... so the payment validity will be known before a hypothetical fraudster benefits.
What would this even look like? is anyone doing 'specialized mining' like this, where particular hashing nodes are being used for preferential transactions?
How do you know they're not getting 6 confirmations? They could just give you a confirmation screen, wait for 6 confirmations, then cancel the order in the rare event that it fails.
In a zero confirmation scenario you could send the transaction to all the big mining pools and wait till they see and validate it which could take just a few seconds. This way it becomes incredibly hard, even with zero confirmations, for an attacker to get her double-spend mined because the big pools saw your tnx first.
For large sums of money of course it's safer to wait for many confirmations, but for $30-40, the risk is relative.
Edit: yep, see https://www.squaremarket.com/about, this is not the US payment company most people on HN would call 'square' but an auction site started by Oxford grads.
I think people don't realize I'm responding to the parent, which stated:
> How is Square/Stripe getting around the issue that most exchanges wait for 6 confirmations before a transaction is accepted?
Square isn't doing anything with Bitcoin. SquareUp is.
Square's website is squareup.com, and their Square Market product is now accepting Bitcoin. See squareup.com/sell-online for reference.
https://www.squaremarket.com/about <- Ghetto-ass Bootstrap site made by Oxford grads, using weird concept of 'squares' that you buy to win the auction. No mention of any relation to 'square' of 'square device iPhone POS' fame.
https://squareup.com/market <- What most people would call 'Square'.
Looks like you're right, I have no idea where 'https://www.squaremarket.com/about' came from. It looks like they have a product with the same name and something got confused somewhere.
(We're hoping to get out of beta in the near-ish timeframe.)
The most important one is that merchants generally want USD, not BTC. Instant Exchange is a really important feature of Coinbase, and so even if we did support bare addresses, they would still be generated through Coinbase anyway, because giving our merchants USD is killer. Since Balanced isn't interested in getting in the business of holding and selling BTC, we'd need to do that through some sort of service, and Coinbase is the biggest and best one.
Secondly, the UX for Coinbase-only payment is vastly superior to using bare addresses. People are generally familiar with "sign in via Facebook," and Coinbase's OAuth works the same way. Using a Bitcoin wallet to buy something on a site is very strange until you've done it a few times. Enthusiasts will know what's going on, just like any early adopter will. But for most cases, Coinbase only is waaaay better.
Coinbase <-> Coinbase transactions have another special property: they can be off-blockchain. I don't remember offhand if they are for all purchases, but they are for microtransactions, at least. Coinbase can (could?) not wait for the ten minutes to confirm a transaction, since they'd just be updating balances within Coinbase itself. They could build options in that consumers have come to expect, like chargebacks, holds, and other things, that the protocol would not inherently have to support.
Next, we feel that Bitcoin is best thought of as cash. Like, physical, printed notes. Websites don't actually accept USD, for example: they accept Visa, which is a financial instrument that happens to be denominated in USD. You can't mail a twenty dollar bill to most SaaS products: that'd be really silly, for a number of reasons. Using bitcoin-qt is like paying with cash, and paying with cash works great in some ways, but is a pain in others. Chargebacks, for example, are an incredibly important part of the advantage consumers see in using credit cards, and nothing like that exists with 'raw' Bitcoin in any significant capacity.
I guess that could all be summed up with "Most people don't actually use cash, because it's pretty inconvenient. They use a financial instrument on top of cash, because it offers a bunch of advantages for online purchases. A successful Bitcoin will be no different."
1. "Merchants generally want USD, not BTC". Coinbase supports BTC -> USD. It's an exchange. You don't need to use their OAuth to convert BTC to USD.
2. "The UX is vastly superior to using a bare address". If you're using Bitcoin, you better know how to use an address. Not sure how that would be confusing to anyone using Bitcoin. Most sites use bare address + QR code.
3. "You can't mail a twenty dollar bill to most SaaS products". This is what Bitcoin solves! People are using Bitcoin to get away from the credit card paradigm. This is a broken implementation of "accepting BTC". You don't accept BTC, you accept Coinbase.
2. Yes, as I said, if you know what's going on, it won't be weird to you. That said, cart abandonment is a big problem, as is keeping checkout pages as simple as possible.
3. Again, this is where we'll have to disagree. You say "people are using Bitcoin to get away from the credit card paradigm", but I say "people are not using Bitcoin because it's too far away from the credit card paradigm." If the Bitcoin community wants to grow outside of the fringe libertarian set, they'll need to understand people's needs more and their dreams less. I myself stayed away from BTC for years simply because of the rhetoric. People that aren't inherently interested in cryptocurrencies aren't going to use them unless they solve a problem they actually have.
But that's... why people want to pay for things with Bitcoins in the first place. They want to give you cash, digitally. If they didn't want the properties of cash, they'd just cash out their bitcoins into a regular bank account, and then use a regular credit card backed by that bank account to pay. That is far, far easier, and far more well-supported by current infrastructure. The fact that they're willing to suffer the vagaries of the Bitcoin system is precisely because they have a problem with using a "financial instrument built on top of cash."
Unless you accept Bitcoins with cash-like transaction semantics, you aren't going to get any transactions going through your system that weren't already going through it. Some people will choose to re-denominate transactions they could well have made in USD in BTC, but nobody's going to choose to pay with BTC where they previously wouldn't have paid at all. People who don't spend money unless it's in BTC are doing that because of BTC's cash-like transaction semantics, not because their wealth is somehow immutably denominated in BTC.
Some don't. I personally happen to have some Bitcoin because people wanted to buy some things from me in Bitcoin, and spending it again directly as Bitcoin is waaay easier than trying to figure out how to convert it to USD for the sake of spending it again.
This has to be a joke. Are you going to ignore the part where I you can't send USD over the wire? Websites would definitely accept USD, if they could.
* Bitcoin builds infrastructure.
* People notice bitcoin isn't going away
* Media says Bitcoin will make everyone Gazillionairres
* Bitcoin skyrockets until infrastructure comes under strain.
* Something involved with bitcoin breaks
* Media(not neccisarrily the same media) says Bitcoin is all over, and everybody will lose their bitoin, their home, and their dog.
* Price drops.
We seem be going into the build infrastructure phase. That's where genuine value actually gets added, and doesn't actually stop at the other times, It's just when the craziness is going on it's hard to see from the noise.
Having said that, I'd be inclined to put regulation and compliance milestones under the heading of infrastructure.
If you mention Bitcoin now, People also don't assume you're a crazy Libertarian buying drugs off the internet (your parent's might still). In a funny sort of way that's infrastructure growth too.
Source? Unless you consider the failure of Mt. Gox an "infrastructure" problem, then this is not the case.
Other Exchanges had problems, I remember the "you can have bitcoin next friday, when we've got some ourselves" episode (bitinstant perhaps?).
Even the most prepared business are going to have trouble when everyone decides to come knocking on your door in in the space of a fortnight. You can prepare for rapid scaling, but you can't hire and train people overnight.
This doesn't affect consumer adoption though, which is what investors/traders would be looking at.
Also, if the number of bitcoin transactions through such methods goes up, BTC/USD is more likely to go down. Any bitcoin sent to a Square merchant will be picked up by Coinbase and sold at the bid price on the bitcoin markets, which will pressure price action down. (Coinbase then takes the USD from that sell and transfers them to Square).
Other factor: the price of BTC is still REALLY high (not that it couldn't 1000x) and assumes there's tremendous (billions of dollars) value in BTC long term. Square processes billions of dollars a year in value, but not on Market and it's not many billions and not much of that will go to BTC.
It's a smart marketing stunt (Square Market has been struggling to compete with more established marketplaces, so this could drive traffic to their service) but in no way points to the evolution of the bitcoin ecosystem. That will have to be measured on the consumer side of the market.
Even if it where tracked people buying things with bitcoin can just as easily drive the prices up as down. As with all transactions you must take into account the value of both sides of the transaction.
Whether that winds up being 1 or 1000 bitcoins is totally irrelevant. There's no intrinsic value
Volatility makes bitcoin a poor store of value: you should not leave assets in bitcoin that you cannot afford to lose, because those assets may vary in actual value (meaning, might vary in what someone else is willing to pay for it) substantially over time: $10,000 of bitcoin today might be $5,000 tomorrow.
Volatility makes bitcoin a poor medium of exchange: if I wish to sell something with bitcoin, I take on large risk that the value of my transaction might change. The t-shirt I sold for $10 today might yield me only $2 tomorrow.
So, it is accurate to say that there is no intrinsic value to a bitcoin--but this statement is meaningless. $10 is also not an intrinsic value--currency is only relevant as a unit of account or a medium of exchange. Things only have value relative to each other. We use currency to assign a numeric value to each object.
Kind of the equivalent of NYT becoming a major website for news, rather than something organic to the Internet becoming the main news site of record.
A great position right now would probably be "products and services to help service providers integrate bitcoin into their core products". Simple merchant integration is one thing, but more in-depth integrations would be interesting.
Any clues on when this will get pushed out to mobile clients? Because that will be absolutely huge.
Initial indications seem to suggest this far the announcement has done little to raise the price of Bitcoin. Time will tell and I personally think this is a great step in the right direction, eventually even Paypal will allow you to accept Bitcoin, it is only a matter of time.
Additionally, you need to look at this from the perspective of a merchant. The average merchant has expenses denominated in US dollars and accepts payment in US dollars. There is no FX risk. Bitcoin changes that. Do you honestly believe that the average merchant is equipped to manage FX risk, or has any appetite for FX exposure in the first place?
Please note that volatility is a red herring. Volatility has no bearing on the costs associated with tracking capital gains and losses (you need to accurately track your transactions regardless), and while the level of volatility will certainly impact how you manage FX risk, low volatility doesn't mean that there is no risk to address.
I don't think the tax issues will be prohibitively complicated for consumers. Whichever exchange someone uses to buy Bitcoin and whatever app they use the spend it can easily generate the necessary paperwork. The companies have hundreds of millions of dollars on the line that require Bitcoin to be easy to use. They're going to do it.
Allowing your payment provider to handle currency conversion for you does not mean that you have eliminated FX risk. You have simply outsourced it, and you (and in many cases your buyer) almost always pay for this.
> I don't think the tax issues will be prohibitively complicated for consumers. Whichever exchange someone uses to buy Bitcoin and whatever app they use the spend it can easily generate the necessary paperwork.
I suspect you've never had to file a tax return with a significant number of transactions involving capital gains and losses. There are often associated matters, such as carryovers, that the average person will need the services of a tax professional to address.
As for the notion that somebody is going to do the paperwork for you: the nature of Bitcoin makes the generation of the paperwork you refer to incredibly difficult.
Currently, when dealing with securities like stock, brokers must provide you with a 1099-B which reports information about the transaction, including the cost basis and sale proceeds. If you transfer securities between brokers, the broker transferring your securities is required to report the cost basis data to the receiving broker.
To the best of my knowledge, Bitcoin is not a covered security for which institutions must provide a 1099-B, so no third party is obligated to provide you with accurate records. More importantly, it may be impossible for third parties to do this for you. For instance, consider this hypothetical yet almost certainly common transaction scenario:
1. I buy 1 BTC using Provider A.
2. I transfer .5 BTC from my account at Provider A to a local wallet housed on my computer.
3. I later transfer that .5 BTC to Provider B.
4. Using Provider B, I send the .5 BTC to a merchant.
In Step 2, Provider A will be faced with the challenge of determining whether my transfer of .5 BTC represented a sale for tax purposes. It should not, as I was transferring the BTC to myself. But how does Provider A know who I transferred the BTC to?
In Step 3, Provider B has no way of obtaining my cost basis and in Step 4, it is faced with the challenge of determining whether or not the transfer of .5 BTC represented a sale for tax purposes. How does it know that I wasn't transferring the .5 BTC to myself?
Now imagine this across n wallets, including desktop wallets, and with lots of fractions of BTC. You're going to be investing a lot of USD in bookkeeping/accounting.
Bottom line: I can't for the life of me imagine why anybody who actually understands the implications of this would ever use Bitcoin as a currency going forward. As far as I'm concerned, it makes absolutely no sense except as a vehicle for investment or speculation.
A currency's utility is directly linked at how many people use it as a unit of account, and it's really hard to become people's real unit of account when your value changes a lot, and is unpredictable. Just look at Argentina during the crisis: Even when taxes in the country were paid in pesos, people really used the US dollar as their unit of account.
My first post here is a rant... dang it.
For Square, it's just an extra payment method that they're hoping will help their merchants (and them) tap into the very small percentage of evangelistic early adopters who have made large gains and are now willing to spend some of their coins.
Square is most probably not a supporter of the vision of bitcoin taking over e-commerce payments. Most of their business stems from partnerships with large credit card companies. This is a pure (and smart) marketing play.
That's why CC fees exist, and that's why people providing bitcoin-related services should be able to charge fees too.
EDIT: I guess if its just the square market, which is just a website (I think).