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Square Market Accepts Bitcoin (squareup.com)
319 points by peter123 on March 31, 2014 | hide | past | favorite | 129 comments

This is a strange case for bitcoin, competing with credit cards. Most consumers would be better off paying with a card: same cost (none), more protections (the ability to dispute bad merchants over defective goods).

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 vendors I don't necessarily trust, and have never dealt with before. For these vendors, credit cards (with their protection, and the consequent premium) are perfect.

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.

I would almost always put expensive purchases (holidays, events, furniture, etc.) on credit card because if the vendor gets into financial trouble, etc. you basically have no protection under standard sales legislation (you have to get into line with all the other creditors) but you have significant protection if you purchase with a credit card.

That's fine - there are specific purchases I would always want to pay the protection premium for, including for some of your examples.

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.

There is absolutely no reason for a restaurant to pay 2.9% of their revenue for payment processing. Their total profit margin is probably around that much, so reducing the processing fee to 1% could potentially result in a very significant increase in profits for them. There is no necessity for insurance on a transaction like a restaurant bill.

> I have yet to hear why bitcoin reflects a better choice than cards for the consumer.

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.

No way is that an obvious answer. The average consumer is massively more at risk of fraud & theft from their hosted bitcoin wallet than via their charge account.

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).

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.

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.

When I say "they make out with some fo your money" I meant the bank's money.

Considering that every restaurant, store or bar you've ever used your card at potentially stashed away your secret, how closely have you been monitoring your card for siphoning of funds?

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)

how closely have you been monitoring your card for siphoning of funds?

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.

"Machine learning" and other techniques have actually been pretty effective at reducing card fraud in recent years -- an overall loss of just 0.07%.

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.

Source: http://en.wikipedia.org/wiki/Credit_card_fraud

>an overall loss of just 0.07%.

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...

There's only 30 or so charges on my CC bill for the whole month. It's an online PDF I have to access in order to see how much I owe, so skimming it is both easy and convenient.

Given that a restaurant would face serious problems if they did this, it seems both low risk and not too hard to monitor.

> Most consumers would be better off paying with a card: same cost (none)

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.

Most people understand that, and also understand that it's irrelevant so long as there is no discount for using a different payment method. If you're going to pay for the protection of credit whether you use it or not, you might as well use it.

Interesting fact: Australia regulated away credit card fees a few years ago. There was no corresponding decrease in consumer prices.

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.

In that case, a merchant would have to offer a discount in order to make Bitcoin worth pursuing.

Don't the credit card companies require that you charge the same price for cash or credit?

Neither cash discounts nor credit surcharges are prohibited now thanks to new legislation and a court settlement in the past few years.

I believe it's ok to offer a discount for cash as long as you don't have to pay more than the posted price when you use credit.

Some gas stations allow you to pay for Diesel with cash at a discount. As a side note, Flash Foods has a card you can get that uses ACH with your debit account (I'm probably not saying that right). You get a flat $0.05 off of gas. They claim it's because of credit card charges (and because ACH doesn't cost them anything).

Keep in mind credit cards offer 1-2% rewards. So in the end it's probably a 1% effective increase. Bitcoin exchange fees are usually about 1%. And that matters unless the merchant is not ever converting his Bitcoin into other currencies, since he would pass on that cost of business to the customer as well.

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.

"Anonymity maybe?"

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!

What taint analysis are you referring to? From my understanding, once a part of a Bitcoin has been tumbled, there's no way to verify which "part" that Bitcoin has in further transactions from that wallet.

There are many cases where credit cards don't work so well. Traveling abroad for instance. Every had your card denied because of a false positive for fraud? Ever lost your card on a trip? They won't send it to you where you're at. They'll only send it to your home address.

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.

If you can lose your card you can lose your phone too. You're proposing accessing your blockchain.info wallet via someone else's web browser? Sounds like a great way to get your entire wallet stolen.

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.

Yeah don't access your blockchain.info wallet on a shared computer at an internet cafe, if you can find one of those anywhere still, sure. But maybe try your laptop, unless you lost that at the same time you lost your phone. Maybe try your friend's laptop? And then change your password after you buy a new phone? It's workable. Obviously have a few different wallets, some with more money, some with less, so you can use different ones depending on the risk of the situation.

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.

I am really excited for the application of bitcoin to micro transaction and tipping/donation services. Typically with Paypal you pay a 2.9% + $.30 fee for every transaction. With donations and other transactions in the $2 range that equates to a $.35 or 17% overhead. With bitcoin you can pay 1%, or even a flat monthly fee if you do a large volume. The cost savings enable a variety of occupations that would otherwise be uneconomical.

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.

Customer yes however sellers have quite an incentive to ask for bitcoin if they can since their the one paying the high fees to the credit card companies and there's no risk of fraudulent charge back which most businesses just have to accept and factor into the price of the product.

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.

>Where bitcoin makes more sense to me is in replacing cash.

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."

For small transactions, it is safe to give the purchases after 0 confirmations. In order to pull off a double spend with 0 confirmations, you need to ensure that the store (or whoever processes payments for them) receives the "wrong" spend first, which requires a large enough fraction of the hash power of the network that just mining the usual way is more profitable.

How is Square/Stripe getting around the issue that most exchanges wait for 6 confirmations before a transaction is accepted? Are they ignoring the risk of a double spend and just going ahead once a transaction has propagated to the network for mining?

> Are they ignoring the risk of a double spend and just going ahead once a transaction has propagated to the network for mining?

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...

You can't determine what the majority of the nodes thinks in this way because of Sybil attacks. Otherwise we wouldn't need proof of work as a consensus mechanism.

Mycelium's "transaction confidence" feature is well intentioned but it is a disaster waiting to happen.

I agree with you, but I don't think it would be worth the effort to conduct this attack for such low value transactions. I'm certainly not an expert here, and clearly the blockchain is the only source of truth in the end.

Agreed, this is a very fragile heuristic. The blockchain exists for a reason folks.

Probably. Unless you're working in concert with major mining power, it's still hard to engineer a successful double-spend. And by pushing their preferred observed transaction to major pools, Square could help ensure a double-spend can't succeed, or get a near-instant indication that a competing transaction exists. (I don't know if they're doing this.)

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.

Makes me wonder - would we ever get to a point where it's in Square/Stripe/Coinbase/et. al's interests to contribute mining power to help their own transactions along? Or is that pretty much taken care of by transaction fees?

I suspect they'd just strike deals with existing mining specialists, if and when necessary, perhaps even via out-of-band (non-Bitcoin-transaction) exchanges of considerations.

There could be a problem with fees from a merchant's perspective because they are chosen by the sender and it's possible that someone could (accidentally or intentionally) pay with a transaction that never confirms. Merchant providers like BitPay/Coinbase/Stripe/Square might benefit from a way to pay fees on behalf of a transaction to ensure it gets confirmed.

>And by pushing their preferred observed transaction to major pools, Square could help ensure a double-spend can't succeed, or get a near-instant indication that a competing transaction exists.

What would this even look like? is anyone doing 'specialized mining' like this, where particular hashing nodes are being used for preferential transactions?

Zero-confirmation transactions are fine for everything but rivalrous digital goods; it takes longer than 60m to ship something in any case, so if there's a double spend you just notify the merchant and they can cancel the order.

> How is Square/Stripe getting around the issue that most exchanges wait for 6 confirmations before a transaction is accepted?

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.

They seem to imply this in the blog post: "We will continually monitor this address throughout the checkout process so we know when it has received payment."

Great question! Although even 1 confirmation is relatively secure and 3 is quite acceptable, still that's 10-30 min.

Consider that even with zero confirmations, with enough clients validating and relying the transaction, it's pretty hard for an attacker to propagate a double-spend for that transaction. This is where the big mining pools are actually a good thing.

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.

They probably absorb the risk of double-spend, which is way harder than stolen credit cards and chargebacks.

Is this Square? Square up has a different logo and looks a little more like generic bootstrap. I'm not sure if they're related or just an auction site with a similar name.

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.

No, it is Square Up. See https://squareup.com/market

I know, I just pointed that out.

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.

There is no company called SquareUp.

Square's website is squareup.com, and their Square Market product is now accepting Bitcoin. See squareup.com/sell-online for reference.

OK think I've sorted it:

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.

A not-insignificant group of existing payment processors / ecommerce platforms are now supporting Bitcoin. Shopify, Balanced (sort of), Stripe, and now Square. Am I missing any?

Hey, Steve from Balanced here. Curious as to why you say 'sort of' for us: if it's that we're in beta, so is Stripe.

(We're hoping to get out of beta in the near-ish timeframe.)

Last I saw, you accepted Bitcoins only from Coinbase accounts. Until I can directly pay with Bitcoins from my own wallet I consider that "sort of".

Ahh gotcha. Yes, we believe that's a pretty important distinction. Fair enough!

What's the reason for this? Is it part of Coinbase's payment integration? I don't recall any other websites doing this (although there's the possibility that I simply haven't used other sites that also do this)

There are a couple of reasons, actually. This will be a short version of something I'm still in the process of writing, so consider this very high level, broad strokes. Consider "Coinbase" a stand-in for any service like it. I also know that lots of Bitcoin enthusiasts won't agree with me, and that's fine.

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."

Sorry Steve, I have a lot of respect for everything you're doing at Balanced, but wow.. everything about this is wrong.

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.

1. Yes, I understand Instant Exchange is separate. This is about how we wouldn't roll our own solution, _someone_ would be powering our Bitcoin integration.

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.

Regarding raw addresses, I would encourage you to look into the payment protocol (BIP70). Once that is widespread (it is already implemented in some wallets), the average BTC user will never have to worry about raw addresses, without the downside of having to route everything through coinbase. As a plus, the UX is IMO, better than that of typing in a CC number.

> 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.

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.

Currently, some number of people who use Bitcoin do, yes. There are also some people who only use open source software because they want full control, and there are some people who have piles of cash and gold underneath their mattresses.

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.

I would guess that you're in the category of "people who would have made a transaction in USD anyway, but will do it in BTC because they happen to have some and want to get rid of it." Adding "accept BTC" as a feature doesn't win you as a customer; you were already willing. If the point of accepting BTC is to make money for Square Market by increasing its user-base, your vote doesn't count.

Very interesting analysis. I'm in the process myself of spinning up a saas with multiple forms of payment. However, my UX basis for bitcoin would be something like gyft which uses bitpay. These transactions are instantaneous and directly from the users wallet (any wallet). That seems to me to be the standard of service at this point. I'm missing the advantage then of using coinbase. I only see it limiting potential audience which seems rather counter to the idea of accepting bitcoin in the first place.

"Websites don't actually accept USD, for example: they accept Visa"

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.

Wat? How can they consider that to mean "accepting Bitcoin"?

Does anyone have an opinion on why the price of Bitcoin doesn't seem to move on news like this? It seems significant in my opinion and I would think that wider acceptance would lead to a higher price, but that hasn't been the case over the past few weeks / announcements.

It seems to be following a repeating pattern.

* 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.

* Bitcoin builds infrastructure.

* People notice bitcoin isn't going away

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.

You miss many elements with this summary, not the least of which is Bitcoin reaching a point of maturity with regards to regulation and compliance. To a large extent, that's happening next week in DC.

Yeah, It wasn't meant to be a detailed analysis.

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.

That's true and a good point: mass market familiarity is certainly an asset. I'm not sure I'd call it infrastructure though, more like an environmental factor. Infrastructure, to me, means internal.

> * Bitcoin skyrockets until infrastructure comes under strain.

Source? Unless you consider the failure of Mt. Gox an "infrastructure" problem, then this is not the case.

It's hard to see how that wasn't an "infrastructure" problem. Mt Gox was the largest BTC exchange - an integral bridge from old world to BTC world.

Not the failure of MtGox, but their day to day operations were significantly impacted during the peak hype.

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.

It's easy for merchants to accept bitcoin, because they always propose it alongside a CC payment alternative. And they never risk anything, because they only ever touch USD. So it's all gain for them. (This is more a marketing stunt to drive traffic to Square Market, more than anything else. Square Market has been having trouble competing with more common marketplaces such as Shopify and Amazon).

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).

It's not actually big news, is what I would say. Square is prominent to us because we know how it's growing, but it doesn't represent some insane amount of volume and this is only Square Market. It doesn't really change anything to say "a high profile tech company wants PR related to Bitcoin and to simultaneously test out what accepting it could do to their business". Every tech company is considering this - somebody probably brings up such a move to me every single day - and many are doing it. This is AWESOME and I'm excited to see Stripe and Square getting involved in BTC in less than a week (way more excited about Stripe btw) but for the larger value of BTC, it's NBD.

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.

Agree with this. Merchants take on absolutely no risk by proposing bitcoin as a payment option because a) they never touch btc b) they still offer the CC alternative. There is no deterioration in customer experience. It's just an additional option that allows Square in this case to tap into a market of evangelistic early adopters who are ready to spend part of their coins.

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.

the real answer is it is being overshadowed by the fact that one of the exchanges stopped allowing CNY withdrawals. I don't think any of the other answerers actually follow bitcoin.

Deposits have been restricted at this time, not withdrawals.

Well, personally, I'm still paid in dollars. And dollars can already be used in all of these places.

Recently a large number of bitcoins were stolen from a major exchange. The hackers will be liquidating these over a long period of time, exerting downward pressure on the price.

If anything the price should go down. When people buy things with bitcoins they are effectively selling bitcoins transitively driving the price down. If you want the price go up there have to be incentives to buy stuff with bitcoins such as lower prices. For many people it is cheaper to use bitcoins because they bought-in early, but that would be equivalent of cashing out their position and exposing their identity to the merchant, which most of the early adopters either don't want to do or would have done already when it was more favorable.

Well, unlike most currencies or commodities bitcoin can be traded at volume for currencies outside of a monitored environment. This means using bitcoins in a trisection does not effect the trading price, and people could trade in 'dark pools' or face to face for amounts significantly above or below the current 'market value' while having no effect on the market price at all.

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.

Wider acceptance takes time to affect the price, it's more of a long term rather than short term price driver. If anything, in the near term something like this puts selling pressure on BTC because the first people to give this a try are going to be people who already own Bitcoin and Square's merchants probably aren't holding any BTC sales proceeds.

It doesn't make it any easier to acquire bitcoins in the first place. When you already have a debit/credit card there is no reason to use bitcoins to shop with square.

A $10 t-shirt will still cost $10 worth of bitcoins.

Whether that winds up being 1 or 1000 bitcoins is totally irrelevant. There's no intrinsic value

Your statement is useless, which is why it has been downvoted. It misses the essence of what currency is.

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.

Sort of starting to feel like all the crappy Bitcoin-specific businesses are about to get replaced by their "normal" equivalents who will just suddenly start taking Bitcoin. Much less disruption than new privacy/security/anonymity focused companies who were early Bitcoin adopters replacing old institutions, but much more likely to actually work.

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.

I don't really think this is a problem, though. The point of bitcoin is not to distrupt businesses, it is to disrupt traditional currencies. That traditional businesses are accepting it is a sign of good, not bad.

I agree that it's a sign of maturity and success for Bitcoin itself; it's just not a great sign for people who invested in Bitcoin-specific businesses.

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.

Looks like this is only for square market stuff right now.

Any clues on when this will get pushed out to mobile clients? Because that will be absolutely huge.


It'll be interesting to see if this announcement actually helps increase the price of Bitcoin which has taken a few hits over the last few months due to countless exchanges being hacked and collapsing (one of those being Mt Gox), to the IRS's announcement proclaiming Bitcoin is property not currency and other bumps in the road.

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.

When Bitcoin's are converted to a fiat currency that's now a taxable event correct? That's when the gain or loss is "realized" So if you pay in Bitcoin and the platform/processor immediately converts it into $US to pay the merchant does that create a taxable event for the seller? I suspect people would like to pay in Bitcoin to a merchant who accepts and keeps it in Bitcoin so that a gain is not realized and no taxable event occurs. But really am curious/scratching head/not sure.

What the merchant does with the bitcoin doesn't effect wether the transaction is taxable to you. Check with you accountant, but I'm thinking you'll have to account for and pay a tax on any gains in your bitcoin's value at the time you spend it. Assuming I'm correct, it is a taxable event anyway.

I believe the taxable event is exchanging Bitcoin for something that isn't Bitcoin. Even if the merchant holds on to the Bitcoin, a gain has been realized.

Got it. So that makes sense. If I pay someone in 100 shares of Google vs $US for a service I no longer own the shares but have transferred them to someone else and would be on the hook for the gain or the loss.

This is perhaps the most useful way of looking at Bitcoin today. Now that the tax treatment of Bitcoin has been established, using Bitcoin as currency makes about as much sense as using stock as currency. In other words, it doesn't.

Can I transfer stock to you with three taps on my phone? Bitcoin makes far more sense than stock as currency, especially if higher sustained demand reduces fluctuations in value, which isn't typical for stocks.

Based on your comment, I would guess that you have never had to file a long Schedule D. Accurately tracking your short and long term capital gains and losses is not always as straightforward as it might seem, especially when you have lots of transactions. Additionally, there are often associated matters (such as carryovers) that you wouldn't want to address without the assistance of a qualified professional. Unless you're an investor/trader who is familiar with these issues and has enough money at play to make it worth your while, the hassle, costs and liability that could arise should you make a mistake are going to quickly eliminate the utility of using Bitcoin over USD.

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.

Merchants don't need to expose themselves to FX risk to accept Bitcoin. Square does that for you, as do Coinbase, Bitpay, and similar companies.

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.

> Merchants don't need to expose themselves to FX risk to accept Bitcoin. Square does that for you, as do Coinbase, Bitpay, and similar companies.

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.

Having to treat it as a stock or a commodity makes it a bad currency, but it was already a bad currency due to volatility. Using a currency that has major deflation is just as silly as using one that has major inflation.

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.


Tax is a bit of a funny business and the laws vary from country to country and the enforcement of the law varies in random ways. For example if as a brit you buy some euros to spent on holiday and then the euro appreciates before you buy your tequila you've made a taxable gain. In practice no one declares that stuff and the revenue never investigates that stuff. At some point they start worrying - I'm not sure where. It depends on the mood. I recently had to account for the sale of a holiday home in euros and then converted into sterling and didn't bother with the change in pound euro rate as it didn't make much difference. Maybe £500 one way or the other. The UK revenue in practice don't really make a fuss unless you are off by serval thousand although they don't publish a fixed figure or else everyone would game their taxes to be off by just under that amount. So in practice with bitcoin if the gains are a few pounds people won't bother. If they are say £30k you should probably declare it or risk pissing off the tax authorities. In the US I don't know - they seem a bit more up tight about enforcing the letter of the law over petty amounts but you can only really tell by looking at what they do because if they published people would game the system.

It has always been a taxable event. If you buy anything and sell or trade it for a profit, you owe income tax (in the U.S.), be it gold, water, wheat, or Hungarian forints. The IRS just confirmed that bitcoins are assets and not currency, which has a few different rules.

Only for transactions over 600 USD, aiui.

The 600 USD threshold is a requirement for form 1099 reporting and is completely unrelated to capital gains tax. Capital gains have no minimum threshold, buying something for $1 and selling it for $2 is a taxable event.

I know this is offtopic... but I recently emailed the squareup's support over an issue that got me really mad at their development team (or whoever is reponsible). I was trying to buy some elementary OS stickers as I've been using it for over a year now and I'm extremely happy with it. Turns out you cant order anything from squareup if you are accessing outside of US. What made me write to their support is that there is no notification about it when you try to buy a product. It just shows you "add product to list" button but hides "buy" or add to cart button and does not display any info on why the buttons are missing. I mean... if you implemented a solution that detect non us ips and made an effort to hide the buy button... at the very least put some notification in there. Sometimes I really cant understand stuff like this >.>

My first post here is a rant... dang it.

Good to see. Businesses that offer marketplace services should have no objection to integrating bitcoin as a payment option. It does not deteriorate the merchant or consumer experience (regardless of whether or not they use or hold bitcoin), so they have nothing to lose, and all to gain.

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.

No need to speculate on their motives, Jack Dorsey explains them here: http://www.youtube.com/watch?v=0zJe4PUVx3c

Curious if they are going to take a lower transaction fee on Bitcoin payments as opposed to credit card purchases. They really should.

Why? They are incurring a potentially-substantial risk in facilitating the transaction for you, as well as providing the infrastructure for you.

That's why CC fees exist, and that's why people providing bitcoin-related services should be able to charge fees too.

Because otherwise people will just stick to credit cards?

given that bitcoin processing fees are on par with credit card processing fees (http://blockchain.info/charts/cost-per-transaction-percent), i bet they won't.

It's great to see the adoption of bitcoin payments by major players like Square and Stripe! Super exciting

Next milestone: for me to stop confusing the two...

Companies like Square and Stripe making it easy to pay with Bitcoin will have a huge affect on whether the general population accepts the cryptocurrency.

So has the Square app been banned from the Apple App Store yet?

EDIT: I guess if its just the square market, which is just a website (I think).

I find it cool!

Umm... April fools?

Is not an april fools joke. Was a hackday project that turned cool.

You should wait until Paypal accepts bitcoin to say that.

Too early and not funny — but good catch, trolling will be starting soon.

They seem to be pretty serious.

This has to be an April Fool's joke.

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