> why would anyone want to exchange a reasonable stable national currency for bitcoin?
Name me 10 currencies you'd be comfortable holding. It'll probably be very difficult. Fact is, billions use currencies with high inflation rates and with relatively short lifespans. And it's not just places like Zimbabwe that have many problems besides insane inflation the past decade. It's also relatively developed countries like Argentina that suffer from insane inflation. It's also small stable countries with a nice standard of living ($27k GDP PPP) with an educated population like Cyprus where many lost their savings as bank deposits were frozen or seized.
And that's just protection from governmental malfeasance that hundreds of millions have to be aware of. But it's also the fact that billions are unbanked. We at HN know more than anyone that providing a physical service (like mail delivery) is 1 million times more expensive than a digital service (like e-mail). Same for banking, for vaults, for ATMs, for services like lending, payments, remittance or money transfer. A digital version can be much cheaper, as well as more accessible. (for a bank you often need proof of identity, residence and employment. Good luck when you have no birth certificate, when you live in a slum, when you have an off-the-record job like selling fruit on the corner of the street). Digital banking can bring cheap financial services to hundreds of millions who don't have it, yet have (intermittent) access to networks as simple as SMS or radio, which can plug in to gateways to the bitcoin network.
Next up is us, the wealthy who enjoy relatively nice financial services. Bitcoin can save 1-3% in fees on any transaction. Imagine that there's a 1-3% tax on everything, not value added, everything, every transaction, whether B2C or B2B, and you have a way to remove that. That's very significant. Entire industries run on margins of 1-5%. Amazon's 2013 margin was 0.35%, imagine they could shave off even 0.5%.
Now that doesn't mean we all should actually buy and hold bitcoin. As you say, the volatility dwarfs this percentage. But volatility can be exclusive to investors. For example, Bitreserve (founded by the founder of CNET) lets you lock in the price. That means you can buy $100 of bitcoin, and see $100 on your account, as if it was Paypal. And then you can spend that $100 anytime you want, and it'll always be worth that much. On the backend the service then lets investors create a market to lock in that price, where various investors make short or long bets, a derivatives market can take out the volatility for the customer, thereby allowing people to use bitcoin, save costs, yet be shielded from volatility. That means business to business payments, too.
Besides that there's lots of other things. Like the fact it can be much more secure. Creditcard fraud is rampant as your password is essentially on the card and you have to share it everytime you pay, it's crazy. Chargeback fraud is an issue. Identity theft is therefore an issue. And you can envision crazy things like a Google driverless car paying, on the fly, to another driverless car infront of it, to move away, so that it can take that lane and go faster, because the one in the back is willing to pay extra for speed, and the one in front is okay with arriving a little later. Those kinds of thing can almost only be built on a global, permissionless protocol layer. So indeed none of us may use bitcoin, it may just be a machine to machine currency, it's too early to tell, it can have an impact in many different ways.
But so little of that is exclusive to BTC as opposed to a digital transaction valued in national currency, and almost none of the benefits you list accrue to consumers - they all benefit merchants.
- Getting rid of charge back fraud also gets rid of charge backs - an important consumer protection.
- Bankless people need banks, not cryptocurrencies. There's no difference to a bankless person between a mobile app to an online bank and a bitcoin gateway.
- My credit card pays me back a chunk of that "1-3% tax on everything," my bitcoin wallet doesn't. Until bitcoin gains market share and the tax goes away, I'm just paying more to use bitcoin.
- My credit card company provides fraud protection for when my card is stolen, my BTC wallet does not.
Looking to the future doesn't make me want to transact in BTC right now.
Just talking about bitcoin, and not about this specific situation or their adoption: Bitcoin has some minor advantages in technology because the financial industry is slow, but that's not the major reason to adopt. The major reason is trust.
Historically, it's difficult to trust many organizations. The US federal reserve and the US dollar have the best record/reputation in modern history. Top competitors have taken devaluations in WWII and even recently (British pound in 1992, Russian ruble in 1998). That's part of why many people use the dollar. Even now, after 2008, when everyone thought the currency was screwed because money was being printed fast, we didn't see inflation. But the dollar isn't perfect. As recently as the 1970s and 1980s the US dollar experienced double digit inflation.
Bitcoin is an alternative currency with less trust in a central authority. It's got a bunch of other features like you've both been talking about but it's real value add is the lack of central authority (both in terms of volume of currency issued and in terms of your ability to hold your own currency without a 3rd party).
Now, maybe you don't want to use Bitcoin now because you believe a problem with the US dollar or any other local currency is a 'low probability event'. That's totally reasonable. But it's also worth remembering that humans are known to be bad at estimating risk/reward from low probability events. Historically speaking, there will be a currency crisis in the next 50 years. I can't think of any fiat currency has ever gone 50 years without some sort of currency crisis (at least of the ones we have a good historical record of). Bitcoin aims to be the first one to do that. We'll see if it ever does.
>Looking to the future doesn't make me want to transact in BTC right now.
And that's fine. Contrary to popular belief, most core Bitcoiners are not particularly interested in "converting" non-Bitcoin users. There was a big group that bought Bitcoin as a (risky) investment in fall of last year who try to pump it up, but they don't even share many of the core values of the Bitcoin community.
I do want people to be educated about their rejection of Bitcoin (i.e., "because tulips" is just annoying). But it sounds like you are making an education call.
So that's fine. I don't think traditional fiat is at any risk of becoming obsolete in the foreseeable future. We can co-exist side-by-side.
I hope you can afford us the same respect.
PS: I do strongly disagree with "bankless people need banks". Bankless people need to not be exploited, and the kinds of banks that accept people poor/no credit are usually not ethical/moral organizations.
With that sentence, I meant that bankless people suffer hardship because they can't get access to basic banking services like savings accounts, currency exchanges, and money lending.
Simply because a financial institution that provides those services transacts in bitcoin doesn't make it any more ethical/moral than a traditional bank. While it's true that bitcoin doesn't have a central monetary authority, you still need a gateway to exchange currency for BTC (currency exchange), some way to safely store your private keys (savings accounts), and lenders.
For most bankless people, a trusted third party is going to be involved somewhere along the way, BTC or not.
>With that sentence, I meant that bankless people suffer hardship because they can't get access to basic banking services like savings accounts, currency exchanges, and money lending.
That's exactly who I'm talking about. And I think this will be the group who adopts Bitcoin, because there's a lot of friction in that market. Bitcoin is being seeing major adoption by markets with significant friction (silk road -> gambling sites -> ?).
>While it's true that bitcoin doesn't have a central monetary authority, you still need a gateway to exchange currency for BTC (currency exchange), some way to safely store your private keys (savings accounts), and lenders.
- Chargebacks happen when cards are stolen. Cards are stolen because they are fundamentally pull payment methods. Every time you pay, you hand the keys to your money over to someone else. Think about this for a second, because it is absolutely insane.
Whenever you pay with a credit card, you have to trust the merchant to (1) charge the right amount, (2) only do it once, and (3) themselves take your privacy seriously enough to not have your information stolen by another party, who, if they did get hold of your card info, could abuse it at will and then share with more 3rd parties or have it stolen from them!
Credit cards are broken fundamentally. If the only kinds of payments were push payments, where consumers choose when to pay and the merchant has no ability to pull at will, the entire issue of credit card thefts - think Target, Home Depot, or the Russian hackers - would simply not exist.
So chargebacks due to fraud simply wouldn't be there. Sure, there are other use cases for chargebacks, like you felt you didn't get what you paid for or something, but that switches to a customer service issue which increases competition among merchants.
- Who cares about volatility? You don't need to own bitcoin to use it. When you want to send it, buy it at the time, then send it. Big whoop.
Also what is volatility on $100? Are you that concerned about losing or gaining $5, $10, $20 in a day, with a total maximum limit of losing at most $100 if it goes to zero, which seems extremely unlikely? Nobody said you have to invest your life savings. Participating in the technology is as expensive or as cheap as you would like.
- "Bankless people need banks, not cryptocurrencies." - Why? You didn't actually say.
"There's no difference to a bankless person between a mobile app to an online bank and a bitcoin gateway." - Which is great, because since "people need banks" (your words), bitcoin can finally provide it to them.
- "My credit card pays me back a chunk of that "1-3% tax on everything," my bitcoin wallet doesn't." - This is short-term thinking. Wouldn't you want something that can provide lower fees to gain market share in the long term, so that discount is not just available to the exclusive group of people who qualify for nice credit cards, but to every person, regardless of qualifications or payment methods?
> So chargebacks due to fraud simply wouldn't be there.
That is far from the only reason there is credit card fraud. Actually most credit card fraud is linked to identity fraud (a hacker stealing someone's financial credentials or posing as them on an online/offline store).
Most of the credit card information stolen from Target and Home Depot is not used but sold as quickly as possible on underground forums to "the greater fool" who is willing to take a risk to use it (if it still works).
Because of the chargeback system, those millions of credit cards stolen are not a huge issue for consumers because they can immediately lock down their card. Cards are replaceable keys. If you believe that you've been compromised, chargeback for whatever amount was stolen from you and change cards. It's a pretty incredible system for consumers when you think about it.
Contrast that to bitcoin. Your third-party bitcoin storage service gets hacked, your bitcoin are gone forever. You choose to store your bitcoin locally and you're exposed to physical theft (like keeping cash under your mattress).
Bitcoin does not solve the fraud/theft problem. I facepalm every time I hear that argument. Chargebacks are omnipresent today because they protect consumers because theft has always been and will always be part of any financial/payments system — simply because thieves don't target "how" you pay (push vs pull doesn't matter) but target where you store your wealth.
> thieves don't target "how" you pay (push vs pull doesn't matter) but target where you store your wealth.
I wasn't arguing against this. Your credit card is where your wealth is stored, if it can be used to purchase things. And your wealth is stored with Target if they have your CC info. So places like that seem a likely target for attacks.
> Contrast that to bitcoin. Your third-party bitcoin storage service gets hacked, your bitcoin are gone forever.
M-of-N key schemes will prevent this in the future. Also not the only option.
> You choose to store your bitcoin locally and you're exposed to physical theft (like keeping cash under your mattress).
I don't see how. If your stuff is encrypted or your devices locked, then they would not be susceptible to theft from your mattress. They'd have to be stolen from your hand while unencrypted or device unlocked.
Not sure that I buy that most CCs are somehow gotten through a means other than 3rd parties who have them.
Another point is that if you get your info stolen, why should the merchant take the loss? They've already given out the product. It's your money to be responsible for, if the merchant doesn't hold the means to charge it, which they wouldn't with bitcoin. This realization will lead to more secure systems, since consumers would not be able to charge back willy-nilly.
> Your credit card is where your wealth is stored.
Your credit card is just a means of payment (a key). Your wealth is stored at your bank.
All these merchants may have your bank keys, but they can't use it to charge you illegally because they will incur costs (a chargeback fee and then some). It a great system in which both the consumer and the merchant are incentivized to behave correctly...
- Getting rid of charge back fraud also gets rid of charge backs - an important consumer protection.
Chargebacks actually suck. In the Netherlands the majority of online payments are made with Ideal, all banks are linked to it and it doesn't have chargebacks. It's awesome, cheap, fast, every bank participates and virtually everyone uses it. It's not just theory, the chargeback thing isn't even a problem, it's not a consumer protection that's needed or asked for.
Why is this so? Because of the nature of business. A business, like Amazon, has a brand. It's in business for decades, makes billions of dollars doing legitimate work. The moment Amazon takes $400 for a new phone and doesn't send it, then lies about it, and does this quite a few times, that's the moment the billion-dollar brand and business collapses. The chance that Amazon will scam you and you needing to resort to a chargeback is 0.
What about the other way around? What's the chance that I, with one of the 100 creditcards I can get, make an account, for every creditcard I have, and send $400 for a phone, receive the phone, then do a fraudulent chargeback? It's small, but it happens. Despite this also being rare, it happens orders of magnitude more often than the other way around. Now Amazon is out of a product and out of $400. It costs them too much to prosecute me (their 0.35% profit margin on that sale won't cover 10 seconds of their lawyers). All they do is blacklist the creditcard.
As you can see, this system invites fraud. It rewards criminals in a way that's pretty easy to get away with half of the time. Amazon now loses money, which means it (and every other business in the world) increase their prices a little bit, charging honest customers. We collectively pay for this consumer protection that is often used for fraud.
Guess what, bitcoin can have chargebacks TOO. IF a consumer really wants it, let him go to a third-party business and say look, I don't trust Amazon, I will pay 1% extra for you to insure the delivery. If I don't get the product, you pay me back the full amount and deal with Amazon yourself if you want. That market will arise if there is demand for it. Difference? In this market ONLY the people who don't trust the merchant they pay for the risk. (very rarely do I buy from a business I don't know, can't locate on a map, or that doesn't have a business registration, and as such I have never in the past decades of my life done a chargeback). All the other people now don't have to pay for the chargeback fraud.
Not only is this cheaper for all but it's also more equitable. Chargebacks ARE useful in one circumstance, which is when e.g. you bought 1 month at the gym, and they keep charging you for 12 months. But bitcoin doesn't have this problem because it has PUSH payments. YOU decide when to pay (excuse the arrogant capital letters lol, I know). Credit has pull payments, of course in a system where anyone can take money from your account is it useful to charge that back. But that protection has no need in a push-system.
- I don't need 10 currencies I'd be comfortable holding
Point is that there are hundreds of currencies, and most are shit. So while I'm comfortable holding my currency (euro), and you probably your dollar (as would I), that luxury doesn't extend to a few billion others for whom bitcoin may be viable. As for your quote of bitcoin volatility, I'm talking long-term here. A currency that goes from 1 to 100 to 1000 to 1m users of course is volatile. But when that settles down, the inherent inflationary properties (generally the root of volatility issues in any economy) have low-volatility.
Besides that, I already mentioned you can lock in the price of bitcoin in a national currency. I'm not saying we should all HAVE bitcoin, but I'm saying we can benefit from using it. That could indeed mean regular joes owning $100 (in bitcoin), pegged to the dollar price built on a back-end derivative market for investors, and using it as if it was paypal. That could happen, too. People are working on that, e.g. the founder of CNET who launched Bitreserve.
- My credit card company provides fraud protection for when my card is stolen, my BTC wallet does not
Circle, Xapo and Coinbase all insure bitcoins already, more insurance services will inevitably follow. The point is, whatever creditcard theft happens that you get reimbursed for, someone has to pay for it, and that someone is you and everyone else, and the amount it costs you and everyone else is the average cost of theft per person. Same with bitcoin. But if bitcoin has more secure properties (and I believe it does, push vs pull, lower chance of fraud, multi-sig, no possibility of getting your wallet stolen), then whatever it costs to insure against bitcoin theft will likely be lower on average than the cost of insuring against creditcard theft, meaning it's a cheaper system. Any of today's financial services can be offered for bitcoin, too, but due to its generally better properties, at a cheaper rate. That's why it's so cool. Bitcoin is a protocol-layer, you can build anything on top if you want.
- Until bitcoin gains market share
Agreed that there are quite a few issues that may not be issues if bitcoin gains market share. A bit like the internet: until internet speed becomes faster, I'm not going to be able to make phonecalls, videochat, download movies, watch live news etc on my computer, or hell even my phone - guy in 1995. That's not a reason to walk away, it's a reason to be excited.
Large retailers like Amazon don't save on their margins if they start accepting BTC because 1) BTC won't be used by any significant number of their users 2) they already get special discounts for CC processing from companies like Visa and Mastercard because of the huge volume they handle.
Fraud is as applicable to credit cards as to bitcoin. You store bitcoin with a third party service means you rely on them to keep their servers secure and hope that hackers don't obtain your credentials/identity information to log in and steal your bitcoin. I would argue it's even worse with BTC because their is no fraud protection.
Chargebacks are an issue for merchants, but a huge advantage for consumers. Ultimately the economic demand comes from the consumer and not the merchant, that is why chargebacks are still omnipresent in ecommerce today.
Two areas bitcoin could have addressed are remittances and smart contracts, yet better systems are emerging to solve those problems (Ripple, Stellar, Ether).
Your arguments could be valid in a world where everyone uses bitcoin and doesn't touch fiat. This is not the case. Bitcoin is a great technology in theory but its practical applications are quite limited.
Large retailers like Amazon don't save on their margins if they start accepting BTC
For point 1, obviously wrong. Any sale they make in bitcoin is one they save on their margins. Just because it's not applicable to 100% of sales doesn't mean it has no effect.
On point 2, that's true but is the discount 0? Because BitPay processes bitcoin payments at 0% right now (and has billion-dollar clients like Newegg already), with enterprise options. Point is, whatever discounts CC can make to large clients, bitcoin processors can do, too. Only more, because an average bitcoin order is inherently cheaper.
Fraud is as applicable to credit cards as to bitcoin
Absolutely, but there's obviously different levels of security. e.g. say I tell you 'let's move from checks to creditcards, it's much safer'. It'd be pretty silly to say 'no, creditcards also have fraud'. Yes, but checks are worse. Why? Due to its inherent design.
The inherent design of creditcards (1950s technology, by the way) is writing all the security details (i.e. your money-vault password) on a plastic card. And handing over that information to anyone you're paying, and then they can (and often do) keep that information on file.
Imagine you want to pay with cash at a supermarket and have to hand over your wallet to the company. And when you're done paying and leave, they still have access to your wallet for years.
It's a security nightmare. Bitcoin is different in that you don't send access to your money to a business, you just send money. It's by design more secure.
That's not to say the bitcoin ecosystem is a secure paradise, far from it. But I do truly believe that bitcoin's properties allow an ecosystem with less fraud. Things like multi-sig can create (in fact, already exist) third-party custodians who have no exclusive access to your money and just act as a signing counterparty, for example.
Chargebacks are an interesting topic that I'd be willing to talk about more if you want to know. But it's not a key issue. If it does turn out that chargebacks are wanted by customers, they can be built into the bitcoin ecosystem through third parties like today, keeping all the other benefits of bitcoin. But more importantly, chargebacks as they exist today are pretty shitty, invite fraud, create huge costs, paid for by the customer, and are barely needed. If you want to know the arguments, let me know I'll write them up for you, wall o text already.
yet better systems are emerging to solve those problems (Ripple, Stellar, Ether)
I disagree on the point of remittance, but I'm keeping an eye out for sure! These three are definitely exciting. All three projects by the way see themselves co-existing with bitcoin, check out the bitcoin talks by the CEO of stripe who launched Stellar, but you're probably familiar already.
Speaking of locking the price of your crypto for $, I followed a very interesting AMA on Reddit that was held earlier today about an innovative crypto based Digital Autonomous Corporation (DAC) called BitShares X. All of the utility of Bitcoin, but it also has a distributed on-blockchain exchange AND has assets pegged to the $ AND also pays interest if you hold those pegged assets. I’ve been following what these guys have been up to for a while (i.e. more than a year). Seriously, if it works, I think this is truly novel stuff that rises well above the usual copycat alt coins:
Bitshares X only launched a couple of weeks ago, it’s really only at an alpha stage at the moment and it has already hit the number 4 spot for market cap at http://coinmarketcap.com. It has had days in the last week where volume has surpassed that of Litecoin. The on-chain exchange built in to the wallet client cannot be shut down or manipulated/debased (like Mt Gox), I think this is one of the first things that grabs peoples attention. Especially Chinese investors or those burnt by Mt. Gox.
The most interesting thing is that on this distributed on-blockchain exchange you can trade your Bitshares (BTSX) for BitAssets pegged to real world assets such as the $ or BTC or even gold. I think I understand how it all works and if the market pegs work, which it seems to be at the moment for BitUSD, then it’ll provide great utility. It’ll promote the ability to actually hold you wealth securely in crypto in a less volatile way rather than cashing out in to real fiat for its relative security like many crypto traders do. BitShares X is an experimental DAC, like Bitcoin, but if it works then it avoiding the issue of having to cash out to real fiat gives it a significant plus point over Bitcoin in my opinion.
Citi bank recently pointed out that news often touted as being ‘great news’ for Bitcoin (e.g. Dell accepting Bitcoin) actually puts downward pressure on the price if they immediately cash out to $ using a services such as BitPay. Dell use this service to protect themselves from Bitcoin's price volatility, but this is liquidity that leaves the Bitcoin/crypto ecosystem. This is not good. It’s only if these companies such as Dell hold their crypto or at least part of it (i.e. like Overstock does) that the liquidity in the Bitcoin ecosystem grows and so does Bitcoin with it. Read up on the details about what Citi had to say here:
If the BitShares derived BitUSD actually tracks the $, and it seems to be doing so, then you, or Dell, would have no reason to move money out of the crypto ecosystem. This is of huge benefit for the crypto currency/equity ecosystem because it means that wealth stays within the system and does not leak back out to fiat. Holders of BitUSD also get paid a yield/interest for holding BitUSD and some have speculated that the amount may be as much as 10%. Add to this that the guys behind Bitshares are actively talking to the guys at Ethereum an the future look really bright I think,
I recommend reading the AMA above and follow some of the links to the FAQs about BitShares. I think they are on to something significant. Please feel free to shoot me down in flames if I’ve missed something or if you have a different view. Like I say I’ve been following the BitShares story for over a year now and it’s great to finally see the vision of the distributed exchange and BitAsset market peg make it from theory to reality.
Disclaimer : Very recently I moved a significant percentage of my BTC holdings (more than 50%) in to the BitShares X ecosystem with the intention of going long. Naturally I personally would like to see more people share my views. But do your own homework on this one and never invest more than you can afford to lose!
>Once the market has reached a consensus that BitUSD should be valued the same as a real US Dollar no one will be able to trade against that consensus without losing money. Thus the value of BitUSD today is based upon the prediction of what market participants will value BitUSD at in the future. There is only one rational way to speculate, that the consensus will hold, and that creates a self-enforcing market peg.
In other words, basically bitusd is supposed to follow usd because it has 'usd' in its name. It's beyond ridiculous.
No it's pegged to USD because it is backed by BTSX. BTSX does have value. It's an experiment, but it might just work. Perhaps this guy can explain how it works a little better than I have:
The only way a dollar peg can work is when there exists an entity (it doesn't matter what it is, it can even be an alien civilization) with very big amount of dollars, ideally infinite. When the pegged currency gets too cheap it has to spend dollars to maintain the peg.
There's no long-term reason for anyone to spend their dollars to maintain bitusd peg.
The short-term reason is a modified pyramid scheme: as long as the cost of maintaining a peg is less than the influx of new money from people buying into btsx because of currently working usd peg (and perhaps others), it will be maintained by major btsx holders.
Accepting $10 from a buddy has no fees, no. But a supermarket taking in tens of thousands on a daily basis, has quite high costs of handling cash, usually at least 1%. And cash is definitely slowly being phased out because it has all kinds of issues, security being a key one. (cash-based businesses have higher ordinary robbery risks than card-based businesses for example)
In addition to other points, you can consider the arbitrary inflation of fiat as a sort of fee.
When you get fiat from anyone, you can not assume the availability of the same currency tomorrow. The state controlling it can arbitrarily create more whenever they please. That is the dominant source of inflation in fiat currencies, whereas in btc and other cryptocurrencies the velocity of funds becomes the influencer in that same regard. That happens in fiat too, but is overwhelmed by the prevalence of unpredictable money printing.
The point is that with a sufficiently entrenched cryptocurrency, that volatility due to money entering or leaving the market (ie, buy some btc as an investment and sit on it) is drastically reduced (and the volatile availability of funds combined with the speculation gives bitcoin its unpredictable exchange rates) you eliminate the most prevalent forms of unpredictability from your money - since with crytocurrencies, the algorithm makes the monetary base very predictable, and if you had a currency at a "good" inflation rate generating a lot of monetary velocity the frequency of funds leaving the system for an extended time (besides lost wallets) would be even more negligible.
That inherent overhead of unpredictability in fiat is a natural "fee" that everyone has to subconsciously consider what evaluating transactions using such currencies.
BitShares + Ethereum are two great teams that are undoubtedly pushing the cryptocurrency ecosystem forward. DAC's and DAO's will bring another wave of cool tech.
I think the next big economic bubble/cycle in cryptoland could come thanks to advancements in these two projects.
Name me 10 currencies you'd be comfortable holding. It'll probably be very difficult. Fact is, billions use currencies with high inflation rates and with relatively short lifespans. And it's not just places like Zimbabwe that have many problems besides insane inflation the past decade. It's also relatively developed countries like Argentina that suffer from insane inflation. It's also small stable countries with a nice standard of living ($27k GDP PPP) with an educated population like Cyprus where many lost their savings as bank deposits were frozen or seized.
And that's just protection from governmental malfeasance that hundreds of millions have to be aware of. But it's also the fact that billions are unbanked. We at HN know more than anyone that providing a physical service (like mail delivery) is 1 million times more expensive than a digital service (like e-mail). Same for banking, for vaults, for ATMs, for services like lending, payments, remittance or money transfer. A digital version can be much cheaper, as well as more accessible. (for a bank you often need proof of identity, residence and employment. Good luck when you have no birth certificate, when you live in a slum, when you have an off-the-record job like selling fruit on the corner of the street). Digital banking can bring cheap financial services to hundreds of millions who don't have it, yet have (intermittent) access to networks as simple as SMS or radio, which can plug in to gateways to the bitcoin network.
Next up is us, the wealthy who enjoy relatively nice financial services. Bitcoin can save 1-3% in fees on any transaction. Imagine that there's a 1-3% tax on everything, not value added, everything, every transaction, whether B2C or B2B, and you have a way to remove that. That's very significant. Entire industries run on margins of 1-5%. Amazon's 2013 margin was 0.35%, imagine they could shave off even 0.5%.
Now that doesn't mean we all should actually buy and hold bitcoin. As you say, the volatility dwarfs this percentage. But volatility can be exclusive to investors. For example, Bitreserve (founded by the founder of CNET) lets you lock in the price. That means you can buy $100 of bitcoin, and see $100 on your account, as if it was Paypal. And then you can spend that $100 anytime you want, and it'll always be worth that much. On the backend the service then lets investors create a market to lock in that price, where various investors make short or long bets, a derivatives market can take out the volatility for the customer, thereby allowing people to use bitcoin, save costs, yet be shielded from volatility. That means business to business payments, too.
Besides that there's lots of other things. Like the fact it can be much more secure. Creditcard fraud is rampant as your password is essentially on the card and you have to share it everytime you pay, it's crazy. Chargeback fraud is an issue. Identity theft is therefore an issue. And you can envision crazy things like a Google driverless car paying, on the fly, to another driverless car infront of it, to move away, so that it can take that lane and go faster, because the one in the back is willing to pay extra for speed, and the one in front is okay with arriving a little later. Those kinds of thing can almost only be built on a global, permissionless protocol layer. So indeed none of us may use bitcoin, it may just be a machine to machine currency, it's too early to tell, it can have an impact in many different ways.