Bitcoin may never be the best retail payments mechanism, but that doesn’t matter, because retail payments aren’t really what it is all about.
Bitcoin doesn’t make sense as retail payment mechanism and I cannot see why anyone would use it in a shop. There, I’ve said it. The comments will be predictable (and I will, of course, in the tradition of free speech and open debate publish the ones that I like) but I stand by that position. When I say that sort of thing in a public forum, I am immediately confronted with the example of Overstock.com and the vast numbers of merchants accepting Bitcoin and the number of startups looking to make accepting Bitcoin even easier. But I have a suspicion that merchants accepting Bitoin is more about marketing than sales.
One of the reasons this is worth mentioning is because at the beginning of 2014 there was an estimated 20,000 – 30,000 merchants that accepted bitcoins for payment. By the end of the first quarter, approximately 60,000 merchants accepted bitcoins. Yet there has been very little corresponding on-chain growth.[From What Block Chain Analysis Tells Us About Bitcoin]
You see the point of this analysis. If you actually look what Bitcoins are being used for, it isn’t buying stuff. In Erin McCune’s excellent and highly-recommended write-up of Bitcoin 2014 in Amsterdam, she says that Bitpay is processing $1m per day for 30,000 merchants, which is about $30 per day per merchant, so maybe next quarter’s blockchain analysis will show an increase, but I can’t help feeling that it doesn’t really matter.
Accepting Bitcoin as a merchant is a great way to get publicity but may not result in any actual Bitcoin business… However, most Bitcoin-accepting merchants are instantly turning their Bitcoin into cash.[From 21 Things I Learned About Bitcoin Living On It A Second Time]
This is exactly what David Evans said in his piece about Bitcoin that attracted such an angry response from the Bitcoin community. I’ve just read his response to this and I have to say that I think he is right to say that “It hardly does the Bitcoin enterprise any good to create the false impression that bitcoin is becoming widely accepted by merchants”. As the article I quoted says, merchants that do accept Bitcoin are “instantly turning their Bitcoin into cash” and there’s nothing wrong with that. Well, “instantly” might be a bit of an exaggeration, but you get the point.
I wasn’t able to buy lunch at Buyer’s Best Friend because it took the Bitcoin network 67 minutes to confirm my $26/.0832 BTC payment[From 21 Things I Learned About Bitcoin Living On It A Second Time]
It’s not clear to me that Bitcoin was ever intended to be a retail payment mechanism, so it’s not surprising that it is less than optimal in such an environment. After all, credit cards were never designed to work on the Internet, which is why they are less than optimal there and people are investing considerable effort in developing digital wallets. My point is that we shouldn’t be surprised that Bitcoin is clunky buying noodles in a fast-food restaurant because that’s not what it is for.
Ramen Underground in Japantown has been accepting Bitcoin payments since early spring. They don’t accept Bitcoin at the restaurant’s busier downtown location, because there’s already a line and doing so would only slow things down.[From San Francisco’s QuickCoin – Bitcoin so simple, even Mom can use it | PandoDaily]
If the technology had been called Distributed Digital Asset Transfer or something else that didn’t involve the word “coin” I wonder if so many people would be trying to bring it to the point of sale? As far as I can see, if you talk to people who are serious about investing in Bitcoin, it because they see where the technology is taking us rather than because they want to speculate on Bitcoins or bring them to the Taco Bell counter.
It’s not the digital currency, but the underlying platform that will cause an enormous market disruption. Bitcoin is more than just another currency, it’s “an Internet” for registering and transferring property.[From Bitcoin: It’s the platform, not the currency, stupid! – The Next Web]
I quite agree, and I think we’ve been accurate in presenting essentially this assessment of Bitcoin to our clients from the first time it impinged on business consciousness. Erin is absolutely right to say that world of payments will face dramatic changes because of Bitcoin but it won’t be because people are using Bitcoin to buy pizza.
But correct me if I’m wrong, but I thought this is exactly what BIPS 70 addressed in October 2013?
The author doesn’t even explain why it is clunky to use bitcoin for retails. I personally find it easier to pay with my phone using a qr than using a debit card. This article is a wast of time.
Wait. You find it easier to pay with a QR code? Do you also eat with chop sticks and your feet? Bass Ackwards.
I agree that there’s far more that’s interesting about bitcoin than the potential to use it for retail payments, but that said, I use it for retail payments frequently and easily.
Most brick-and-mortar merchants who accept bitcoin don’t make you wait for network confs. Once they see the transaction propagated through the network (which takes 2-3 seconds), you’re good. As to why they’d want to do that? Saving the credit-card merchant fees for one (~3%)…
The example you cherry-picked from Kash Hill’s article was a glitch with the wallet software she was using, not something that’s fundamentally representative of problems/delays using bitcoin to buy lunch. Improvements to such wallets/tools are exactly the sort of thing that bitcoin startups are working on and rapidly evolving with much success.
See I don’t get Circle or Coinbase as a merchant plugin to accept bitcoins. The issue isn’t – could Bitcoins be accepted by a technology at the POS. Of course they could, very simply. That’s not the point though.
Bitcoin patently wasn’t “intended” to be anything other than an experiment in cryptography. If you speak to the people writing Altcoins or creating IDE’s for people to build their own startups on top of the Blockchain(s) they see what Satoshi did as a grand experiment.
In conversation with Richard Brown from IBM at our weekly “Brain Trust” meetings for all things Crypto went something like this:
Me: Satoshi wanted to invent a trustless network, and to do so he needed to reward “number crunchers” who would use a significant amount of computing power to do the network a favour. For that he came up with Bitcoin, but the currency aspect really is the afterthought.
Richard: [I’ve] “been thinking about it and the reason why you need to make mining so difficult is to give the time for the transaction to propagate across the network. It could never suit real time transctions because of Blockchain bloat. You’d have to do something similar to today’s retail POS where you “Auth” and “Settle” against the blockchain. The advantage being the blockchain is public and hidden in plain sight. Everyone has a copy of the data but only those allowed can see it. With that you can do some massively parallel Big Data mining / get best in breed Fraud prevention rather than proprietary and based in just one bank”.
I think when people hear you say “Bitcoin isn’t a great payment method” they emotionally think “Oh this banker doesn’t think Bitcoin is any good”, which is expressly NOT what you’re saying (I think). You’re saying the technology behind Bitcoin is amazing, and has world changing potential, just not in its current form. I haven’t met a single person who’s working on this stuff who would disagree with that sentiment. Whether it’s the SV startup saying “Bitcoin needs to come of age” or the lawyers quietly trying to understand what law looks like on a Blockchain… There is tremendous value there.
If you don’t believe me bobbi and others, come to the next Ethereum or Coinscrum event on meetup.com
Side note: Imagine how much a bank would save if it’s mainframe was replaced (over time) with a Blockchain. So all customer details were stored on the Blockchain. In effect the miners would be paying the cost of maintaining what a bank currently spends 80% of it’s IT budget on.
Side note #2: What if Visa or Mastercard put their entire network on a Blockchain by
1) Leveraging their existing Auth capabilities ++ Reputation economy
2) Creating a settlement engine against a blockchain wherein proof of all transactions would be in bulk (1x proof of work block could carry thousands of transactions)
3) Mining of those blocks could be competed for in the mining communities, and the proof of work algorithm could be socially useful and / or nearer a zero cost to merchants because the miners were effectively removing cost from the equation for the network
4) You could then do interesting things with the data because all of the transaction data would be globally available but 100% controlled by the individual consumer’s private key
I think Erin and Dave have called this one right. https://spendbitcoins.co.uk currently lists 3 places I can pay with BTC in England and that doesn’t change my opinion of Bitcoin one iota. Why? Because everything is distributed at Point of Sale, duh. The value of Bitcoin is that it offers us the chance to decentralize the entire industry, end-to-end.
It’s a sideshow that people make a lot of noise about a company like Overstock. It bothers me that they think they can promote BTC by attacking David Evans, rather than doing something constructive like saying “We’ve got a protocol for that, BIPS 70, why not adopt it?” But it’s still a sideshow, and it shouldn’t stop anyone evaluating Bitcoin for serious use.