Bitcoin Forum

Warning:  A long, and likely boring, post.

Note:  I’m so new to Bitcoin that I might just as well be an outsider looking in.

Bitcoin, what a marvelous idea.  A decentralized currency which cannot be counterfeited and can be transmitted anywhere in the world fairly quickly and with minimal fees.

I read articles here that point out ways and means of expanding the use of Bitcoin.  The whys and wherefores of the need to expand general acceptance of Bitcoin seem to be ignoring the basics of everyday users.  Namely, the ongoing need to convert BTC to fiat.

Yes, I understand that the value of one BTC resides solely with the holder.  Some holders may value their BTC much differently than other holders.  The argument goes ‘One BTC is worth exactly one BTC’.  That’s fair and accurate until one should wish to exchange that BTC for goods and services.  At this point there can be an agreement on the relative worth or a disagreement.  Unless there is agreement, there will not be an exchange of BTC for goods or services.

Recruiting others to do business denominated in BTC is a worthwhile effort if you believe that the world actually needs a semi-anonymous decentralized currency system.  I will not dwell on the politics involved except to say that revolution and anarchy have proven to make some places in this world better for everyday humans.

So, you want me to start accepting BTC for the goods that I sell to the general public.  You are going to be faced with a difficult task.  Say that I own a small grocery store and employ six worthy individuals.  I have three main suppliers and about a dozen smaller, specialized, suppliers.

You approach me and say something like, ‘Hey you should start accepting BTC for your groceries’.  Now, being the progressive grocer that I am, I say, ‘You know what, I’d like to do that, but at this point it is impossible’.  Then you might say something like, ‘No, it’s really easy.  You just figure out what fraction of a BTC your groceries are worth and accept that for your payment’.  There is a big part of the disconnect.

I buy my supplies and goods with fiat.  I pay my employees with fiat.  I pay my rent and utilities with fiat.  My wife takes what is left and buys shoes and clothing for the children, spends the fiat at the beauty shop, pays her tuition in fiat dollars.  None of my suppliers of goods and services accept BTC and it is not very likely that they ever will.

So, then, the argument goes; convince all of those others to do business in BTC.  This amounts to a monumental task that would likely take two or three lifetimes to accomplish.  Consider the case of carrots.  Say I convinced my carrot supplier to accept BTC.  He would have to convince the broker to accept BTC.  The broker would have to convert the wholesaler.  The wholesaler would then tell the farmer that he can only pay with BTC.  The carrot farmer should reply, ‘Fine.  Who sells seed, fertilizer, fuel, and crop insurance for BTC?’  I’m not saying this is impossible forever; just that it will take quite a long time to accomplish.

There is another portion of the problem that will likely be more difficult and potentially impossible to deal with: utilities.  I invite you to speculate on when a city (pick one: Amsterdam, Paris, London, New York City, Sydney, Christchurch, Manila, etc.) will accept BTC as payment for their metered services.  Tell me which publicly traded telecom will take BTC in exchange for the cell phone bandwidth you use.  Short answer:  it’s not likely to happen in this lifetime.

So, you say, ‘Well, what about all the businesses now accepting BTC?’  To which I reply, ‘The owners are either holding the BTC hoping for future valuation increases, they have found a supplier that accepts BTC, or they are gambling on one of the exchanges, converting to fiat to pay the bills.’

I’ve read that BTC should be regarded as a store of value, much like gold.  I partially agree with that.  The early adopters will wholeheartedly agree.  Just exactly what is the value is a good question.  One BTC is valued at one BTC.  But, it isn’t likely that you can take your one-ounce bar of .9999 gold into the local utility office and pay your electric bill.

None of what I have written should be viewed as an attempt to discourage, or disparage, those who wish to promote the expansion of BTC.  Instead, what I aimed to do was describe the obstacles that I see in words that most everyone will understand.

Those of you who are waving the BTC flag and beating the drum loudly, I salute you.  Extolling the virtues of BTC is a fine thing to do if you are a holder, intend to be a holder in the future, or just plain hate the idea of central banks.  Just understand that your fight is not over until you have converted the entire supply chain to BTC.  You know, the chain with the very, very, long tail.

Until then, our everyday life is denominated in some fiat.

/Frank

Many retailers accept BTC and then turn it into fiat on the spot.  It is a step you can do until your vendors start to do the same.

Absolutely.  However, I don't see any advantage in that unless the customer only has BTC to purchase with.

/Frank

Cheaper processing fees than credit cards.

One advantage at present is that you can still be the first merchant of X product to accept bitcoin, or first merchant in Y location to accept bitcoin and generate a bit of buzz that way, and list your store on various bitcoin sites, and hopefully get some new customers that way.

Yes, quite a lot too.  Still what I would be doing is acting as a facilitator in the transfer of wealth from the customer to the exchange.

/Frank

first of all:

retailers do not accept bitcoin because of

retailers acept bitcoin because there is less red tape then setting up a credit card system, less fee's then a credit card system, less headaches and delays.
did you know that when doing credit cards merchants do not receive the funds within a couple days, credit card companies wait until the end of the month and deduct 'fee's and then send to merchants.. bitcoin doesnt do this.

secondly a random new currency would go around and people would barter out a set price of value until everyone got together and found a average and collectively agreed value to use.. with bitcoin this is already done, so there is no letting the grocer pick a price for his apples and then have customers argue and barter as much over the value.. bitcoin already has a known value point to use..... the value from the main exchanges.

now the bit about wages,suppliers and the wifes fiat.

merchants do not pay staff wages with customers credit card debt, suppliers, wifes shoes etc all the same.. they pay in fiat.. which is the money that the credit card receives AFTER sending their customers the bill. the customers pay the creditcard company FIAT and that FIAT is passed onto the the merchants..

bitcoin is the credit card companies
credit card companies convert debt into FIAT
bitpay and bips convert bitcoin into fiat

the only difference is bitpay and bips do it faster, less fee's, less headache and less.. well less everything compared to a credit card company.

imagine it this way of why bitcoin is great for customers and businesses.
take starbuck as a future example of the way to pay (because they dont yet)
Credit card:
customer queues up, waits a few minutes, requests a latte, gets told the price and swipes their card.

Bitcoin:
customer sits at their table laughing at the queue of customers, scans a QR code from the coffe menu, presses send on their app.

Yes, possible but not likely in my village of mostly agrarian neighbors.  

lol.  If I mention BTC to most of the folks around here I either get a puzzled look or else they say 'oh yeah.  That place where you buy guns, drugs, and pictures of nekkid wimmin'.

/Frank

Don't misunderstand me.  I'm not saying anything against BTC.  I'm not advocating the use of fiat over BTC.  I'm merely pointing out some difficult steps that must be addressed if BTC is to become the widespread currency of the future.

/Frank

Not adopting because it's not right for your area [yet] is much different than not adopting because there's no good reason.  It's definitely not ready for widespread use yet, but it will get there.

we need atms people, thats it! the price will 10 fold overnight

-AU

I'm hoping somebody else will give you a thorough line-by-line, though you probably still won't get it. But I'll address my favorite little pieces:

I'll bet you one bitcoin that a publicly traded telecom will take BTC in exchange for cell phone bandwith within the next 9 months. No geographical limitations. I'd be willing to make a similar wager regarding utility bills in a major city, though I'd give 12 months for that. Care to gamble? There are plenty of great escrow services available to facilitate an honest transaction.



Don't worry. Nothing you wrote will discourage anybody. The "obstacles" that you "see" are not obstacles at all. They reveal a basic lack of comprehension of the concept. Bitcoin is unstoppable. Nobody needs to go around trying to convince others to use it. Everybody will be forced to use it in order to remain competitive. The fools who cling to fiat longest will suffer the worst.

This is not at all surprising. That's the stage we're at right now. In six months all of  your neighbors will know what bitcoin is. In one year all of your neighbors will be using bitcoin. In five years none of your neighbors will be using fiat.

my philospohy is this:

to pay for something with debit card
    Customers:
    requires bank account
    required to be of certain age
    required identity papers, to be passed onto the bank

    Retailers:
    requires a merchant/business account.
    requires submitting company registration details
    requires a card processing providor and fee's

now

to pay with bitcoin
    Customers:
    download App
    find someone nearby on localbitcoins.com or mine them - no paperwork needed

    Retailers:
    download App
    find someone on localbitcoins.com or sign upto bitpay/bips

 

I appreciate your enthusiasm for BTC.  You may not understand the rural area where I live and love.  It took nine years for our state to legalize liquor by the drink after all of our adjacent states had it.  One may hope for progress.

Thanks for the offer to gamble.  I don't do much gambling.  I hope you are right in your estimated timetables.

/Frank

I see this quite often. Where do u live, guys? In a 3rd world country? Banks have to compete and now it's hard to find any that charges fee for credit card transactions (they earn profit by holding ur money). In my country.

Lucky you, my wife takes that first then what is left is to pay the bills!

Its an accurate description of the problem.  You could offer to pay your staff 1btc + rest in fiat. 

I try spread btc by paying mates back in BTC.  If we go out for lunch, someone always wants to put the bill on their credit card for the group, and take cash off everyone.  I offer to pay them in BTC.   Then hopefully, then can do the same...

and wouldn't you have loved to have been the first and only supplier to offer liquor to your area, think of the potenial earnings you could make bringing an area something they could not get easily on their own.

now the same goes for VISA/Mastercard

would'nt you love to be the first payment processor to have introduced shops in your town to mastercard.....

now put those thoughts towards bitcoin...... 

There is always need of using fiat in some areas, so don't think anyone would disagree with that. I think the ultimate goal for many bitcoin users is to eliminate as much of that dependency as possible.
I've seen apartments for bitcoin in some places, and If you can knock off rent/housing that is a major success against the current corrupt financial system.

You'll never have true freedom from fiat currency without a bitcoin friendly government or country.

People will spend the inflative currency and save the deflative currency, fiat is for spending and bitcoin is for saving, their benefit don't overlap each other. Under a fiat money system, everyone are forced to borrow and spend (savings will lose value quickly), now there is an alternative

I like that explanation.

+1

/Frank

What? Under a fiat money system, people invest in an effort to outpace inflation. Who just leaves money sitting in a plain bank account, or under your mattress, doing nothing?

When you think about it, it was just like that with the Internet of the early to mid 1990's.  I was there.  I'd tell people about the Internet and they would get a quizzical look on their face.  Then they would tell me they would never use the Internet - that they go to the library to get information and read the newspapers.

LOL  Bet they would never admit to saying that now!

When bitcoin goes main stream it could very well be like that - everywhere used as a matter of course, no big deal, easy to use.

This is spot on. I feel sorry for the folks who can't see it. It seems so obvious. To my eyes, it's the only logical conclusion. When presented with the world, as it is now, and presented with the idea, bitcoin, as soon as you grasp what bitcoin is, how it works, why it works, suddenly it becomes apparent that the world has become infected with this idea and it will rapidly spread until every corner of the earth is infected and all the other competing currencies are wiped out.

You may, perhaps, forgive me if I remain somewhat skeptical about the near instant, and universal, adoption of BTC.

Yes, I do remember the earliest days of the modern computer.  I was at a university conference in 1974 when I overheard two electronic engineers talking about a computer project under the wing of DARPA.  (http://en.wikipedia.org/wiki/ARPANET)  You will possibly remember that early adopters were mostly geeks.  The general public didn't get interested until that nifty thing called email came about.  Then Tim Berners-Lee did his thing and the rest is history.  But it was email that made the 'IBM Clone' a household fixture.

I mention that part about the general public intentionally.  It may be that the rest of the world is much different than the populace here in the good old USA.  If so, then you may be right about the rapid adjustment to BTC.  However, my experience with the general public here at home is dismal.  Ignorance and apathy are the norm and it seems to increase every year.

There may well be some facet or off-shoot of Bitcoin that will catch the attention of the general public and cause it to take off.  I don't believe that what we have now will generate enough interest to take the sluggards away from their nightly dose of 'Dancing With the Nearly Real Housewife of Nueva Scotia'.

/Frank

Yes, Americans will probably be among the last to adopt bitcoin. As a nation, we have the most to lose, considering that we are the ones currently in control of the world's currency and bitcoin would wrest that control away from us. But beyond that, yes, we're generally ignorant and apathetic. And pathetic.

But even so, even we here in the good ol' US of A will find ourselves quickly learning about bitcoin when we discover that suddenly a can of soda that was a dollar costs five all-of-a-sudden or they start taking the money out of our bank accounts like Cyprus or our government shuts down because we're so broke... oh wait that's starting now! Yay! Grab some popcorn and watch the show, we're in for a wild ride!

Perhaps you're right.  I suspect that when the public finally wakes up it will lead to an armed uprising.  Watching all of those 'Redneck AK-47s' coming out from under the seat in the pickup trucks will be scary.

/Frank

Early adopters should be quite happy if BTC became a successful 'exchange currency' as well.  I'd be fine with that...I just think it is highly unlikely.

Bitcoin has never had much appeal to me as an exchange currency, at least in it's pure form.  The latency, security hassles, privacy issues, development baggage, etc, all conspire to make me believe that it is simply not competitive in that role.  More than anything though, I am convinced that succeeding as an exchange currency would be the death knell for Bitcoin in the form that it originally appealed to  me in.  (As a distributed crypto-currency broadly supported by a dispersed userbase.)  OTOH, it is almost ideal as a backing store or 'reserve currency' for some of these same reasons.


That would be (and will be) fine with me.  Fiat works perfectly well as an exchange currency and it offers the ability to leverage the legal system which I pay for with my taxes.

The legal system could very well fail me when trying to use mainstream instruments as a wealth storage medium because the larger corporate institutions have significant control of the legislative and executive branches (and the savings of my class of individual when taken as a group are worth expending the effort to appropriate.)  For that reason I am constantly on the lookout for a reliable and durable method of storing my nest-egg.  As time goes by without a rupture, Bitcoin looks like a more and more like a viable partial solution for this problem.

Outstanding!

+5

/Frank

Well, as with the mass adoption of personal computers and the mass adoption of the Internet by many millions of people, as I recall it was not near instant.

It required computer usage and the Internet, say, ten years or so to start to become mainstream - to reach a tipping point.  A decade. In geological terms that is Instant, perhaps, but in modern terms not so much.

Once that tipping point was reached, the herd moved in and adopted what we had already been using for years.

Your bank may not charge you fees for credit card transactions but payment processors sure do (http://en.wikipedia.org/wiki/Merchant_account#Transaction_fee).

Exactly. If you've ever run a small (or large) business and chose to accept credit cards you know all about the fees.... They suck. And all the payment processors have enthusiastic and persistent salespeople who are very clever about concealing hidden fees and surcharges and fine print that goes on for ten pages and .... blah... as you can see I'm not a big fan of payment processors in their current incarnation.

In my area I believe the standard fee is usually advertised at 1.5% and works out to about 4% by the time you've added all the hidden fees.