The snowball effect of bitcoin-only sale

[johnyj]

I'm thinking about a very interesting possibility:

With people's knowledge of money increasing everyday, sooner or later some large producer with excessive amount of cash flow and big interest in bitcoin will provide bitcoin-only sale for part of their high-end product line

That will create a miracle in business history: The more he sell, the more valuable his income will become due to rising demand for bitcoin. This will result in a snowball effect, more and more merchant will join the bitcoin-only sale campaign, and it will create a self-sustainable loop, until one day most of their sales become bitcoin-only

The great thing is, in such a scenario, producers have higher and higher motivation to expand their bitcoin-only sale line since the value of their income rise continuously compared to their fiat-only sale

The size of bitcoin economy is relatively small, it is enough to have just a few large producers to start this whole process and the effect will be observable

Since the bitcoin value is rising continuously due to their bitcoin-only sale, they will not need to spend all of the coins they earned due to rising purchasing power, and the number of coins spent is always less than the number of coins earned, there will always be rising demand for bitcoin

The only negative effect is for fiat money, now there are less goods chasing fiat money, its value will drop, but since the fiat money economy is a much larger scale, at the beginning this effect is negligible

Is there any flaw in this reasoning? Critics are welcome 

[phillipsjk]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  
• The market cap of Bitcoin is now high enough that one high-end product line won't move the price much.
• If successful, they will run into Bicoin scaling issues.

[silvergoldandbitcoin]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  
• The market cap of Bitcoin is now high enough that one high-end product line won't move the price much.
• If successful, they will run into Bicoin scaling issues.

What he said.

Somewhere down the line, fiat is required.

Unless the business can convince their direct supplier to accept BTC, it will be darn near impossible to produce a product funded solely with BTC.

[abdada]

Actually, I am working on a side project at one of my businesses that will be 100% BTC funded.

What we're doing is offering to buy used but in good condition white cotton (bedsheets or old shirts, whatever), launder them by hand (no fiat), cut them down by hand (no fiat), re-sew them into new shirts, print on them and have them ready for pickup.

I'll pay my labor guy in BTC (he already approved), and we'll only buy the cotton with BTC from locals via word of mouth and craigslist.

I think I can keep the entire chain in BTC, especially since we're working on our own ink manufacturing, too.

Of course there are fiat-bought tools that are in the mix, but these were puchased for cash long before BTC arrived on the scene.

[johnyj]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  
• The market cap of Bitcoin is now high enough that one high-end product line won't move the price much.
• If successful, they will run into Bicoin scaling issues.

It's important that producer have excessive amount of cash flow so they don't worry about the fiat payment for the latest 5 years for that special part of their product line

Imagine an extreme case: Apple with their hundreds of billions of USD in cash account have one of their best high end retina screen mini tablet only payable in bitcoin, what will happen? Clearly, Apple is going to make huge amount of profit due to their sale could push bitcoin price by at least one magnitude. And all the other manufacturers will follow

For scaling part, that might be a little bit tricky. I think as usual, they will rely on some large wholesalers in each country to distribute the product, so one transaction per month is enough for them. And for the wholesalers, they could use several offline transaction hub nodes for small transactions from individual buyer

[johnyj]

I accept bitcoin-only sales.

I am the owner of http://www.knives4bitcoin.com

The reason I only accept bitcoin is the exact points you bring up. I want to make bitcoin flourish and succeed separate from other currencies.

Great site, I like some of the knives there, high quality build

[pwi]

Actually, I am working on a side project at one of my businesses that will be 100% BTC funded.

What we're doing is offering to buy used but in good condition white cotton (bedsheets or old shirts, whatever), launder them by hand (no fiat), cut them down by hand (no fiat), re-sew them into new shirts, print on them and have them ready for pickup.

I'll pay my labor guy in BTC (he already approved), and we'll only buy the cotton with BTC from locals via word of mouth and craigslist.

I think I can keep the entire chain in BTC, especially since we're working on our own ink manufacturing, too.

Of course there are fiat-bought tools that are in the mix, but these were puchased for cash long before BTC arrived on the scene.

I like this idea and may borrow and mold it to fit my needs if that's OK? It is genius on so many levels. Good luck with your endeavor.

[Vince Torres]

If they have the money to put into a successful product there is no reason they would limit themselves to bitcoin commerce solely unless they were selling a product market towards bitcoin such as asics.

[johnyj]

If they have the money to put into a successful product there is no reason they would limit themselves to bitcoin commerce solely unless they were selling a product market towards bitcoin such as asics.

The main obstacle here is that fiat money has already occupied the position of transaction medium, people have little motivation to use another transaction medium if the seller does not accept bitcoin exclusively

You are buying something from an europe online merchant, they only accept Euro, you pay with your credit card, and the credit card company do the conversion: Buy euro at foreign currency exchange and pay the seller. So if more US people are buying europe products, then Euro's exchange rate will rise

It's the same for bitcoin economy, if more people are buying goods/services that only payable in bitcoin, then bitcoin's value will rise. On the contrary, if more people use bitcoins to buy products payable with fiat money, bitcoin's value will drop. For example the recent price drop is related to that kncminer was converting lots of coins to fiat money to pay their chip manufacturer who only accept US dollar

[atomium]

I agree with everyone's point in this thread, I think our main goal would be to get fully BTC funded businesses. The higher the demand the higher the price will go. It would be genius for a large company to only sale a product in bitcoin only, it will be the smartest move they could ever do. My idea is that if anyone ever does it it will be something in the technology space since it will have easier adopters.

[jaywaka2713]

If you want to buy gasoline in Bitcoin, you need to get Coal mining companies to accept it. Gasoline is refined using Coal. If the base resource of anything accepts Bitcoin, mass-adoption is bound to happen.

http://www.sciencedaily.com/releases/2011/07/110725190044.htm

As you can see here, an idea expands like wildfire once 10% of any population agrees with you. So, if we get 10% of online business to accept Bitcoin, the cycle begins on its own. If we get 10% of "base" companies like Coal mining companies or other resource companies (Iron refineries, metal mines, etc.), then the businesses above are bound to start accepting Bitcoin as well. It's all about the "target audience".

[atomium]

If you want to buy gasoline in Bitcoin, you need to get Coal mining companies to accept it. Gasoline is refined using Coal. If the base resource of anything accepts Bitcoin, mass-adoption is bound to happen.

http://www.sciencedaily.com/releases/2011/07/110725190044.htm

As you can see here, an idea expands like wildfire once 10% of any population agrees with you. So, if we get 10% of online business to accept Bitcoin, the cycle begins on its own. If we get 10% of "base" companies like Coal mining companies or other resource companies (Iron refineries, metal mines, etc.), then the businesses above are bound to start accepting Bitcoin as well. It's all about the "target audience".

+1

[Lethn]

I don't know if this is old news to you lot but you might still be interested, I think this is already happening, at least for the startups and such, there is a startup miner recently that popped up onto Bitcoinfunder.

https://bitfunder.com/asset/Kenilworth

[johnyj]

Just had this thought: Like German producers only accept Euro and Japanese producers only accept Yen, those producers who only accepting bitcoin will essentially form A COUNTRY, a country with its own currency, without government but exists everywhere on the planet 

[Francesco]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  
• The market cap of Bitcoin is now high enough that one high-end product line won't move the price much.
• If successful, they will run into Bicoin scaling issues.

What he said.

Somewhere down the line, fiat is required.

Unless the business can convince their direct supplier to accept BTC, it will be darn near impossible to produce a product funded solely with BTC.

That's where Ripple comes in. If you can convert your bitcoins on-the-fly to pay others who don't accept it -then it works.

[BitBank]

Here's a challenge:

Q:  How do we make large companies more willing to accept bitcoin?
A:  They need to be able to use them.  Employees must willingly accept them, and/or they could be used in the company's supply chain.

Q:  How do we get employees to accept bitcoin as payment?
A:  The would if they could buy groceries with them (something everyone needs weekly).

Q:  How do we get grocery stores to accept bitcion
A:  Make conditions such that employees would accept them, and they could be used in the company's supply chain.

Q:  How do you get employees to accept bitcoin?
A:  Get grocery stores to accept bitcoin

...
...

Catch-22.  Chicken-and-egg.

The real solution is to create micro-economies.  

1)  Get a local grocery store to accept bitcoin

2)  In theory, employees of that store would accept payment in BTC, at least partially, since they could use them to shop at the grocery store where they work.  This is also adventageous to the grocery store, since they will likely have a good portion of their own employees to shopping at their store.    

3)  Business A in town is approached to start accepting bitcoins.  Business A is informed that the grocery store is accepting bitcoins, so Business A knows that they could pay their employees partially in bitcoin, and the employees would accept it.

That is the real snowball effect.  It's not top-down, it's bottom up.  That's actually what we're working on at BitBank.  

[BitBank]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  
• The market cap of Bitcoin is now high enough that one high-end product line won't move the price much.
• If successful, they will run into Bicoin scaling issues.

What he said.

Somewhere down the line, fiat is required.

Unless the business can convince their direct supplier to accept BTC, it will be darn near impossible to produce a product funded solely with BTC.

That's where Ripple comes in. If you can convert your bitcoins on-the-fly to pay others who don't accept it -then it works.

It's not like you can just send ripples in company A's direction and they magically appear in that company's bank account.  There seems to be a large barrier to entry, even larger than if we tried to get businesses to use bitcoin.    

[silverfuture]

There is no reason a large company can't  accept bitcoins and exchange enough for suppliers and anyone else who doesn't take bitcoin.  Bitpay's service will exchange them on a daily basis at whatever ratio of bicoin to fiat is needed.  There are big incentives for first movers to start accepting them as any savings that company owns will likely shoot up in value as soon as the public announcement is made. The incentives are there, it's just a matter of time.

[johnyj]

Here's a challenge:

Q:  How do we make large companies more willing to accept bitcoin?
A:  They need to be able to use them.  Employees must willingly accept them, and/or they could be used in the company's supply chain.

Q:  How do we get employees to accept bitcoin as payment?
A:  The would if they could buy groceries with them (something everyone needs weekly).

Q:  How do we get grocery stores to accept bitcion
A:  Make conditions such that employees would accept them, and they could be used in the company's supply chain.

Q:  How do you get employees to accept bitcoin?
A:  Get grocery stores to accept bitcoin

...
...

Catch-22.  Chicken-and-egg.

The real solution is to create micro-economies.  

1)  Get a local grocery store to accept bitcoin

2)  In theory, employees of that store would accept payment in BTC, at least partially, since they could use them to shop at the grocery store where they work.  This is also adventageous to the grocery store, since they will likely have a good portion of their own employees to shopping at their store.    

3)  Business A in town is approached to start accepting bitcoins.  Business A is informed that the grocery store is accepting bitcoins, so Business A knows that they could pay their employees partially in bitcoin, and the employees would accept it.

That is the real snowball effect.  It's not top-down, it's bottom up.  That's actually what we're working on at BitBank.  

Even every merchant accept bitcoin, it does not automatically encourage people to get it and use it, the consumer just don't see the benefit of using bitcoin

When I travel to another country, I still prefer to pay with the currency of my own country, but most of the people there only accept their currency, I have to exchange and pay the exchange fee etc... For me, this is an extra step and always cause some loss during the exchange process

But, if that is a special product/service I really want from that country, then I will exchange the currency and pay for it without feel uncomfortable. Currently the main motivation that people exchange for bitcoin is the hope of bitcoin's price will rise and they will benefit from it, pure speculation. There are almost no real good products only exclusively sold in bitcoin so far (ASIC miners is an exception)

It's very funny that if you ask chinese people, most of them think this is a digital collection item, since collection item is always a hot topic in china

[PiaggioCaptain]

I run a small forum with 150 or so dedicated members. The site renewal came up and instead of asking for cash donations I posted my BTC wallet and only accepted BTC.

I received 0.00BTC.

Guys posted complaining that they wanted to give but couldnt figure out how to get BTC. I had posted links to various methods but it was too much of a PITA for anyone to do.

I think that's the barrier...it's too hard to convert your government money into BTC. Too hard and takes too long and costs too much.

[johnyj]

I run a small forum with 150 or so dedicated members. The site renewal came up and instead of asking for cash donations I posted my BTC wallet and only accepted BTC.

I received 0.00BTC.

Guys posted complaining that they wanted to give but couldnt figure out how to get BTC. I had posted links to various methods but it was too much of a PITA for anyone to do.

I think that's the barrier...it's too hard to convert your government money into BTC. Too hard and takes too long and costs too much.

Exactly, people tends to select the most easy way to pay, not exchange and pay

The only people that can pay right away are those bitcoin miners and early adopters, but after they spent their mining income and difficulty went to roof, they also have less motivation to spend their coins

Some virtual currencies in game have to be bought with fiat money, the gaming company usually provide an easy way to purchase those currencies. If you provide bitcoin-only sale, you should also provide your customer an easy way to purchase bitcoin, and that part of service should be provided by exchanges

[crumbs]

If i have a hot widget, and want to sell as many of them at the highest possible price, i should make purchasing it as frictionless as possible.  Today, this means accepting Bitcoin as an option -- making any form of payment exclusive can never help, but only hurt, the sales volume. 
If i then feel investing in Bitcoin is wise, all i'll need to do is buy Bitcoin.  As long as the cost of that transaction* is lower than the profits i've gained by making my widgets available in any currency, profit.  I can also pick & choose the timing & volume of my investment in Bitcoin, and profit from Bitcoin's volatility.

*Some of these costs could be discounted if you allow that the customers buying my widgets in "Bitcoin-only" sale would have to convert their fiat into Bitcoin, thus effectively increasing the fiat price of my widgets.

[countryfree]

Your reasoning is quite good but the problem is finding the leader who will start the revolution.

Can you imagine Apple selling its next iPhone 6 only in BTC?
Can you imagine Ford selling its next Mustang only in BTC?

Maybe David Bowie could sell its next songs only in BTC?

[johnyj]

If i have a hot widget, and want to sell as many of them at the highest possible price, i should make purchasing it as frictionless as possible.  Today, this means accepting Bitcoin as an option -- making any form of payment exclusive can never help, but only hurt, the sales volume.  
If i then feel investing in Bitcoin is wise, all i'll need to do is buy Bitcoin.  As long as the cost of that transaction* is lower than the profits i've gained by making my widgets available in any currency, profit.  I can also pick & choose the timing & volume of my investment in Bitcoin, and profit from Bitcoin's volatility.

*Some of these costs could be discounted if you allow that the customers buying my widgets in "Bitcoin-only" sale would have to convert their fiat into Bitcoin, thus effectively increasing the fiat price of my widgets.

At first glance this has the same effect as bitcoin-only sale, just you buy the coins later with all the income, but the point is promote mass adoption. If your customers are interested to buy bitcoin-only products, they might buy more coins than just your widget worth and some of those coins will support some other merchant's bitcoin-only sale later on

[johnyj]

Your reasoning is quite good but the problem is finding the leader who will start the revolution.

Can you imagine Apple selling its next iPhone 6 only in BTC?
Can you imagine Ford selling its next Mustang only in BTC?

Maybe David Bowie could sell its next songs only in BTC?

I'm afraid this is going to happen sooner or later, once you made some bitcoin-only sale, you might never look back at fiat

During the starting phase, some merchants might prefer that only 1% of their sales go to bitcoin, but soon they will find out that this part of the companies sale contribute more than other parts of the sales to the company's total revenue and then they will increase the percentage accordingly

It just a public awareness, I'm already planning bitcoin-only sale for some of my products and I will keep track on the status of those sales

[crumbs]

If i have a hot widget, and want to sell as many of them at the highest possible price, i should make purchasing it as frictionless as possible.  Today, this means accepting Bitcoin as an option -- making any form of payment exclusive can never help, but only hurt, the sales volume.  
If i then feel investing in Bitcoin is wise, all i'll need to do is buy Bitcoin.  As long as the cost of that transaction* is lower than the profits i've gained by making my widgets available in any currency, profit.  I can also pick & choose the timing & volume of my investment in Bitcoin, and profit from Bitcoin's volatility.

*Some of these costs could be discounted if you allow that the customers buying my widgets in "Bitcoin-only" sale would have to convert their fiat into Bitcoin, thus effectively increasing the fiat price of my widgets.

At first glance this has the same effect as bitcoin-only sale, just you buy the coins later with all the income, but the point is promote mass adoption. If your customers are interested to buy bitcoin-only products, they might buy more coins than just your widget worth and some of those coins will support some other merchant's bitcoin-only sale later on

I understand that mass adoption is the goal here.  But unless i'm mistaken, you're implying that beyond that, the seller would also profit financially by limiting his customers to Bitcoin-only transactions.  If that's the case, i'd like to understand the logic behind that claim, specifically how trading in Bitcoin exclusively would benefit me more than simply offering Bitcoin as an option.
If i misunderstood, and you're simply calling for merchants to ignore profits & selflessly promote Bitcoin, i'm with you.

[johnyj]

I understand that mass adoption is the goal here.  But unless i'm mistaken, you're implying that beyond that, the seller would also profit financially by limiting his customers to Bitcoin-only transactions.  If that's the case, i'd like to understand the logic behind that claim, specifically how trading in Bitcoin exclusively would benefit me more than simply offering Bitcoin as an option.
If i misunderstood, and you're simply calling for merchants to ignore profits & selflessly promote Bitcoin, i'm with you.

From just your business point of view, getting more sales should be more important. But it could take some time to see the ripple effect of bitcoin-only sale: After some of your customers learned to get bitcoin and pay for your products, they will realize many benefits of bitcoin, and spread the words to others and get more people involved. And the more people start to provide bitcoin-only sales, the more popular bitcoin will become, demand rise, value increase

If merchants simply offering bitcoin as a payment option, this ripple effect might never happen, people will just ignore the bitcoin and pay with fiat, they simply don't have the motivation to get bitcoin at the first place

[FreeMoney]

My site only accepts bitcoin. To accept old style money would probably put us out of business one way or another.

[countryfree]

My site only accepts bitcoin. To accept old style money would probably put us out of business one way or another.

Congratulations, but we need more, an iconic product that everybody wants to buy. Ice-cream would be nice. Imagine it would be impossible to buy an ice-cream without bitcoin. That would make BTC really successful. Maybe it could be done in one town for one day for a start.

[johnyj]

Today I passed by the local post office and saw that on their credit card reader terminal there is a small piece of instruction of how to use mobilephone to pay a certain bill:
1. Launch an app called Bart issued by the local banks
2. Input the amount of money they want to pay
3. Scan the QR code from local merchants' terminal
4. Pay, merchant terminal will issue a confirmation in couple of seconds

I think this is exactly how bitcoin should be used

From an user point of view, people have to first buy credits and store them in Bart app, that is the same as buying bitcoin and store them in an online wallet account, the only difference is that user's bank might directly give user the app and connect the app to their bank account, while purchase of bitcoin is still problematic

[Stampbit]

Not possibility, fantasy, no one is using bitcoin for legitimate purchases, just look at bitcoinstores sales figures. This correlates with my own business. Looks like paypal was right.

[johnyj]

Not possibility, fantasy, no one is using bitcoin for legitimate purchases, just look at bitcoinstores sales figures. This correlates with my own business. Looks like paypal was right.

I just saw someone bought Humble Bundle with bitcoin 
https://bitcointalk.org/index.php?topic=243164.0

[AliceWonder]

• Their suppliers and employees want to be paid in FIAT. Since all of their suppliers want to be paid in FIAT.
  

Yes, but that also is a positive.

My model (currently early development) will basically have two wallets kept separate.

Wallet A - just has bitcoin purchased via fiat.
Wallet B - just has bitcoin paid by customers. Wallet B gets sold for fiat.

Keeping them separate means transactions can't be tracked from buyer to supplier. It also ads some cost but if I'm smart I can sell high and buy low and come out ahead.

So doing business that only accepts bitcoin but keeps incoming and outgoing separate means more money moving through the exchanges and more money moving through the exchanges actually helps stabalize the price and stable price means more people are willing to risk using the currency for their on-line purchases which means a predictable stable increase in the value of bitcoin.

In my mind anyway, I'm not exactly mr. business whiz.

EDIT - what I was trying to say is it doesn't matter in my model because all incoming bitcoin will be sold for fiat anyway.
So suppliers who want to be paid in fiat will be paid in fiat and suppliers who want to be paid in bitcoin will have to be paid in bitcoin I purchased with fiat because I don't want the blockchain used to track my business.

This moving of coin in and out of the exchanges will help stabalize the cost of bitcoin to some degree because I'll be sellling at least once a month if not more often and probably buying at least once a once. As lots of business do that, it helps dampen the effects of people dumping on the exchanges.