Easiest way to explain Bitcoin

[Epicurus]

I'm a long-time online merchant (going back to the 90s) with multiple partners, employees, and investors. I like bitcoin, and I'm interested in it, but one roadblock I've come up against multiple times is a concise, layman's explanation of Bitcoin and why the average consumer should care.

Anyone have good suggestions for an explanation of bitcoin that is oriented completely towards the practical? Either a video or a visual presentation of some kind is best.

I've watched videos and read presentations but so far everything I've read either ends up devolving into idealism or geeking out on tech. Neither is useful to the average consumer, to whom Bitcoin acceptance is key to its future success.

[zoinky]

It's not easy enough yet.  People won't care till governments start to fu.. oh wait.

[Epicurus]

It's not easy enough yet.  People won't care till governments start to fu.. oh wait.

I'm not asking people to care. I'm asking for a tool to help me make people care.

[Stephen Gornick]

layman's explanation of Bitcoin

These videos are good:
 - http://vimeo.com/63502573
 - http://www.youtube.com/watch?v=Y-w7SnQWwVA
 - http://www.youtube.com/watch?v=EA0LkCkvUeU

and why the average consumer should care.

That will be very specific to each business and each consumer.

A person who likes to play poker online will care about bitcoin different from the next person.

Plus, many of the advantages that should be here now with Bitcoin are still out of reach.  For instance, merchants can pass along their savings when accepting Bitcoin by offering a discount for that payment method and gain a competitive advantage.  But few do this today.   But if a customer was offered a 3% discount on the bill if paid using bitcoins, that alone might be enough to cause the average consumer to want to use Bitcoin.  But today the cost to acquire coins (via exchange) offsets that gain and thus offers no economic incentive.

The Bitcoin Education Project might be a resource that will help in this area:
 - http://btcedproject.org

[nii236]

The best way to teach would probably be to have an example. As soon as I sent my buddy overseas 10mBTC, it all clicked together.

[Epicurus]

That will be very specific to each business and each consumer.

That's a big problem! Fiat currency is universally useful to to every legitimate business and consumer, and btc needs to be as well if it's to have a long-term role in the world.

A person who likes to play poker online will care about bitcoin different from the next person.

That's an almost irrelevant minority from the perspective of long-term success for bitcoin. Same with basically everything sold on silk road.

Plus, many of the advantages that should be here now with Bitcoin are still out of reach.  For instance, merchants can pass along their savings when accepting Bitcoin by offering a discount for that payment method and gain a competitive advantage.  But few do this today.   But if a customer was offered a 3% discount on the bill if paid using bitcoins, that alone might be enough to cause the average consumer to want to use Bitcoin. 

That's because today there is no competitive advantage to bitcoin. For one, you're telling consumers to use a payment method that is objectively worse for them. There is no insurance at all for the consumer with btc payments currently. If they use Visa/Mastercard/Paypal to buy stuff from me, Visa/Mastercard/Paypal will protect them to some degree. As a merchant, that is incredibly valuable, because I'm not Amazon. I don't have a reputation large enough to precede me, and so I depend on the payment protection that Visa/Mastercard/Paypal offer my customers to ensure that the first time they buy with me (ie before trust is established), they can feel indisputably safe.

As an example, I just bought a $1300 camera from a store in Taiwan over Ebay. I'd never have paid them in BTC, because if they screw me over, I have no recourse. With Visa I have recourse, and Ebay adds an extra layer of protection for me on top of that.

That's the kind of thing that bitcoin needs to explain to consumers. If it's not there, then there's no reason at all for most consumers to use bitcoin, and it will remain a niche currency that isn't useful for most purchases.

[Epicurus]

layman's explanation of Bitcoin

These videos are good:
 - http://vimeo.com/63502573
 - http://www.youtube.com/watch?v=Y-w7SnQWwVA
 - http://www.youtube.com/watch?v=EA0LkCkvUeU

Thanks btw! Watching those now.

[Epicurus]

These videos are good:
 - http://vimeo.com/63502573
 - http://www.youtube.com/watch?v=Y-w7SnQWwVA
 - http://www.youtube.com/watch?v=EA0LkCkvUeU

Just watched part of them, at least. Comments.

The first (http://vimeo.com/63502573) goes all nerdy and idealistic in the first two sentences. Who cares. Tell me how it saves me money/convenience as a consumer, or at least how it might in the future.

The second has the same problem, but the presentation is worse.

Same with the third.

What's needed is something that a dude living in Atlanta watching Nascar can understand in a 30 second tv commercial.

Seriously. Bitcoin will never have the kind of long-term impact it's dreamed of having unless that happens, in effect.

[AliceWonder]

One of the things I like about bitcoin from consumer perspective is it is a hell of a lot safer.

My fanancial information simply isn't being transmitted over the net or stored on someone else's server.

[Melbustus]

That's because today there is no competitive advantage to bitcoin.
...

1) It's cheaper; ie, pennies to send a transaction of any size, not a fixed 2-3%. As someone noted above, merchants could pass those savings along.

2) Consumers do not expose ANY sensitive information when they execute a transaction, unlike every means of electronically sending fiat. As a consumer, I will not use a credit-card on sites that I don't have a good reason to already trust because I know that I'm handing them everything needed to steal a bunch of money from me if they're dishonest (or simply lax in their own IT security). Yes, there's recourse with credit-cards if fraud happens, but even in the best case scenario, it's a big pain to correct; and in the worst case, far more than my transaction amount can be lost.

3) Privacy (pseudo-anonymity), potentially.

[Epicurus]

One of the things I like about bitcoin from consumer perspective is it is a hell of a lot safer.

My fanancial information simply isn't being transmitted over the net or stored on someone else's server.

Well, you have to ask yourself, "What information?" The entire history of every btc you and anyone else has ever spent is publicly accessible, for instance. It is, in fact, being transmitted to everybody who cares to look. That is very much unlike a bank account.

The difference is that your identity might(might!) be decoupled from the information in the blockchain, depending on the lengths you've gone to anonymize your transactions. Bitcoin is, however, designed from the ground up to permit 100% disclosure of all transactions via the blockchain, unless I'm mistaken (and many of you know a lot more about btc than I do, so apologies if that's an incorrect assertion.)

There are different kinds of privacy. I don't consider a currency that has a public record of how it is spent to be particularly private, though it is more private in some ways and less private in others than fiat currency.

[dave111223]

That will be very specific to each business and each consumer.

That's a big problem! Fiat currency is universally useful to to every legitimate business and consumer, and btc needs to be as well if it's to have a long-term role in the world.

Hmm...got quite a few dollar bills in my cupboard from my last visit to the US...but they don't seem very "universally useful" to me at the moment...?

[Epicurus]

1) It's cheaper; ie, pennies to send a transaction of any size, not a fixed 2-3%. As someone noted above, merchants could pass those savings along.

But see, one of the reasons it is cheaper is because there is no insurance for the consumer. One of the reasons that Visa/Mastercard/Paypal charge transaction fees is because they offer insurance on transactions. That's worth something, and bitcoin currency doesn't offer that option for the most part. So it is nominally cheaper, but if you get ripped off enough, it may well effectively be more expensive.

2) Consumers do not expose ANY sensitive information when they execute a transaction, unlike every means of electronically sending fiat. As a consumer, I will not use a credit-card on sites that I don't have a good reason to already trust because I know that I'm handing them everything needed to steal a bunch of money from me if they're dishonest (or simply lax in their own IT security). Yes, there's recourse with credit-cards if fraud happens, but even in the best case scenario, it's a big pain to correct; and in the worst case, far more than my transaction amount can be lost.

3) Privacy (pseudo-anonymity), potentially.

As a consumer, I won't use bitcoin, period, on any site that doesn't have a great reputation (virtually none), because I have literally no recourse if I'm ripped off.

I've had people steal my credit card info (not the card itself) and proceed to run up $16,000 in charges. The credit card company just took care of that for me, at zero charge to me other than a bit of time. Until Bitcoin can offer that kind of protection, it will always be a niche currency at best. With Visa/Mastercard, I don't have to trust the site I'm on. I can spend money without thinking about it, because they've got my back. THAT is why they get their 2-3% from merchants, which the bitcoin community generally seems to fail to understand.

Happily, there are going to be well-backed companies that prove they deserve the kind of investment it will take to fund the creation of the insurance required for that trust, and they'll get that investment. Bitcoin isn't there yet though, and ultimately the different between bitcoin and Visa/Mastercard is probably going to be under 1%....but that's enough to build huge businesses off of given the size of the global retail market.

[dave111223]

That's because today there is no competitive advantage to bitcoin. For one, you're telling consumers to use a payment method that is objectively worse for them. There is no insurance at all for the consumer with btc payments currently. If they use Visa/Mastercard/Paypal to buy stuff from me, Visa/Mastercard/Paypal will protect them to some degree. As a merchant, that is incredibly valuable, because I'm not Amazon. I don't have a reputation large enough to precede me, and so I depend on the payment protection that Visa/Mastercard/Paypal offer my customers to ensure that the first time they buy with me (ie before trust is established), they can feel indisputably safe.

As an example, I just bought a $1300 camera from a store in Taiwan over Ebay. I'd never have paid them in BTC, because if they screw me over, I have no recourse. With Visa I have recourse, and Ebay adds an extra layer of protection for me on top of that.

That's the kind of thing that bitcoin needs to explain to consumers. If it's not there, then there's no reason at all for most consumers to use bitcoin, and it will remain a niche currency that isn't useful for most purchases.

It's interesting that you refer to yourself as "a long-time online merchant" yet you seem to only understand the consumer side of the equation?

I have a company, if customers are worried about me being a scam artist they can search for my company, they will soon find people of various forums, and social media talking about how good my company is and how they ordered...
Customer now can trust me..pretty easy...

Now say "johnsmith@hotmail.com" orders from me...how exactly can I check if he's trustable?   I search for him...no results...

It's easy to verify the trust in a merchant/company, very difficult to verify the trustability of a customer...so why then are all our existing financially systems setup so protect consumers at the expense of merchants?

[Epicurus]

That will be very specific to each business and each consumer.

That's a big problem! Fiat currency is universally useful to to every legitimate business and consumer, and btc needs to be as well if it's to have a long-term role in the world.

Hmm...got quite a few dollar bills in my cupboard from my last visit to the US...but they don't seem very "universally useful" to me at the moment...?

Unsure where you live, but unless it's on a deserted island, you have money changers you can reliably take your dollars to and convert into your local currency. If you live anywhere near an urban area, you have dozens of hundreds of options, whose reliability may vary not much at all (Europe/US) or widely (2nd and 3rd world). Regardless though, you'll have many options.

Part of a currency's value is in how universally it is accepted as a storage of value, and the dollar is way up there. Bitcoin has a very long way to go to becoming universally recognized, much less universally recognizes as having value.

[dave111223]

I've had people steal my credit card info (not the card itself) and proceed to run up $16,000 in charges. The credit card company just took care of that for me, at zero charge to me other than a bit of time. Until Bitcoin can offer that kind of protection, it will always be a niche currency at best. With Visa/Mastercard, I don't have to trust the site I'm on. I can spend money without thinking about it, because they've got my back. THAT is why they get their 2-3% from merchants, which the bitcoin community generally seems to fail to understand.

And who do you think had to pay for the $16,000?

Did you have to pay it?  No
Did the credit card company had to pay it? No
Did they get the money back from the criminal?  No

So where did they get your money back from?  They stole it back from the honest merchants who though they could trust you and your credit card.

[dave111223]

That will be very specific to each business and each consumer.

That's a big problem! Fiat currency is universally useful to to every legitimate business and consumer, and btc needs to be as well if it's to have a long-term role in the world.

Hmm...got quite a few dollar bills in my cupboard from my last visit to the US...but they don't seem very "universally useful" to me at the moment...?

Unsure where you live, but unless it's on a deserted island, you have money changers you can reliably take your dollars to and convert into your local currency. If you live anywhere near an urban area, you have dozens of hundreds of options, whose reliability may vary not much at all (Europe/US) or widely (2nd and 3rd world). Regardless though, you'll have many options.

Part of a currency's value is in how universally it is accepted as a storage of value, and the dollar is way up there. Bitcoin has a very long way to go to becoming universally recognized, much less universally recognizes as having value.

Yes I can also convert Bitcoins into my local currency, so why are USD universally more useful to me?  I can't buy anything with my dollar bills (or is there a slot on my computer somewhere that I can push them in?)

I can buy things with my Bitcoins, I bought a domain from namecheap yesterday.

[Epicurus]

That's because today there is no competitive advantage to bitcoin. For one, you're telling consumers to use a payment method that is objectively worse for them. There is no insurance at all for the consumer with btc payments currently. If they use Visa/Mastercard/Paypal to buy stuff from me, Visa/Mastercard/Paypal will protect them to some degree. As a merchant, that is incredibly valuable, because I'm not Amazon. I don't have a reputation large enough to precede me, and so I depend on the payment protection that Visa/Mastercard/Paypal offer my customers to ensure that the first time they buy with me (ie before trust is established), they can feel indisputably safe.

As an example, I just bought a $1300 camera from a store in Taiwan over Ebay. I'd never have paid them in BTC, because if they screw me over, I have no recourse. With Visa I have recourse, and Ebay adds an extra layer of protection for me on top of that.

That's the kind of thing that bitcoin needs to explain to consumers. If it's not there, then there's no reason at all for most consumers to use bitcoin, and it will remain a niche currency that isn't useful for most purchases.

It's interesting that you refer to yourself as "a long-time online merchant" yet you seem to only understand the consumer side of the equation?

I have a company, if customers are worried about me being a scam artist they can search for my company, they will soon find people of various forums, and social media talking about how good my company is and how they ordered...
Customer now can trust me..pretty easy...

Now say "johnsmith@hotmail.com" orders from me...how exactly can I check if he's trustable?   I search for him...no results...

It's easy to verify the trust in a merchant/company, very difficult to verify the trustability of a customer...so why then are all our existing financially systems setup so protect consumers at the expense of merchants?

I understand the customer side of the equation because that's the side that matters. I make money when customers feel safe in spending their money with me. Happily, Visa/Mastercard/Paypal assist both us and the customers by providing a trusted, regulated intermediary. We can certainly be ripped off by customers, and sometimes are, but that's our business to manage. If someone should bear the burden here, it should be the person whose enterprise is this, rather than the person who just needs to buy something. The merchant is more equipped to deal with the consequences of trust, in other words, in those cases where the third-party intermediary (visa/mastercard/paypal)'s guarantees aren't sufficient.

[AliceWonder]

One of the things I like about bitcoin from consumer perspective is it is a hell of a lot safer.

My fanancial information simply isn't being transmitted over the net or stored on someone else's server.

Well, you have to ask yourself, "What information?" The entire history of every btc you and anyone else has ever spent is publicly accessible, for instance.

But not in a form where someone else can spend it. And it would be as difficult to tie to me, from the blockchain anyway, as I want it to be.

[Stephen Gornick]

and it will remain a niche currency that isn't useful for most purchases.

Bitcoin doesn't have to be useful in every situation for it to grow.  If bitcoin were used just for online gambling, or just for remittance payments, or certain other specific uses, that would be enough.  But since Bitcoin can serve all these plus more expect it to permeate other areas as well.    But if your Nascar fan never knows of nor cares about Bitcoin a few years from now, that's not failure.

As far as credit cards giving protection, that's correct and something not available currently (without using escrow).  

But you as a consumer are paying for that.  The difference is that when a merchant includes the cost of the payment card fee into the price, every customer pays the higher price regardless of payment method used.  So currently, credit card customers are being subsidized by customers paying cash.    But certain types of business that are considered high risk already pay a higher rate, and they will be among the first to have an incentive to accept bitcoin and pass along the savings to the customer.

High Risk Merchant Accounts
 - http://bitcointalk.org/index.php?topic=73694.0

So when you pay for an airline ticket with credit card the fare is several percent higher than it should be.  So if your ticket is $400 with credit card or the equivalent of $388 with Bitcoin, and it is a non-refundable ticket anyway, what payment method are you going to choose?

So then those that still choose to pay with credit card do so because they plan to use the customer protection -- thus the cost of fraud on a per-dollar basis rises and the merchant fees have to rise.   It's a self-reinforcing trend.   A larger share of the remaining credit card transactions will be fraudulent, allowing the cash/bitcoin discount to become larger, which pushes more of the non-fraudulent activity over to the cash/bitcoin method.

Additionally, at the restaurant that has "Cash only", I don't get the option to say that I prefer credit card.  If that's the only payment method they accept then that's how I pay.   So when Nascar Bob wants tickets to a sold-out race and the seller only accepts Bitcoin payment, Bob will follow whatever instructions he needs to do to get his tickets.   Today, those instructions could be as simple as: "go to Seven Eleven, pay the cashier exactly NNN.NN dollars for a Moneygram bill payment transaction".  Boom.  Done.  Bob just made a purchase using Bitcoin and still doesn't have to know a thing about Bitcoin.