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Author Topic: Let's crack this chicken/egg problem  (Read 2702 times)
BradZimdack
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July 01, 2011, 05:33:46 AM
 #1

First of all, let me say that I really, really want Bitcoin to succeed as an ubiquitous form of online payment.  Speaking primarily from the merchant side of things, I see enormous potential to bust up the Visa/MC monopoly so as to free merchants and customers, not just from their exorbitant fees, but their strong-arm control of open trade as well.

To make that happen, we need to get cracking on this fast.  Time is not on our side.  Bitcoin is already on the radar as a potential threat to services like Paypal, other corporations (like Google) are working rapidly to bring proprietary payment solutions to market, and the world may be headed for a double-dip recession that will make the first dip look like a tiny divot.  (If the latter occurs before Bitcoin is well enough established to serve as a safe haven asset, we're ruined.  It will dry up much needed venture capital, ensuring that we never get off the ground.)

The challenges are great, but I believe we can succeed.  Bitcoin is a brilliant concept and this community has a tremendous array of talents and expertise.  We can make this happen, but it's time to come up with a serious plan for the next step.

The biggest obstacle I see right now is a classic chicken and egg problem.

Problem 1: The egg.
Customers have no incentive to use Bitcoin because very few merchants accept it, they can already get everything they need with dollars, and getting started with Bitcoin is too difficult.

Problem 2: The chicken.
Merchants have no incentive to accept Bitcoin because no one uses it.  Until it gets to the point where a good 5-10% of sales are paying with Bitcoin, the development, administrative, and bookkeeping overhead will exceed the value of accepting it.

As with any chicken and egg problem, both must be solved simultaneously.  I've been thinking about this non-stop for weeks now but have yet to solidify a concrete idea that would work.  But here's what I've got so far:

Solving the egg:
An online wallet is absolutely the way to go to get the Average Joe involved.  Joe can understand signing up on a web site, opening an account with some service, and holding an online balance.  He won't ever be able to figure out how to install a client, download the block chain, secure his wallet, or even understand what any of that means.  We need someone who can make a very professional looking easy to use online wallet service that appeals strictly to new users.  It will have to get them started with some initial amount of coin too.  So, what if this site charged a $10 sign-up fee (via credit card) and included some small amount of coin, which would be sold at a 2x-3x markup over market price?  Between the high markup and credit card security features such as AVS with IP geo-location, I think the fraud risks could be mitigated reasonably well.  If a customer wanted to add more than his small starting coin to his account, he'd have to procure them elsewhere.

Solving the chicken:
This is where my idea is a little hazy, but I think we need a service that accepts Bitcoin exclusively and couldn't even exist without it.  I can buy alpaca socks anywhere, and I can get much better price and selection if I shop around.  But if I wanted a Widget X, and Widget X Corp. only accepts Bitcoin, and no one else sells Widget X's, I'd have no choice but to go to that online wallet site and open an account.  So what is it that does not yet exist anywhere else and can only exist because of Bitcoin?  I'm thinking it will have to be something that takes advantage of its micropayment capabilities.  That's something no other payment system can presently compete on.  What if it were some site that offered a really awesome tic-tac-toe game for 0.01 BTC per match?  But instead of tic-tac-toe, make it something that people would actually want and couldn't easily get anywhere else.

We just need to get the ball rolling a little bit, then the venture capital will be willing to step in.  If we can show some forward momentum, I can bring massive resources to the table.  I have connections to large amounts of venture capital and experts in web programming, graphic design, sales, marketing, and business management.

So for now I ask, Is there anyone here who wants to participate in an effort to solve the egg, and does anyone have ideas on a type of product or service that could solve the chicken?
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July 01, 2011, 05:41:08 AM
 #2

Here's one idea:

Some private company opens up a business selling 'giftcards' (which contain BTC) to businesses that already accept BTC. As people go into the businesses/website/etc, they'll see that they can not only use them at the store which they purchased them from but any other store that accepts this weird 'e-currency' the average Joe is so unfamiliar with.

This will in-turn incentivize other businesses to start accepting BTC to promote business, as they'll notice that whenever a business opens up that accepts BTC, they receiving an influx of new customers.

It's a fact that people buy giftcards, especially if the cards offer discounts.

And businesses would be motivated to sell these giftcards to promote business.

DO IT
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July 01, 2011, 05:43:14 AM
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I'm currently working on a startup that plans to solve the egg.

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July 01, 2011, 05:50:51 AM
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Thoughts on the Chicken:
Finding a service that plays to bitcoins strengths is tough. Naturally a pseudonymous distributed currency will finds its niche with services matching those needs. Sounds illegal or immoral (silkroad/wikileak donations/porn) to the 'average' user. Personally, I think these services will be (are?) an excellent initial driving force for bitcoin adoption. But people will complain that we also need 'legit' businesses taking up bitcoin. But what legit businesses have strong needs that match bitcoins strengths? If you find out, tell the community, so we can drive adoption there too. Lower fees might seem like another obvious market, but history has shown that the market will rather pay for easy, than have free. And right now bitcoin is just too much work to save a few payment fees (the solution here is to build more infrastructure!).

Any intelligent fool can make things bigger, more complex and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction.
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July 01, 2011, 06:16:14 AM
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Here's one idea:

Some private company opens up a business selling 'giftcards' (which contain BTC) to businesses that already accept BTC. As people go into the businesses/website/etc, they'll see that they can not only use them at the store which they purchased them from but any other store that accepts this weird 'e-currency' the average Joe is so unfamiliar with.

This will in-turn incentivize other businesses to start accepting BTC to promote business, as they'll notice that whenever a business opens up that accepts BTC, they receiving an influx of new customers.

It's a fact that people buy giftcards, especially if the cards offer discounts.

And businesses would be motivated to sell these giftcards to promote business.

A lot of business wont want their gifcards to be able to be spent at other places (especially competitors). The only business who will support this will be ones that have something to gain, i.e. they are probably obscure businesses. You will have a hard time convincing the ones that have a lot to lose. After all, one of the central ideas of a giftcard is that you have to spend it at the shop, right? Guaranteed sale!

Any intelligent fool can make things bigger, more complex and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction.
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July 01, 2011, 06:23:03 AM
 #6

So sell them on 34th street and call them 34th street giftcards and refer people to the movie for deeper insight.

-MarkM-

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Alex Thornton
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July 01, 2011, 06:27:09 AM
 #7

The entire point of a appreciating currency is to by-pass the whole chicken and the egg problem. That's one of the reasons Satoshi is so brilliant. If the currency is worth an astronomical sum, both consumers and merchants will jump at it.

This is not to say we shouldn't work on the problems the OP list. I'm just not so concerned about "running out of time".
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July 01, 2011, 06:30:38 AM
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The entire point of a appreciating currency is to by-pass the whole chicken and the egg problem. That's one of the reasons Satoshi is so brilliant. If the currency is worth an astronomical sum, both consumers and merchants will jump at it.

This is not to say we shouldn't work on the problems the OP list. I'm just not so concerned about "running out of time".

More or less this.

We just have to worry about the social and political aspects of Bitcoin so it sails smoothly to acceptance.

This thread has its place though. Speeding up this process is of course good for early adopters.

DO IT
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July 01, 2011, 06:38:57 AM
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I don't see the advantages of Bitcoin in its current form for consumers of hard goods (that aren't illicit).  What are they?

I can see the potential for independent artists/designers/programmers/etc. to take donations per download (for example), but only if there were decent infrastructure to put up a "Donate Bitcoins" button and have a wallet that didn't require days of energy/research/worry to protect from theives.  But then I see the same potential for other future micropayment solutions, too.  I mean, if gmail users don't mind giving access to their data in return for storage space, what makes anyone think they'd care that a google micropayment system is centralized?

There is an advantage to Bitcoin for online porn-- there people really do care that they're sending some random number instead of (explicit) identifying info about themselves.  (But who the hell pays for porn?)
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July 01, 2011, 06:45:37 AM
 #10

I have been trying for decades to do something that the nightmare world of fiat currencies violently opposes at every turn, it seems, at least until it has aquired uncreative control, airbrushed and dolby'd all the vital  ingredients out of it, mashed it into pablum, removed taste odour and other sensibilities and turned it into just another way of preventing it from being done whilst pretending to be getting it done.

It seems likely still in fact, despite how brilliant Bitcoin is, that even bitcoin might not be sufficient to the task.

So here is the simplified baby-step dream:

Now that we don't have to worry about "money", "currency", and all that legalistic nightmare, maybe we can finally actually play games, maybe even games where it is only the forces of evil who are all tied up into ghastly knots of greed and mangerous dogs and oh such concern and worry about what is pretty much, actually, little if anything more than a bunch of protons, electrons, neutrons, photons and their various actual or imagined or hypothetical components.

Yada yada yada, the hash of my file converts into a better genetic program than yours, and your genetic program isn't even a carbon-based lifeform, ha ha so there, take that you silicon-based monstrosity, who cares, lets make a gold-based lifeform if you love gold so much, maybe a clan of dwarves known as Midans?

Whatever. Sheesh. My character can't have certain sequences of bits in his her or its wallet in *your* game? So what? Maybe it is not *your* game we are trying to play.

-MarkM- (No supper if I don't complete the level by bedtime? That is *gambling*, how dare you suggest such a thing!)

(tl;d or whatever they notation is: short form is we dont use money the closest we come to it is playing with crypted bits.)

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July 01, 2011, 06:49:01 AM
 #11

I'm already producing but now planning on releasing my an indie 3D PC game in BTC. That would be some chicken solving. Care to invest? Smiley
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July 01, 2011, 08:13:22 AM
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I think the biggest problem right now is.. where do you buy Bitcoins? Seriously, where does the average person buy bitcoins right now? The exchanges? No way!
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July 01, 2011, 08:14:59 AM
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I think the biggest problem right now is.. where do you buy Bitcoins? Seriously, where does the average person buy bitcoins right now? The exchanges? No way!

Why not? (honest question).
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July 01, 2011, 08:19:45 AM
 #14

Solving the chicken:

Modify Currency generation rules as described here:
http://forum.bitcoin.org/index.php?topic=19130.0

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July 01, 2011, 08:23:39 AM
 #15

The hoops you have to go through to use the exchanges are not very trivial.

It would maybe be better to leave Bitcoin to the grownups, and instead play with Kidcoins, dirt cheap easy kiddie coins no-one thinks will ever be worth much so no-one has any qualms about selling them or even giving them away, other possibly than being concerned that they might almost be kind of sleazing or cheating by actually accepting money for the things instead of treating them as a loss leader educational tool to splatter all over everywhere so everyone can at no cost play with all the concepts and systems as long as they like, maybe even long enough that their fiat will actually make it into one of the exchanges so they can play with Real Bitcoins.

-MarkM- (Of course bitNicKeLs are far far too valuable to be casually thrown around like that, sorry, they'll cost you in Real Bitcoin... Wink)

(P.S. of course no-one ever heard of testnet, right?)

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July 01, 2011, 08:36:13 AM
 #16

I think the biggest problem right now is.. where do you buy Bitcoins? Seriously, where does the average person buy bitcoins right now? The exchanges? No way!

Why not? (honest question).

I honestly couldn't imagine anyone in my family wiring USD to mtgox (from a GBP bank account), going thru the process of trading then pulling the bitcoins back to the client (which no one in my family really understands)

Now, if there was a website where you could buy bitcoins into an online account with a credit card in a few minutes, then have them (almost) instantly usable with a barcode enabled smartphone app, that would be different.
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July 01, 2011, 08:42:21 AM
 #17

I honestly couldn't imagine anyone in my family wiring USD to mtgox (from a GBP bank account), going thru the process of trading then pulling the bitcoins back to the client (which no one in my family really understands)

Now, if there was a website where you could buy bitcoins into an online account with a credit card in a few minutes, then have them (almost) instantly usable with a barcode enabled smartphone app, that would be different.

Something like this? http://www.bitcoin.com.es/ (its in Spanish and I have no relation of any kind with that webpage)
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July 01, 2011, 08:46:59 AM
 #18

I think the biggest problem right now is.. where do you buy Bitcoins? Seriously, where does the average person buy bitcoins right now? The exchanges? No way!

Why not? (honest question).

I honestly couldn't imagine anyone in my family wiring USD to mtgox (from a GBP bank account), going thru the process of trading then pulling the bitcoins back to the client (which no one in my family really understands)

Now, if there was a website where you could buy bitcoins into an online account with a credit card in a few minutes, then have them (almost) instantly usable with a barcode enabled smartphone app, that would be different.

+1

Same here. I talk to people about it and then they say "That sounds great! How do I get some?" ... "Urmm well.. I can buy some for you via #bitcoin-otc and then just transfer the balance to my bank account"... "...oh.".

Maybe it's just a GBP thing.

The encouraging thing is the... "that sounds great!" part.
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youtube.com/ericfontainejazz now accepts bitcoin


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July 01, 2011, 08:49:20 AM
 #19

Solving the chicken:
This is where my idea is a little hazy, but I think we need a service that accepts Bitcoin exclusively and couldn't even exist without it.  I can buy alpaca socks anywhere, and I can get much better price and selection if I shop around.  But if I wanted a Widget X, and Widget X Corp. only accepts Bitcoin, and no one else sells Widget X's, I'd have no choice but to go to that online wallet site and open an account.  So what is it that does not yet exist anywhere else and can only exist because of Bitcoin?  I'm thinking it will have to be something that takes advantage of its micropayment capabilities.  That's something no other payment system can presently compete on.  What if it were some site that offered a really awesome tic-tac-toe game for 0.01 BTC per match?  But instead of tic-tac-toe, make it something that people would actually want and couldn't easily get anywhere else.

+1.

I think the killer app will be BandCamp but payment with bitcoins instead of paypal.  Or for that matter, any downloading or filesharing site whereby you don't have to give 35 cents out of your dollar donation to paypal's corporate behemoth.

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
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July 01, 2011, 08:59:24 AM
 #20

Something like this? http://www.bitcoin.com.es/ (its in Spanish and I have no relation of any kind with that webpage)

That's nice that you don't have to do exchange trading. But it's still all done by email, and in EUR, not GBP. And it's wiring money, not paying by card. Still a way to go to get my family interested.

(And the more I think about it, the more I think the easy to use smartphone barcode app. that links directly to an online bitcoin account would change things so much. Surely this already exists?)
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