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Author Topic: [RECOMMENDATION] how to properly do bitcoin business  (Read 781 times)
doldgigger
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August 06, 2011, 02:39:13 PM
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I started this topic on this forum rather than https://bitcointalk.org/index.php?board=8.0 to make sure the right people will read it. As of now, the "Trading" forum seems to be mostly about speculation rather than actual bitcoin business.

I found it necessary to write this because there are still many business owners who use bitcoins to have other currencies transferred to them, by adapting the bitcoin prices to the USD-BTC exchange rates. This is bad for the bitcoin economy as it destabilizes the exchange rates.

It is very understandable that new bitcoin adopters wish to reduce the risk posed by the exchange rates while bitcoin is relatively new. But it is important to do it in a way that does stabilize the bitcoin currency.

So I am sharing my strategy for expanding my business to bitcoin, in the hope that more businesses will adopt this approach or even improve it:

When having a working business, the idea is to do a fraction of the complete business volume using bitcoin, but with stable bitcoin prices (of course, prices change over time, but ideally, BTC prices should not be more volatile than prices in other currencies). The business owner should decide the level of involvement he is comfortable with. It should be in a range where it is feasible to store the bitcoins for a relatively long time in order to find the right time to exchange it back to the local currency. Or even better, to use it to buy other services using bitcoins. 10% might be a good starting point.

This way, bitcoin businesses can even make profit from low BTC exchange rates because new bitcoiners can get the services cheaper. This creates a new momentum of buying bitcoins, thereby driving the exchange rates up (allowing to pull out the profit into other currencies if necessary).

Please let me know your thoughts.

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Phinnaeus Gage
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August 06, 2011, 03:28:35 PM
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I started this topic on this forum rather than https://bitcointalk.org/index.php?board=8.0 to make sure the right people will read it. As of now, the "Trading" forum seems to be mostly about speculation rather than actual bitcoin business.

I found it necessary to write this because there are still many business owners who use bitcoins to have other currencies transferred to them, by adapting the bitcoin prices to the USD-BTC exchange rates. This is bad for the bitcoin economy as it destabilizes the exchange rates.

It is very understandable that new bitcoin adopters wish to reduce the risk posed by the exchange rates while bitcoin is relatively new. But it is important to do it in a way that does stabilize the bitcoin currency.

So I am sharing my strategy for expanding my business to bitcoin, in the hope that more businesses will adopt this approach or even improve it:

When having a working business, the idea is to do a fraction of the complete business volume using bitcoin, but with stable bitcoin prices (of course, prices change over time, but ideally, BTC prices should not be more volatile than prices in other currencies). The business owner should decide the level of involvement he is comfortable with. It should be in a range where it is feasible to store the bitcoins for a relatively long time in order to find the right time to exchange it back to the local currency. Or even better, to use it to buy other services using bitcoins. 10% might be a good starting point.

This way, bitcoin businesses can even make profit from low BTC exchange rates because new bitcoiners can get the services cheaper. This creates a new momentum of buying bitcoins, thereby driving the exchange rates up (allowing to pull out the profit into other currencies if necessary).

Please let me know your thoughts.

Who are you to decide that a business should sell 10% of their stock for Bitcoin!

Had you there for a sec! I was tryin' my hand on being a naysayer by attacking the OP, along with taking the main idea out of context.

It's a great idea. It helps in bringing traffic to your website or B&M business. Let's say I have an accordion website. I can start BTCaccordions, accepting mainly Bitcoin on it. But I have a link to my other accordion website that doesn't mention Bitcoin or, at the very least, has a Bitcoin logo with the phrase (Now Accepting Bitcoin). My main site shows my B&M address where I have a Bitcoin sign in the window and a Bitcoin accepting plaque on the counter. Also on the tangent site that accepts mainly Bitcoin, I would have a lost-leader item http://en.wikipedia.org/wiki/Loss_leader like maybe selling the black keys at a not-for-profit price point. This way I've made a sale, gleaning an email address whereupon, with their permission, I'm now able to send them my newsletter, current sale items and, moreover, information on new accordion related merc which normally has a higher profit margin.

It's a hell of a lot better than this business model:

doldgigger
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August 07, 2011, 07:59:19 PM
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Who are you to decide that a business should sell 10% of their stock for Bitcoin!

Where did I talk about stocks??

I'm just saying that selling 10% of my products using bitcoins for now seems appropriate to me. This number may vary for other businesses depending on their margins.

It's a great idea. It helps in bringing traffic to your website or B&M business. Let's say I have an accordion website. I can start BTCaccordions, accepting mainly Bitcoin on it. But I have a link to my other accordion website that doesn't mention Bitcoin or, at the very least, has a Bitcoin logo with the phrase (Now Accepting Bitcoin).
Using separate sites is certainly a good idea.

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August 07, 2011, 11:33:29 PM
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The lack of stability is frustrating, but a natural aspect of a newly introduced concept. That stability won't be attained until the majority of weak short-term speculators have been knocked out.

Your idea is nice, but segregating the service introduces additional maintenance. It doesn't make sense to expend additional resources to maintain a duplicate site. You'll also be spending extreme effort trying to convince thousands of businesses, one at a time.

Integrating BTC payments into the shopping cart back-end is far more viable, so target the CMS software and payment processors instead of end-businesses. This way, you focus on a few target entities instead of thousands. If even one of them adopts Bitcoin, the others will feel the need to follow suit in order to compete.

Business will be more apt to try Bitcoin if it is available. They will not attempt to "roll their own" solutions.
doldgigger
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August 08, 2011, 12:03:57 PM
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The lack of stability is frustrating, but a natural aspect of a newly introduced concept. That stability won't be attained until the majority of weak short-term speculators have been knocked out.
I don't think the instability is caused by speculators. They are merely a symptom of the not-yet-stable currency. True stability will naturally occur when there are enough products and services to buy for bitcoins at stable prices.
Your idea is nice, but segregating the service introduces additional maintenance. It doesn't make sense to expend additional resources to maintain a duplicate site. You'll also be spending extreme effort trying to convince thousands of businesses, one at a time.
Well, the idea of having a duplicate site was from Phinnaeus Gage - it is not my main idea, although I think it is a good idea when the resources to do it are available (and with a powerful CMS, the effort will not be big).

My idea is that instead of having volatile BTC prices based on daily exchange rates, businesses should keep their BTC prices fixed, and instead limit the amount of transactions they do using BTC if they need to limit the impact of fluctuating exchange rates.
Integrating BTC payments into the shopping cart back-end is far more viable, so target the CMS software and payment processors instead of end-businesses. This way, you focus on a few target entities instead of thousands. If even one of them adopts Bitcoin, the others will feel the need to follow suit in order to compete.
This is a great idea! As far as I know, there are even efforts to extend widespread shopping cart solutions with BTC.
Business will be more apt to try Bitcoin if it is available. They will not attempt to "roll their own" solutions.
Well, there are already businesses out there who build their own solutions - my post was meant as an attempt to suggest a proper strategy for doing so.

But this process can of course be sped up through distribution of ready-made solutions.

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