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Author Topic: BTC vs CC for ecommerce, advantage CC.  (Read 3710 times)
Mattius459
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January 07, 2014, 04:33:32 AM
 #1

CC's often times offer upwards of 1.5% cash back to the consumer as a reward for using the card. BTC on the other hands costs money to purchase (.5-1%). Why would the consumer buy BTC to pay for something when he could just use his CC and make money?

I have a feeling that these big merchants adopting BTC as a payment platform are going to be largely disappointed by the lack of people who use it.

I don't see BTC becoming a mainstream ecommerce tool unless it rewards customers for using it OR those merchants stop accepting CC payments.

Would love to hear anyone's comment on this issue.
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January 07, 2014, 04:57:30 AM
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Because the merchant can offer 5% discount by not having to go through VISA. Or because they just like using bitcoins and don't care about the costs.
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January 07, 2014, 05:05:58 AM
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It's up to the merchant to reward the customer for using BTC, which is well within their capability to do (and some merchants do... like Gyft)..

When credit card companies give you 1.5% cash back, they are giving you 1/2 (or less) of the extra money they made the merchant charge you back to you.

If a merchant can accept payment in bitcoin, then they can charge 3% less (generally) and still be ahead on the costs of accepting credit cards (because there are no charge backs or credit card fees for them to worry about).

It's pretty well established that the overall cost of the credit card system is much higher than using bitcoin.  There's normally a much higher disparity than that for remittances as well, which is another area where bitcoin can really help..

If you read some bitcoin FAQ's or watched an introductory video or something, you'd know all of this already.

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January 07, 2014, 05:11:24 AM
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It's up to the merchant to reward the customer for using BTC, which is well within their capability to do (and some merchants do... like Gyft)..

When credit card companies give you 1.5% cash back, they are giving you 1/2 (or less) of the extra money they made the merchant charge you back to you.

If a merchant can accept payment in bitcoin, then they can charge 3% less (generally) and still be ahead on the costs of accepting credit cards (because there are no charge backs or credit card fees for them to worry about).

It's pretty well established that the overall cost of the credit card system is much higher than using bitcoin.  There's normally a much higher disparity than that for remittances as well, which is another area where bitcoin can really help..

If you read some bitcoin FAQ's or watched an introductory video or something, you'd know all of this already.



You've said it all there. Kudos for educating the OP Smiley
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January 07, 2014, 07:16:55 AM
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Thanks for the responses. So we all agree that merchants will have to incentivize people to use BTC then? Not as sweet of a deal as it originally sounded for merchants, but overall it appears as though they can still save a percentage point or two overall. So far...

Consider this:

Bloomberg ran an interesting article the other day that pointed to the fact that the BTC network pays for itself by releasing a constant supply of coins into the market (to miners) which acts to constantly drive the price of BTC down. This amounts to approximately 3.9% at current volumes. ** This percentage will surely go down with an increase in volume and decrease in inflation over time, but still in my opinion, AT BEST it will be 1.5% over the next eight years or so.

http://www.bloomberg.com/news/2014-01-02/bitcoin-is-an-expensive-way-to-pay-for-stuff.html

So we have we have 1% deposit fee onto the consumer, and 2-3% onto the merchant as an "incentive fee" in order to compete with CC companies. This averages out to 1.5-2% sum fee to both parties collectively. Put this on top of the 1.5(ideal)-3.9%(actual) fee exacted upon the markets by the maintenace of the BTC network, and we have a total of 3-5.9% overall cost to do business in BTC.

Getting expensive.

Would love to hear any and all responses. Thanks for your time.

** You can calculate this fee by taking daily bitcoins released (3600) and dividing it by the total daily volume in BTC. See this chart:
https://blockchain.info/charts/cost-per-transaction-percent
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January 07, 2014, 07:18:48 AM
 #6

Bitcoin beats CCs hands down for Reddit, and this is the first major company to produce such stats.  IMHO, this is bigger news than Zynga.



http://seekingalpha.com/article/1928121-Zynga-Accepts-Bitcoin-And-Savings-May-Be-Material-To-Earnings?source=yahoo

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January 07, 2014, 07:27:03 AM
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Because the merchant can offer 5% discount by not having to go through VISA. Or because they just like using bitcoins and don't care about the costs.

I sell stuff online and give a 20% discount for paying with Bitcoin. The reduction in fraud more than makes up for the discount.

Mattius459
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January 07, 2014, 07:33:47 AM
 #8

Bitcoin beats CCs hands down for Reddit, and this is the first major company to produce such stats.  IMHO, this is bigger news than Zynga.

http://static.cdn-seekingalpha.com/uploads/2014/1/4/317858-1388821576112053-Trace-Mayer.png

http://seekingalpha.com/article/1928121-Zynga-Accepts-Bitcoin-And-Savings-May-Be-Material-To-Earnings?source=yahoo


Beats in what way? It looks like volume-wise CC wins. The usage vs revenue only points to the fact that BTC users are spending more per purchase, not that BTC is inherently more efficient. Is this correct?
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January 07, 2014, 08:28:45 AM
 #9

Beats in what way? It looks like volume-wise CC wins. The usage vs revenue only points to the fact that BTC users are spending more per purchase, not that BTC is inherently more efficient. Is this correct?

Obviously not a volume comparison as btc is a new tech.  I see it as being more profitable, probably on spend and reduced fees.

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January 07, 2014, 08:29:27 AM
 #10

Bitcoin beats CCs hands down for Reddit, and this is the first major company to produce such stats.  IMHO, this is bigger news than Zynga.



http://seekingalpha.com/article/1928121-Zynga-Accepts-Bitcoin-And-Savings-May-Be-Material-To-Earnings?source=yahoo


Beats in what way? It looks like volume-wise CC wins. The usage vs revenue only points to the fact that BTC users are spending more per purchase, not that BTC is inherently more efficient. Is this correct?

It's clear to me that you are actually what I call a "well-mannered troll". You come to a Bitcoin forum, not to gain perspective, but with the mistaken idea that thousands of engineers over five years have never realized what glorious knowledge resides in your skull. You are here to free us from our Bitcoin worship. Much like the polite religious folks on bicycles, with their flawed logic and repetitive arguments, when they meet an informed agnostic.

Eventually this goes two ways. In person, sometimes you can shake hands and leave, the religious zealot having given up. It can also become more and more aggressive, the tone of discussion becoming one of argument. On the internet this is far more common, as the inner troll begins to show itself.

We could do this all day if you were simply benignly slow. We love to help; that's why we write here when it does little for us but feel good to be helpful. But you are bordering on intentional anti-intellectualism. I don't believe it is rocket science to look at the simple two-column chart provided and infer that BTC is significantly better at delivering revenue to Reddit. Therefore you must be trying to ignore it (or deliberately not trying to understand it, which is the same), presumably to return to the religious aspect.

Bloomberg has an incredibly visible history of exclusively negative coverage of Bitcoin. Much like the LA Times. Independent journalism is nonexistent these days. Everything is editorialized. You might do well to start reading many sources and coming to a conclusion about the true equilibrium of truth. Otherwise you're no better than a Fox zealot, or an MSNBC loon. I won't argue with one of them, and I won't argue with you. You're taking time away from someone who is genuinely slow but open to new understanding. Go politely browbeat your economic religion into people elsewhere, please.

Uberlurker. Been here since the Finney transaction. Please consider this before replying; there is a good chance I've heard it before.

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Mattius459
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January 07, 2014, 08:41:26 AM
Last edit: January 07, 2014, 08:51:28 AM by Mattius459
 #11

Bitcoin beats CCs hands down for Reddit, and this is the first major company to produce such stats.  IMHO, this is bigger news than Zynga.

http://static.cdn-seekingalpha.com/uploads/2014/1/4/317858-1388821576112053-Trace-Mayer.png

http://seekingalpha.com/article/1928121-Zynga-Accepts-Bitcoin-And-Savings-May-Be-Material-To-Earnings?source=yahoo


Beats in what way? It looks like volume-wise CC wins. The usage vs revenue only points to the fact that BTC users are spending more per purchase, not that BTC is inherently more efficient mode of transaction. Is this correct?

It's clear to me that you are actually what I call a "well-mannered troll". You come to a Bitcoin forum, not to gain perspective, but with the mistaken idea that thousands of engineers over five years have never realized what glorious knowledge resides in your skull. You are here to free us from our Bitcoin worship. Much like the polite religious folks on bicycles, with their flawed logic and repetitive arguments, when they meet an informed agnostic.

Eventually this goes two ways. In person, sometimes you can shake hands and leave, the religious zealot having given up. It can also become more and more aggressive, the tone of discussion becoming one of argument. On the internet this is far more common, as the inner troll begins to show itself.

We could do this all day if you were simply benignly slow. We love to help; that's why we write here when it does little for us but feel good to be helpful. But you are bordering on intentional anti-intellectualism. I don't believe it is rocket science to look at the simple two-column chart provided and infer that BTC is significantly better at delivering revenue to Reddit. Therefore you must be trying to ignore it (or deliberately not trying to understand it, which is the same), presumably to return to the religious aspect.

Bloomberg has an incredibly visible history of exclusively negative coverage of Bitcoin. Much like the LA Times. Independent journalism is nonexistent these days. Everything is editorialized. You might do well to start reading many sources and coming to a conclusion about the true equilibrium of truth. Otherwise you're no better than a Fox zealot, or an MSNBC loon. I won't argue with one of them, and I won't argue with you. You're taking time away from someone who is genuinely slow but open to new understanding. Go politely browbeat your economic religion into people elsewhere, please.

I own Bitcoin, idiot. Thanks for addressing the substance of my post though. Just kidding, you didn't. I simply posted something that has been going through my mind for the last couple of weeks and I can't get over it. I am a relentless doubter, even if I want to believe in something. It is called critical thinking. Go join the legion of bitcoin zombies here, the grown-ups are having a discussion.

Asking for genuine responses please.

Thanks for the responses. So we all agree that merchants will have to incentivize people to use BTC then? Not as sweet of a deal as it originally sounded for merchants, but overall it appears as though they can still save a percentage point or two overall. So far...

Consider this:

Bloomberg ran an interesting article the other day that pointed to the fact that the BTC network pays for itself by releasing a constant supply of coins into the market (to miners) which acts to constantly drive the price of BTC down. This amounts to approximately 3.9% at current volumes. ** This percentage will surely go down with an increase in volume and decrease in inflation over time, but still in my opinion, AT BEST it will be 1.5% over the next eight years or so.

http://www.bloomberg.com/news/2014-01-02/bitcoin-is-an-expensive-way-to-pay-for-stuff.html

So we have we have 1% deposit fee onto the consumer, and 2-3% onto the merchant as an "incentive fee" in order to compete with CC companies. This averages out to 1.5-2% sum fee to both parties collectively. Put this on top of the 1.5(ideal)-3.9%(actual) fee exacted upon the markets by the maintenace of the BTC network, and we have a total of 3-5.9% overall cost to do business in BTC.

Getting expensive.

Would love to hear any and all responses. Thanks for your time.

** You can calculate this fee by taking daily bitcoins released (3600) and dividing it by the total daily volume in BTC. See this chart:
https://blockchain.info/charts/cost-per-transaction-percent


Can someone address this post please? I have no problem being wrong, in fact I would love it, but it looks to me like BTC is expensive to use.
FenixRD
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January 07, 2014, 08:50:09 AM
 #12

I own Bitcoin, idiot. Thanks for addressing the substance of my post though. Just kidding, you didn't. Anyone else here want to have a real discussion? I simply posted something that has been going through my mind for the last couple of weeks and I can't get over it. I am a relentless doubter, even if I want to believe in something. It is called critical thinking. Go join the legion of bitcoin zombies here, the grown-ups are having a discussion.

Certainly sounds adult of you. Your phrasing, tone, and attitude tell all. You might own some bitcoin. If you do it's because you think you are getting rich quick off suckers. That's okay, because Bitcoin is useful for those people too. It's a positive-sum game. Even with your attitude, the economy is better than if you behaved the same in the old-world monetary system.

This is the other key difference: Some folks here are firm economic atheists. They will try very hard to convert you to Bitcoin. Your argument will, if unchecked, devolve into a religious debate between atheists and monotheists. You're both theists. I'm agnostic. I'm pretty sure I'm right, and I'm going to use logic and reason and numbers to back that up. But in the end, the game theory of it also says that if I'm right, it doesn't matter if there are few staunch monotheistic folks running about. The science is unaffected, and eventually you'll catch up, or perish wasting your life on a false god rather than improving humanity.

What is your argument, then? It looks to me like you have decided to turn a blind eye to years of theory, much of it documented in this very forum. You certainly aren't asking anything new.

Uberlurker. Been here since the Finney transaction. Please consider this before replying; there is a good chance I've heard it before.

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January 07, 2014, 08:50:56 AM
 #13

Using bitcoin is the same as putting a middle finger in the face of CC companies and banks...worth every penny
Mattius459
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January 07, 2014, 08:57:54 AM
 #14

I own Bitcoin, idiot. Thanks for addressing the substance of my post though. Just kidding, you didn't. Anyone else here want to have a real discussion? I simply posted something that has been going through my mind for the last couple of weeks and I can't get over it. I am a relentless doubter, even if I want to believe in something. It is called critical thinking. Go join the legion of bitcoin zombies here, the grown-ups are having a discussion.

Certainly sounds adult of you. Your phrasing, tone, and attitude tell all. You might own some bitcoin. If you do it's because you think you are getting rich quick off suckers. That's okay, because Bitcoin is useful for those people too. It's a positive-sum game. Even with your attitude, the economy is better than if you behaved the same in the old-world monetary system.

This is the other key difference: Some folks here are firm economic atheists. They will try very hard to convert you to Bitcoin. Your argument will, if unchecked, devolve into a religious debate between atheists and monotheists. You're both theists. I'm agnostic. I'm pretty sure I'm right, and I'm going to use logic and reason and numbers to back that up. But in the end, the game theory of it also says that if I'm right, it doesn't matter if there are few staunch monotheistic folks running about. The science is unaffected, and eventually you'll catch up, or perish wasting your life on a false god rather than improving humanity.

What is your argument, then? It looks to me like you have decided to turn a blind eye to years of theory, much of it documented in this very forum. You certainly aren't asking anything new.

Thanks for all of those ten cent words, you are really impressing me. Could you do me a favor though and address my post about CC fees, BTC fees, and hidden costs? Maybe I'm double counting something? Maybe the added supply of BTC doesn't have as harsh affect on the market as I am seeing? Give me something that has math please.

Thanks for the responses. So we all agree that merchants will have to incentivize people to use BTC then? Not as sweet of a deal as it originally sounded for merchants, but overall it appears as though they can still save a percentage point or two overall. So far...

Consider this:

Bloomberg ran an interesting article the other day that pointed to the fact that the BTC network pays for itself by releasing a constant supply of coins into the market (to miners) which acts to constantly drive the price of BTC down. This amounts to approximately 3.9% at current volumes. ** This percentage will surely go down with an increase in volume and decrease in inflation over time, but still in my opinion, AT BEST it will be 1.5% over the next eight years or so.

http://www.bloomberg.com/news/2014-01-02/bitcoin-is-an-expensive-way-to-pay-for-stuff.html

So we have we have 1% deposit fee onto the consumer, and 2-3% onto the merchant as an "incentive fee" in order to compete with CC companies. This averages out to 1.5-2% sum fee to both parties collectively. Put this on top of the 1.5(ideal)-3.9%(actual) fee exacted upon the markets by the maintenace of the BTC network, and we have a total of 3-5.9% overall cost to do business in BTC.

Getting expensive.

Would love to hear any and all responses. Thanks for your time.

** You can calculate this fee by taking daily bitcoins released (3600) and dividing it by the total daily volume in BTC. See this chart:
https://blockchain.info/charts/cost-per-transaction-percent




FenixRD
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January 07, 2014, 09:18:59 AM
 #15

Beats in what way? It looks like volume-wise CC wins. The usage vs revenue only points to the fact that BTC users are spending more per purchase, not that BTC is inherently more efficient mode of transaction. Is this correct?



[anger removed]

Asking for genuine responses please.

In the offhand chance you are absolutely sincere and I've jumped the gun — this is the internet after all, no body language and spoken tone — I'll dance for a minute or two. Such venomous defensiveness reenforces my suspicions, just so you know...

Thanks for the responses. So we all agree that merchants will have to incentivize people to use BTC then? Not as sweet of a deal as it originally sounded for merchants, but overall it appears as though they can still save a percentage point or two overall. So far...

Consider this:

Bloomberg ran an interesting article the other day that pointed to the fact that the BTC network pays for itself by releasing a constant supply of coins into the market (to miners) which acts to constantly drive the price of BTC down.


No, this is how you bootstrap a currency without concentrating all the wealth in a few hands. Had we done that, we'd be genuinely open to ponzi criticism much more than now, like NXT and other premined coins are. Proof-of-work secures the system against counterfeit and the Byzantine Generals problem. This is one of the most basic tenets of the theory, which is part of my trouble taking you seriously.

As I said, don't listen to Bloomberg any more than you would accept Fox as completely independent for politics. I am pretty sure they are using Bitcoin to get rich themselves — their mistranslation of the China events directly caused the severity of the crash we saw. Now, Bitcoin US is blaming Chinese investors for crashing the market, and the Chinese are blaming the West for being irrational and hurting their investments. Nicely done, all around.

Quote
This amounts to approximately 3.9% at current volumes. ** This percentage will surely go down with an increase in volume and decrease in inflation over time, but still in my opinion, AT BEST it will be 1.5% over the next eight years or so.

http://www.bloomberg.com/news/2014-01-02/bitcoin-is-an-expensive-way-to-pay-for-stuff.html

And the inflation and printing rate of the USD, for example, is...? Well, inflation is targeted at 3%, and our inflation-corrected GDP rate of increase has dropped to below 1% (because productivity has tanked). So, the USD is at the very least as bad off. Except Bitcoin is mathematically predictable and transparent.  

Quote
So we have we have 1% deposit fee onto the consumer,

That's not a deposit fee. It's akin to a Forex exchange fee. Since the market has been rising for years, 1% is debatable as it depends on your timescale. In any case it is exactly like any other market: there is a gap between bids and asks. The market cannot function otherwise. You can do better than 1% if you look. I don't mask the bid/ask spread with a fee. The fee is built into the bud/ask. If you look at it that way, as you should and I wish CB would, the bid/ask is not, say, $916 / $924 with 1% fee each way. The bid / ask is $907 / $933. This isn't bad, either. Gold doesn't vary as much and it has a spread of 2x that in most consumer markets.

Quote
and 2-3% onto the merchant as an "incentive fee" in order to compete with CC companies.

No, the CCs are doing that as an incentive. You are right that BTC would need to be able to match existing incentives, and it can, and can exceed them. This figure cannot be included as a CC benefit calculation because it is already a cost that is getting passed back to the merchant... Which, yes, must then be paid for by consumers. It's just a shell game, and one which apparently works very well.

Quote
This averages out to 1.5-2% sum fee to both parties collectively. Put this on top of the 1.5(ideal)-3.9%(actual) fee exacted upon the markets by the maintenace of the BTC network, and we have a total of 3-5.9% overall cost to do business in BTC.

Getting expensive.

Would love to hear any and all responses. Thanks for your time.


Now that we disproved all those, can we move on?

Quote
** You can calculate this fee by taking daily bitcoins released (3600) and dividing it by the total daily volume in BTC. See this chart:
https://blockchain.info/charts/cost-per-transaction-percent

Can someone address this post please? I have no problem being wrong, in fact I would love it, but it looks to me like BTC is expensive to use.

FYI those figures are well-known to be overstated because miners don't use equipment they calculate for. Blockchain should update for the efficiency of ASICs, yes. Also, somewhere around here there is an excellent post breaking down the cost of the fiat system -- printing, counterfeit management, human labor, physical transport, minting, mining of metals, etc etc. It was astronomical, in the US alone. Something like 10,000x more expensive for the value.

Uberlurker. Been here since the Finney transaction. Please consider this before replying; there is a good chance I've heard it before.

-Citizenfive
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January 07, 2014, 09:26:25 AM
 #16

Thanks for the serious response. I'll mull it over and come back tomorrow.
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January 07, 2014, 09:29:26 AM
 #17

Thanks for the serious response. I'll mull it over and come back tomorrow.

I hope so. If you do, you have my sincere apologies for my brashness. I've found, while distasteful, the fastest way to out a possible "polite" troll is to call them one. It also seems to bring folks who are on the fence between trollish skepticism and genuine curious doubt back into the light for long enough to have a few minutes of meaningful discussion.

Not that you are any one of those in particular. I can't really know. It is just the best catch-all response I'm aware of, thus far.

Uberlurker. Been here since the Finney transaction. Please consider this before replying; there is a good chance I've heard it before.

-Citizenfive
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January 07, 2014, 09:40:09 AM
 #18

Bitcoin is good as a "Alternate payment system" but it can't replace CC system as people are using it from a long time.  Both have some advantages and disadvantages for merchant and consumer.


Quote
I have a feeling that these big merchants adopting BTC as a payment platform are going to be largely disappointed by the lack of people who use it.

Well no, they will only get disappointment if they will start accepting "Bitcoins" Only. If they will chose to aceept BTC on their sites along with other payment methods, they will get more consumer traffic. (Bitcoiner).

Quote
Why would the consumer buy BTC to pay for something when he could just use his CC and make money?
It's true but isn't that's comman sense? If someone have Only Bitcons (Or extra btc) he will obviously use bitcoins for payment and if someome have CC (and good cash in his bank acc) he will use that.

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January 07, 2014, 12:20:52 PM
 #19

Assumption 1:  People will spend bitcoin on goods and not just see it as an investment vehicle

I don't believe e-commerce would be where it is today without the element of consumer protection that Credit Cards and Paypal provide.  I have had no qualms making big purchases on the web knowing that if the merchant goes bust or fails to deliver the goods I am protected and I get my money back.  I understand merchants may not like it, but the fees serve a purpose. 

Holding assumption 1 to be true then for small value goods I certainly believe that bitcoin could be useful, even in transactions that do not require anonymity, but then we get to the second major hurdle in that you have to purchase something to purchase something.  This is fine if the goods can't be bought in any other way, but most of the time it is too much hassle even with a discount.  I have seen quite a few schemes over the years that have tried to complement or replace credit cards with digital cash and cards that can be topped up electronically but for whatever reasons they never seem to take off *.
 
I will be keen to see some real data from Zynga and others showing the consumer's willingness to buy using bitcoin.  I admit that I only have my own experiences to draw from and my own reluctance to use my coins to actually buy anything with. None of this says anything about the usefulness of crypto currencies for other purposes though, such as international transfers, gambling or even web tipping. I just don't believe that Visa has anything to worry about.

* The first time I encountered such a product touting itself as a global alternative to cash and self standing store of value was in 1997 and was called Mondex.  Its failure to reach wider adoption is an interesting case study that some of you might like to read - http://wings.buffalo.edu/academic/department/som/isinterface/is_syllabus/mondex/mondex.html
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January 07, 2014, 12:25:22 PM
 #20

up to 1,5% cash back but you forgot to mention the annual fee that they charge you. Credit card companies take up to ~4% from the merchant on each transaction, and charge the customer an annual fee. How cool is that?

Also to be able to use a CC you need to have money in the bank and all the taxes that are involved in the process. So you pay a CC annual fee plus an account maintenance fee (at least here in Brazil).

But the whole point is, with BTC you don't need to put money in the bank system to begin with. It's not like you buy BTC to use it. You receive BTC and use it and avoid the banking system altogether. But I agree that right now most people would have to buy BTC. This is just because we are in the beginning of the process(transition).

Let me tell you another scenario that happens here in Brazil. If you use your CC to purchase abroad, you are taxed 6%!!! So I'm here in Brazil and want to purchase something on Ebay, whhaammm , 6% tax! I travel abroad and use my CC for my expenses (food, hotel, etc) whhaaam another 6% gone. Not to mention the dollar to brazilian money conversion rate that the bank uses.

When you see the big picture, it's easy to spot the advantages of using BTC.
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