[2019-03-06] Starbucks Unveils Key Detail about its Secretive Bitcoin Strategy

[Lmaooo]

An article in The Block yesterday includes the following statement: “Only U.S. customers will be able to pay in bitcoin initially.” They’re referring to Starbucks’ recent deal with Bakkt, the great hope of the crypto industry, which might manage to pull off the first crypto ETF. The deal gives Starbucks significant equity in Bakkt, but at no point does it actually require Starbucks to accept Bitcoin. And, for its part, Starbucks reportedly has no intention of doing so – at least not in the conventional manner.
Starbucks: We’ll Help You Convert Crypto to Cash

The company told The Next Web that rather than accept crypto directly, it will create more ways for customers to convert bitcoin and other assets into fiat, which can then be used at their stores (emphasis added):

    “Our role as the flagship retailer for Bakkt is to consult and develop applications for customers to convert their digital assets into US dollars, which can then be used in our stores. We anticipate that a range of cryptocurrencies will gain traction with customers and, through our work with Bakkt, we will be uniquely positioned to constantly consider and offer customers new and unique ways to pay seamlessly, at Starbucks. As we continue to move forward with this work, we anticipate we’ll have more to share in the coming months.”

So, some type of gift card situation is what’s brewing at Starbucks. Some kind of Bakkt-powered seamless payment platform seems possible. As regards the Seattle-based coffee giant, however, the notion of a Bitcoin QR code at checkout seems far-fetched.


CCN | https://www.ccn.com/starbucks-unveils-key-detail-about-its-secretive-bitcoin-strategy

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[o_e_l_e_o]

As regards the Seattle-based coffee giant, however, the notion of a Bitcoin QR code at checkout seems far-fetched.

We have to start somewhere.

I think it would be unrealistic to expect Starbucks, or any major company, to start accepting bitcoin from nowhere, along with all the difficulty and expense of setting up payment terminals, infrastructure, cold storage, taxes, etc. As you say, they are using Bakkt as a payment processor, and so Starbucks will only receive fiat, for the time being. However, another article I read here included this quote:

At the current time, we are announcing the launch of trading and conversion of Bitcoin. However, we will continue to talk with customers and regulators as space evolves.

It's not the ideal situation yet (which would be paying Starbucks directly with bitcoin), but it's a step in the right direction. If nothing else, it's great advertising for bitcoin payments to be available at every Starbucks store in the US.

[1Referee]

It raises a major question though, Bakkt converts people's coins to fiat, then uses that fiat to settle the Starbucks payment. Isn't that a taxable event within the US? Don't forget that this is just the very beginning. At one point I do expect a large number of multinationals to participate, and the amounts concerned will greatly exceed that of a coffee and a muffin.

In the end, it's more of an empty marketing gimmick than something that provides much usefulness, especially if turns out that you must have an account with Bakkt in order to utilize that payment option.

[Theb]

The key word here is "initially", Starbucks is a global brand and they try their best for their other stores (internationally) to replicate what they are offering to the United States. I remembered when Starbucks only limited their Starbucks cards in the US now most of the Starbucks internationally have them which also comes with their app. I also remembered the time when I only see the Pumpkin Spice Latte drink only in memes but now I managed to taste it locally in one of our SB branches. This only shows that they want to offer the same service as they can on all of their stores which I think will also happen with their BTC payments initially starting in the US.

[BitHodler]

Bakkt will do this, bakkt will do that. It's not going to do anything as long as they haven't been granted an approval by the CFTC. It's quite funny how they plan ahead while they don't even know if Bakkt will be approved in the first place.

Overall, payment forms that aren't Bitcoin to merchant or gateway isn't any different from spending fiat. I don't see anything special in how they set this up. It's like how people praise crypto debit cards, while it's still fiat that you are spending. Meh.

[squatter]

It raises a major question though, Bakkt converts people's coins to fiat, then uses that fiat to settle the Starbucks payment. Isn't that a taxable event within the US?

It sounds like people will be selling and storing in a fiat-denominated account at Bakkt. That's just straight forward capital gains taxation. Or if it's a Bitpay-style payment processing situation, it's still taxable under the current code.

There have been at least two bills proposed -- one is currently under consideration -- that would exempt capital gains taxes up to $600 yearly that are incurred through buying goods and services. No changes yet, though.

It's not the ideal situation yet (which would be paying Starbucks directly with bitcoin), but it's a step in the right direction. If nothing else, it's great advertising for bitcoin payments to be available at every Starbucks store in the US.

Accepting Bitcoin directly doesn't sound ideal for consumers anyway unless they'll be accepting 0-confirmation or using Lightning. Can you imagine waiting around for a confirmation so you can buy a cup of coffee?

[gentlemand]

Bakkt will do this, bakkt will do that. It's not going to do anything as long as they haven't been granted an approval by the CFTC. It's quite funny how they plan ahead while they don't even know if Bakkt will be approved in the first place.

Overall, payment forms that aren't Bitcoin to merchant or gateway isn't any different from spending fiat. I don't see anything special in how they set this up. It's like how people praise crypto debit cards, while it's still fiat that you are spending. Meh.

I was under the impression that approval isn't that huge a deal though I may be wrong. The CTFC have already approved LedgerX for Bitcoin custody which is the sticky bit. It's not precedent setting like an ETF approval.

The delay is more likely to be about Bakkt not having their affairs in order.

[figmentofmyass]

Bakkt will do this, bakkt will do that. It's not going to do anything as long as they haven't been granted an approval by the CFTC. It's quite funny how they plan ahead while they don't even know if Bakkt will be approved in the first place.

Overall, payment forms that aren't Bitcoin to merchant or gateway isn't any different from spending fiat. I don't see anything special in how they set this up. It's like how people praise crypto debit cards, while it's still fiat that you are spending. Meh.

I was under the impression that approval isn't that huge a deal though I may be wrong. The CTFC have already approved LedgerX for Bitcoin custody which is the sticky bit. It's not precedent setting like an ETF approval.

The delay is more likely to be about Bakkt not having their affairs in order.

that would be surprising given who's trying to launch bakkt---the ICE. they run the NYSE and other major wall street financial markets.

it's all very strange tbh. i suppose we just had the longest government shutdown in history. maybe the CFTC is just swamped with delayed matters as a result and bakkt just isn't high on the priorities list.

[gentlemand]

that would be surprising given who's trying to launch bakkt---the ICE. they run the NYSE and other major wall street financial markets.

it's all very strange tbh. i suppose we just had the longest government shutdown in history. maybe the CFTC is just swamped with delayed matters as a result and bakkt just isn't high on the priorities list.

Well, I seem to recall them constantly looking to recruit people which says plenty. And it has the feel of a grand experiment to me than something carefully thought through. I mean the Starbucks tie up feels plain weird to me. But what do I know?

[o_e_l_e_o]

Accepting Bitcoin directly doesn't sound ideal for consumers anyway unless they'll be accepting 0-confirmation or using Lightning.

I had assumed Bakkt would have to accept zero confirmation transactions anyway? Or do you have to "pre-load" your Bakkt account in advance before actually buying anything? If that's the case, this is a far less interesting development.

Still, I would have imagined Starbucks would be able to accept zero confirmation transactions, provided they had opted out of RBF. The chances of someone going to all the effort of setting up a double spend to save themselves 0.001 bitcoin on a coffee is tiny.

[anu1908]

why don't Starbucks use existing payment processor like coinspayments. i know they want to convert to fiat but i think coinspayments can do the deal. bakkt is still not approved yet so this seems like a hopium without any actual product.

[figmentofmyass]

I had assumed Bakkt would have to accept zero confirmation transactions anyway? Or do you have to "pre-load" your Bakkt account in advance before actually buying anything? If that's the case, this is a far less interesting development.

Still, I would have imagined Starbucks would be able to accept zero confirmation transactions, provided they had opted out of RBF. The chances of someone going to all the effort of setting up a double spend to save themselves 0.001 bitcoin on a coffee is tiny.

it reads like people will have to pre-load like a gift card but i'm not sure. it's all very vague.

you don't need to double spend (in the mining sense) to screw them over if they accept zero confirmations. you just need to use a simple script to re-spend the same outputs with a higher fee before the first transaction gets confirmed. at considerable volume or at higher values, that's probably a significant risk for any merchant. bitpay seems to have stopped accepting zero confirmation tx some time ago, probably because they got screwed over like this.

[Slow death]

[...]

I wonder, what is the advantage of this news? What good does this news bring to the crypto world? Reading this news, I believe people will continue to buy their coffee using Fiat. I initially thought that these guys were intending to accept bitcoin as a form of payments, but reading this news I do not see what will be the advantage of what they are creating

250+ Places That Accept Bitcoin Payment (Online and Physical Companies)

this number may have increased or may have decreased, so what is Starbucks innovation bringing?

[o_e_l_e_o]

you don't need to double spend (in the mining sense) to screw them over if they accept zero confirmations. you just need to use a simple script to re-spend the same outputs with a higher fee before the first transaction gets confirmed.

My understanding, and correct me if I'm wrong, is that to re-spend the same outputs with a higher fee, the transaction has to be opted in to RBF. That is to say, the transaction must have an nSequence of less than MAX-1. Provided the transaction does not have an nSequence of less than MAX-1, the transaction cannot be replaced in the time between broadcasting and confirming. Any sender accepting zero confirmation transactions would include a stipulation that these transactions could not be opted in to RBF, which would prevent this vector of attack. This doesn't prevent other more complicated "double spend" mechanisms, of course.

[LeGaulois]

Anyone noticed when it's about a large company. They don't(want to) adopt directly Bitcoin to their business, but they develop something around. Like here, Rakuten adopted the same strategy not so long ago.

As folks said, during the gold rush, it was not the prospectors who won most of the money. It was the surrounding companies that sold products or services related to the mining industry

I wonder, what is the advantage of this news?

For us, nothing, for the company just a way to get free advertisement

[J. Cooper]

so what is Starbucks innovation bringing?

Well at least in western countries Starbucks has become a household name in the coffee industry so from a promotional side of view it could prove to be very beneficial. Lots of people will think that  Starbucks will actually start accepting Bitcoin even though the bitcoin is turned into fiat first (which sort of defeats the purpose). But other than that I really don't get the hype around bakkt at all. Mainly because, or at least from what I have read about it (and I admit it isn't a lot), it sounds like it's going to be a washed-up version of  BitPay. Again not really where we want to be, or rather, be stuck at for an extended period of time. But then again it is a start and the ability to (indirectly) pay your overly sugary coffee with Bitcoin probably won't hurt Bitcoin too much.

[figmentofmyass]

you don't need to double spend (in the mining sense) to screw them over if they accept zero confirmations. you just need to use a simple script to re-spend the same outputs with a higher fee before the first transaction gets confirmed.

My understanding, and correct me if I'm wrong, is that to re-spend the same outputs with a higher fee, the transaction has to be opted in to RBF.

nope, RBF has no effect on zero confirmation security as peter todd eloquently pointed out a few years ago: https://twitter.com/peterktodd/status/686365181241212928

it won't work 100% of the time because of how some miners process transactions on their side. some pools will perceive it as a double spend and refuse to mine it. but it's easy to do and is very possible to confirm the double spent transaction. businesses accepting zero confirmations are straight up reckless!

That is to say, the transaction must have an nSequence of less than MAX-1. Provided the transaction does not have an nSequence of less than MAX-1, the transaction cannot be replaced in the time between broadcasting and confirming. Any sender accepting zero confirmation transactions would include a stipulation that these transactions could not be opted in to RBF, which would prevent this vector of attack. This doesn't prevent other more complicated "double spend" mechanisms, of course.

this is just the nsequence signalling logic from bip125. not flagging RBF =/= the inputs can't be double spent. there is nothing at the consensus level that would prevent a double spend from being mined.

[o_e_l_e_o]

Thank you for the explanation. Perhaps I wasn't entirely clear - I wasn't suggesting opting out of RBF made double spending impossible, just that the transaction couldn't be redirected to another address using RBF.

businesses accepting zero confirmations are straight up reckless!

I'm not sure I would agree with that statement. More or less every company in the world accepts credit card, which can have payments reversed for weeks or even months after they are made by me claiming my card was lost, stolen, cloned, I was defrauded, I was overcharged, etc. A company like Starbucks can quite easily eat the price of the odd coffee here or there from a double spend attack. Sure, if you are a small business, or transacting with significant amounts of money, wait for some confirmations, but $3 to Starbucks is completely negligible. Alternatively use LN.

[figmentofmyass]

businesses accepting zero confirmations are straight up reckless!

I'm not sure I would agree with that statement. More or less every company in the world accepts credit card, which can have payments reversed for weeks or even months after they are made by me claiming my card was lost, stolen, cloned, I was defrauded, I was overcharged, etc.

these are apples and oranges though. an unconfirmed bitcoin transaction literally has no security whatsoever. relying on them defeats the purpose of using bitcoin at all since there is no proof of work involved. like satoshi said, they shouldn't be counted as part of a wallet's balance at all:

As you figured out, the root problem is we shouldn't be counting or spending transactions until they have at least 1 confirmation.  0/unconfirmed transactions are very much second class citizens.  At most, they are advice that something has been received, but counting them as balance or spending them is premature.

A company like Starbucks can quite easily eat the price of the odd coffee here or there from a double spend attack. Sure, if you are a small business, or transacting with significant amounts of money, wait for some confirmations, but $3 to Starbucks is completely negligible. Alternatively use LN.

i dunno, just sounds like a reckless approach to me. there should at least be a security model of some sort. accepting unconfirmed txs is literally like accepting IOU notes from randoms off the street.

it sounds like we're just assuming that few people will steal, and the ones that do won't steal much. my experience with humans is slightly different than that.

[bbc.reporter]

So, some type of gift card situation is what’s brewing at Starbucks.

I reckon it might be nothing but another Facebookcoin situation in Starbucks hehehe.

The big corporations are beginning to leverage their brand to issue cryptocoins. I predict that the lucky platform on which they will be issued in might hit the top prize as the highest coin in market capitalization in the cryptospace.