One-touch shopping (Pounce), Coinbase and financial innovation

[Peter R]

Despite long my rambling posts with (hopefully) some thoughtful analysis, I take great pride in minimizing my energy expenditure.  Yes, I'm as lazy as possible.  

Since learning about bitcoin, I've had a vision of a future where I could scan a QR code on a TV commercial and the product would just show up at my door the next day.  If I wanted a pizza, well, I'd just scan a QR code on a menu and it would get delivered in 30 minutes or less or its free.  

So I was excited when I learned from Reddit (r/bitcoin) about Pounce Mobile Shopping (http://www.pounce.mobi).  Pounce offers 1-button shopping in a very unique way: you know those annoying flyers you throw out that get delivered with the mail?  With the Pounce app you can scan an item that you like, the app recognizes the product, and if you want to purchase it you just hit "Buy Now" and the product is automatically shipped to you.  No fussing with merchant checkouts, typing in credit card numbers, and all that.  

I tested out Pounce by:
 - downloading the Pounce app (unfortunately, it is only available for iOS),
 - adding my shipping address,
 - linking my Coinbase account.

I then browsed through their "specials" (I didn't have any flyers to scan), found a cheap SD memory card from BestBuy, and hit "Buy Now."  My Coinbase account was debited correctly and I received the SD memory card a few days later as promised.  So my experience was a positive one.  


I've had three positive experiences related to Coinbase now:

 - Using the BitWalls pay-wall service at the Chicago Sun-Times for micropayments. (If you pay another Coinbase address from your Coinbase wallet, the transfer happens "off chain" and with no miner's fee, making micro-payments practical.)

 - Using the Pounce app linked to my Coinbase account. (You give permission to Pounce to directly debit your Coinbase account.  You can minimize risk by keeping your Coinbase balance at a sufficiently low threshold.  A simple bitcoin transfer to you Coinbase address tops it up instantly if you need to purchase something expensive.)  

 - Paying an email invoice from a merchant (the invoice was "smart"--the merchant billed in USD and the invoice amount in BTC changed dynamically such that whenever I paid it the merchant would receive the correct amount of USD).  


I've read criticism that Coinbase goes against the spirit of bitcoin, since they control the private keys.  I disagree now.  I think free off-chain transactions and the ability to allow third-parties to directly debit your account is critical.  To implement these features, they need to hold the private keys.

I can't believe I'm saying this because after I couldn't cancel a direct-debit gym membership I swore I'd never give anyone permission to stick their hands into my accounts again.  But the Coinbase model is different!  After giving Pounce permission to debit my account, I can see in my Coinbase account where the Pounce service is "linked."  At any point in time if I am unhappy with Pounce, I can revoke their privileges instantly.  You can't do this with the legacy banking system.  (In fact, my parents were milked for over 2 year by GreenPeace direct debits.  The bank said the only way to stop it was to sue GreenPeace or completely shut down their bank account!) Furthermore, Coinbase does not offer credit so my balance cannot go negative and I cannot be charged "overdraft" fees.  I can protect myself by (a) revoking permissions from third parties to debit my account, and (b) limiting the amount of bitcoins stored with Coinbase while topping up instantly when needed.  

I think we will see more innovation with apps linking to Coinbase accounts.  Here in Vancouver we have the EasyPark app for mobile payments at parking meters.  I've tried to use this app twice now, but I've always given up because they require me to type in a kazzillion personal details and my Visa card number--I guess as an anti-fraud measure to authenticate me.  One time the app crashed somehow and I needed to re type everything again, and the second time I think I just got lazy.  But if they linked to Coinbase accounts, they don't even need to know my name!

Of course, the future of pay parking is unique-to-stall bitcoin addresses expressed as a QR code on a small sign.  No parking meter at all.  But this belongs to a more distant future and is the topic for a different post...


 

[TopherB]

I've read criticism that Coinbase goes against the spirit of bitcoin, since they control the private keys.  I disagree now.  I think free off-chain transactions and the ability to allow third-parties to directly debit your account is critical.  To implement these features, they need to hold the private keys.

As long as if and when Coinbase is hacked you don't go complaining and suing I've got no philosophical problem with the concept. In my mind buying the best home security system on the market and then posting your address and passcode online would be a silly thing. But that's me. It's a fine line between cautious and paranoid.

When I switch from thinking of Bitcoin as an investment to a currency I will probably keep a little in a live exchange. About as much as I keep in USD in my wallet I figure. By then the technology will have matured a bit as well (as will the hacking techniques <sigh>)

One must balance ease of use with how much one is willing to lose.
It all comes down to personal choice, which I think is the one thing we all here can agree on

[cbeast]

I've read criticism that Coinbase goes against the spirit of bitcoin, since they control the private keys.  I disagree now.  I think free off-chain transactions and the ability to allow third-parties to directly debit your account is critical.  To implement these features, they need to hold the private keys.

As long as if and when Coinbase is hacked you don't go complaining and suing I've got no philosophical problem with the concept. In my mind buying the best home security system on the market and then posting your address and passcode online would be a silly thing. But that's me. It's a fine line between cautious and paranoid.

When I switch from thinking of Bitcoin as an investment to a currency I will probably keep a little in a live exchange. About as much as I keep in USD in my wallet I figure. By then the technology will have matured a bit as well (as will the hacking techniques <sigh>)

One must balance ease of use with how much one is willing to lose.
It all comes down to personal choice, which I think is the one thing we all here can agree on

I don't think he was suggesting otherwise. Pushing only what you need to spend into these accounts is the safest way. I hope more of these services grow and develop faster Bitcoin validations.

IIRC Coinbase keeps most of their keys in very secure cold storage.

[Carlton Banks]

I can't believe I'm saying this because after I couldn't cancel a direct-debit gym membership I swore I'd never give anyone permission to stick their hands into my accounts again.  But the Coinbase model is different!  After giving Pounce permission to debit my account, I can see in my Coinbase account where the Pounce service is "linked."  At any point in time if I am unhappy with Pounce, I can revoke their privileges instantly.  

I disagree.

Coinbase's model is pretty much the same as the legacy banking model; the way their system is coded to work today is the way it will work today. It therefore depends entirely on the code running on their servers whether or not instant cancellation will work. Ditto withdrawal to keys under your control.

"But Coinbase wouldn't be like that!" You could easily have said that about our current financial services companies, and yet look at the situation we are in now. It's not convenience that's the issue here, it's control. Coinbase haven't built up the trust capital that the large financial institutions did, but by definition, if they ever got to that position using the same trust based model, they would be in a similar position as to where their incentives lie. Put simply, if you're dependent on the goodwill of a monopolist cartel member for access to your money, then your money might be in trouble.

And Coinbase should be applauded for their convenience enhancing features, as it has done well to illustrate how well cryptocurrency can be put to practical use, your story demonstrates this. But it's not so impressive when you look at how Coinbase already behave towards, for instance, account holders who are denied the opportunity to buy BTC at a favorable exchange rate (there is a consistent pattern of people trying to buy during price dips, only to get a pleasantly worded decline email in return, and these are customers who have bought from Coinbase without problems beforehand). Transparently cynical profiteering is enough to prevent me from using a company that have been shown to act like that.

You are beginning to trust Coinbase to keep possession of your BTC in order to enable cool features. Which may not be misplaced, time will tell. But it would be a great deal more impressive if someone were designing these services to work in a trustless manner. It's a more significant challenge to design a system that way, but that's the qualification I'd want for a third party to be offering a fourth party the ability to sweep bitcoins from my wallet on an open-ended basis.

[Peter R]

I disagree.

Coinbase's model is pretty much the same as the legacy banking model; the way their system is coded to work today is the way it will work today. It therefore depends entirely on the code running on their servers whether or not instant cancellation will work. Ditto withdrawal to keys under your control.

I thought someone would bring this point up, and it's a good point.

My argument is that since customers have a choice, "bitcoin banks" will be forced to behave reasonably well.  Otherwise they will lose customers to new players that do not abuse trust.  Services like Coinbase are also competing against direct peer-to-peer bitcoin transfers.  They must provide a useful service for a fair price or people will simply exchange bitcoins directly.

Legacy financial institutions, on the other hand, are competing against the direct transfer of physical paper cash.  The legacy system has to be pretty bad before it becomes more efficient to mail cash across the world.  The legacy financial system essentially has a monopoly on electronic money transfer, while "bitcoin banks" would compete with peer-to-peer bitcoin transfers in a competitive way.

My opinion can still be swayed, but right now I'm thinking services like Coinbase are inevitable and a good thing.