Volatility IS a bug, not a feature :)

[d5000]

My point is that if they are only adopting it for fees, then Bitcoin can never be the top competitor in this field.

And my point is not that they're only adopting it for fees, if you interpreted that this way than it indeed is wrong. (In reality, I don't really know where we disagree because I see currently the same problems as you.)

Fees was one of the reasons I mentioned, and I mentioned it for a future scenario with low volatility, not for the present. In the present, what I see is increased adoption, but for other reasons, like those detailed in the PayPal study.

I think currently the broader argument "use Bitcoin because it will lower your operational cost" for a merchant is currently not really relevant because the highly volatile Bitcoin does create costs (either for hedging or for payment processors) which are IMO currently higher than the possible benefit due to fees and other cost savings. This is what is slowing down adoption.

Thus my argument is that for merchants, volatility matters. The higher the volatility, the higher the cost to accept Bitcoin. There's not really a difference which are other reasons to adopt Bitcoin, be it fees, new potential customers, payment settlement speed, privacy or whatever.

And for the "treasury" option, volatity does matter too - here I indeed disagree with you. You could say that merchants can stack up satoshis easier when they're cheap. But in crypto winters often the payment activity is also lower than in bull market phases when many Bitcoin hodlers think they can spend some of their short term profits and thus select Bitcoin as a payment option more often. In a more stable scenario, we don't have these pronounced crypto winters anymore, and retailers' payment behaviour doesn't depend so much on the price movement. (I'll see if I can find sources for that.)

Even if the cost/fees argument isn't currently the main one, I think it's worthy to discuss it, so let's go with this part:

It merely introduced competition into a very stagnant area, but centralized blockchains or tokens are going to have much lower fees. It is not possible to compete in that area with something that needs an expensive server to run due to the amount of resource requirements that it has. Wouldn't you agree with this?

Not really. Running a simple Bitcoin node isn't costly, not even if you add Lightning. And many merchants actually don't need a full node. If they use a sidechain, the costs are even lower (comparable to running an altcoin light wallet).

Centralized services will normally always include some hidden fee. Otherwise, how do they make money from payment functions only? A bank account currently in many countries doesn't have transfer fees anymore, but a monthly maintainance fee which is higher than ever. Of course you can argue "everybody has a bank account today". But bank transfers aren't as convenient as a QR payment as I already wrote. And banks intentionally don't add a "free" QR payment feature to their bank accounts because they also benefit from card payments. So there is still a niche for Bitcoin to shine. (Even CBDCs like the digital Euro seem to plan to charge fees for merchants.)

In addition that points us to another scenario which would be benefitted by a low volatility scenario: what if it's not necessary anymore to have a bank account, because you are safe enough from price swings holding Bitcoin? That's of course a more utopian scenario where volatility would have lowered to much lower levels than gold.

Centralized blockchain based coins or web based currencies also will have a hidden cost. Even stablecoins. In the case of Tether for example I think the cost is the risk of holding large amounts because there's a lower protection of the cost from bankruptcy. Tether would not be profitable if it didn't engage in some investment activities, even if they're not high-risk, so holding USDT is inherently riskier than holding USD on a bank. If Tether goes bankrupt, Tether holders will probably suffer losses.

And altcoins have all an extremely high risk, mainly of devaluation due to decreased founder activity or directly a founder exit, rugpulls, but also attacks. I don't see them really as a competitor thus.

Volatility is a great thing. It keeps people from using leverage to make huge gains or just buying Saylor style and getting rich on autopilot.  Maybe that isn't what people want, but personally I like it.  It separates the people who are here just to suck liquidity from the market and people who believe in Bitcoin. The people who want to suck out liquidity buy the tops on leverage, then become the liquidity when the market turns. This is an important feature to me that ultimately limits crashes by constantly resetting market leverage, and it also punishes the people who look to suck money out of the Bitcoin market while rewarding those who act responsibly and stick with their long term stacking goals.

Interesting argument, even if I disagree that volatility is that great. It is true that if there was an "autopilot" and Bitcoin would be practically risk-free, bubbles would also build up, as the price can't grow eternally and there will always be profit taking. Thus a lowering volatility will likely only happen if the price growth rate also lowers, decreasing the incentive for leveraged buying because while you'll in most case will make profit, you also won't "get rich" and there'd be still the risk to run into a light crash (in a few years <30%, later <20%). But that's just the scenario I consider most sustainable for a continuation of Bitcoin's growth and adoption. It's also what probably is happening currently according to the volatility data I've quoted many times. And the mechanism (punish too greedy leverage buying) would continue to work, even if it was on a lower scale.

[Betwrong]

~ Yeah, but ... We have "huge volatility" only in the short term, maybe 2-3 years max. Take into consideration any 4-year period and Bitcoin is no longer so volatile, it's on a stable rising. I mean, you can check the price every day, but imaging you were doing it every 4 years.

This is not correct, don't put every kind of volatility in the same category. As is clear from this thread, or maybe if you read between the lines, there is nothing wrong with upward volatility. The primary obstacle for Bitcoin is the downward volatility, and it is the same for the concept of store of value. Who would complain about upwards volatility? Why? You'd prefer it to not appreciate in value over time instead?

I know that no one would complain about the upwards volatility, and when I wrote "Bitcoin is no longer so volatile", I meant "upwards volatility" wasn't going anywhere, we just can ignore it because investors don't mind. It's obvious that if you were checking the price of BTC every 4 years, it wouldn't be the same all the time, we know it, it would be higher and higher.

[GiftedMAN]

I know that no one would complain about the upwards volatility, and when I wrote "Bitcoin is no longer so volatile", I meant "upwards volatility" wasn't going anywhere, we just can ignore it because investors don't mind. It's obvious that if you were checking the price of BTC every 4 years, it wouldn't be the same all the time, we know it, it would be higher and higher.

I don't understand what you meant by not so volatile but I put it to you that Bitcoin is not close to being stable and would never be cause it's controlled by up and downward volatility in other words demand and supply. We ain't witnessing the upward volatility too often lately cause were in the bear season, when it's the bull period i bet you won't say it no longer experiencing downward volatility. Well I understand that people love the bulls than bears but both seasons have their advantage.

[Satofan44]

My point is that if they are only adopting it for fees, then Bitcoin can never be the top competitor in this field.

And my point is not that they're only adopting it for fees, if you interpreted that this way than it indeed is wrong. (In reality, I don't really know where we disagree because I see currently the same problems as you.)

Fees was one of the reasons I mentioned, and I mentioned it for a future scenario with low volatility, not for the present. In the present, what I see is increased adoption, but for other reasons, like those detailed in the PayPal study.

Yes, then there was a misunderstanding here. Still even if you include all those reasons, we don't have an objective data to quantify the value assignment per function/utility so we are just speculating how much each function weighs.

I think currently the broader argument "use Bitcoin because it will lower your operational cost" for a merchant is currently not really relevant because the highly volatile Bitcoin does create costs (either for hedging or for payment processors) which are IMO currently higher than the possible benefit due to fees and other cost savings. This is what is slowing down adoption.

Yes.

Thus my argument is that for merchants, volatility matters. The higher the volatility, the higher the cost to accept Bitcoin. There's not really a difference which are other reasons to adopt Bitcoin, be it fees, new potential customers, payment settlement speed, privacy or whatever.

Yes, most are not really adopting it -- they use services that convert to fiat or stablecoin on payment receipt. Where I don't agree with is that there is no difference, of course there is the same way there is a difference for anybody who adopts Bitcoin personally -- it depends on why you are doing it. There are people who were unfazed by the volatility since day 1, and there are people who are panicking at volatility yet they've been here for many years. If the goal is a long term treasury, short-term volatility is meaningless. If it is not meaningless, it is the merchant who is doing something wrong with the alleged strategy and not the strategy itself.

And for the "treasury" option, volatity does matter too - here I indeed disagree with you. You could say that merchants can stack up satoshis easier when they're cheap. But in crypto winters often the payment activity is also lower than in bull market phases when many Bitcoin hodlers think they can spend some of their short term profits and thus select Bitcoin as a payment option more often. In a more stable scenario, we don't have these pronounced crypto winters anymore, and retailers' payment behaviour doesn't depend so much on the price movement. (I'll see if I can find sources for that.)

I don't agree with this at all. I didn't say that one has to stack solely from the incoming Bitcoin payments. One can stack slowly with this model using all incoming payments, as long as the percentage is low enough to not create any risk. This method has benefit where in down periods accumulation would continue at lower prices even if Bitcoin payments have stagnated. Sure only stacking from Bitcoin payments has benefits, but it comes with drawbacks during specific periods as you have mentioned. Therefore, I think as adopting and stacking from all sources is generally going to be preferable -- except in specific cases such as where the cost to convert BTC back to the needed fiat is very high for whatever reason.

Even if the cost/fees argument isn't currently the main one, I think it's worthy to discuss it, so let's go with this part:

It merely introduced competition into a very stagnant area, but centralized blockchains or tokens are going to have much lower fees. It is not possible to compete in that area with something that needs an expensive server to run due to the amount of resource requirements that it has. Wouldn't you agree with this?

Not really. Running a simple Bitcoin node isn't costly, not even if you add Lightning. And many merchants actually don't need a full node. If they use a sidechain, the costs are even lower (comparable to running an altcoin light wallet).

Centralized services will normally always include some hidden fee. Otherwise, how do they make money from payment functions only? A bank account currently in many countries doesn't have transfer fees anymore, but a monthly maintainance fee which is higher than ever. Of course you can argue "everybody has a bank account today". But bank transfers aren't as convenient as a QR payment as I already wrote. And banks intentionally don't add a "free" QR payment feature to their bank accounts because they also benefit from card payments. So there is still a niche for Bitcoin to shine. (Even CBDCs like the digital Euro seem to plan to charge fees for merchants.)

In addition that points us to another scenario which would be benefitted by a low volatility scenario: what if it's not necessary anymore to have a bank account, because you are safe enough from price swings holding Bitcoin? That's of course a more utopian scenario where volatility would have lowered to much lower levels than gold.

Centralized blockchain based coins or web based currencies also will have a hidden cost. Even stablecoins. In the case of Tether for example I think the cost is the risk of holding large amounts because there's a lower protection of the cost from bankruptcy. Tether would not be profitable if it didn't engage in some investment activities, even if they're not high-risk, so holding USDT is inherently riskier than holding USD on a bank. If Tether goes bankrupt, Tether holders will probably suffer losses.

And altcoins have all an extremely high risk, mainly of devaluation due to decreased founder activity or directly a founder exit, rugpulls, but also attacks. I don't see them really as a competitor thus.

You want merchants, who are unable to see Bitcoin besides its MSM's headlines, to also consider hidden costs?  While you are correct about the costs, I can guarantee you that not even 1% of merchants see it this way. They will happily adopt a stablecoin payments system, and it will cost them less than the Bitcoin solution. Similarly, shitcoin chains tend to have a much higher TPS at lower fees for the reasons that I have outlined. You can't seriously argue that Bitcoin is the best solution that exists fee-wise right now, I would never agree with that. Bitcoin is terrible to use and expensive at times, even without intermediaries which almost always play a role for many merchants. By the way, I was talking about transaction costs or costs from intermediaries to accept Bitcoin, not about node costs.

~ Yeah, but ... We have "huge volatility" only in the short term, maybe 2-3 years max. Take into consideration any 4-year period and Bitcoin is no longer so volatile, it's on a stable rising. I mean, you can check the price every day, but imaging you were doing it every 4 years.

This is not correct, don't put every kind of volatility in the same category. As is clear from this thread, or maybe if you read between the lines, there is nothing wrong with upward volatility. The primary obstacle for Bitcoin is the downward volatility, and it is the same for the concept of store of value. Who would complain about upwards volatility? Why? You'd prefer it to not appreciate in value over time instead?

I know that no one would complain about the upwards volatility, and when I wrote "Bitcoin is no longer so volatile", I meant "upwards volatility" wasn't going anywhere, we just can ignore it because investors don't mind. It's obvious that if you were checking the price of BTC every 4 years, it wouldn't be the same all the time, we know it, it would be higher and higher.

Sure, but you have to be very specific about what kind of thing you are referring to. I can assure you that most people won't even be able to differentiate between the two vollatilities in their mind when reading these things unless it was explicitly mentioned.

[BlackHatCoiner]

Fees was one of the reasons I mentioned, and I mentioned it for a future scenario with low volatility, not for the present. In the present, what I see is increased adoption, but for other reasons, like those detailed in the PayPal study.

I don't think the fees argument will ever suffice for the merchants to adopt bitcoin. Transactions via debit/credit card are not so costly for the merchants now more. It used to be, but it no longer is that much expensive.

Beyond volatility, the primary reason why no merchant accepts bitcoin in real life today is that it simply is not demanded enough. That's just the "painful reality". People don't care whether they pay in BTC or in EUR, as long as the transaction is seamless.

I haven't read what you two wrote, but I feel like the simplest answer is usually overlooked in these discussions. It's not volatility, the scalability problem or the capital gains tax as much as the brute fact that people don't care about paying in bitcoin.

[Satofan44]

Fees was one of the reasons I mentioned, and I mentioned it for a future scenario with low volatility, not for the present. In the present, what I see is increased adoption, but for other reasons, like those detailed in the PayPal study.

I don't think the fees argument will ever suffice for the merchants to adopt bitcoin. Transactions via debit/credit card are not so costly for the merchants now more. It used to be, but it no longer is that much expensive.

Beyond volatility, the primary reason why no merchant accepts bitcoin in real life today is that it simply is not demanded enough. That's just the "painful reality". People don't care whether they pay in BTC or in EUR, as long as the transaction is seamless.

I haven't read what you two wrote, but I feel like the simplest answer is usually overlooked in these discussions. It's not volatility, the scalability problem or the capital gains tax as much as the brute fact that people don't care about paying in bitcoin.

You can argue that for sure, in many cases, but not always. If the cost to adopt Bitcoin is negligible, then why would someone not want to adopt it even if it only brings a few extra customers or sales? As a merchant myself I have adopted it a very long time ago, and I absolutely do not care whether it brings consistent sales or not. In the case of others, this may not be true if there are:

• Running costs, such as a paid service to accept payments.
• Market costs, whether due to volatility, exchange costs or whatever else could be.
• Difficulty in overall adoption or integration, which I believe is not so much the case almost anywhere anymore.

Anyway how do you asses this demand as an average merchant? Do you need to have people writing you emails all the time or approaching you in person to adopt it? Would you adopt it if people did this and you knew nothing about Bitcoin or how to adopt it? What about many cases where there were countless emails asking for acceptance of a certain small or mid size merchants, but it let to nowhere? I mean I get your point, and it is valid in some cases -- but this is definitely not the complete story.  We may differ in details and perspectives, but overall d5000 is right -- even if volatility may or may not be so much of a big deal in some cases as I argue -- improved volatility metrics would help in practically all cases. With or without demand, it will be easier to convince someone to accept something that does not have a chart riddled with pumps and crashes.   You really need to put yourself in the shoes of an average person, when they see something like that the majority of people will instantly conclude something is bad with it. Very few would get to the understanding that this is how it is supposed to be for some period of time for an asset that is in the value discovery mode.

[BlackHatCoiner]

You can argue that for sure, in many cases, but not always. If the cost to adopt Bitcoin is negligible, then why would someone not want to adopt it even if it only brings a few extra customers or sales?

Does it bring a few extra customers, or does it not bring anyone at all? Beyond Internet services, I have never had the need to pay in bitcoin, in real life. I just like cash, and debit card payments are seamless. And imagine that it is me who would rather that!

Anyway how do you asses this demand as an average merchant? Do you need to have people writing you emails all the time or approaching you in person to adopt it?

Any feedback would be welcomed, but I'm sure that for the 99% of the merchants with a physical store out there, there has never been a single request to accept bitcoin. Cash or debit is just sufficient, and keeps things simple.

If volatility was the problem, then wouldn't USDT have a much higher acceptance? No one in the physical world accepts USDT, at least none in my experience.

[d5000]

Beyond volatility, the primary reason why no merchant accepts bitcoin in real life today is that it simply is not demanded enough. That's just the "painful reality".

The PayPal study  contradicts this a bit: "Access to and attraction of new customers" was mentioned by 45% of the merchants who responded as a reason to adopt Bitcoin.

I don't think the fees argument will ever suffice for the merchants to adopt bitcoin. Transactions via debit/credit card are not so costly for the merchants now more. It used to be, but it no longer is that much expensive.

I think the fee argument indeed is minor in the present, as written in the discussion with Satofan44.

But in my country, the fees are between slightly below 1% (debit cards) and 4-7% (credit cards!) per transaction, depending on the payment volume, the type of card and the transaction speed. Credit cards payments can take up to 10 days. These are the fees of our biggest payment processor Mercadopago. I don't think this is negligible.

Still even if you include all those reasons, we don't have an objective data to quantify the value assignment per function/utility so we are just speculating how much each function weighs.

You're of course correct -- and everything is speculative anyway, when we talk about a future low-volatility scenario. For now, we can use data like the PayPal study I mentioned, but of course that only gives us data about the (recent) past, not the future.

Where I don't agree with is that there is no difference, of course there is the same way there is a difference for anybody who adopts Bitcoin personally -- it depends on why you are doing it. There are people who were unfazed by the volatility since day 1, and there are people who are panicking at volatility yet they've been here for many years.

But that already requires some "pro-Bitcoin mindset", or at least awareness about how Bitcoin works. I was instead mainly assuming a "dumb" (in the sense of "unaware"/"not interested in details") merchant who doesn't care at all about Bitcoin and doesn't know how it works. For this kind of merchant the cost of implementation/hedging and the potential benefit are the main drivers of adoption (or not). They don't want to care about Bitcoin's cycles and so on.

Of course you're correct that Bitcoin awareness (and its future potential) is present, then the equation for merchants can be quite different.

I don't agree with this at all. I didn't say that one has to stack solely from the incoming Bitcoin payments.

I agree to disagree here - we're talking about different things however. The scenario you mention - a merchant who not only accepts, but also buys Bitcoin - is imo already also a "Bitcoin investor". And thus it will be a Bitcoin-aware person (see last paragraph). I think this is of course the ideal every Bitcoiner strives to propagate, but that merchant percentage probably will stay low.

You want merchants, who are unable to see Bitcoin besides its MSM's headlines, to also consider hidden costs?   While you are correct about the costs, I can guarantee you that not even 1% of merchants see it this way.

I still talk about an utopian low-volatility future here

Let's speculate Bitcoin achieves a volatility close to gold's, i.e. crashes would be of less than 50% compared to ATH (1980 crash aside) and take several years, i.e. you wouldn't risk to lose 50% in a few months. If there was some really convincing gold derivative (not some random RWA token) which could be accepted by the merchant without real counterparty risk, then I guess adoption of that token would already be significant. In the 90s or early 2000s the e-gold system had some success in e-commerce even if this business was still nascent.

In that utopian future you're a merchant and are presented with four main options:

- card payments (around 1-5% fees depending on the type of card, no hedging cost, chargeback fraud risk, used by 70% of population)
- Bitcoin payments (significant but low fees, some hedging cost but much less than now, 1% exchange cost, 15% of population, treasury option due to positive long term trend)
- stablecoin payments (no hedging cost, but risky to hold for longer periods, otherwise ~1% exchange cost, relatively high deposit fees on exchanges, 5% of population)
- altcoin payments (high hedging cost, near zero fees, 1% exchange cost, 1-5% of population per altcoin)

then Bitcoin would be one of the 2 most attractive payment means, either besides stablecoin or besides card payments (depending on if the importance of fees).

Bitcoin would be even more attractive if there was a positive feedback loop where also the suppliers accept it. This would however take longer, I guess.

You can't seriously argue that Bitcoin is the best solution that exists fee-wise right now, I would never agree with that. Bitcoin is terrible to use and expensive at times, even without intermediaries which almost always play a role for many merchants.

That's why I mentioned Lightning and sidechains. A "Bitcoin as a currency" scenario without second layers, imo, is not viable.

By the way, I was talking about transaction costs or costs from intermediaries to accept Bitcoin, not about node costs.

ACK. Yes I know some payment processors take 2% or more fees. However, if you have significant volume of Bitcoin customers, that cost would shrink to ~1% or less if you simply use an exchange. And then you would already be cheaper than credit cards with negligible hedging costs.


Ah, before I forget: a stat which may prove decreased transaction activity during crypto winters is the number of active addresses. While it declined also in 2023/2024, I guess this was due to the fees explosion after the Ordinals craze. In all other periods, the number correlated strongly with price.

[legiteum]

That's why I mentioned Lightning and sidechains. A "Bitcoin as a currency" scenario without second layers, imo, is not viable.

On that I agree 100%. We can argue about whether a Bitcoin "L2" is really Bitcoin at all (it's not  ), but it's good to at least acknowledge that Bitcoin itself will never be a viable mainstream payment method.

Now, as soon as you introduce the L2 concept, you need to defend another network, infrastructure, rules, security, etc. Any L2 is at best going to have the same overhead issues as a native stablecoin, so no matter what, the stablecoin wins from an architectural POV. All other things being equal in terms of features and quality, the Bitcoin solution is two things and the native stablecoin solution is one thing.