Another Noob perspective - drawbacks and potential growth opportunities

[steelhouse]

twoplustwo

I think you need to have a business that earns bitcoin then use the exchange to transfer to $.

[1714928309]

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[1714928309]

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[Cusipzzz]

There is a lot you can do...Offer exchange in your local area. Set up your own exchange for Paypal users with less fees than Coinpal. Or are you waiting for others to do it?

You can accept transactions with 0 confirms and have nearly instant transactions. Of course there is the risk of a double spend, but hey, your impulse gambling site should make enough coins to cover those.

You are probably never going to buy groceries or pay your mortgage in BTC. Sure, some people see that as the goal or as a 100% substitute for USD - but that doesn't mean that anything short of that is a failure.

BTC is already a wildly successful niche currency providing significant benefits to both buyers and sellers online. Be it webhosting, betting on sports, or any of the other businesses listed on the /Trade page.

Yes, it may not be easy or frictionless for Joe Sixpack to get his hands on his first bitcoins, but so be it. Joe Sixpack probably shouldn't be using bitcoins yet. If your business requires a non-technical person to have bitcoins, then you should be working on the issue as well.

[tomcollins]

Fees on coinpal are 5.5 to 10% depending on order size.  Pretty huge.

That's about the same fee as for the purchase of foreign currency (in tourist quantities), although the exchangers present that as a "spread" rather than as a "fee". So I don't think it's too high at all.

What's missing from current Bitcoin exchanges is convenience, not cheapness.

And that works for tourists because they *have* to convert their currency to the local stuff.

Unless I need to hide my money, why would I want to use BTC if I have to pay 10% more?

[Jered Kenna (TradeHill)]

Fees on coinpal are 5.5 to 10% depending on order size.  Pretty huge.

That's about the same fee as for the purchase of foreign currency (in tourist quantities), although the exchangers present that as a "spread" rather than as a "fee". So I don't think it's too high at all.

What's missing from current Bitcoin exchanges is convenience, not cheapness.

And that works for tourists because they *have* to convert their currency to the local stuff.

Unless I need to hide my money, why would I want to use BTC if I have to pay 10% more?

I agree the 5 to 10% is a huge drawback. It's also really early for the tech / currency.
I'm surprised what options you do have for it being so early.
If you want it to be a little cheaper I'd suggest you open an account with ingdirect you can do it completely online and they have free incoming and outgoing transfers. Then link that account to your regular bank (or use it). Use that to (freely) transfer to MT-Gox and convert to BTC which is obviously free to transfer to your wallet.

Might be your best option at this point.

Also I do a lot of international business and what he said is right, I lose a few percent everytime. I'm going to try to use btc to reduce this.

[tomcollins]

Fees on coinpal are 5.5 to 10% depending on order size.  Pretty huge.

That's about the same fee as for the purchase of foreign currency (in tourist quantities), although the exchangers present that as a "spread" rather than as a "fee". So I don't think it's too high at all.

What's missing from current Bitcoin exchanges is convenience, not cheapness.

And that works for tourists because they *have* to convert their currency to the local stuff.

Unless I need to hide my money, why would I want to use BTC if I have to pay 10% more?

I agree the 5 to 10% is a huge drawback. It's also really early for the tech / currency.
I'm surprised what options you do have for it being so early.
If you want it to be a little cheaper I'd suggest you open an account with ingdirect you can do it completely online and they have free incoming and outgoing transfers. Then link that account to your regular bank (or use it). Use that to (freely) transfer to MT-Gox and convert to BTC which is obviously free to transfer to your wallet.

Might be your best option at this point.

Also I do a lot of international business and what he said is right, I lose a few percent everytime. I'm going to try to use btc to reduce this.

Thanks for the idea.  Still gotta eat a $15 fee from mtgox, but if I ever needed large transfers, bank wire might be great.

If I can get some bitcoins going, it seems like making a business out of payment processing might be a good way to go.

[mtbomb]

#3 is certainly doable on a small scale.

But think from the merchant's perspective, why would they ever require this?

1)  Cheaper for them than processing credit card transactions
2)  Government mandate (lol @ governments mandating bitcoins)
3)  Merchant is advocate for BitCoin, values this more than getting business
4)  Merchant requires anonymity or other BitCoin advantage (selling something illegal?)

Am I missing anything else why a merchant would *only* take BitCoins?  Or even charge "less" for using them?

One thing you might be missing...

A merchant entering a market could generate a lot of interest for his product by accepting BTC. There is a short list of people accepting coins, but a pretty large number of people who want to use them. Accepting coins and getting your name on the list could jumpstart someone's small business. For example, I bet there have been a lot of Alpaca socks sold to BTC guys than there otherwise would have been.

One of bitcoin's big advantages is transaction costs. 3% on paypal adds up quickly especially given the margins in eCommerce. Unfortunately if a customer and merchant are moving in and out of BTC for the transaction this advantage is lost.

To cater to bitcoin's advatanges, people interested in promoting the currency should target markets where buyers are often sellers and sellers often buy. Rolling funds over between buyers and sellers without having to cash out will showcase the advantages of free transaction costs. Something like etsy could be good for this, but there are probably better examples of markets. Existing barter markets might make a good entry point for bitcoin too.

[mtbomb]

I'm well aware of the difficulties.  I'm also aware of how quickly a lot of the betting dried up after depositing became incredibly difficult.

BitCoin as a currency in this arena is awesome.  However, having casual users being able to easily and cheaply purchase BitCoins in order to deposit is very important for such businesses.

Yesterday I saw it take 2+ hours for my transactions to complete.  I don't know how long it actually took since I went to bed before it actually worked.  I did one transaction with a transaction fee, and 1 without.  Both took over 2 hours.

If I was making a gambling website, I would want people to deposit on impulse and waiting 2 hours would not be acceptable.  But I see the potential and hopefully that issue gets better.

The time lag is less than desirable but it's not too bad. For the sports betting example, the book could show the balance instantly and still take the bets, but they could prevent cash out until the funds cleared, voiding all transactions if they were fraudulent. For physical goods, there's no issue either. You submit your order and whether the store is waiting on cleared funds or not is transparent to you because you have to wait for UPS to pick up anyway.

One time the lack of instant transactions will be a problem is when you want to send money to a friend who wants to cash out instantly. Even this could be mitigated by having accounts on the same BTC e-wallet.

[Alex Beckenham]

#3 is certainly doable on a small scale.

But think from the merchant's perspective, why would they ever require this?

1)  Cheaper for them than processing credit card transactions
2)  Government mandate (lol @ governments mandating bitcoins)
3)  Merchant is advocate for BitCoin, values this more than getting business
4)  Merchant requires anonymity or other BitCoin advantage (selling something illegal?)

Am I missing anything else why a merchant would *only* take BitCoins?  Or even charge "less" for using them?

Sorry I'm late to the conversation, but you're also missing customer mandate. Eg. If the people walking up to your bar only have bitcoins, then you'd better start accepting bitcoins.

And once bitcoins are the norm and paying in anything else is a rare and random event, of course you'd charge more when they pay the old-fashioned way.

Edit: Sorry, you said *only* bitcoins. My mistake.

[tomcollins]

#3 is certainly doable on a small scale.

But think from the merchant's perspective, why would they ever require this?

1)  Cheaper for them than processing credit card transactions
2)  Government mandate (lol @ governments mandating bitcoins)
3)  Merchant is advocate for BitCoin, values this more than getting business
4)  Merchant requires anonymity or other BitCoin advantage (selling something illegal?)

Am I missing anything else why a merchant would *only* take BitCoins?  Or even charge "less" for using them?

Sorry I'm late to the conversation, but you're also missing customer mandate. Eg. If the people walking up to your bar only have bitcoins, then you'd better start accepting bitcoins.

And once bitcoins are the norm and paying in anything else is a rare and random event, of course you'd charge more when they pay the old-fashioned way.

Edit: Sorry, you said *only* bitcoins. My mistake.

I think you are describing a situation that occurs after they are mainstream (customers prefer to pay in BTC).  However, there's a good argument that there might be a niche where people would love to pay BTC, even at a slight premium right now.  People who have/are earning in BTC probably would prefer to spend BTC.  Assuming they are not hoarding them, and want to spend them.

There's a huge number of bitcoins in existence right now, and targeting that audience makes great sense as a business opportunity.  Those who have them are most likely miners or speculators.  I'd guess the speculators are holding them hoping they go up in value more.  The miners are doing this for profit, though.  They want to make money and a lot are wanting to spend their earnings.  So targeting them is great.  It won't really do much to expand the usage of BTC, but it can't hurt.  The more things you can buy in BTC, the more likely people will want to use them, especially if transaction costs are cheaper.

[Alex Beckenham]

there might be a niche where people would love to pay BTC, even at a slight premium right now.

One scenario where I could see people paying a premium when using btc, is where the buyer doesn't really feel like it's 'real' money... Like how casinos issue chips, or theme parks issue their own 'fun' notes, so that people are more likely to splash it around and overpay for stuff.

[Jered Kenna (TradeHill)]

there might be a niche where people would love to pay BTC, even at a slight premium right now.

One scenario where I could see people paying a premium when using btc, is where the buyer doesn't really feel like it's 'real' money... Like how casinos issue chips, or theme parks issue their own 'fun' notes, so that people are more likely to splash it around and overpay for stuff.

Or they want it to grow and succeed so they're willing to pay a premium. Or they're early adopters and paid 10usd for 800btc.

[tomcollins]

I've done some thinking about this topic.

My first post may have been a bit premature, but it's at least good to identify pain points for adoption.

I'm mainly looking to brainstorm ideas of where BTC is currently (or at least with little work) superior to using local currency or credit cards.

BTC thrives best when the economy is circular.  I spend my bitcoins with A, he spends it with B, etc...  If fewer conversions to outside currency are needed, the more valuable it is to use since you aren't eating transaction costs.  BTC is vastly superior to other currency in transaction fees internally.  Anonymity is also a huge advantage, although I'm not sure there's huge value to most users in that area.  Anonymity is hugely valuable if governments ever try to crush BTC, though.  So it's essential but not a huge draw to people, besides those with something to hide.  I understand this case, but it's not something I want to promote, just to avoid association with anyone involved with this being a subversive or scaring people from using it.

The other part where it might be advantageous is areas where people already are paying huge fees.  Western Union costs quite a lot to send money from one country to another and people eat the cost.  Local currency trading for tourists tends to be pretty bad as well.

Does anyone have any stories about how using BTC was beneficial to them, and not just a "I want to promote people using it" case?  I'd be interested in finding out areas where it has a decent competitive advantage.

[Alex Beckenham]

Anonymity is hugely valuable if governments ever try to crush BTC, though.

Can someone point me to the wiki page which lists Bitcoin myths? I'm sure there was one somewhere.

I need to add a section about Bitcoin being 'anonymous'.

[Jered Kenna (TradeHill)]

Anonymity is hugely valuable if governments ever try to crush BTC, though.

Can someone point me to the wiki page which lists Bitcoin myths? I'm sure there was one somewhere.

I need to add a section about Bitcoin being 'anonymous'.

It might not be anonymous by it's self but it can be used anonymously. It's a hell of a lot easier to hide than a credit card.

[Alex Beckenham]

Anonymity is hugely valuable if governments ever try to crush BTC, though.

Can someone point me to the wiki page which lists Bitcoin myths? I'm sure there was one somewhere.

I need to add a section about Bitcoin being 'anonymous'.

It might not be anonymous by it's self but it can be used anonymously. It's a hell of a lot easier to hide than a credit card.

I agree. But there are very specific things you need to do in order to protect your anonymity while using Bitcoin. I think it's dangerous to tell newbies Bitcoin is 'an anonymous currency' and have them trot off to silk road with their first paycheck.

[tomcollins]

Anonymity is hugely valuable if governments ever try to crush BTC, though.

Can someone point me to the wiki page which lists Bitcoin myths? I'm sure there was one somewhere.

I need to add a section about Bitcoin being 'anonymous'.

It might not be anonymous by it's self but it can be used anonymously. It's a hell of a lot easier to hide than a credit card.

I agree. But there are very specific things you need to do in order to protect your anonymity while using Bitcoin. I think it's dangerous to tell newbies Bitcoin is 'an anonymous currency' and have them trot off to silk road with their first paycheck.

I should have been more clear.  The decentralization is far far far more important for the survival of the network from attack.

[Jered Kenna (TradeHill)]

Anonymity is hugely valuable if governments ever try to crush BTC, though.

Can someone point me to the wiki page which lists Bitcoin myths? I'm sure there was one somewhere.

I need to add a section about Bitcoin being 'anonymous'.

It might not be anonymous by it's self but it can be used anonymously. It's a hell of a lot easier to hide than a credit card.

I agree. But there are very specific things you need to do in order to protect your anonymity while using Bitcoin. I think it's dangerous to tell newbies Bitcoin is 'an anonymous currency' and have them trot off to silk road with their first paycheck.

I should have been more clear.  The decentralization is far far far more important for the survival of the network from attack.

Yeah that's 100% true. Also in regards to anonymity you're always going to give out less info with a transfer than you are with another means of payment.
So even if it's not anonymous from the go it's still somewhat anonymous without doing anything at all. Should you go buy LSD without doing anything else.. no.