"Bitcoin only has speculative value". Are you sure?

[10c]

That depends on where you are located in the world.
Over here you are not obligated to issue charge backs. Your customers have a 14 no questions asked return right.
so they have to return you the item first before you compensate them. and since bitcoin is not considered money you just pay them the euro amount. so if btc doubled they just lost half their funds  

A big difference between BitPay and PayPal or Visa is BitPay isn't required to provide a chargeback service. It's my understanding this is a legal requirement for the companies that do provide it, and I find it hard to believe BitPay won't be faced with the same requirement as soon as legislators catch up. What will happen to pricing then?

[10c]

A big difference between BitPay and PayPal or Visa is BitPay isn't required to provide a chargeback service. It's my understanding this is a legal requirement for the companies that do provide it, and I find it hard to believe BitPay won't be faced with the same requirement as soon as legislators catch up. What will happen to pricing then?

What is interesting about that, is that in terms of avoiding chargebacks it makes using bit pay less attractive than just using bitcoin itself.

I'm not saying send BTC blind (course you can if you want) but in a hazy-trust situation use the mechanism(s) present in the BTC protocol (e.g. multi signed transactions/escrow etc). I don't know where we are in terms of easy to use public implementations of such things, but I understand those things are possible?

One step further away from fiat...

Very true but for now bitpay like services are the only affordable way to accept bitcoin if you have a business. the IRS doesn't have a wallet yet (I inquired several times).

bitpay will die when we actually enter the mass adoption stage and there is no need to convert to fiat, simply because suppliers will accept it to

[Tzupy]

During 2012 bitcoin's speculative value was reasonably close to it's real value, which is driven by demand from
activities that circumvent laws and regulations (SR and like). The current speculative value is much higher than
the real value, and it has been driven mostly by MtGox fiat withdrawal issue and bots and then by crazy Chinese speculators.
As long as the Chinese speculators are able to keep the price high, the current status will continue, with fluctuations and pumps.
But if they start to panic sell, then bitcoin price will endure a harsh reality check.

[Ibian]

For fair comparison it's worth factoring in the bitcoin network running costs:

No, it isn't. The network is being run on a volunteer basis, and the people doing so are profiting from it.

You could apply that same argument about paypal.

No. Paypal makes money through their fees. Miners and bitpay are economically unrelated.

[Miz4r]

During 2012 bitcoin's speculative value was reasonably close to it's real value, which is driven by demand from
activities that circumvent laws and regulations (SR and like). The current speculative value is much higher than
the real value, and it has been driven mostly by MtGox fiat withdrawal issue and bots and then by crazy Chinese speculators.
As long as the Chinese speculators are able to keep the price high, the current status will continue, with fluctuations and pumps.
But if they start to panic sell, then bitcoin price will endure a harsh reality check.

I find the speculative value of this post too high compared to its real value, you may be in for a harsh reality check soon. You have no idea what the real value of a bitcoin is and neither do I, we only know the current market value and the future will show whether that is too high or too low.

[tabnloz]

very nice but you forgot one thing... what are the rates the customer gets?
a merchant needs to have that priced in as well

You mean, the cost of acquiring bitcoins for the customer? Or "handing through" the cheaper costs to the customer in the form of a rebate?


The former is a good question, but doesn't really matter to the business owner: if his/her operating costs are lower, he/she's happy.

Which brings us to the latter: if people are reluctant to make use of the new, more efficient payment system, businesses have a simple option - pass through some of the reduced costs to the customer in the form of rebates. As long as the rebate is lower than the saved costs, it's still profitable for them to do so, and if the rebate is high enough, it will attract additional customers that look for the lowest price of an item.

I believe reggie Middleton wrote up a comparison similar to this as a look at the coming Margin Compression theme he says will hit the payments industry.

I don't always grasp it, but I believe it is something that is dangerous to the viability of some of the players

[StarenseN]

nice OP

[10c]

I find the speculative value of this post too high compared to its real value, you may be in for a harsh reality check soon. You have no idea what the real value of a bitcoin is and neither do I, we only know the current market value and the future will show whether that is too high or too low.

How can you say that???

All the bulls know the real value is way higher than where we are now,
just like all the bears know the real value is much, much lower then where we are now.

[Erdogan]

If you want to understand, you have to use the words best representing what is.

Use value: Most things and services has use value.

Exchange value: Added value as a result of folks using a stuff in indirect exchange.

Speculative value is a condescending word for exchange value.

Bitcoin has only exchange value. Same as fiat money.

[oda.krell]

I slapped on an 'addendum #2', with an argument in favor of a minimum price target of $2000 in the near future, motivated by the conclusions from my post about payment processors.

Feedback very welcome.

[Keyser Soze]

Visa -- Cheaper, but fees are one intransparent mess

There's no easy way, it seems, to find Visa's pricing model for you as a merchant from their website. There's this FAQ-style subsection...

Merchant (credit card) pricing is so confusing, it is pretty much impossible for an average person to understand. There are so many different types of fees that apply in different cases. For example, I used to work in banking (retail branch) and we would never actually show anyone inquiring about merchant services the fee schedule. If we did, they wouldn't understand and it would be misleading. We would tell them "Our pricing is very competitive and if you bring us a copy of your merchant statement, we can do a comparison for you." Of course if they actually were going to sign up we would have to show them, but by then it would be largely irrelevant.

[scarsbergholden]

Agreed with the main message, Bitpay is actually the strongest fundamental I know of. But as others said it needs to scale and it isn't proven yet. Bitpay may also have some hidden costs or risks (some sorts of fraud or attacks that are only possible with Bitcoin) that they have just been lucky to avoid so far.

I agree with the sentiment expressed in the OP -- Bitpay exhibits BTC's quite strong fundamentals. But it's also true -- what will things look like when the bitcoin economy scales up, big time?

[Bitcoin_is_here_to_stay]

I think the main problem is there is not really much incentive now for consumers to buy with bitcoins. Ppl buy things at overstock or at TigerDirect either to support them or to cash out avoiding international wires from exchanges, etc.

At the moment, I have not heard about discount for buying with bitcoins. Since I live in US, I have no incentive whatsoever to buy from Overstock or TigerDirect using bitcoins.  It will only cost me extra to buy btc, not mention the hassle.

I wonder why buying digital content (movies, music) with btc is not more popular - that would make more sense. So far buying things online with btc is not competitive, because it is mostly implemented by business selling mostly domestically anyway, and for this domestic currency is more convenient and cheaper. So unless we will see "10% discounts for buying with btc" ads, I think most this buying with btc is done for promotional purposes or (under the radar) cashing out.

[oda.krell]

I think the main problem is there is not really much incentive now for consumers to buy with bitcoins. Ppl buy things at overstock or at TigerDirect either to support them or to cash out avoiding international wires from exchanges, etc.

At the moment, I have not heard about discount for buying with bitcoins. Since I live in US, I have no incentive whatsoever to buy from Overstock or TigerDirect using bitcoins.  It will only cost me extra to buy btc, not mention the hassle.

I wonder why buying digital content (movies, music) with btc is not more popular - that would make more sense. So far buying things online with btc is not competitive, because it is mostly implemented by business selling mostly domestically anyway, and for this domestic currency is more convenient and cheaper. So unless we will see "10% discounts for buying with btc" ads, I think most this buying with btc is done for promotional purposes or (under the radar) cashing out.

Agreed. So far there isn't enough incentive for customers to switch to Bitcoin based payments. But the first step is getting the merchants on board, through cheaper rates. It's up to them then to give an incentive to customers to actually use it.

By the way, I don't think it's coincidence that the new, even cheaper than before, Bitpay fee structure is introduced relatively briefly after a $30 million funding round. Part of me suspects, the fees are actually slightly below their own break-even point, but they use the extra buffer they got through the latest funding to aggressively win new businesses through their flat fees.

Nothing wrong with that, if that's what happened. Could however mean that they will eventually raise prices.

[Miz4r]

I know a few places that actually give discounts for buying with Bitcoins in my country. One is a webshop that sells computers: if you pay in BTC there they don't charge you any shipping costs. The other one is a food delivery service that normally charges you transaction costs if you pay with a credit card or directly through your bank, but if you pay in BTC you don't have to pay for that. Those are rather small incentives I know, but you have to start somewhere.

[oda.krell]

I know a few places that actually give discounts for buying with Bitcoins in my country. One is a webshop that sells computers: if you pay in BTC there they don't charge you any shipping costs. The other one is a food delivery service that normally charges you transaction costs if you pay with a credit card or directly through your bank, but if you pay in BTC you don't have to pay for that. Those are rather small incentives I know, but you have to start somewhere. :)

thuisbezorgd, huh? :P

[Miz4r]

I know a few places that actually give discounts for buying with Bitcoins in my country. One is a webshop that sells computers: if you pay in BTC there they don't charge you any shipping costs. The other one is a food delivery service that normally charges you transaction costs if you pay with a credit card or directly through your bank, but if you pay in BTC you don't have to pay for that. Those are rather small incentives I know, but you have to start somewhere.

thuisbezorgd, huh?

Yup, always feels like free dinner to me when I order something there.

[ampere9765]

Never really looked at the details behind Bitpay's fees, but this is pretty spot on analysis by the OP. Fundamentals are looking bullish as hell, that's for sure.

[YogoH]

Coinbase had free bitcoin to fiat business transactions up to first million dollars.  Then a flat 1% after that. Thats what I set up the bowling here in town at. not sure if they still have that deal.

[Spaceman_Spiff]

I have built a few sites for clients in the past that use bitpay and the price gap was an issue because of high priced items they sold (mainly metals and jewels) margins were tight in the market and the offset disrupted the prices quite a bit

I see. Something to watch out for then, I guess.

Wonder if there's a site that tracks historic Bitpay rates vs. market rates.

Yes, this has been my experience as well.  I used bitcoins a few times to buy some food (back in november-december I believe), and at times the rates were kinda ok, but sometimes there was a BIG premium (IIRC in the area of 5-10%) to be paid for the conversion (to euros).

That being said, I like the functionality that Bitpay provides, and if the rates for the customer are competitive, I might use it more often. 
I suspect this will happen over time.