7 ms·

Here's one model that could work. Think of Bitcoin as analogous to physical cash. Cash = small casual payments in offline world. Bitcoin = small casual payments

by cdixon 13y ago

Here's one model that could work. Think of Bitcoin as analogous to physical cash. Cash = small casual payments in offline world. Bitcoin = small casual payments in online world. (btw, the original Bitoin paper says this pretty explicitly). I don't keep my savings in (physical) cash. I keep some spending money there. Similarly you will have your internet spending money. You'll converts to and from USD occasionally but not on every transaction. Maybe some people will store value in Bitcoin but they will be the exceptions. But ultimately smarter people than me will figure out the right model. That's the beauty of software platforms.

kordless 13y ago
I like this analogy Chris. We're already seeing an uptick in interest by developers around the platform: http://blog.bitcoinpulse.com/bitcoin-big-hit-with-developers-predicting-the-future-with-github/ http://blog.bitcoinpulse.com/bitcoin-big-hit-with-developers.... The most likely immediate use of your "Internet Spending Money" would be online services including apps, games, online advertising, storage, hosting and more.
- cdixon 13y ago
  I also think this issue is going to become more urgent as native mobile apps that do have a "global" (OS-wide) payment system become more dominant. Open web needs something analogous to compete.
tvladeck 13y ago
Chris, are you looking into non-currency uses for BTC, a la Albert Wenger [0]? My own feeling is that the protocol (secure ledger) is more generally valuable and can likely be put to work in a lot of uses. Is that your feeling as well or are you primarily excited in its use as cash? [0] http://www.usv.com/posts/bitcoin-as-protocol http://www.usv.com/posts/bitcoin-as-protocol
- cdixon 13y ago
  Definitely interested in lots of other uses for the ledger. If you or someone you know is working on something, we (a16z) would love to talk. I'm hoping next year we'll see a lot more startups building on top of the Bitcoin protocol.
  - tvladeck 13y ago
    Thanks for the response. I hope so too! I work in climate policy so unlikely to come from me, but will keep the thought in mind if my hacker friends start getting on it.
  - nadaviv 13y ago
    Hey Chris, I was trying to reach you to talk about Bitrated. Drop me an email (in my profile) if you're interested to chat about it and see if we can do something together.
  - possibilistic 13y ago
    Hey Chris, my friend and I are working on such a thing. Hopefully we'll be able to post a "Show HN" relatively soon.
rhino369 13y ago
But internet transactions for most people are a one way street. You still have to pay the fees to go from USD to bitcoin for all the bitcoin you have. Also, this exposes you to crazy risk because of price fluctuation. Bitcoin has fluctuated over 3% today, and today is a relatively flat day for it.
alooPotato 13y ago
Chris - this argument seems compelling, at least on the surface. It brought up two questions in my mind: 1) You say "You'll converts to and from USD occasionally but not on every transaction" . Sure you wouldn't need to exchange on every transaction, but when you do the conversion, the 1% applies to $ amount not the number of transactions. So if I convert $200 into BTC, I pay the 1% (+ exchange spread) on $200. It doesn't really matter if I do this over 1 transaction or many small ones. Am I missing something here? Are BTC transactions really cheaper? 2) Whats the actual advantage for the average consumer to pay with BTC? Do you see merchants offering discounts if you pay them with BTC? If not, whats the mechanism that compels me, the average consumer, to pay with BTC over say Visa?
- deleted 13y ago
  [deleted]
- waterlesscloud 13y ago
  I'm not aware of any exchange charging 1% for a one-way exchange. That would be very high. Most tend to be around 0.5-0.6%, with some as low as 0.2% Actually, many of the Chinese exchanges are currently 0% to trade, though they charge to bring money in or out of their systems. It's also worth noting that many of the exchanges have fees that get lower if you trade larger amounts in a given time frame. If you're a high volume trader, the difference can be significant.
  - yebyen 13y ago
    Coinbase is probably the most popular US exchange (no source on this, sorry... I just use them) and they charge $0.15+1%. I think I have read that if you are a merchant and establish a merchant account that you can get the first 1 Million Dollars (USD) free of fees. I am not sure what bar you must pass to earn merchant status, but I do have a link[1] to back this up. Presumably it's not more complicated than "accept payments for services" -- you could probably fudge it if you were simply in the business of cashing out bitcoins up to $1M. I haven't looked into it further because I'm not a merchant and I have been more interested in buying than selling at Coinbase. Are the Chinese exchanges still bringing money in and out? I thought I read this was forbidden, and that was the reason for the great dump of $1000USD prices a few weeks back. [1]: http://blog.coinbase.com/post/59417545262/your-first-1-000-000-usd-in-merchant-processing-is-now http://blog.coinbase.com/post/59417545262/your-first-1-000-0...
wsxcde 13y ago
I'm sorry, I don't follow. I don't keep my savings in cash, but I can withdraw as much cash as I could reasonably want at zero cost from my bank. How can I do this (i.e., USD->spending money conversion for free) with Bitcoin? Also, are you making an assumption that the volatility of Bitcoin<->USD will go away at some point in the future? If that happens, keeping Bitcoin around instead of USD will become reasonable. > But ultimately smarter people than me will figure out the right model. That's the beauty of software platforms. Sounds like wishy-washy thinking which I hear a lot of from bitcoin advocates.
- bluedino 13y ago
  >> I don't keep my savings in cash, but I can withdraw as much cash as I could reasonably want at zero cost from my bank. And once you are over a certain amount, the government finds out.
  - wsxcde 13y ago
    Maybe this is an issue for you, but I don't see this as compelling advantage.
    - CamperBob2 13y ago
      Also, go to your bank and try to withdraw "as much cash as you reasonably want." At some point they will probably charge you a "Cash Withdrawal Fee," or some such. I'm interested in Bitcoin because of its stated goal to disrupt the banking system. Banks suck. Maybe this is an issue for you Are you a US citizen, or a resident of one of the Five Eyes countries? If so, it's an issue for you whether you like it or not. You commit crimes all the time without knowing it, just like the rest of us do. Your government wouldn't have it any other way.
    - foley 13y ago
      I've been working on a Bitcoin card over the past twelve months so I have had a lot of time to think about the benefits and drawbacks of using Bitcoins for everyday transactions and I completely agree with you, no compelling advantage. Besides the obvious problem of the volatile exchange rate there is just no trust in any of the Bitcoin institutions, if I can't trust anyone else to manage my Bitcoins I need to do it myself. I can do that, but it takes time and effort to maintain secure systems. The real kicker is if something goes wrong, its my problem. If someone hacks my netbanking details the bank will cover my losses. So what does Bitcoin offer? it opens up transactions that would have otherwise been too risky. Irreversible electronic transactions are Bitcoins niche. However that fact makes it very difficult to acquire Bitcoins with reversible payment methods. This slows down the process of entering and exiting the Bitcoin market leaving you vulnerable to the volatile exchange rate. I really want Bitcoin to succeed but at this stage there is no way I would use Bitcoin for a transaction unless it was the only option.
dustingetz 13y ago
bitcoin can be an implementation detail of credit cards, totally hidden from the user. In the medium term, banks can probably figure out how to work this to their advantage, for example by reducing cc fraud.
porter 13y ago
The reason why you carry cash is because you sometimes find yourself in situations where a credit card won't work - tipping the valet, vending machines, car washes, etc. In what cases will bitcoin be better for small transactions online than a credit card? I'm at a loss for examples.
- conception 13y ago
  Really small transactions (eg the reddit bitcoin tipbot, small website donations, payment for content) for one. iTunes tries it aggregate transactions to lower credit card fees, with bitcoin, you wouldn't need to do that.
- robinhoode 13y ago
  Micropayments is one obvious example. Credit card fees make micropayments very difficult. I'm sure there are workarounds, but that's only one possible use-case for Bitcoin. There are more that have yet to be invented.
- cdixon 13y ago
  I think the original Bitcoin paper said it well: "small casual payments." To pay online right now, you have to decide: 1) do I trust this vendor 2) do I want to fill out this form with all my info Generally this (plus transaction fees) only make sense for transactions above $10. The vendor responds by trying to build a relationship with you- by building brand trust and by pushing you toward an ongoing relationship (recurring payments, creating an account etc). This is why "cards on file" is considered a major business asset online. As a result, any online service that doesn't make the cut is forced to resort to an advertising based business model.
  - steveklabnik 13y ago
    > I think the original Bitcoin paper said it well: "small casual payments." You can see this with the tipping culture on Reddit. It's helped Dogecoin really take off, because it's pretty trivial to send a small, casual payment to someone.
- deleted 13y ago
Guvante 13y ago
Huge issue with that model, while cash has a fixed value against a fiat currency that is known to be stable, bitcoins have a fixed value against a commodity that is known for being unstable.
PureApeshit 13y ago
Bitcoin being deflationary, storing value in it is very good idea, apart being a bit risky. I also do not see why it should be limited to small payments, bitcoin is full currency not a toy.
- bmm6o 13y ago
  That's true in the long run, when its value has settled to something far less volatile than it is currently. Today, storing value in it is investing/speculating/gambling.
- XorNot 13y ago
  Bitcoin being deflationary, the value will never settle. No government wants deflationary money, and you don't either because no one who doesn't have it has any reason to accept permanent servitude from a deflationary currency. Or as I like to put it: why do you think you should get wealthy for doing literally nothing? Not investing, not loading, not accepting any risk, not working?
  - PureApeshit 13y ago
    computer power is deflationary, tablet i bought for 200 euros 2 years ago, oday i can buy same specs for 59 euros... still noone waits and holds till stuff get cheaper, same with bitcoin it will only help environment for massive stockpiling of goods will be bad. You are not getting wealthy for nothing, you get wealthy for restraining your consumption, which is major problem of todays world, trust me im homeless(for proof can check me on youtube channel AngriestCat) and amounts of good food i find in supermarket trash is ridiculous.
    - XorNot 13y ago
      The computer you bought 2 years ago didn't increase in computing power in that time. A computer from 2 years ago is not worth more today. But wealth in a deflationary currency does. The rest of your argument about curtailing consumption is an irrelevant tangent here.
andrewfong 13y ago
The analogy doesn't work perfectly because there is usually no cost to withdrawing and depositing cash from an ATM. And when there is a fee, it tends to be fixed as opposed to percentage-based. These may very well be solveable problems, but there's definitely a bit of work to do to make bitcoins function like pocket cash.

by cdixon 13y ago

kordless 13y ago

I like this analogy Chris. We're already seeing an uptick in interest by developers around the platform: http://blog.bitcoinpulse.com/bitcoin-big-hit-with-developers-predicting-the-future-with-github/ http://blog.bitcoinpulse.com/bitcoin-big-hit-with-developers.... The most likely immediate use of your "Internet Spending Money" would be online services including apps, games, online advertising, storage, hosting and more.

cdixon 13y ago
I also think this issue is going to become more urgent as native mobile apps that do have a "global" (OS-wide) payment system become more dominant. Open web needs something analogous to compete.

tvladeck 13y ago

Chris, are you looking into non-currency uses for BTC, a la Albert Wenger [0]? My own feeling is that the protocol (secure ledger) is more generally valuable and can likely be put to work in a lot of uses. Is that your feeling as well or are you primarily excited in its use as cash? [0] http://www.usv.com/posts/bitcoin-as-protocol http://www.usv.com/posts/bitcoin-as-protocol

cdixon 13y ago
Definitely interested in lots of other uses for the ledger. If you or someone you know is working on something, we (a16z) would love to talk. I'm hoping next year we'll see a lot more startups building on top of the Bitcoin protocol.
- tvladeck 13y ago
  Thanks for the response. I hope so too! I work in climate policy so unlikely to come from me, but will keep the thought in mind if my hacker friends start getting on it.
- nadaviv 13y ago
  Hey Chris, I was trying to reach you to talk about Bitrated. Drop me an email (in my profile) if you're interested to chat about it and see if we can do something together.
- possibilistic 13y ago
  Hey Chris, my friend and I are working on such a thing. Hopefully we'll be able to post a "Show HN" relatively soon.

rhino369 13y ago

But internet transactions for most people are a one way street. You still have to pay the fees to go from USD to bitcoin for all the bitcoin you have. Also, this exposes you to crazy risk because of price fluctuation. Bitcoin has fluctuated over 3% today, and today is a relatively flat day for it.

alooPotato 13y ago

Chris - this argument seems compelling, at least on the surface. It brought up two questions in my mind: 1) You say "You'll converts to and from USD occasionally but not on every transaction" . Sure you wouldn't need to exchange on every transaction, but when you do the conversion, the 1% applies to $ amount not the number of transactions. So if I convert $200 into BTC, I pay the 1% (+ exchange spread) on $200. It doesn't really matter if I do this over 1 transaction or many small ones. Am I missing something here? Are BTC transactions really cheaper? 2) Whats the actual advantage for the average consumer to pay with BTC? Do you see merchants offering discounts if you pay them with BTC? If not, whats the mechanism that compels me, the average consumer, to pay with BTC over say Visa?

deleted 13y ago
[deleted]
waterlesscloud 13y ago
I'm not aware of any exchange charging 1% for a one-way exchange. That would be very high. Most tend to be around 0.5-0.6%, with some as low as 0.2% Actually, many of the Chinese exchanges are currently 0% to trade, though they charge to bring money in or out of their systems. It's also worth noting that many of the exchanges have fees that get lower if you trade larger amounts in a given time frame. If you're a high volume trader, the difference can be significant.
- yebyen 13y ago
  Coinbase is probably the most popular US exchange (no source on this, sorry... I just use them) and they charge $0.15+1%. I think I have read that if you are a merchant and establish a merchant account that you can get the first 1 Million Dollars (USD) free of fees. I am not sure what bar you must pass to earn merchant status, but I do have a link[1] to back this up. Presumably it's not more complicated than "accept payments for services" -- you could probably fudge it if you were simply in the business of cashing out bitcoins up to $1M. I haven't looked into it further because I'm not a merchant and I have been more interested in buying than selling at Coinbase. Are the Chinese exchanges still bringing money in and out? I thought I read this was forbidden, and that was the reason for the great dump of $1000USD prices a few weeks back. [1]: http://blog.coinbase.com/post/59417545262/your-first-1-000-000-usd-in-merchant-processing-is-now http://blog.coinbase.com/post/59417545262/your-first-1-000-0...

wsxcde 13y ago

I'm sorry, I don't follow. I don't keep my savings in cash, but I can withdraw as much cash as I could reasonably want at zero cost from my bank. How can I do this (i.e., USD->spending money conversion for free) with Bitcoin? Also, are you making an assumption that the volatility of Bitcoin<->USD will go away at some point in the future? If that happens, keeping Bitcoin around instead of USD will become reasonable. > But ultimately smarter people than me will figure out the right model. That's the beauty of software platforms. Sounds like wishy-washy thinking which I hear a lot of from bitcoin advocates.

bluedino 13y ago
>> I don't keep my savings in cash, but I can withdraw as much cash as I could reasonably want at zero cost from my bank. And once you are over a certain amount, the government finds out.
- wsxcde 13y ago
  Maybe this is an issue for you, but I don't see this as compelling advantage.
  - CamperBob2 13y ago
    Also, go to your bank and try to withdraw "as much cash as you reasonably want." At some point they will probably charge you a "Cash Withdrawal Fee," or some such. I'm interested in Bitcoin because of its stated goal to disrupt the banking system. Banks suck. Maybe this is an issue for you Are you a US citizen, or a resident of one of the Five Eyes countries? If so, it's an issue for you whether you like it or not. You commit crimes all the time without knowing it, just like the rest of us do. Your government wouldn't have it any other way.
  - foley 13y ago
    I've been working on a Bitcoin card over the past twelve months so I have had a lot of time to think about the benefits and drawbacks of using Bitcoins for everyday transactions and I completely agree with you, no compelling advantage. Besides the obvious problem of the volatile exchange rate there is just no trust in any of the Bitcoin institutions, if I can't trust anyone else to manage my Bitcoins I need to do it myself. I can do that, but it takes time and effort to maintain secure systems. The real kicker is if something goes wrong, its my problem. If someone hacks my netbanking details the bank will cover my losses. So what does Bitcoin offer? it opens up transactions that would have otherwise been too risky. Irreversible electronic transactions are Bitcoins niche. However that fact makes it very difficult to acquire Bitcoins with reversible payment methods. This slows down the process of entering and exiting the Bitcoin market leaving you vulnerable to the volatile exchange rate. I really want Bitcoin to succeed but at this stage there is no way I would use Bitcoin for a transaction unless it was the only option.

dustingetz 13y ago

bitcoin can be an implementation detail of credit cards, totally hidden from the user. In the medium term, banks can probably figure out how to work this to their advantage, for example by reducing cc fraud.

porter 13y ago

The reason why you carry cash is because you sometimes find yourself in situations where a credit card won't work - tipping the valet, vending machines, car washes, etc. In what cases will bitcoin be better for small transactions online than a credit card? I'm at a loss for examples.

conception 13y ago
Really small transactions (eg the reddit bitcoin tipbot, small website donations, payment for content) for one. iTunes tries it aggregate transactions to lower credit card fees, with bitcoin, you wouldn't need to do that.
robinhoode 13y ago
Micropayments is one obvious example. Credit card fees make micropayments very difficult. I'm sure there are workarounds, but that's only one possible use-case for Bitcoin. There are more that have yet to be invented.
cdixon 13y ago
I think the original Bitcoin paper said it well: "small casual payments." To pay online right now, you have to decide: 1) do I trust this vendor 2) do I want to fill out this form with all my info Generally this (plus transaction fees) only make sense for transactions above $10. The vendor responds by trying to build a relationship with you- by building brand trust and by pushing you toward an ongoing relationship (recurring payments, creating an account etc). This is why "cards on file" is considered a major business asset online. As a result, any online service that doesn't make the cut is forced to resort to an advertising based business model.
- steveklabnik 13y ago
  > I think the original Bitcoin paper said it well: "small casual payments." You can see this with the tipping culture on Reddit. It's helped Dogecoin really take off, because it's pretty trivial to send a small, casual payment to someone.
deleted 13y ago

Guvante 13y ago

Huge issue with that model, while cash has a fixed value against a fiat currency that is known to be stable, bitcoins have a fixed value against a commodity that is known for being unstable.

PureApeshit 13y ago

Bitcoin being deflationary, storing value in it is very good idea, apart being a bit risky. I also do not see why it should be limited to small payments, bitcoin is full currency not a toy.

bmm6o 13y ago
That's true in the long run, when its value has settled to something far less volatile than it is currently. Today, storing value in it is investing/speculating/gambling.
XorNot 13y ago
Bitcoin being deflationary, the value will never settle. No government wants deflationary money, and you don't either because no one who doesn't have it has any reason to accept permanent servitude from a deflationary currency. Or as I like to put it: why do you think you should get wealthy for doing literally nothing? Not investing, not loading, not accepting any risk, not working?
- PureApeshit 13y ago
  computer power is deflationary, tablet i bought for 200 euros 2 years ago, oday i can buy same specs for 59 euros... still noone waits and holds till stuff get cheaper, same with bitcoin it will only help environment for massive stockpiling of goods will be bad. You are not getting wealthy for nothing, you get wealthy for restraining your consumption, which is major problem of todays world, trust me im homeless(for proof can check me on youtube channel AngriestCat) and amounts of good food i find in supermarket trash is ridiculous.
  - XorNot 13y ago
    The computer you bought 2 years ago didn't increase in computing power in that time. A computer from 2 years ago is not worth more today. But wealth in a deflationary currency does. The rest of your argument about curtailing consumption is an irrelevant tangent here.

andrewfong 13y ago

The analogy doesn't work perfectly because there is usually no cost to withdrawing and depositing cash from an ATM. And when there is a fee, it tends to be fixed as opposed to percentage-based. These may very well be solveable problems, but there's definitely a bit of work to do to make bitcoins function like pocket cash.