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It's a good question and also needs to be answered. I'm the author of the post and have one coming on the consumer side.

philrapo 13y ago
Nice, looking forward to reading your thoughts. I've been thinking about this myself recently. I'd suggest using a higher estimate for the value of rewards points. (You used a 1%.) You can explicitly get >1% cash back on many cards, so I'd argue that's really the lower bound.[1] Most reward points can be redeemed for ~2%, with conscious consumers getting even more than that. [2] Consumers are very aware of the value they're getting, too. If you read AMEX company filings, the redemption rate on MR points is >90%. I found that shockingly high. It's tough to get consumers to switch to bitcoin when it's worse value and more risk. [1] https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/na/multiple https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/... [2] http://boardingarea.com/onemileatatime/2012/05/25/my-updated-analysis-on-what-a-milepoint-is-worth-credit-card-points/ http://boardingarea.com/onemileatatime/2012/05/25/my-updated...
- davidrangel 13y ago
  Thanks. You make a good point about the rewards. I thought 1% could be a decent estimate given that not everyone pays attention, some points are never redeemed and rewards over 1% are usually only for specific purchase types (e.g., gas). But I may very well have underestimated this. And if people do redeem at a 90%+ rate, then they will definitely notice if there are no rewards on the Bitcoin side. Very interesting.
  - philrapo 13y ago
    Here's a source for that stat from a Q3'12 AMEX earnings call transcript: "As you know, our current ultimate redemption rate is 93%, a very high assumption for any consumer loyalty program." [1] http://seekingalpha.com/article/931161-american-express-management-discusses-q3-2012-results-earnings-call-transcript?part=single http://seekingalpha.com/article/931161-american-express-mana...
bdlbdl 13y ago
I'd be very interested in hearing why a consumer would use bitcoins when a credit card option is available to them. The only reasons I can come up with are: - The user is a bitcoin evangelist - The user bought/mined bitcoins early and wants to cash in without selling them which would incur an exchange fee and tax hit. - The user would prefer anonymity for that txn. Assumes no physical delivery (e.g. online porn) - The merchant offers a steep discount for btc. But why would a merchant offer a fee more than the 0.35% referenced in the article?

philrapo 13y ago

Nice, looking forward to reading your thoughts. I've been thinking about this myself recently. I'd suggest using a higher estimate for the value of rewards points. (You used a 1%.) You can explicitly get >1% cash back on many cards, so I'd argue that's really the lower bound.[1] Most reward points can be redeemed for ~2%, with conscious consumers getting even more than that. [2] Consumers are very aware of the value they're getting, too. If you read AMEX company filings, the redemption rate on MR points is >90%. I found that shockingly high. It's tough to get consumers to switch to bitcoin when it's worse value and more risk. [1] https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/na/multiple https://creditcards.chase.com/freedom?jp_cmp=cc/freedom/off/... [2] http://boardingarea.com/onemileatatime/2012/05/25/my-updated-analysis-on-what-a-milepoint-is-worth-credit-card-points/ http://boardingarea.com/onemileatatime/2012/05/25/my-updated...

davidrangel 13y ago
Thanks. You make a good point about the rewards. I thought 1% could be a decent estimate given that not everyone pays attention, some points are never redeemed and rewards over 1% are usually only for specific purchase types (e.g., gas). But I may very well have underestimated this. And if people do redeem at a 90%+ rate, then they will definitely notice if there are no rewards on the Bitcoin side. Very interesting.
- philrapo 13y ago
  Here's a source for that stat from a Q3'12 AMEX earnings call transcript: "As you know, our current ultimate redemption rate is 93%, a very high assumption for any consumer loyalty program." [1] http://seekingalpha.com/article/931161-american-express-management-discusses-q3-2012-results-earnings-call-transcript?part=single http://seekingalpha.com/article/931161-american-express-mana...

bdlbdl 13y ago

I'd be very interested in hearing why a consumer would use bitcoins when a credit card option is available to them. The only reasons I can come up with are: - The user is a bitcoin evangelist - The user bought/mined bitcoins early and wants to cash in without selling them which would incur an exchange fee and tax hit. - The user would prefer anonymity for that txn. Assumes no physical delivery (e.g. online porn) - The merchant offers a steep discount for btc. But why would a merchant offer a fee more than the 0.35% referenced in the article?