Awesome. Now to see how their integration works with regards to confirmation time. The best solution IMO is to use a risk analyzer to determine the number of needed confirmations. 0 conf for small payments for a merchant with a low fraud rate, with increasing confirmations needed as the size of the payment grows. I would look at BitPay's checkout flow to see the state of the art here.
Also hoping they implement the payment protocol (BIP70), which gives a much better user experience and improved security. Instead of copy pasting an address, a signed payment request is sent to the users Bitcoin wallet with a message stating something like "Bob's shop has requested a payment of 10USD (20mBTC) - accept?". Some particularly insidious coin stealing malware has been developed that modifies the payment address in the clipboard to be changed to an attackers address, and the whole UX around copying long Base58 encoded strings is horrible. Furthermore, the signed payment request serves as a receipt. With BIP70, the UX of bitcoin payments surpasses that of CC payments, IMO.
+1 to BIP70. Very exciting that a payment company as capable as Stripe is entering the bitcoin space. Much better for everyone if the Stripes of the world are at the center of the bitcoin ecosystem rather than the Gox's.
> The best solution IMO is to use a risk analyzer to determine the number of needed confirmations
As I understand it, you can still feel pretty safe with 0 confirmations if you're monitoring the bitcoin network for double-spend attempts over the average network propagation time. If you don't see any double-spend attempts anywhere on the net by the time most of the net has seen your transaction, you're probably good. There are a lot of hidden pitfalls in bitcoin security (such as - the above isn't guaranteed, if miners change their mind to be greedy and pick the transaction with the highest fee instead of the first one, that method breaks) so I'm not sure if it's bulletproof though.
> you can still feel pretty safe with 0 confirmations if you're monitoring the
> bitcoin network for double-spend attempts over the average network propagation time
The above is much easier said than done. First, you're assuming you can have a good enough coverage of the network which is hard to assess. You need to do a constant topology analysis to see how well-connected you are. Second, you need to ask a chosen set of peers for all the transactions they have in their pool. And wait until they all reply. Third, you need to be pretty good at normalizing against malleability on all those transactions.
After doing all of this, the scheme is still not bulletproof. The blockchain exists for a reason.
> There are a lot of hidden pitfalls in bitcoin security (such as - the above isn't guaranteed, if miners change their mind to be greedy and pick the transaction with the highest fee instead of the first one, that method breaks) so I'm not sure if it's bulletproof though.
Keep in mind that enabling this also opens up a counter-attack, against double spending: if User A sends 1 BTC to you with a fee of 0.0001 BTC, and you discover that, after sending this transaction to you, he sends the same 1 BTC to another address, this time with a 0.1 BTC fee, you can create a new transaction that spends the 1 BTC originally sent to you (with the 0.0001 BTC fee) which spends everything as a fee in this new transaction.
This way you don't actually get the money, the miners do, but you punish double spending. And if miners are greedy - and want to include whichever transaction makes them the most money - they will want include to include yours, as this makes them a whole 1 BTC in fees.
So in the end, while it may seem that miners including the highest-fee transaction increases the risk of double spending, it might actually prevent it, since merchants will also gain an effective way of punishing it.
Is this actually possible? You couldn't change the original transaction without the private key, nor can you spend the results of it until it is in an accepted block chain block, no? Am I wrong?
You can broadcast a valid tx that depends on an unconfirmed valid tx that was already broadcasted. The second tx will only be confirmed if the first is, this is how betting sites that accept 0conf txs (such as SatoshiDice) work.
Not sure if pool software currently selects txs as a sum of the fees of the txs that depend on them, but it seems reasonable to implement.
As you said, even if the original tx has propagated, a double spending tx with a higher fee will jump the line in a miner's mempool. Never assume miners are altruistic - they seek primarily to maximize their profit. Propogation is a useful heuristic, but its not a panacea.
For most miners at the present time this is not true. The reference code does not do this, and most mining pools are running something close to the reference code. (And furthermore, most such txes will never transit the network in any case, because most nodes will refuse to relay them.)
Merchants that don't deliver their goods/services immediately (e.g., those that ship things) can accept transactions immediately in the UI, but wait for some number of confirmations to actually deliver.
The interesting part of this from my point of view is how Stripe will manage the conversion of received bitcoin back into dollars. Will they directly sell bitcoin to consumers themselves or trade on one (or more) of the exchanges.
Stripe are obviously taking the risk of the volatility so will probably want to keep the bitcoin float that they hold fairly small. They also need to keep a reasonable margin on these transactions and watch for people who don't complete transactions unless the price moves in their favour (after the price has been quoted).
I assume refunds are of bitcoin to the agreed dollar value not the same number of bitcoins as was spent, otherwise there would be risks there too.
Payments will arrive in their bank accounts in seven days or fewer. Neither Stripe nor its customers will hold onto the bitcoin, meaning the businesses that accept bitcoin will not be subject to the volatility of its price. Collison said his company is working with a variety of undisclosed partners to exchange the bitcoin into local currency in near real time.
i'm going to guess that they will exchange at spot and take a small transaction fee. having bitcoin on your balance sheet (volatility-wise) is not the wisest move for a startup.
The concept that Stripe may be moving away from strictly supporting Credit Card payments (which are awful, but necessary for now) and into alternatives is so exciting to me that I am literally shaking. We're building infrastructure to make bank-to-bank transfers palatable to consumers and drive their cost toward zero, but it's only if thought leaders like the Collisons embrace the move away from CC's that the move will happen. This is such a huge step!
Because as a consumer, I've never had a complaint about my CC, ever. With the NFC chips built into all new CCs (at least here in Canada) I tap my card and leave.
You can't get more convenient than that. As such, I don't think credit cards are going anywhere.
The 1st order effects are on business. It's mostly the 2nd order effects that consumers feel. Marginally higher costs that inevitably pass to consumers . Merchant refusal to ship to "high risk" locations. More difficult international transactions generally. Fewer online vendors (=less choice & higher prices) of high risk (easily resellable) items.
Then there are the effects of having such a thick intermediary, a duopoly. Some consumers can't get a credit card. It's hard for consumers vulnerable to overspending & borrowing to avoid the card's expensive credit component.
There's also a general brokenness (IMO) of the "pull" nature of credit cards. I want to send vendors money, not authorize them to take some themselves while reserving the right to dispute the charge. Even for recurring transactions I would rather an easy bill paying service that works like invoices & checks do, but with a 10X simpler UI.
> Some consumers can't get a credit card. It's hard for consumers vulnerable to overspending & borrowing to avoid the card's expensive credit component.
Aren't debit and credit cards 100% interchangeable these days? I've for sure never had my MasterCard debit card rejected.
Almost certain of it, some places even tack on a fee for using a credit card instead of a debit card.
However, consumer protections for a debit card are nowhere near as good. e.g. in the UK at least, if you experience fraud you have to wait for your bank to refund your account, whereas you don't experience any loss with a credit card. As such I avoid using debit unless the merchant charges for credit.
Maybe not in the next few years. But people who pay with cash because they aren't allowed to be in this country and don't want a bank account (some portion of the unbanked) might enjoy shopping in the digital world by using some "digital cash".
They can already shop in the digital world with prepaid Visa, Master Card or even AmEx cards. Going after people without bank accounts is big business.
As others have said, risk=chargebacks which bitcoin does fix. with CCs merchants basically have to trust customers and being overseas makes you untrustworthy (like to chargeback).
Lots of other things imply risk. The only way to reduce it is by finding out more about customers: full name, current location, previous location, chargeback history and anything else that the merchant, CC company, payment gateway and 3rd parties hired by any of these can find.
That segways nicely into the high profile brokeness that bitcoin aims to fix: privacy. I prefer a world where people can buy stuff without their name being crosschecked and recorded by all these parties, at least by default. If we want to require porn or ammunition or whatnot to be purchased by verified individuals, lets do it with some explicit identity check instead of by default in some opaque way.
The concept that credit cards are lower risk to consumers than ANYTHING is laughable to me, but I can stop laughing long enough to consider it for BTC. BTC has a lot of consumer risk right now, anything OTHER than BTC is better than CC's though.
> The concept that credit cards are lower risk to consumers than ANYTHING is laughable to me
Can you explain why? Imagine I buy a car for £5000 and put £100 on my visa credit card and pay £4900 in cash. If the dealership goes under I can get all of my money back from visa. Similarly if they just fail to deliver or there are serious problems I can push visa and get my money back.
That gives a massive amount of protection against a wide range of things.
What would be better, or what are the staggering other risks?
Higher risk for consumers on a purchase, lower risk for consumers of being defrauded by billing scams or skimming from those who have access to their card numbers.
Consumers are accustomed to the risk of cash; and many would be more than happy to use Internet cash since they trust their vendors. They'd still have the card option for unknown vendors. Bitcoin simply adds a cash choice. This isn't an either or situation; it's a now you have two options situation.
For me this depends on the price. While I would want to have protection for (say) £100, I'd be less concerned about that and more concerned about fraud if I was buying something for £1.
No bitcoin will fix that because you can't reverse the charges. So there is no risk in shipping because you are 100% positive that you have the money you expect you have.
What if I use bitcoins to buy something and then the vendor doesn't ship it to me?
I fully expect this is part of the user experience Stripe will sell. If I buy something through Stripe using bitcoins and get stiffed, is Stripe going to tell me "too bad" when I complain to them?
Stripe isn't the vendor, they're the payment processor for the vendor; that decision isn't up to Stripe, it's up to the vendor. Your relationship isn't with Stripe, it's with the vendor. Your recourse is with the vendor as well, not Stripe.
The solution to this is block chain escrow through a third party.
So there is no risk in shipping because you are 100% positive that you have the money you expect you have.
Only if you wait for a significant amount of time (days?) to verify the transaction. If you use a payment processor and they allow you to pass through transactions without verification, they are assuming that risk for you, but the risk is still there, and there is of course also risk caused by the currency volatility, chance of theft or loss of coins (very different from digital cash, more like paper cash), etc.
I'd be interested to know how companies like bitpay hedge that risk, or the risks caused by Bitcoin volatility, if indeed they do.
> Only if you wait for a significant amount of time (days?) to verify the transaction.
What? Two or three confirmations are generally irreversible. Six - an hour, give or take - has been generally agreed to be absolutely irreversible since the original Bitcoin client (if it's not, there's something really wrong and Bitcoin isn't as valuable as we thought).
If you're using a payment processor which takes risk that doesn't need to be there because you're not going to have your items in the post in an hour anyway (i.e. the vast majority of merchants), you're simply wasting money.
Credit cards generally verify in seconds, so this is a significant difference, even if the time is hours (I'd read somewhere it could be days for 7 confirmations, but thanks for the correction if that is never true and it is hours) - that confirmation time varies wildly and is not predictable is also an issue. A lot of merchants ship almost immediately after orders are completed (e.g. digital goods), so introducing another delay is not great and a significant downside for both merchants and consumers.
These and other technical challenges like blockchain size are probably soluble though, esp. if it hit scale and people were working on it, what worries me more in terms of mass adoption is the attitude to other risks like security, volatility and lack of insurance in the Bitcoin community, the insane requirements for sending in copies of passports etc that exchanges still have for purchasing bitcoins, and the fundamental problems caused by giving individual cryptographic keys perpetual value.
It would certainly be nice to have a payment system not controlled by Visa/Mastercard, and I imagine one is coming, but I'm not convinced Bitcoin is that alternative because of the assumptions baked into its design that we need to exchange tokens in order to exchange value.
> the insane requirements for sending in copies of passports etc that exchanges still have for purchasing bitcoins.
If you've ever bought foreign currency in a bureau de change, you'll have had to provide ID. It's the same set of laws which require Bitcoin exchanges to require ID. Take it up with your Government.
> Credit cards generally verify in seconds, so this is a significant difference
Which is equivalent to a 0 confirmation transaction, so no it's not a difference. Cards can be reversed for months, that's what 6 confirmations is competing with.
Which is equivalent to a 0 confirmation transaction, so no it's not a difference.
The CC issuer is queried for the card status, funds available, address etc, and transactions are accepted or declined based on that information. Sometimes there's even an extra verification step directly contacting the issuers bank to check a passcode (SecureCode), and all that is reversible afterward if a mistake or fraud is detected.
In what way is that analogous to a 0 confirmation irreversible bitcoin transaction?
Safety for the merchant. First off, funds don't need to be checked, there is not a card status or funds available, address is not necessary so all of those things are problems cards have that Bitcoin doesn't; they aren't relevant.
It is just as safe to accept a 0 confirmation transaction as it is to accept a credit card. In both cases, the transaction could be essentially reversed either by a double spend or by a charge-back. And frankly, a charge-back is far more likely than a double spend.
In both cases, the merchant is equally out. Bitcoin typically clears in less than an hour while cards don't clear for months. There is far more risk of a charge-back in months than there is of a double spend in the milliseconds it'd have to occur to be successful.
Cards offer more safety to the consumer of a fraudulent vendor of course, but that's the nature of cash and that's when you use escrow if it's big enough to worry you. However, fraudulent customers are far more common than fraudulent vendors; it's the vendors who need the most protection here and it's the vendors the current system disfavors.
I'm not convinced vendors are the important party here, they are making a sale and the onus is on them to provide an easy method of payment. Convincing customers to give up the protections of CCs or other digital cash payments would be a very hard battle. Escrow is not a viable alternative to verified identities in transactions, and for most consumers the slim advantages of Bitcoin are far outweighed by the numerous disadvantages.
> If it's 0 confirmation, what exactly is checked?
That's it's been broadcast to the network.
> Convincing customers to give up the protections of CCs or other digital cash payments would be a very hard battle.
No it won't, customers don't like sharing their credit card information online, it's why Paypal is still in business.
> and for most consumers the slim advantages of Bitcoin are far outweighed by the numerous disadvantages.
Not when they trust their vendors. I trust Amazon for example, I don't need to pay a few extra percent to the card company for consumer protection. Bad reviews work far better in getting a vendor to act.
>> No it won't, customers don't like sharing their credit card information online, it's why Paypal is still in business.
Paypal is in business because it's easy, nothing to do with giving out CC details.
>> Not when they trust their vendors. I trust Amazon for example, I don't need to pay a few extra percent to the card company for consumer protection.
Then you'll end up paying a few percent to amazon to protect you from vendors in their marketplace. Comes down to the same thing.
>> Bad reviews work far better in getting a vendor to act.
Typical libertarian nonsense. It doesn't matter if I get ripped off, I'll leave a bad review! We don't need health regulations for restaurants, if I get food poisoning and die I'll just never eat there gain!
Reality does not work that way, and we have all of recorded history to prove it.
Libertarian nonsense huh, despite what I said being completely true on amazon, and me not being a libertarian but a bleeding heart liberal, I'm just going to say you're trolling for a political argument with such idiotic abandon that I'm not wasting another breath on you. Go troll reddit.
I'm sorry you feel it's trolling, I'm not making a political point, and it's not how amazon works now, amazon are a broker in trust and take their cut, just like the companies you object to.
Sorry, but f*ck the merchant. We have thousands of years of history of consumers being ripped off by merchants. Laws and payment methods have spent the last few decades arranging themselves on the consumer's side and you want to rebalance evrything in favour of the people who have (historically and continually) been ripping the rest of us off?
Merchants are ripped off by consumers far more then consumers are ripped off by merchants. That's reflected in the prices of goods which means the consumers are still being fucked by it. Saying fuck the merchant is profoundly ignorant; it's always the consumer who is fucked in the end.
No, it's completely different from sales tax because while the company will have slightly increased costs (usually ~2.5%), they will also move significantly more inventory which will allow quicker reinvestment cycles, and thus more growth. This is the value of credit/debt in general: assuming everyone trusts everyone else transaction volume can greatly increase. And that trust comes from the credit card companies.
I think the point is that if we can replace credit cards with a no-fee payment method, merchants will save 3% on every transaction. Of course, it has to be as easy for the consumer as credit cards (which I think Bitcoin can become).
No, the point is that credit cards give people a line of credit, which increases overall liquidity. People buy things on credit cards they wouldn't otherwise be able to. When they buy that thing on a credit card, the company selling that thing gets the money earlier, and can thus take it and buy more from their suppliers and so on and so forth.
Bitcoin removes overall liquidity, by behaving like cash. The merchant may save 3% on bitcoin transactions, but they will have fewer transactions.
Credit Card payments in person can be great - swipe and go, why not?
Online, it's 23 digits that you don't know, and then 3-23 more fields (shipping address, billing address, name, email, etc. etc.) That sucks. Even at it's best in the Stripe Checkout model, it's less than ideal and extremely unsafe - it's so unsafe that American Express is RUNNING COMMERCIALS ADVERTISING HOW UNSAFE THEIR PROCESS IS! For your convenience, let's 2.9% and $0.30 of every transaction. That's a huge drain on the margin for a business of any size, but especially someone with checkout size about 10-50 bucks and margins of 10-40%.
So to summarize - online it's bad for consumers, bad for businesses, but it's the only way right now because hell if I know my account and routing number, and if I do the business still needs 3 days to make sure I own that account. That's the problem we've solved (I believe) but it's in its nascent stages. Bitcoin could potentially lend a lot of relief there too, which is why this is so exciting.
> Online, it's 23 digits that you don't know, and then 3-23 more fields (shipping address, billing address, name, email, etc. etc.) That sucks.
Shipping address, name, and email are necessary even if you use bitcoin. Billing address is usually the same as shipping address. That leaves the CC number, in which case the equivalent is your bitcoin address. So there's no real win here. And if you're using a regular online shop, then they probably have all these details saved. With Amazon, I can buy things with one click. With Newegg and other stores that I use regularly, its two. I haven't seen any bitcoin experience that matches that. Reading up on "experiences" people have with Overstock and Tiger Direct, it all seems very roundabout and inconvenient. And then you're hit with shit like no refunds to top it off.
> Even at it's best in the Stripe Checkout model, it's less than ideal and extremely unsafe - it's so unsafe that American Express is RUNNING COMMERCIALS ADVERTISING HOW UNSAFE THEIR PROCESS IS!
Pull is less safe than push, yes. Bitcoin is undoubtedly more secure than giving your CC number. But pull is more convenient for consumers, as I outlined above.
There's work-arounds for credit cards, such as virtual card numbers, but they haven't gained broader consumer penetration for the exact reason that they're inconvenient. In practice, the "unsafe but you can get the charges reversed" system works well enough that promoting a new system based on the fact that its safer isn't really enough.
> For your convenience, let's 2.9% and $0.30 of every transaction. That's a huge drain on the margin for a business of any size, but especially someone with checkout size about 10-50 bucks and margins of 10-40%.
Not every business charges 2.9%. Many get rates as low as 1% (this is what we charged large corporations, if I remember correctly). With bitcoin, you're going to get hit with transaction fees, exchange fees, and exchange spread. For small shops, its likely that will come out less than the CC fees, but for bigger stores its questionable.
Edit: Note that I hope these problems will be solved. Ideally, we see the Bitcoin protocol and ecosystem mature such that it is as convenient as a credit card and safer to boot.
> Shipping address, name, and email are necessary even if you use bitcoin
Not for digital goods (maybe email)
> That leaves the CC number, in which case the equivalent is your bitcoin address
Most bitcoin payments are done either through mobile phone scanning a QR-code, or through uri's opening bitcoin software. I've never manually typed in a bitcoin address (worst case is copy pasting the payee address)
> I haven't seen any bitcoin experience that matches that. Reading up on "experiences" people have with Overstock and Tiger Direct, it all seems very roundabout and inconvenient.
Not sure what you've been reading, but my bitcoin purchasing experiences have all been extremely straightforward. Scan QR-code, press send, done.
> And then you're hit with shit like no refunds to top it off.
Uh...no you aren't. There's no chargebacks, not no refunds. That is, to get a refund the merchant has to agree. Basically, risk moves from merchant to customer (banks usually require the merchant to prove they delivered the goods in chargeback cases)
edit:
> With bitcoin, you're going to get hit with transaction fees, exchange fees, and exchange spread. For small shops, its likely that will come out less than the CC fees, but for bigger stores its questionable.
bitpay already offer 0% fees for a flat $30/month, and things can only get cheaper (as there get more/better exchanges and less volatility)
Yep, for one-time purchases of digital goods, Bitcoin is superior. For repeat purchases, like my Amazon Kindle purchases, you have to beat one-click.
> Most bitcoin payments are done either through mobile phone scanning a QR-code, or through uri's opening bitcoin software. I've never manually typed in a bitcoin address (worst case is copy pasting the payee address)
Ah yes, I forgot about this part. Although you can store your CC# in your auto-fill or password management software. And most stores will save it for you. The argument here is that is insecure, because you're storing your CC# and it can be stolen. But likewise, you're storing your Bitcoin private addresses on whatever device and they can be stolen as well. Except without any chance of recovery.
> Not sure what you've been reading, but my bitcoin purchasing experiences have all been extremely straightforward. Scan QR-code, press send, done.
Well I'm comparing getting an invoice, scanning a code, sending, waiting for confirmations with literally clicking a button to buy and then another button to tell Amazon where to ship my stuff. Or in some cases, just one button to buy and ship.
Then I accounted for the stories in which the invoice expired before enough confirmations, and apparently the order just evaporated despite the bitcoins being sent. And there's plenty of Coinbase horror stories from people trying to get refunds.
Broadening the use cases.. There's stuff like paying bills where I literally have to do nothing. Netflix, my electric company, Comcast, etc all just pull the funds necessary every month. I literally have to do nothing.
> Uh...no you aren't. There's no chargebacks, not no refunds. That is, to get a refund the merchant has to agree.
That was in reference to Overstock and Tiger Direct specifically. If I remember correctly, neither allow actual refunds of stuff bought with Bitcoin. They just give you store credit.
> Basically, risk moves from merchant to customer (banks usually require the merchant to prove they delivered the goods in chargeback cases)
That's a problem I have with it. Merchants are better equipped to manage risk than consumers, so pushing it back onto consumers is a bad thing.
> bitpay already offer 0% fees for a flat $30/month, and things can only get cheaper (as there get more/better exchanges and less volatility)
Didn't know that. I was going off of Coinbase's rates. Thanks for the correction.
For CC I get "charged" ~1.5% (pay extra, because prices are higher due to high CC usage), because I get ~1.5% back as a reward I'll definitely use. The exchange spread cost for Bitcoin could easily be > 1.5% and it would be extra work for me with every transaction to determine that cost.
> Shipping address, name, and email are necessary even if you use bitcoin. Billing address is usually the same as shipping address. That leaves the CC number, in which case the equivalent is your bitcoin address.
Maybe I'm confused. Why is the address, name and email necessary for BTC payments? Is it a stripe requirement?
And, as you probably know, a bitcoin address is WAY more secure than a CC#. They are nowhere near "equivalent"
> Maybe I'm confused. Why is the address, name and email necessary for BTC payments? Is it a stripe requirement?
Its necessary in that they need a place to send your stuff. Email is often used for accounts and confirmation. This would also be stored by whatever system you are using if you are a repeat customer: Amazon, Stripe, etc. My point is that its a wash and that they are not comparing like for like in an attempt to make credit cards more complicated than they are.
> And, as you probably know, a bitcoin address is WAY more secure than a CC#. They are nowhere near "equivalent"
If you read my post beyond the first few sentences, then yes, I know that and specifically discuss it. The context of the first paragraph is discussing whether credit cards are more difficult to use in terms of inputting information. The equivalence here is that there is some number that you have to input somewhere to make the payment. Thats it. There's no other inferences beyond that.
Can't respond to individual comments - chargeback protection is NOT a credit-card thing - it's a consumer protection called Regulation E that all payment processors must have. We have it for ACH for example.
Regulation E only applies to specified forms of electronic funds transfer. For example, it would not apply to prepaid cards. It is not clear that Regulation E would apply to Bitcoin transactions, and so far most retailers and BTC payment processors have taken the stance that Regulation E does not apply to BTC transactions.
That seems to be at odds with how Bitcoin works with the handful of large retailers that accept it. Reading online experiences, there are a subset where they order something at Overstock/Tiger Direct, the order does not go through, but the Bitcoins are sent, and they are told to complain to Coinbase. The alternative is I spend 5 minutes on the phone with a third party to issue a chargeback. ACH are also reversible by a third party (the bank).
Is my understanding flawed? How does a chargeback work when a third party does not exist and the protocol does not allow chargebacks.
Edit: Note that the merchant itself doing a refund is not equivalent. The important feature of a chargeback is that its a third party issuing it.
Bitcoin is equivalent to cash, of course businesses want a cash equivalent as their method of online payment. However many consumers have gotten used to the protections credit cards offer.
No it's not. Since businesses have to convert most or all of it to real cash and it can take hours or days for this process to complete, there would be padding built in to account for the volatility.
I let my password manager handle the multiple fields required, although it's still not the best solution ever.
What are these commercials that AmEx is running? I assume they're presenting it as "convenient" rather than "unsafe" but it's obvious enough if you know what's going on?
I recently tried buying a something online with a credit card, and the transaction was declined due to a fraud alert. I happened to have a few bucks worth of BitCoin, and the merchant accept BitCoin, so I used BitCoin to make the purchase. Making the purchase felt like cash, and it felt oddly satisfying.
For some purchases, there is MasterCard. For everything else, there's BitCoin.
>Because as a consumer, I've never had a complaint about my CC, ever. With the NFC chips built into all new CCs (at least here in Canada) I tap my card and leave.
I don't want to tap my card and leave. I wish I could turn off that "feature."
A way credit cards are bad for consumers?
Science proves that you tend to spend less money when you pay with cash, especially on unplanned and/or impulse purchases. I guess the psychology of actually handing something over then having less of it afterwards makes people think twice about if they really need to spend the money. Also getting extra cash when you over budget has an extra step (trip to bank/ATM) so you're probably more likely to stay in budget or to rethink if you really need that over budget purchase.
No, but I'd rather not have my credit cards have that option in them. Basically, I do not like the fact someone can tap my card and then get money from it. I just am not a fan of that type of payment, because it is too easy. I don't like the argument "don't use it" because it isn't an optional "feature," if your card has it, it has it. You cannot turn it off.
Credit cards have little wire antenna in them. If you basically cut it in down near the chip, the chip still works when inserted into the machine but the NFC doesn't work.
I did this accidentally and have been using my phone with chip and pin for about a year.
It depends on a lot of other factors. Are my bitcoins on the card insured against loss or theft? Can I reverse the transaction if I get stiffed? If the answers are "no" and "no", then I'd probably still prefer my credit card for peace of mind. 3% isn't a huge discount in the grand scheme of things, and I get 1-3% rewards on my credit card for most purchases.
I already pay for it one way or another (credit card fees, bank fees, fractional reserve, etc), so yes, if its affordable. Bitcoin currently has a dearth of such services, but competent companies (I consider literally none of the Bitcoin service companies operating at this time competent, btw) offering them would get me to reconsider using it
Cool. Bitcoin is still young, so there's a lot of room for growth. I personally think Coinbase is doing a good job (though having growing pains), and others are quickly coming to join in.
Cash is still an extremely common and well-accepted method of payment for brick and mortar stores, despite the fact that it (like Bitcoin) doesn't have all the consumer protection features of credit cards.
The context of the discussion was a bitcoin card vs a credit card. Cash has nothing to do with the conversation we're having. Don't move the goalposts.
But I'll play the moving-the-goalpost game. For in-person transactions they have some similarities. They both have no chargeback or consumer protections, but we're receiving goods immediately so thats not a very large issue. Cash is instantaneous, unlike Bitcoin. Cash doesn't have exchange risk. Cash doesn't have transaction fees, while Bitcoin does. So cash is actually superior for an in-person transaction.
If I'm going to do an in-person transaction and am not going to use my card, why would I not use cash? If I don't want to carry cash, why would I not use my card? And if its an online transaction, then chargebacks are definitely something I want, even with a trusted merchant. So whats the use case for bitcoin? The OP proposed one use case; I assume that there are people who find that valid. It is not a case that interests me, personally, and that prompted my response.
Can't respond to individual comments anymore, but consumer protection is something all payment processors must have, it's the law - it's called Regulation E and it's mandated by the government. We do it for ACH same as credit cards - CC's have convinced people it's something they created, but it is not - it's the law.
Probably not. I'd prefer the mileage, peace of mind that I have recourse, consolidated statementing, free 30 day loan, etc. And you would not save 3%. In fact, with Bitcoin's volatility, you might be charged 3% as you are now when you purchase in a different currency. Bitcoin enthusiasts have a difficult time understanding the cost of currency volatility.
And yet, it's pretty common to pay with cash at any brick and mortar store, where you have no electronic protection (like chargebacks) and not even any physical protection for the cash you carry around.
If I pay with cash at a store then I'm literally walking out with the goods. For services, I've already received the services before paying.
You're correct that there is no physical protection for the cash, but that is why most people do not carry lots of cash. Most store it in an insured bank account.
What about consumer protections? Extended warranties, painless returns, fraud protection, etc. I am at no risk when using a credit card. Why would I even want to switch?
But you won't save 3% because the payment processor is going to charge you, at least eventually. And if the fee is low enough that it competes with CC then the CC companies will simply lower their prices. The CC companies can afford a price war, everyone else can't.
It's my understanding that it's explicitly against the merchant agreement with the big CC players to have different prices for different payment methods.
Of course, that's difficult to enforce in practice for every Ma and Pa operation, but if you're operating on any scale, where a significant portion of your revenue comes from CCs, that will be an issue.
>It's my understanding that it's explicitly against the merchant agreement with the big CC players to have different prices for different payment methods.
It was. Then there was a class action lawsuit against Visa and Mastercard brought on by Walmart, Target, Amazon, etc.
A part of the settlement that allows merchants to charge fees to customers paying via credit card in order to recoup swipe fees took effect on 27 January 2013. Debit cards and transactions in the ten states that prohibit credit-card surcharges will not be affected. Many large retailers, such as Wal-Mart and Target have opted not to impose surcharges.[6] In the event of a return, surcharges are refunded along with the purchase price of the merchandise.[7] The National Association of Convenience Stores, also known as the NACS, complained that this measure "merely make[s] retailers the collection agents for the banks."[8] The National Retail Federation said, "that card company fees are the problem and the surcharge story is a volume that belongs on the fiction aisles. The real threat to retailers and their customers continues to be price-fixed hidden fees that can only be cured by transparency and competition." [9]
However, the way that gas stations got around the rules at first was they were allowed to offer a "cash discount." So CC price was the "real" price and if you paid with cash you got a discount. Same thing in the end though.
> Because as a consumer, I've never had a complaint about my CC, ever.
I take it you've never had your CC details stolen, or less seriously, had your CC automatically shut down when you're traveling due to "suspicious activity."
I am not sure what is exactly that awful in having free credit for X days, rewards for making purchases (which effectively cancels fees) and, the most important thing, chargebacks.
I can understand Credit Card issues from seller point of view, but for clients (that is most of us), they are not that bad.
Bitcoin will have to provide the same level of consumer comfort and safety to have wider adoption.
This also touches banking system as a whole. If I make an error in my bank transfer, I will get my money back and this is up to bank to return them, I don't have to worry about this. Who will give me back my bitcoin payment done by mistake?
Chargebacks are awful. 99% of the time, the merchant is a trusted party with a reputation to uphold, and the customer is a nobody who either couldn't care less about or couldn't be held to their reputation. Established companies won't go around overtly scamming people. The only time that chargebacks are really a good thing is with the very uncommon untrusted-merchant sale (like a new seller on Ebay with little/no feedback).
And in these situations it makes more sense to just use a trusted third party broker than to have it built into the transaction schema. It adds huge amounts of overhead and unpredictability to what should be simple exchange.
Even nobodies have the right to be dealt with fairly and receive their money back if the company dealing with them has fouled up. We've seen again and again in the bitcoin world that companies with truct built up can either take the money and run, or just fail miserably. Consumer protections are a god thing.
Chargebacks themselves are a necessary part of the trust infrastructure you talk about. Not just for new merchants, they keep the established ones honest too.
> Bitcoin will have to provide the same level of consumer comfort and safety to have wider adoption.
I think I know what you mean by that statement, but I want to make claer that Bitcoin (the protocol) should never provide this. This is like wanting to build guarantee-of-delivery into the IP protocol. It's completely unnecessary and counter-productive.
We want to preserve the ability to send funds to people where chargebacks aren't required, just as we want to be able to send data to people where guarantee-of-delivery isn't required.
Stripe, BitPay, Coinbase, PayPal etc. should be the ones who choose to provide chargeback services.
That's a good point, BTC doesn't have that figured out yet but I bet Stripe will be able to help figure that out! We handle that for ACH if you're interested.
Bitcoin does have the capability of "2 of 3" authorizations which can mitigate some of the upfront risk. The idea being that a payment only completes after 2 parties approve it, the 3rd being an independent 3rd party in this case (who could be configured to auto-approve if a complaint isn't filed in x days).
The rush to defend credit cards on this thread is staggering but extremely interesting to me! It seems the consensus is that in the absence of an ideal solution, we love credit cards (especially in the USA). Two really important things:
1. Consumer protections are not a Credit Card thing - chargebacks and literally every single protection CC's give you are legally mandated by Regulation E - all payment processors must have them in place. It's unclear how this will relate to BTC, but other solutions (including my own) have this to the letter the same way CC's do. CC's want you to believe it's them, it's not - the US Government made those regulations.
2. Yes Billing and Shipping Address are needed in every instance - but there are better ways than typing them out, especially on a mobile phone. Sure there are services that can save that info for you, but a better solution is a network that already knows that info. Stripe could build that with their "remember me" features, I've built that by using the information your bank has. There are solutions, and we need them to move into mobile commerce where it's impossible for every app to have your info pre-saved. In a world outside the browser, we need better options.
Re 1) Maybe in the US that's true but in the UK the protections on credit cards are not the same as for other payment methods such as debit cards. Debit cards do not cover you if the business you paid goes broke for example while credit cards do. This happens fairly often with travel companies who sell holidays and then go bust before you travel.
would you please lend me few bitcoins to see how things work. /s
My CC got hacked twice on the internet, every time I got my money back., it took 90 days but ultimately was credited. Can I expect it from Bitcoin?
Anyway 99.9% people do not have bitcoins to spend. I like it, however it is far from becoming a mainstream payment method., and perhaps never will sadly.
I've seen a lot of replies to this comment that are missing the point tomasien is trying to make. BTC can actually completely wipe out the need for VISA, MC, etc. as it can serve for the underlying technology for transactions.
The only thing stopping this from happening today is illiquidity of the BTC<>(insert fiat currency) market. Once we see more liquidity, this dream can become a reality.
But BTC cannot simply wipe out the need. Transactions per second is absurdly low currently (7) and confirmations take more than an instant to complete. I just don't see how it can replace the well structured payment networks that exist.
> Transactions are not reversible. This feature is important. No, BTC cannot replace Visa/MC etc.
How do you think merchants are paid by VISA? Through wire transfers. Are wire transfers reversible? Nope. Yet VISA is a reversible payment system built on top of bank-to-bank wire transfers. Customers deposit funds into their bank account, they get a credit card tied to this account, they pay a merchant with this credit card, the merchant receives the money into their bank account.
Just because the lowest layer is not reversible, does not mean reversibility cannot be built on top. In fact, it's preferable that the lowest layer be irreversible, because irreversibility cannot be built on top of a reversible system.
Bitcoin is the IP Protocol of payment protocols. I'm sure that companies are busy building the TCP/IP protocl of payment protocols on top of Bitcoin right now.
I used Stripe for several months, but then they said my business is "too high a risk" for them, 7 years in business (longer than Stripe), hosting company in Ireland, very low charge-back rate, all customers more than happy, good support etc!
Since then opened a merchant account with Elavon after referal from our bank for credit cards and started using Bitpay for bitcoin,
not only have lower fees (0% in case of Bitpay + 30$ a month for professional account), but also registered with Mastercard 3D Secure and Verified by Visa, which Stripe doesn't offer either.
Thanks email sent, our service is actually not to dissimilar to tarsnap now that I think of it, anyways that was in the past. Thought I tell people my experiences.
Stripe is fantastic at building interfaces and APIs for payment processing - the fact that they could lead the move away from CC's (on which they built their business up until now) is thrilling to me. Step 1!
I don't know Stripe enough to draw any conclusion on that, would you see Stripe becoming a Paypal like, where you could just have an account, link your CC, BTC, whatever you want, and then have a button "Pay with Stripe"?
We almost provide that today with Checkout. If you've used Checkout on a website before, you can easily pay on another site without entering your CC info again.
Given the recent guidance from the IRS regarding bitcoin (it's property like stocks or bonds... http://online.wsj.com/public/resources/documents/0325irsbitc...) I wouldn't try to use it as a day-to-day currency. Every single transaction will represent a taxable event, requiring calculating cost-basis and capital gain/loss. If Stripe were announcing today a "pay with MSFT shares" feature, people would ridicule them. That's essentially what bitcoin payment is. (in the US at least)
It's really not that bad. Stripe would presumably offer you a full ledger showing the exact time and price of all the Bitcoins you used.
There are some things to be skeptical about, but the IRS hasn't made Stripe's use of Bitcoin any harder. They have to keep super-careful records anyway.
This is quite an intriguing move by Stripe, and I assume they'll provide a similar service to Neo&Bee, where merchants will be completely shielded from the price volatility in Bitcoin. It would be interesting if Stripe adds this Bitcoin support to the Stripe Checkout by default, being one of the first mainstream deployment of Bitcoin payments. It might also allow them to reduce fees, which have been largely set by the large card processors so far.
I'd like to see an easing of the "prohibited businesses"[0] restrictions for Bitcoin payments, since they aren't beholden to the credit networks for these transactions. I have a business in the works that tangentially falls under category #2 so I may not be able to use Stripe as it currently stands.
Pow! Add me to the list of people foaming at the mouth for this. I'm refreshing my email every minute in anticipation of seeing their API.
Now, under one provider, we can easily accept CC and BTC. This is great news for consumers because it means coinbase and stripe are now in head-to-head competition. These are both well funded startups with great usability. Bring on the feature war and lower transaction fees!
This is most exciting because this will enable great micropayment support on stripe, enabling a whole new breed of marketplace. Also, it is now easy to offer paid anonymous consumption of an API. This is a whole new world of opportunity!
I wish all these resources spent & millions of investment dollars would go to a better version of Bitcoin. BT is a major breakthru but it is still in an alpha stage. The main problem is that it is deflationary, to support a global economy it needs to slightly inflationary. This is because for hundreds of millions of people to use BT, the supply of the coins need to gradually increase to support the flow of spending. Right now more half of Bitcoin supply is already own by someone (a lot of them stolen). The BitCoin owners are holding on their stash in hopes that they will get a return on their investment. They will sell their BT for currency rather buy depreciating goods with them.
This is not a critical problem (or even a problem at all, depending on whom you ask). This has been argued again and again, and what is always comes down to is that, according to the Keynesians, an inflationary currency is preferable for encouraging economic growth, but the reality is that A) economics is not hard science and B) as long as the inflation/deflation rate isn't extreme, both inflationary and deflationary goods make fine exchange mechanisms.
>supply of the coins need to gradually increase to support the flow of spending.
Why? If adoption increases, the value goes up, and people spend fewer bitcoins for the same thing. Bitcoin is especially good at this because it has a lot of base units.
>They will sell their BT for currency rather buy depreciating goods with them.
This is incorrect. You're arguing the extreme of the effects of deflation. People will buy goods with deflationary assets, because sometimes the expected value of owning a good is higher than the expected value of keeping an equivalent value of the deflationary asset.
The equivalent (and equally incorrect) ad extremum argument against inflation is "With inflationary currencies, no one will bother working, because they know the payoff of their labor will be worth less by the time they get it."
I'm sure he means that half of all bitcoins that will ever exist have already been mined, meaning they belong to someone (obviously not one person). This is correct (unless you want to argue about lost coins etc).
I disagree, because Bitcoin's monetary policy can be changed at any time. In fact, Dogecoin, which uses a fork of the Bitcoin code, just changed theirs a short time ago, without much fuss, to a continuous inflation policy like you mentioned. I agree that for either of them to be used as a currency (rather than just for speculation), a low and stable level of inflation is necessary.
But that's all about inflation in the long term. In the short term, the rate of inflation depends on other factors such as the rate of capital moving into the Bitcoin economy and the rate of Bitcoins being lost.
So right now, there's no reason people should hold back on adopting Bitcoin because of its current monetary policy of having a fixed maximum number of coins. It's not like there's a fixed amount of money or time that can be invested in it; there's no reason people like Stripe and merchants can't do their bit at the same time core Bitcoin developers do theirs..
if bitcoin weren't deflationary, it never would have been bootstrapped from zero. why would i buy a worthless bitcoin in 2010 if it was going to be worh the same or less in 20xx? This applies to all other cryptos as well; without central backing there is only supply/demand. No one wants to be the first to take a risk if there is no upside.
Actually it's current inflationary and will be for a while. It's deflationary eventual nature is a long term issue with plenty of time to be addressed; short term, it's inflationary.
I wonder how Stripe will handle customer disputes. Obviously Bitcoin doesn't have chargebacks, so will customers be out of luck if the merchant doesn't provide the services?
Why are they doing this? It's too late. No one is going to want to make Bitcoin transactions through a US-based company now because you know the Fed is going to start creating all sorts of lawsuits unless people follow the rules. I have zero Bitcoins but if I had any I'd play it safe and put it somewhere overseas (or if I did put it in a US-based company I'd want to make damn sure they were backed by an overseas bank).
No, it's not. ACH (which standard for 'automated clearing house') is just a bank transfer - and a slow one at that.
Direct Debits in the UK are distinct to bank transfers because they're guaranteed by the bank - you can dispute a direct debit and have your bank refund it, but this is considerably harder (if not impossible) to do with ACH.
I wonder how this will work. Once out of beta, will it be a default option, or will it require extra steps for both the developer and the end-user? And will we be able to operate primarily in Bitcoin end-to-end, or will everything be converted to/from a preferred currency (e.g. USD) during each transaction?
Stripe is going to convert it to the merchant's local currency in "real time" to prevent the problems in fluctuations of BTC value. This is shaping up to be very nice.
Bitcoin aside, Stripe has been an awesome landing page factory IMO. Love watching them churn out landing page after landing page (Checkout, Marketplaces, and now one for Bitcoin)
Hm...it's only March 27. Is Stripe about to jump the shark?
Edit: the reason I think it could be a JTS moment is that I associate "the addition of bitcoin" with "tired marketing stunt performed by irrelevant companies like Overstock". I could be wrong.
Also hoping they implement the payment protocol (BIP70), which gives a much better user experience and improved security. Instead of copy pasting an address, a signed payment request is sent to the users Bitcoin wallet with a message stating something like "Bob's shop has requested a payment of 10USD (20mBTC) - accept?". Some particularly insidious coin stealing malware has been developed that modifies the payment address in the clipboard to be changed to an attackers address, and the whole UX around copying long Base58 encoded strings is horrible. Furthermore, the signed payment request serves as a receipt. With BIP70, the UX of bitcoin payments surpasses that of CC payments, IMO.