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Comment by eldavido | Hacker News Reader

Incidentally, I think this is the biggest reason bitcoin is going to fail. The demand for money changes, so you either have to pick between a fixed supply, in which case prices will oscillate wildly, or a supply managed by some kind of central authority, that results in an unstable amount of currency but stable prices.

I just don't see a currency working as a unit of account or store of wealth with such oscillation in value. Maybe as a medium of exchange, but then you're making every transaction cross an FX exchange (btc/usd) and I doubt that's possible at scale for less than what a scaled payment network (e.g. Visa) charges.

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> then you're making every transaction cross an FX exchange (btc/usd) and I doubt that's possible at scale for less than what a scaled payment network (e.g. Visa) charges.

Bitcoin is already cheaper as a medium of exchange than credit cards and pretty much all international remittance providers.

Coinbase Exchange has a $0.01-$0.02 spread and charges 0.25% for removing liquidity.

Stripe costs 3% + $0.30 and Western Union / Wire Transfers are multiples of that.

Disclosure: I work for Coinbase

Believe me, I want you to be right (I'm currently writing a settlement system for Visa/MC txns for a SF-based hotel chain) but I just don't see a world where those economics work long-term.

Stripe is an expensive acquirer. I'm working with Heartland and we're getting a hair over 2.1%. I suspect this is going to fall even farther as EMV gains wide acceptance and skimming/other forms of fraud become a thing of the past.

I'll admit, that's a tighter market than I thought (CB exchange) but I'm still having a hard time seeing how those economics work long-term without tons of VC. You'd have to get below 2% on an ongoing basis and with all the fraud/rewards/other stuff cards provide, 2% still seems cheap.

> I'm working with Heartland and we're getting a hair over 2.1%

2.1% isn't your whole acquisition cost. You will have to eat the inevitable chargebacks and associated fees too (which is not an issue with Bitcoin).

> You'd have to get below 2% on an ongoing basis

I'm not sure what you mean by this. We've never charged more than 1% for merchant processing and I doubt we ever will.

> with all the fraud/rewards/other stuff cards provide, 2% still seems cheap.

Why would I use my 1% cashback credit card at a trusted merchant when I can get a 2% rebate from the merchant instead? I'm not alone in this thinking, many Americans choose the 'cash price' when pumping gas every day.

"Not an issue with bitcoin" = you have no recourse, as a buyer, if you get ripped off by an unscrupulous seller.

You make some good points about cash back and gas, but you can't deny there's value in the extra layer of protection between you and the merchant provided by the credit card. I don't know whether it's worth 1%, but it's not worth zero. BTC payment is more like handing a stack of notes, not payment via card.

There's no fraud or cashback with Bitcoin. All Bitcoin transactions are absolutely irreversible, period, after roughly 60 minutes.

That's how transaction costs are so low.

If you include the relevant IRS paperwork for handling it, Bitcoin is relatively expensive.

I bought and sold bitcoin and paid for things with bitcoin, but the associated paperwork to account for the gains and losses incurred by the inherently fluctuating price was onerous.

I believe in the premise of bitcoin, and still own some, but it's way easier to pull out my credit card to buy a cheeseburger than it is to use bitcoin and then compute the capital gains tax owed on my cheeseburger the following spring.

You don't need to hold BTC for it to be useful for payments.

You can already hold USD at Coinbase and send USD to BTC addresses with an on-the-fly conversion (although it will run you 1% today). Or conversely, generate a BTC address for your USD wallet and have all incoming BTC converted on-the-fly (also 1%).

For a local cheeseburger in your own country it's never going to make sense to use Bitcoin but there are plenty of other applications where it already makes a lot of sense (remittances, online purchases, goods and services with a high risk of payment fraud, etc.)

Both elements of your comment are highly astute.

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