The Time is Now for Bitcoin Startups | Hacker News Reader

The Time is Now for Bitcoin Startups

astrohacker.com

17 pointsAstrohacker27 comments

What bitcoin needs is a killer app.

For instance on April 15 the US government shut down all of the online poker sites that were letting people play poker for money in the USA. If you look at the charges, they pretty much all have to do with wire fraud. (The operator of the site can also be charged, but analyses that I have seen suggest that that charge may be harder to make stick in the case of poker.) If someone is willing to not travel to the USA, and is willing to set up a poker site that does transactions in bitcoin, then all of those financial issues go away. (Or are subsumed in the inevitable ones that bitcoin will face, depending on your point of view.)

There are a lot of issues to getting a poker site to work well. (People will let you charge surprisingly high fees if in return you do a lot of policing to eliminate people running bots and who are engaged in various kinds of cheating.) However there are a lot of online poker players suffering serious withdrawal in the USA. The market is there. And the online poker market in the USA until a month and a half ago was well over an order of magnitude larger than the current bitcoin economy.

So there you have a realistic company which could be built, now, using bitcoin. You can generally count me as a bitcoin skeptic, but if someone can get traction with something like this, bitcoin may indeed have a nice future.

Public companies have their financial records available. I wonder if it'd be possible to work out how much they pay in transaction, chargeback and credit card fees.

Startup: "Dear Amazon (or any Fortune 500 company,) you pay $xx in transaction fees annually, install our system to cater to the $xx-sized bitcoin economy, and save about $xx in fees."

Even Square: "2.75%. [But] if you enter credit card numbers manually, Square costs 3.5% + 15¢ per transaction." https://squareup.com/pricing

Can that be beaten with say an android client: https://github.com/bitcoin-labs/bitcoin-mobile-android and a printed qr code?

Philosophizing more, in the larger scheme of things, perhaps Bitcoin can remove the notion of socialized losses from society which has devastated the economy.

Unfortunately the entire bitcoin economy isn't big enough to represent an interesting line of business for Amazon. Certainly not enough to have to keep track of exchange rates and offer pricing.

But I wonder if there is a role for an affiliate that actually makes the purchases and sends them to people. That is they make the purchase on Amazon on their own account, and have it shipped where you want it shipped. They accept bitcoins from you, pay dollars to Amazon, and trade back bitcoins for money on the exchanges. Their profit margin comes because they are an Amazon affiliate, and put their affiliate code on all of their purchases, so that they get the affiliate fee.

Something like this would not really need much cooperation from Amazon. Heck, you could just have a browser plugin that recognizes Amazon, and gives the user the option to make a bitcoin purchase instead of using your credit card.

This is a good idea, but the key is in making the browsing and selection of items as transparent as possible. It's another layer. Some type of price comparison engine would work really well: browse on Amazon, buy on xxx, pay with Bitcoin.

add:

the other short-term use case for bitcoin and say Amazon is giving refunds in bitcoin given the reach of bitcoins is low right now. Refunds are a push to market, as opposed to a pull. Typical cc chargebacks can be expensive too, and so refunding in bitcoin avoids it.

The poker market was driven by ease of putting funds into an account. That is to say, the casual person looking for entertainment and willing to lose money drove the sites. As anyone who made a living off the sites will tell you, things started going south after the first bill was passed making it illegal for banks to do the transfers. Now, if all you had were bitcoin transactions to deposit, then you would end up with a pool made up mostly of sharks. Until a dead-simple and ubiquitous solution is available for making bitcoin transactions, I express much doubt that a bitcoin poker operator would appear and thrive.

There is no question that the online poker market was much tougher after the US laws were passed. But even after the laws were passed, after casual players were limited because payments to/from the poker sites had to wind through payment processors to get around the restrictions, the poker sites were still making something like $1.4 billion/year in revenue from the US market.

Dealing with bitcoin doesn't seem to me to be much more complicated than the network of payment processors people used to use to get money to/from Full Tilt. Sure, the potential market is going to be smaller. But even if it is an order of magnitude smaller, $140 million/year in revenue is nothing to sneeze at.

I don't see the opportunity here.

It is very easy to transmit Bitcoins across the Internet.

It seems cumbersome to me, what with having to use client software, having to wait 10 minutes, etc. I guess Bitcoin is the easiest totally paranoid payment system, but that's not saying much.

There is no Bitcoin bank

Because the point of Bitcoin is that there is no bank. If you're going to trust a Bitcoin bank, you might as well trust Paypal instead.

So long as your business is solid, it will scale with the Bitcoin economy.

As opposed to a normal startup that can scale with the Internet economy, which is much larger.

Bitcoin will probably succeed in some form or another... If it succeeds, it will probably be huge.

Obviously this is a matter of opinion, but given its selling point of paranoia, I see Bitcoin getting to the size of e-gold, maybe a little bigger. (If you haven't read about e-gold, I think it's instructive.) And if it gets that big, the US government will try to shut down all USD-BTC exchanges.

The time is right now, because the government will most likely kill bitcoin as soon as it even gets close to becoming mainstream.

the government will most likely kill bitcoin

Which one?

All of them, together. There are already lobbyists at work to criminalize the use of Bitcoin. And they will succeed.

Why are you so sure? There'll be a counter-movement.

http://en.wikipedia.org/wiki/Pirate_Parties_International

"The party strives to reform laws regarding copyright and patents. The agenda also includes support for a strengthening of the right to privacy, both on the Internet and in everyday life, and the transparency of state administration."

I'm not so optimistic anymore. They(TM) believe we already have too many liberties because the internet is largely uncensored. Now Bitcoin comes along and it further undermines governments by providing an untraceable shadow currency - and currency is one of those things where they take their monopolies really seriously.

Bitcoin is also very vulnerable to FUD attacks, not just because it can easily be used for illicit purposes but because statements about the flow of money are impossible to verify. I can see the headlines now: "Millions of BTC used for drug trade" and "96% of Bitcoin economy based on illicit activities" or "The majority of BTC go towards supporting child pornography". It's ridiculously easy to make these statements and they're impossible to disprove (not that it matters once these headlines air on Fox News).

Killing Bitcoin is a lobbyist's wet dream to begin with. When lawmakers and bankers get wind of this it will be the censorship shitstorm of all time. It might even turn out to be the one vehicle they need to finally reign the "free internet" in once and for all.

That said: long live Bitcoin! I'm actually a big fan, just not very optimistic about our future in general.

You may have overlooked the rough diamond: the fact that auditing can be easier. Tax departments can just ask what addresses a person used to send and receive btc. People have to declare income already (and people hide income), and now people will have to declare bitcoin addresses! It's all online for governments to check. So a DNS-like system over bitcoin addresses is the answer.

Users can generate as many of these addresses as they like- it's all completely anonymous. But even if Bitcoin had features that allowed this sort of tracking, it would still be a non-governmental free currency that is fundamentally at odds with how the old world works.

On a technical note, this is what the content of a block address looks like:

http://blockexplorer.com/address/1PbLcpBhxrMvgdcjwSgBatg1JiF...

Couldn't the client software just keep track of addresses sent and received in a log file, and when you submit a tax return, you send them that file? They then determine how much tax you owe (either a consumption tax or wealth tax,) and you pay it in bitcoin. The government can then inject or withdraw bitcoins from the money supply as it sees fit to promote or ease inflationary pressure.

So the government has two sets of transactions: those accounted for, and those unaccounted for.

In theory, a government-approved client could be implemented that is restricted to only send BTC to other government-registered addresses. There would have to insane restrictions on using and authenticating to the client software. And they would probably require the implementation to safeguard against unregistered addresses sending you money as well. All in all, shoehorning this into something approaching legal compliance would require stripping away every single point that makes Bitcoin worthwhile for end users.

And how is a government going to do that ??? Bitcoin is decentralized is the government going to go to everybody's house and take their computers away, and do this on a worldwide scale ?

"I give failure the somewhat low but still significant probability of 25%. ... According to my estimation, there is a 75% ..." Where are those numbers coming from? Does it mean that the author believes 1 out of 4 virtual currencies fail? Or that only 3/4 of cryptography algorithms are secure?

They're Bayesian probabilities, not frequencies.

I definitely think there can and will be some massive bitcoin startups on YouTube scale. So what. All startups have obstacles to overcome. It can base itself wherever it needs to.

In my opinion, there's too much uncertainty about the legality of operating with bitcoin, especially if you're a startup without a serious legal team.

Based on what business model?

What demand for what service exists for bitcoin?

The "e-wallet" / PayPal model is based on transaction fees, which the bitcoin protocol seeks to eliminate. There is no need for a middle-man?

What demand is there for financial services in general? A whole new financial sector can (and will) be created, whether regulated or not. It's the wild west.

First disclaimer: Before doing any of these see the appropriate legal rules around this as at least in the US dealing with 'alternative' currencies are not exactly looked positively on.

First ideas that just push bitcoins around:

0) Another exchange, but nicer than what we have today. The top exchange is pulling in ~30K+ a week.

1) bitcoin arbitrage bot. Connect to the various exchanges and make trades.

2) future trading. Miners who are buying 8 gpu's would be willing to buy future sales of bitcoin at todays prices so they can 100% be sure to pay back their gpu costs.

Actual bitcoin item:

1) Sell physical 'bitcoins' read-only usb sticks tied to 1 bitcoin that can be returned at any time for 1 bitcoin or some other form of physical bitcoins that be traded around.

2) A debit card backed by bitcoins. Like a UK debit card that can be use in the states, but converts on the fly this would deduct from deposited bitcoins.

Software/hardware:

1) Turn-key software mining solutions. Plop in this linux live cd into your gpu computer and it will generate you bitcoins!

1b) Turn-key mining solutions. We mail you a tricked out box

2) Linode for mining.... Rent a box and generate your own coin and slightly less than the current rate.

Other:

1) Auction site that takes bitcoin 2) Really any service that would take local currency, but use bitcoin. The real kicker would be to find a service that is used all over the world where having one currency would be good. Games and app-stores (android porn based app store?) come to mind.

A universal currency for the internet where people don't worry about exchange rates, and can feel more comfortable purchasing from any part of the world.

Sell physical 'bitcoins'

http://bitbills.com/

A debit card backed by bitcoins.

Like https://www.bitcoincashout.com/ or https://www.bitcoin2cc.com/ (but there's definitely room for improvement here)

Turn-key software mining solutions

People are working on this; I think it's going to be free. http://forum.bitcoin.org/index.php?topic=7374.0 http://forum.bitcoin.org/index.php?topic=9917.0 (A better model might be an easy-to-use miner that participates in a high-fee pool, so the developer would get a cut of all mining proceeds.)

Turn-key mining solutions. We mail you a tricked out box

http://www.bitcoinrigs.com/

Linode for mining.... Rent a box and generate your own coin

http://forum.bitcoin.org/index.php?topic=8523.0 (Of course, if you buy such a contract, it means you think BTC is going to be worth more than he does. I hope you know something he doesn't know.)

Found this project for printing out your bitcoins https://github.com/bitcoin-labs/paper-keys

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