MasterCard to open up network to cryptocurrencies
reuters.com
reuters.com
They’re hoping other people will buy cryptocurrency from these announcements, driving the price up. Or, more likely, they’re just hoping other people will buy cryptocurrency and not use it in these spending systems.
Spending cryptocurrency would result in selling that cryptocurrency, which would drive the price down. That’s not what cryptocurrency investors actually want.
Should also note that MasterCard crypto transactions almost certainly won’t be settled on the blockchain. Not with $8 Bitcoin transaction fees. They’ll just be denominated in cryptocurrency and people can deposit/withdraw in certain cryptocurrencies. MasterCard only needs to buy and sell on the blockchain as needed to provide an FX window. The actual transactions would be stored in traditional database systems (aside from customer deposits/withdrawals, just like Coinbase)
Why? Because MasterCard would get to act as an exchange and collect exchange fees. Exchange fees are a great way to charge consumers for spending their own money in 2021, when normal credit cards actually pay people 1-2% to use them. Cryptocurrency’s inefficiency is their financial upside.
Currency and its exchange rate needs to be relatively stable for the world to put trust into it. Saying that BTC is stable, but the rest of the world's fiat currency is fluctuating makes no sense.
US dollar provides stability and security, I feel confident that a cappuccino will cost me $4. Crypto's volatility deters me from using it, simply put. There is no buffer that you would have with a Treasury. Converting from BTC to coffee makes BTC exchange rate go down.
I agree that for someone living in US or EU there's no much point using BTC.
Some might call me a conspiracy theorist, but the fact remains there’s no good way to verify any of what they’re telling us is true, other than to trust people with billion dollar reasons to mislead, or rely on an SEC which has repeatedly failed to do its job and stand up to big institutions (see Moody’s subprime ratings, or Robinhood already getting fined by SEC but for trivial amounts).
There’s certainly pump and dumps, fraud and manipulation in crypto, but some could argue a lot of stocks exist right now with terrible fundamentals but huge market caps that nobody labels a pump and dump because “serious” institutions say the valuations are “forward looking.”
All this is to say, finance is a game with massive incentives to deceive and manipulate. We see that in the traditional finance space and in the crypto space . But long term, Id argue in many ways the decentralized nature of crypto lends itself to far more transparency than our traditional systems.
Now, that doesn’t mean it makes sense to buy coffee with crypto, or that a specific coin is the solution, especially one with the type of technical challenges BTC has. But in a broader sense, I do think decentralized finance is starting to look more and more like the future, if the alternative is to continually put trust into institutions that repeatedly betray that trust.
The most convincing "point" of bitcoin I've heard is to accomodate transfer of large sums of money across borders, quickly, with minimal transaction costs and oversight. Everyone here can afford the fee to transact 8 billion dollars worth of bitcoin. And settlement happens in seconds to a couple minutes. That's appealing to people trying to move millions or billions of dollars around.
For an example of this take a look at something like Strike Global using bitcoin's lightning network.
https://jimmymow.medium.com/announcing-strike-global-2392b90...
At any given time, some small slice of world currency demand will be focused on this “protection from unstable fiat currency” and some other small slice would be like a prepper mindset hedging their perceived risk of facing that (eg “but what if the US dollar collapses?” from people with very extreme risk aversion preferences).
That total “market cap” demand for cryptocurrency will surely be way, way lower than traditional fiat currencies, but it may still be much higher than the current total market cap for crypto, which means there is room for completely rational speculative buying and holding of crypto, depending on your outlook and risk preferences, for perfectly sound reasons.
I highly doubt Bitcoin is ever going to become a major direct medium of exchange. But also it does not need to become that. It can offer big value in a lesser role that would still justify speculative buying of crypto today.
Here is Ross Stevens, CEO of Stone Ridge Asset Management, describing "the point" for an hour:
https://www.microstrategy.com/en/bitcoin/videos/bitcoin-macr...
It sounds like you've made up your mind about Bitcoin, but I believe you've missed the big picture. The above video, if you watch it with an open mind, will help you to glimpse it. Hint: it's not about cappuccino, it's about living in a world of competitively devaluing currencies and resulting asset inflation.
BTC is only volatile as not enough people use it. Further, if you stay on USD, every year a cappuccino will cost you more. Fractional reserve banking is practically a license to print USD. We're not funding the stimulus or really any of our government via tax anymore. Inflation is the real tax.
the USD is very much subject to social media and traditional news manipulation. When the US decides it wants a stimulus package or other types of debt, it drives down the dollar's value. Granted the US is good about making payments to creditors, i.e bonds, it is not immune to fluctuation.
It is sad but the way of the dollar is slipping and the global demand currency. It is slowly being replaced by the CNY and other market demands.
Lastly, the Treasury does not control the dollar. It the Foreign exchange markets. (https://www.fool.com/knowledge-center/who-determines-the-val...)
I dont hold USD because it relatively loses in value for months and years now.
The base futures contracts are 5 Bitcoin i.e. notional value of $200k, but that's merely an inconvenience and not a fundamental blocker to subdivide the futures contract or have someone do it for you.
I think for years payment companies like Bitpay have had price guarantees for merchants(probably using futures in the backend), but you do have more counterparty risk dealing with unregulated exchanges.
The US dollar provides stability and security over a very short timescale. It’s been inflating for decades (punishing dollar holders and waged/salaried workers) and based on the current political environment (insane dollar printing, “MMT” having political currency, etc.) there’s a substantial risk of serious dollar instability in the next few decades.
Or, in other words, what’s the point of having a stable currency if you can’t use it in smart contracts?
There is stable coins which have held a consistent peg against the US dollar for a couple of years now. You get all the benefit of high APY yield (relative to a bank account) and none of the volatility of a Doge or a BTC.
Is that worth 2% of your net worth? You should read about optionality. You don't have to be poor if you understand risk.
I don't know, but for some reason people keep using USD. Even though in the long run BTC keeps growing and USD will only lose its value.
This move by MC seems at odds with their recent spat with Pornhub, but I would not be the first to accuse financial organisations of hypocrisy.
> Should also note that MasterCard crypto transactions almost certainly won’t be settled on the blockchain.
And neither are USD transactions. In fact, USD doesn't even have a blockchain! The great thing with Bitcoin is once you want to cash out your Bitcoin, you can take it with you "on chain" without any intermediary (and it's a bit more convenient than carrying bags of cash).
https://markets.businessinsider.com/currencies/news/chamath-...
This creates an environment there is never a reason to use the currency for a purchase, strictly because it's supply is completely limited and never increasing over time.
Since the world economy continues to grow as GDP, output, and the population grows, it stands to reason that if Bitcoin in any way parallels our real world economic scenario, it would continue to rise in price per unit, because the overall GDP continues to increase.
As a result, it in fact never stabilizes, unless overall GDP stops growing.
Since it never stops growing, it never makes sense to use it for a purchase, and so you have a flywheel effect of ever increasing upward price pressure.
It will be a reserve asset, used to back actual payment systems.
And eventually other newer technologies will supplant it, as long as there are “synthetic bitcoins” that can be on that new network, crypto collateralized.
If that new network launches as a sidechain though, then free unstaked BTC will be a perpetually dwindling amount of coins, and perpetually going up in price like collectibles or gold. With no other thing giving them value other than everyone else wanting it, and the miners / HODLers shilling it. It is a perfect investmen vehicle, it can go to $50 Billion a free coin once most coins are staked in other things. So, ironically, competitors better in every way will drive up the price for those who don’t switch and keeo HODLing for decades. And mining rewards will be worth so much that electricity will be wasted on a bigger and bigger scale until people can’t afford to power their homes since bitcoin mining makes more $. It’s sad... but where is the flaw in the logic
1. The card handles also selling some off for taxes every transaction and put that in an interest-accruing account.
2. The card tracked my capital gains for each transaction for easy reporting on taxes.
3. The card provider will help manage fees - I’d rather bulk deposit funds to a layer2 and have fee-less payments over having to wonder what the current network fee is.
I’d prefer if it wasn’t MasterCard since I use Visa cards, but I can’t complain too much.
The reason I want this is that I have a lot of money in cryptocurrencies and I’d rather not sell them into other assets at the moment.
I'm curious: is this because your preferred bank mainly issues Visa cards, or are there things about MasterCard that you don't like?
> 2. The card tracked my capital gains for each transaction for easy reporting on taxes.
How should it ever do that? It would basically have to limit you to spend Bitcoin that you acquired over that exact same card (like when you buy Bitcoin via PayPal) and that you hold in a virtual wallet provided by that card network operator. Otherwise they'd be unable to tell how many $ you paid to acquire the Bitcoin you just spent.
As a related question: how comfortable would you be with a cryptocurrency-backed electronic payment card that would require you to keep your Bitcoin in the wallet of Visa/MasterCard/whatever (or their associated banks or crypto custodians) in order to spend them?
"Spending" and "transacting" is a solved problem, namely fiat and credit.
Why do crypto-assets, specifically Bitcoin, need to solve this problem?
Cap Gains on btc profit is crazy insane. I guess it's offset if value increases 100% since you bought - but that's still a big tax tax on anything you buy.
Maybe you can get lucky and set some type of tax advantage first in first out during down swings to take a loss?
When you are long on bitcoin you almost don't care about volatility. Because you can't predict the future the only good time to buy bitcoin is when you have too much dollars and the only good time when to sell bitcoins is when you have not enough dollars.
Sure, now you have 10 mln dollars in BTC at all tine high, and 2 mln after price drops but in day to day purchases it doesn't matter.
MasterCard could offer joint dollar-bitcoin account that works as follows:
You have some amount of dollars on that account, whenever you pay for something price is deducted from dollar balance.
If dollar balance is insufficient then some portion of bitcoin is sold automatically from your bitcoin balance to give you some multiples of thousands of dollars. You could also have manual trading available if you want to gamble a bit and buy some bitcoins if it dropped to 20% of last ATH or sell some ... I don't know when... when you are drunk and think you can predict the end of the bull run..
Not sure how much bitcoins would someone entrust MasterCard with current bankruptcy law but if it was significant enough amount then all bitcoin millionaires would get to use their fortunes totally hassle free.
This doesn't track at all, unless it is a safe assumption that the general trend of Bitcoin will always be up, and you are able to time the market to do any major withdrawals at higher prices. Or, you don't have any major withdrawals, and you luck out in that your many small withdrawals average out at a higher price.
None of that is guaranteed, and with Bitcoin's volatility, you're in for a bit of a ride every step of the way.
For people who have big Bitcoin hoards due to (say) mining back when mining was cheap, maybe they won't mind the swings so much since all of it is "free surprise money", but this doesn't really work for people who bought into Bitcoin in the last 5 years or so (either by buying coins with fiat currency, or by building expensive mining rigs and burning electricity).
(If you're solely talking about the first kind of person, then: apologies! In that case I think you're pretty much on the nose.)
It's the exact same story for any high net worth investors with most of their net worth tied up in stocks.
If you have 10 million dollars invested, be it stocks or Bitcoin, then pulling out $10K (0.1%) here and there to top up your cash account or pay your credit card off each month isn't exactly a huge deal. Investing that last 0.1% into stocks or Bitcoin at all times doesn't make a measurable impact on your overall returns.
That's a misunderstanding of how these things work. If selling drove the price down, then the price would never go up! Why? Because nobody can buy without a sale on the other side of the transaction. The common belief that selling lowers the price comes from the fact that if you put out a big sell-now order on a market, it will eat through the asks sitting there already. However in the slightly longer term others will put up new asks, up to the equilibrium where the price is close enough to the perceived value that there's no money to be made, after tax, by going in to move it closer. The phrase "Sell! Sell! Sell!" is based on the idea of selling at any price because you want to get rid of it so badly, but that's not a normal sale. That only happens when a party suddenly realizes that they have too much of something, not when they are doing everything as expected.
When your sell order is higher than the highest bid it will be put onto the order book. If your buy order is lower than the lowest ask it will be put onto the order book.
You can sell or buy instantaneously by fulfilling an existing order. When you do a market order the exchange automatically presents you with the most favorable order. Once that favorable order is gone it will take the second most favorable order and so on. Each new order is less favorable than the last one.
By repeatedly selling Bitcoin you are clearing the order book on the buy side. Less buyers mean lower prices.
It’s the same story with any currency. Basic foreign exchange concepts.
Just look at the Nano cryptocurrency for example: 0 fees and <1 second transactions. You can send 0.00001 dollar or 9 billion to anyone in the world at any time. All you need is a phone.
Crypto is going to disrupt a lot of things. If it's not clear by now, you will be in for a surprise.
Sounds great! But why can't we just use that technology to move our existing money around? Why do I have to trade my USD for NANO, transfer the NANO, and then trade the NANO back to USD at the other end?
Why wouldn't I simply engage with a bank that lets me use the same open-source technology to simply move the USD from one place to another? I don't want to become an investor in Nano just to transact any more than I want to buy PayPal shares to use PayPal.
Visa and Mastercard are likely still going to be important in the future just for the sheer fact that business owners will take at least a decade to update their backend stack to be sophisticated enough to handle the various payment APIs, UX problems, etc that crypto brings. With Visa and Mastercard your existing PoS terminals still work (now with crypto) and you can continue focusing on selling books or groceries or whatever else you do instead of being a financial systems engineer.
Bitcoin’s deflationary nature discourages spending and selling, by definition. The high transaction costs discourage it even further.
Investment centralization is bad because it makes it much more susceptible to regulatory capture by the industries crypto stands to disrupt. We're already seeing this now. The same big banks that called crypto a scam have suddenly become bullish after a few years of quietly buying coins. We need regular people on the streets advocating for crypto.
The reduced use cases is a problem because it minimizes adoption and the network effect, both of which are vital for the long term survival of the network.
It is the speculators buying and holding that create the expectation that its value will hold over time, thus making it viable as a medium of exchange.
Credit card companies in the US are a special kind of evil. They charge huge fees, force vendors not to pass the fees on to customers, and then pretend to be the consumer's best friend by returning a bit of the fees to them.
They insert themselves between buyer and seller, drive prices up, and their customers think they are saving money.
Regardless of what you think about credit card companies, which payment method do you think the average consumer would choose?
1) Pay by credit card, get 2% cash back, reserve option to reverse charges if vendor fails to deliver, don't lose all of your money if you lose your credit card.
2) Pay by Bitcoin, pay $8 transaction fee, wait 10-30 minutes for transaction to be confirmed, resubmit if transaction fee was too low, no recourse if vendor runs away with your money, lose all of your money if you forget your password.
Realistically, any crypto-as-payment service will either charge the merchants large fees (to cover risk, volatility, exchange, transaction costs) and/or collect profit on the exchange rate.
There's no free lunch, but the lunch is definitely not cheaper on the Bitcoin side for average transactions.
This is a huge addition to the network with a giant amount of accepts edges.
I'm all for it, if it's properly audited and confirmed that the funds are in place.
I'm a huge proponent of cryptocurrency technology as long as it doesn't:
1) Depend on wasting ever-increasing amounts of electricity doing arbitrary useless proof-of-work
2) Create a new currency out of thin air, when all we really want is a way to move our existing money around. I don't want to have to buy an arbitrary cryptocurrency from some early adopters at an inflated price just to move my USD from point A to point B.
I'm not inclined to transfer it to USD, but I'd happily spend some of it were it easy to do so. Maybe buy some stocks, upgrade my PC, or get a PS5 and some games? Sure, why not!
I'm only sitting on it because it's a hassle to use it, not because I believe it's going to suddenly grow 100x in size. If I really cared about the growth I'd immediately move it to some index funds.
Spending it is effectively the same thing as converting it to USD.
Why are you hesitant to convert it to USD to buy something, yet you'd be happy to have a 3rd party service handle the BTC-USD conversion in the background and collect their profit on the exchange?
There's no free lunch. Mastercard isn't doing this out of a desire to offer free services to the people. They're collecting profit by offering worse exchange rates than you can get on an exchange by yourself. Same story for PayPal and other providers.
https://www.casebitcoin.com/images/stories/charliebilello_re...
They could easily settle merchant balances on the blockchain. An $8 fee is nothing compared to the revenue of a merchant.
Assuming e.g. a 1.5% credit card fee, a merchant pays $8 in fees when receiving ~$500 in payments.
Even if you turn this into a credit card that a consumer pays off once a month, how many consumers want to pay $8 for the privilege of paying their credit card bill?
Also, $8 is just the current transaction fee, with virtually zero vendors accepting Bitcoin. If Bitcoin became popular, the transaction fees would become prohibitively expensive. The transaction fees have been in the $60 range before, and that’s still before any widespread vendor adoption.
Bitcoin isn’t usable for transactions at scale. It’s by design. Bitcoin has rejected proposals to increase the block size. Bitcoin holders don’t want anyone doing anything with Bitcoin other than holding it
Is this necessarily true? If you have a merchant that accepts cryptocurrency why would that drive down the price? (e.g. Tesla [1])
[1] https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-i...
They spend it on paying employees and buying raw materials. It’s getting spent (sold) one way or another.
Tesla is no exception.
Not necessarily. I could give you the address of 0.001 BTC over the MasterCard network and you give me something I can eat (I don't know if this is how it will work, but why not?) No BTC is converted in fiat currency. You can hoard you BTCs for years or change them in dollars as soon as you receive them. Your choice.
Edit: I must give you the private key too.
You can't guarantee that you haven't memorized the private key. You can't guarantee you haven't traded the same key multiple times.
The only way the receiver can truly guarantee ownership of the BTC is to put it in a transaction, which costs money.
They understand that it's building up the network effects, creating onramps, and improving the ecosystem.
Over the long run I highly doubt mastercard will be a meaningful player in the crypto space but they definitely have the ability to hasten its adoption.
Mostly right.
Most likely, they will use things like a "state channels" for the actual transactions. State channels are like pre-paid cards, where the channel gets settled after the entire card is spent.
But why? Well, cryptocurrency makes sense over traditional currency, because it's programmable, auditable & composable with many other dapps that exist on the blockchain.
An economy based on BTC would be highly deflationary as no one would want to spend - why buy something today when it'll be cheaper in a week or a month? Scarcity isn't necessarily a good feature for a currency. Ideally supply of a currency should increase as more people enter the economy. Such a currency would aim for stability instead of aiming for the currency itself to increase in value (as happens for BTC or even physical gold).
Because you need it today?
We already see this all the time in subsets of the market which experience deflating prices. If you wait a year to buy that fancy device you're wanting there will most likely be a better model available at a lower cost. People still buy the current model, though, because there is a cost to waiting which offsets the expected price deflation.
A move like this can increase the confidence that the Bitcoin price won't go down in the long-term - that is, someone do wants to spend their bitcoin in the future, and signals of greater market confidence increase the perceived likelihood of that.
The more I believe bitcoin is here to stay, the more comfortable I feel allocating savings in it.
This time is also a bit different; 2017 was almost entirely retail, this time it's a lot more businesses and institutions driving the BTC market.
> They’re hoping other people will buy cryptocurrency from these announcements, driving the price up.
So what? Does every investor use the products of the companies they invest in? Professional investors don't care about that, they care about how well the company is doing and what they think its trajectory will be (up or down), not whether they personally will use the services offered.
Spending crypto using a card is actually what people want in order to avoid taxes on crypto as it's treated as a security from the IRS tax perspective.
Anyone who has made money on crypto would love it if they can just spend the crypto as currency and buy every day things with it and remove the tax liability from having to convert to fiat.
15% tax capital gains, no thanks, let me spend it on food and furniture.
It seems like MasterCard should be reporting each swap of crypto for dollars to the IRS and sending you a tax form at the end of the year. If that's not the case, expect regulatory action to correct it.
I would gladly pay the 15%. I mean how greedy is it to make these kind of gains in crypto and then trying to avoid a measly 15% of tax lol.
https://www.coinbase.com/learn/tips-and-tutorials/crypto-and...
that’s really assuming a lot
a closed loop cryptocurrency transaction does not result in selling
mastercard may or may not be offering that capability
mastercard offering that capability makes the cryptocurrency proponents vision a reality
Mastercard is offering exchange services. They will collect exchange fees on transactions, just like PayPal and other providers.
They won't even bring blockchain into this any more than necessary. They'll handle it in databases like everyone else, only engaging with the blockchain as necessary for deposits and withdrawals.
Cryptocurrency people are hoping for all sort of things... that's part of why enthusiasm can be currently quantified at a $1trn.
While I'm sure you're right for most of the current bets (bitcoin owners are long, after all), there's something to be said for blind, dumb momentum. Connecting more people & financial nodes to the network, however disintermediated, for whatever reason.
Maybe the "mastercard model" of denominating in bitcoin and clearing yourself in dollars is an early version of how bitcoin transaction costs actually get to normal. That's not unlike how stocks, bonds, forex & such are exchanged.
I know. I know. Irony. Inevitable though, I think. Pretty much all currency & currency-like stuff gets moved around through clearing houses. Direct blockchain transactions are the theoretically ultimate transaction in the same way that NYSE transactions are theoretically ultimate. Actual stock transactions generally happen within a broker, the broker's broker or whoever else is between them and the actual stock market. The logic is similar.
TLDR... People are giddy or hypocritical because they're long (or short) on bitcoin. That doesn't mean that momentum isn't momentum.
That is almost certainly wrong... otherwise, they could claim to have bitcoins and would not really need any?
Edit: I see that you've copy/pasted it once but some other commentary on Bitcoin seems mostly genuine.
Does it really matter if the bottom is 5% instead of 0%? Is that honestly something you think about when choosing an investment?
Their users can "buy and sell Bitcoin" and pay "no fees". How does Paypal make money? "From the spread". The difference between bid and ask. And who sets the spread? Drumroll ... Paypal!
Since you cannot transfer your bitcoins out, when you sell your bitcoins, Paypal pays you whatever they like.
So far, Paypal only offers this in the United States. And do the Americans take this offer? Yes! They buy over a billion dollars worth of Bitcoin per month on Paypal. If this continues, it means that every American from toddler to senior buys $50 worth of Bitcoin per year.
Other companies in the finance industry will want the same free lunch. Run on crypto in 3..2..1..
This will continue until the first companies will start to offer you to transfer your crypto out. Then slowly the market will normalize. Now everyone has crypto. In their paypal/mastercard/bank/whatever account and/or in their own wallet.
Looks like chances for broader crypto adoption are pretty good.
Though I must admit that it's doubtful for them to find enough cash to take the other side of this bet, so most likely they have to resort to actual Bitcoin bought from liquid exchanges or OTC.
Why? If they never offer withdrawals then they don't need to worry about that.
As Matt Levine pointed out yesterday, a mainstream company can make money by buying Bitcoin and then making an announcement that sounds like they're going to use it. (It doesn't matter whether that plan works out or not, as long as the price of Bitcoin goes up.)
For Paypal, getting their own customers to buy Bitcoin (that they already own) would be a way of hedging, if they're long Bitcoin to begin with.
1) For the metals ETFs I know about, the underlying is held by a bank which is a separate legal vehicle to the ETF. Since the ETF and the bank are both publicly-listed firms, their full-reserve commitments would be regularly audited to a high standard.
2) Brokers participate in risky activity that is unrelated to digital asset trading. This seems like a higher risk profile than a firm that is streamlined to maintain a single ETF.
3) The broker acts as custodian for your digital assets, but not for your shares.
Imagine that you buy a digital asset through your broker and they become insolvent a week later. Assuming your contract gives you no special rights, you would sit on the books as one creditor alongside unpaid vendors and unpaid employees. Years later, you may get back cents in the dollar.
Whereas you would have full and immediate rights to any ETF you had bought through that broker on the same day. They have no influence once it has settled.
With “fractional reserve crypto” all hell seems like it can break loose - much like the pre-central banking era of monetary instability.
Elon Musk is best ignored.
What's the point of buying them then? Sounds more like a lease thing.
More than 95% of "money" in circulation was created in the private banking sector. That's the closest thing to printing money because that's actually what it is.
Paypal is just taking a cut for providing a service. Don't like it? Don't use it.
The equivalent for Bitcoin would be that Paypal has to send your balance to you on the blockchain. But they do not do that. They will pay you in dollars. How much dollars? However much they like.
If everyone would try to do that the system would collapse. The system is built upon the assumption that the vast majority of people don't do that.
Of course you can. Whether you get it or not is another matter. Have you ever tried it? Do you know anyone who has tried it? Sure, for trivial amounts you can do it. But do you think you can just waltz into your bank and walk out with $50,000 in cash? Good luck.
[checking...] It looks like they are doing alright: https://www.coindesk.com/paypal-2020-results-outstanding-fin...
If it weren't such an obvious move I'd say PayPal carbon-copied it from Revolut. Can't wait for the competition to put pressure on them.
https://www.binance.com/en/blog/421499824684901264/Experienc...
That looks more like a bucket shop.
https://www.paypal.com/us/smarthelp/article/cryptocurrency-o...
Why did they do this? It turns out that about a third of Nigerians report using or holding cryptocurrency (!). https://www.statista.com/chart/18345/crypto-currency-adoptio... Second place are Vietnam and the Phillipines. For all, the #1 reason was for remittances.
Haven't we all had it drilled into our heads by CNBC and the likes that crypto was nothing but a big speculative bubble? Woops, I guess that was a big lie.
> Users will also benefit from Wirex’s Cryptoback™ rewards program, which automatically gives customers up to 1.5% back in Bitcoin for every purchase made in-store.
It does appear that they will support transfers to external wallets (!), contrary to what has been claimed elsewhere in this thread -> https://wirexapp.com/help/article/how-do-i-transfer-cryptocu...
The card is not yet available to US customers, although, apparently it is in the works -> https://news.bitcoin.com/wirex-launching-us-after-receiving-...
https://www.coindesk.com/price/bitcoin
Cryptocurrency adoption in 3rd world countries like Nigeria, Vietnam, and the Philippines is not a good thing. It's actually really sad, because it means they cannot rely on or trust their country's currency. Therefore, they are forced to place bets in a volatile and dangerous game to keep their life savings. If Bitcoin or Ethereum or Dogecoin go bust, they will still lose everything, because there is no trust, recourse, or regulation tolerated in a decentralized system. Well, not much worse than their home country's currency, I guess.
It's a new asset class, of course it's going to see huge gains as it picks up adoption and of course if you zoom all the way out it'll look like a bubble. The bubble goes bust every few years and comes back stronger. That's a healthy market.
> It's actually really sad, because it means they cannot rely on or trust their country's currency.
That's a huge benefit and reason why bitcoin will become popular. It's a portable store of value outside the control of any government. It doesn't have the same issues as the US dollar for example where other countries need to be concerned about how not only their country is performing, but also the US since their reserves are in USD.
This is also why it's gaining popularity around the world. Trust in governments is rapidly decreasing and the world as a whole is destabilizing due to polarization, poverty/wealth gaps, and rising environmental concerns.
> there is no trust
That's the point. It's trustless. You don't need to worry about it.
To me these things are totally useless, paint on a canvas (when I could just look at a photo of the same thing) and a shiny piece of metal, no utility whatsoever, who cares?
Well the value doesn't come from one person's assertion of value, it's supply and demand. Apparently enough people like paint on a canvas and shiny metal for their own reasons.
Externalities by definition don't feature into the price, although perhaps they do only to a very small extent in the case of BTC because of political/regulation risks leading to a risk premium effect.
So it therefore has no value for me. Millions of people like me have the same basic intuition. Others, like you, are driven by ideology and see digital tokens as something nice and valuable that can be "kept", for ideological reasons. This value has no basis in anything physical like looks or usefulness, and has no battle-tested authority telling you it is responsible for making it useful.
Decentralization doesn't count, because as I've already said many times there is no trust or recourse in a decentralized system with random people. So you haven't given me a reason for why a "Bitcoin" should be worth $40k+. That's why I say its sad that authorities in other countries are so unreliable that people have to buy into this disreputable game to stay afloat.
Gold's value has nothing to do with its utility.
I don't get your people's arguments. You keep repeating "a digital asset can't have real value" when the last 10 years have proven you wrong. You fool!
Tell me again how this is in any way rational or logical? It's not, you've just bought into the narrative that artwork has legitimate value but haven't bought into the narrative that BTC has legitimate value.
You are trying to push your subjective opinion of value as an assertion. Just because you derive utility from original art but not bitcoin doesn't mean there's value in the former and not the latter. Value is assigned by supply and demand, not by an authoritative top-down council composed of u/nexthash.
It may well be the case that the market's opinion of BTC's value changes and the price drops to near nothing. But then again maybe people will wake up to the fact that an original artwork is indistinguishable from a photo, and the art market collapses too :-)
Blockchain is a global consensus network. The consensus is on a data structure's definition, rules and it's actual data.
1. https://businessday.ng/sponsored/article/how-nigerians-are-u...
I'm new to stablecoins and trying to understand the situation. Is this not the same thing Brazil did with the URV [0] -- that is, replacing their ruined state currency with a temporary one pegged to the USD -- only coming from the private sector instead of the government?
> Other benefits of buying into stablecoins include: (snip) ...has no central authority which could breach payment... (snip)
How is it possible to "peg" one currency to another without a centralized issuing body? Bitcoins can be mined by anyone with enough computing power, and stability is only achieved via an engineered stalemate between miners, node operators, and exchanges. How do these "stablecoins" achieve their stability without controlling issuance of coins at the top level?
My understanding is that altcoins derive their value from their fungibility with Bitcoin; that's why when Bitcoin tanks, it brings the entire ecosystem down with it. How are these stablecoins any different? If Bitcoin's value fell by 80% tomorrow, bringing down Ethereum, LTC, and Doge, what keeps these stablecoins' value from falling down with it?
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- centralized issuing authority backs the coins with dollars, here although the trust is the same as in a central authority, for people in Nigeria and Brazil, its asymmetric compared to people in the US. For Americans, a central authority is a central authority. For Nigerians, a central authority in US (or Carribean etc) is vastly different from a central authority in Nigeria. Example: USDC, USDT, PAX
- Seigniorage-style stablecoins, these coins try to algorithmically issue or reduce the total coins to keep the price stable. This seems to have never worked. Most stablecoins in this design failed.
- collateralized stablecoins - These stablecoins try to hold a certain amount of collateral in 'unstable' currency (like ETH/BAT etc) and try to maintain that collateral. If the price of the stablecoin moves away from $1, then it creates profit opportunities for people to benefit from it and help bring the price down. For example: Dai, Havven. These are experimental but seems to be working well.
If all that was necessary to reliably predict a price was looking at a chart, we would all live in a very different world.
Oh and BTW, phrase `why a "BitCoin"` makes it very clear that you are not familiar with this field and have done very little research.
BTC follows the stock-to-flow model pretty accurately https://www.lookintobitcoin.com/charts/stock-to-flow-model/
Is there any evidence that people in these countries are rushing to transfer their cash into Bitcoin? Not just a couple people that some news reporter found, but actual statistics?
Realistically, if these people have access to out-of-country transfers they're going to switch to USD, not transfer to a Bitcoin exchange and switch to digital money that they can't actually use for any transactions.
On the other hand, Bitcoin would be a very attractive vehicle for oppressive governments to embezzle funds out of their country at scale, as they control the strings to the banks and the regulations. Their only concern is not getting caught or seeing their money confiscated.
Consumers do not care about anything other than the net price they pay.
Stores that take Bitcoin payments flip this around, passing the transaction cost to consumers.
If I'm ordering a $50 thing online and the store takes Bitcoin, I have two options:
1) Pay with my credit card, for a net cost of $49 to me and a guarantee that if they don't deliver I can reverse the charges.
2) Pay with Bitcoin, for a net cost of $58 with the current $8 transaction fee, and zero recourse if the vendor fails to deliver.
$49 and money-back guarantee versus $58 and zero recourse. Why would anyone choose the latter?
This is still contingent on using a Lightning network to reduce fees on smaller day-to-day transactions, which I agree are too high with Bitcoin proper.
The original Bitcoin whitepaper actually outlines this as one of the main problems it aims to solve, and I'll let the paper do the talking:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions,and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need.A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
What is needed is an electronic payment system based on cryptographic proof instead of trust,allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.
* Pay $2.00 with my credit card and get $.04 back = $1.96
* Pay $2.00 with cash and get $0 back = $2.00
* Pay $2.00 with btc and get $-x satoshis back because I have to pay transaction fees + fees to convert to fiat = $2.00 + some amount of fees that change daily
Hm.
Just as an illustration, if a merchant's profit margin on an item is 10% and the cc fees are 3%, they've lost a third of their profit on that sale.
https://twitter.com/maxfield_wall/status/1287097229220536321
I lived in Taipei for a year and almost all transactions there are cash, debit, or bank transfer. You can do a bank transfer to anyone instantly for pennies. Really puts the ACH system to shame. Some things are better than getting 2% back.
This isn’t true. Interchange fees are capped at that rate, but that’s only one portion of the total transactional fee charged to merchants for processing card payments.
Don't merchant's already charge the amount that causes (number of units sold) * (profit per unit) to be as high as possible? If visa suddenly dropped the transaction fee to 1%, I don't think stores would pass the 2% savings on to the customer
My credit card pays me 2% to use it.
No one wants to use the Bitcoin blockchain for average transactions.
No one is buying Bitcoin as anything other than a speculative investment right now.
Most cryptocurrencies are plagued by the same issue. Everyone and their mother still come out with their own cryptocurrencies, but none has been proven to have any actual usefulness outside of speculation. I guess Monero and ZCash are at least really used as a transaction method because of the "black market", but, outside of anonymity, they also have the same fundamental issue that btc has.
Also, your credit card pays you 2% because they extract a larger fee from the merchant, who will raise prices to cover that expense. So you're not really saving money.
That's not how it really works, but you're right that $8 is a pretty insane transaction fee.
Bitcoin transaction fees are set by the sender. At least, that's true if you aren't a nOOb and you control your own wallet.
Transaction fees vary, at this very moment, between 1 satoshi/vbyte to 9,900 satoshi/vbyte. That range is 10^5. See https://mempool.space/
Last week at this time, a tx could be placed in the very next block for 13 sat/vbyte.
But sure, claim it's "$8". But it's better to educate yourself before sprouting off like that.
With Bitcoin you pay the fees you want to pay. If you want fast settlement, you pay more. If you want to pay next to zero, you can do that too.
There are a lot of people on HN who love and support crypto but the arguments are exhausting and you get nothing but downvotes. All of my friends and family I convinced to buy and hold have been texting me how I changed their lives. It’s just so sad to see what this website did to engineers who normally have open minds but were convinced to hate crypto.
So, as someone who doesn't know much about crypto aside from "it's bitcoin!", please tell me, what advantage do stablecoins/Ethereum provide that fixes the problems presented with bitcoin? I actually want to learn more.
I would be interested to know about the volatility specifically and also if these currencies are less susceptible to a 51% attack or a fork.
Interesting, but where do you get that from?
notice how they clump "cryptocurrency" with "digital currencies" as the same thing.
Getting 1 of the 21 million bitcoins is like decentralized proof of saying "I had 48k worth of value in Feb 2021!"
It locks in the value that you created forever. Otherwise governments will just keep printing money, and your value gets diluted arbitrarily.
Assuming the mechanisms of protection for the blockchain holds, it should work out exactly as that.
Bitcoin doesn't prove anything about your USD value. Bitcoin blockchain only proves how many Bitcoin you have. Nothing about how much they're worth.
No one cares how much your 1BTC was valued at an arbitrary date in the past. The only thing that matters is how much someone else is willing to pay for it right now.
If you buy 1BTC for $48K, you don't have $48K. You have $0 and 1BTC. Someone else has your $48K.
> It locks in the value that you created forever. Otherwise governments will just keep printing money, and your value gets diluted arbitrarily.
What is inflation? Inflation is when the price of something is pushed up. You don't need to buy Bitcoin to avoid inflation. You can also buy stocks, or real estate, or gold, or businesses, or any other number of investments. Basically, do anything other than put cash under your mattress and you'll avoid currency inflation. Bitcoin isn't even close to unique in this regard. People have been investing to avoid inflation for centuries before Bitcoin came along. This idea that Bitcoin is the only way to avoid USD inflation is a deliberately misleading narrative from the people who want you to buy Bitcoin instead of other assets. Fear-mongering.
Bitcoin, however, is inflating in US dollar terms. It is inflating due to demand-pull inflation, by the textbook definition of inflation. The fixed supply of Bitcoin isn't what drives the price up. The only thing that drives the price up is demand.
> Assuming the mechanisms of protection for the blockchain holds, it should work out exactly as that.
No, blockchain has no notion of price. USD prices of BTC are purely a function of exchanges. Exchanges don't even touch the blockchain until you withdraw from the exchange.
Blockchain only protects your 1BTC. It doesn't protect your $48K value. The $48K value comes from other people buying Bitcoin. Why are they buying Bitcoin? Because they expect the price to go up. Why do they expect the price to go up? Because other people are buying Bitcoin.
Point is, as long as you are on their turf, you will follow their rules. Unless you want to make your own rules, in which case you will have to fight the government, become the government, and realize that having no control over a currency being used in your turf can be really bad for you and your citizens. You have no control over its value to at least try keep the economy stable, and they will have nowhere to turn in event of a financial crime or scam. No courts, no recourse, no trust.
2. There are obviously ways to transact anonymously, also P2P/OTC.
3. The government gets to tax all exchange crypto... easy revenue source.
I think mastercard visa etc will focus on #2 above and it will bring extremely powerful dynamic to these ecosystems
Unfortunately, it doesn't offer the speculative upside of something like Bitcoin. People don't actually care if their transactions are carried across a blockchain or a database, as long as it gets done.
Bitcoin is hot specifically because it's so detached from any real-world use cases or metrics that might put bounds on its price. There's a narrative that because no one can determine an upper limit for Bitcoin price, there's infinite upside. Of course that narrative is no different than any other arbitrary asset, but the Bitcoin narrative is strong because it's been in the news so much.
I think as a tech community here on HN we should try to focus on why these changes are occurring so quickly and what the repercussions are. Let’s talk constructively about the risks and opportunities more than we do about who’s buying, who’s selling, on and on.... is it a bubble.. does it have value, etc etc. Clearly it’s here to stay and clearly large chunks of our economy will soon be dealing with it.
So let’s instead talk about constructive ways to move regulation forward. Expand education and communication etc.
For instance I have a concern that we’ll leave a large percentage of people further behind as digital cryptocurrency becomes a larger part of the economic system.
Regarding your concern around economic inequality: why do you think that people would fall further behind? I'd argue that cryptocurrencies have had a positive effect on inequality, particularly in countries like Argentina, Nigeria, Venezuela, etc. Without cryptocurrencies, people in these countries - particularly the ones who don't have assets in other countries - would have lost a lot of wealth due to the financial instability of their respective economies. As cryptocurrencies are here to stay, I'd even argue that they are currently still underpriced and hence provide many people from the lower income strata of society in 1st world countries with an opportunity to improve their financial wellbeing. This might not be true for people who don't understand technology, but then I ask myself what the current system has to offer to improve inequality for those who lag behind economically and in terms of education.
A constructive idea how we could avoid further deterioration in terms of economic inequality: countries / communities could set up cryptocurrency trusts similar to Norway's Oil investment funds that are funded from cryptocurrency that was mined from e.g. excess energy in the grid from renewables. They could then invest a certain percentage of their cryptocurrency in trustworthy DeFi platforms to further increase yield. Returns from these trusts are invested into causes that benefit the public, e.g. education, health care, etc.
Excellent points. I think like with a lot of tech, if there’s a potential to liberate people, there’s also the potential for it to work against them too. The internet helped foster open communication when it evolved, helping with the fall of the USSR and the lifting of the iron curtain... but it has evolved now in many places as a way to spread more propaganda, and track citizens movements etc.
Crypto trusts sound like a good idea. I also like how the US targeted family’s and kids for savings bonds back in the day. Get people started in the direction of understanding financial instruments, and then teach them more as they go.
Ultimate I’m in the educate, educate, educate camp. If we can lobby our collective governments to start that earlier than later, so much the better. When people can see cryptocurrency working for them rather than just the financial sectors, then it’s no longer the “enemy”.
Maybe we can have a small fund of highly divisible crypto, or even a totally separate chain that schools can use. Kids in computer science classes then have an on ramp to learning how it works.
It’s already a mystery to most. I do fear what might happen when the vast majority of people don’t understand what may become a significant part of their economy.
The current world of cryptocurrency gives you a choice of trusting big banks or not, and having the same economic opportunities regardless of the level of trust you are comfortable with.
I've never understood this. With an immutable ledger of all transactions, governments simply have to make it illegal to transact anonymously (or pseudonymously), watch the blockchain, and investigate any un-attributed transactions.
It would actually enhance governments' surveillance capabilities against anyone not willing to run the risk of trying to obscure their identity, which I expect would be most people.
If you can intimidate the participants, the inescapable math of the whole thing becomes a tool that can be used against those participants. You don't need to control a currency if you can control anyone who holds it.
One of the key selling points of bitcoin and other cryptocurrencies is removing the middleman from transactions. Arguably miners in the proof of work consensus are a middleman but not as much as the 2.5-3.5% charged by the likes of Visa and Mastercard.
The other one, as OP mentioned, is permissionless or decentralization - the freedom from the whims of governments and traditional banking systems. I don't see how Mastercard can straddle between the two without some deception.
The idea that Bitcoin was going to become a new currency was never true with the low transaction limit and Hugh transaction cost.
This is only possible in our current financial system if you want to take delivery of physical bank notes.
Can I buy stuff from merchants using crypto, and they receive crypto? Useful, but most merchants will want fiat currency, so someone on the chain will have to convert it to dollars, which again would be a taxable event.
>Consumers can instantly convert their cryptocurrencies into traditional fiat currency, which can be spent everywhere Mastercard is accepted around the world. Currency will always enter Mastercard’s network as traditional fiat currency.
Edit to add: Many replies are acting as if it's difficult to automatically, digitally track conversions and taxes, to then pay your taxes? It's a digital "currency" we're talking about here.
There are many legitimate and ethical reasons why someone would want to avoid taxes they're not obligated to pay.
To your second point about calculating and tracking these expenses, it gets messy really quickly. Certainly do-able, but messy nonetheless. Imagine having a 1099 that is dozens of pages long because it's basically your yearly credit card statement. Imagine having to pay a capital gains tax of like 5 cents on a starbucks purchase. Interestingly enough, this isn't a requirement when paying for things using foreign exchange. You don't have to track gains if you take a vacation to Europe and pay for things using Euros. So I think the goal is to have crypto transaction treated like a Forex purchase.
As someone who has to deal with this every year, yes, even if it is "tracked automatically", it's a huge pita to manage.
I don't trust a traditional bank, or much less some random retailer accepting crypto, to get this right. Huge headache.
The focus on Bitcoin's lack of intrinsic value and energy use is really getting boring.
I read Hacker News comments for more information on a story.
How about some of that for a switch? Go bitch about intrinsic value and ecological disaster on one of the other bitcoin threads please.
Ethereum is pretty much where everything is happening and has been the case for a few years. On that platform there's multiple projects that are interesting and show promise like Uniswap, Aave, Synthetic, Maker, Vechain, Filecoin, etc.
Bitcoin itself may end up being worthless or being a fortune. The block-chain technology is the revolutionary part that is here to stay and will only continue to grow in the future.
If you've followed crypto and blockchain for long enough though, you realize that the risks are high and the value is low. It's a shitty technology, and a shitty investment. The cryptoverse is filled with volatility, no real-world "thing" to tie value back to, and scams upon scams.
Blockchain is an innefficient, energy-guzzling excuse for a database. Oh but you forgot its decentralized So what? Most applications don't need decentralization - it makes them inefficient and slow. Why do you think the general trend of the world has been centralization into hubs, cities, and services? Here's a nice refuter of the blockchain hype:
http://doyouneedablockchain.com/
And of course, the classic:
It mutated into a sort of global pyramid scheme that consumes >0.5% of the world's energy consumption to perform deliberately useless calculations.
Modern bitcoin isn't even about blockchain. Most people just put money in their exchange, click the exchange button, and watch the number go up and down. Never even touches the blockchain. It's all about speculation and convincing others to become the next layer in the pyramid of hodlers.
Modern Bitcoin isn't about tech or distributed systems or challenging the financial system (with $8 transaction fees that go to mining companies and exchange fees that skim every trade). It's been captured by the financial system and pumped as a speculative investment, all so financial institutions and giant mining operations can profit off of the frenzy.
[1] https://en.wikipedia.org/wiki/International_use_of_the_U.S._...
I have never seen this claim made before. Do we have an explanation on why the US dollar causes inequality? Would it improve if the US changed their currency to Yuan or Euro tomorrow? Also, how will cryptocurrencies prevent gross wealth inequality?
MasterCard is in the business of payments. Millions of people now have a bunch of idle money sitting in a potential payment vehicle outside of their current network. Anything MasterCard can do to start to siphon off some of that value is good for them. This has nothing to do with ideology, philosophy or technology. And d4mn right it’s a good sign for the Bitcoin bulls.
I use a crypto backed cc since nearly 1 year. It's NOT that you are paying in crypto, you still have to convert the coins to a stable currency and the top up your card with it. There are cards that 'make it look' like you are paying in crypto. But the do the same thing in the background.
Note: I don't really understand how this all works, so if my question is silly, I'd love to learn.
Imagine you're an abused spouse or child who needs money to escape their situation. Opening up a bank account isn't an option for a lot of people, but anyone can instantly open a crypto "account" and start stashing a nest egg away from the prying eyes of their oppressors. Crypto is the only option for this, and I've seen it successfully used like this multiple times.
The existing banking system favors those in power and those in good standing in the existing systems. If you're underage or financially dependent on an abuse spouse, it's a lot more obvious why you might want a way to store and transact money outside of that system.
Because we are forced to generally keep our wealth in things susceptible to political influence it’s nice to have a place to store value away from that.
My homes value can be wrecked by a variety of government or central bank policies. Same with my equities and bonds. So having a part of your wealth in BTC is frugal as a protection from these things. It is outside the scope of these influences.
Precious Gold/ Silver is way more adverse to risk than crypto and actually exists as a physical good.
> My homes value can be wrecked by a variety of government or central bank policies.
Crypto can be affected by those things also. I see the utility in certain aspects, but I don't understand the gold rush when there a lot better decentralized currencies.
Mentioned elsewhere in the thread was a larger problem: the amount of time it takes to settle up. I’m very curious how this will be addressed.
Basically what Visa is doing by facilitating the Coinbase card or something more involved?
Please upvote my very original opinion that hasn't been rehashed on nearly every cryptocurrency thread on hacker news.
(Use https://wirexapp.com/r/kseistrup if you wanna sign up through a referral link.)
I can see the argument of "it's just another currency for exchange, how is this hard," but the difference today is it's super high volatility, without a rescue facility, and given bitcoin's public ledger of every bad person who has ever owned it, it is arguably less fungible than cash because MC would have to track the provenance of every block it had on its books.
Your mastercard probably won't be a bitcoin wallet either due to card chip capabilities, and I'd bet heavily they will just support it as another virtual currency and do your real bitcoin settlement asynchronously on their back end in a hypothecated and risk-managed form, and even then it will be a private ledger with their bitcoin capital levels levered way up.
IMO, the entire levered business model and capitalization requirements when applied to cryptos sets banks up for the squeeze to end all squeezes, like when countries demand delivery of their physical gold from bullion banks and it creates political instability, except next time it will be 4chan organizing to get delivery of their bitcoin. For an issuer to act as a bank maintaining a float of cryptocurrencies to facilitate settlement seems like a super interesting hard problem.
Edit: this will probably be handled by reserving the right to pay you in bonds or IoUs instead of bitcoin, just like paper gold and silver today, which reduces the usefulness of doing your BTC payments through them in the first place.
Interesting take, BTW - I don't see it as impossible. There's some possibility this is the greatest trojan horse ever (unless it was just inevitable just like the internet was).
[0]: https://news.bitcoin.com/chinese-government-crackdowns-and-c...