Square Market Accepts Bitcoin

I don't think the tax issues will be prohibitively complicated for consumers. Whichever exchange someone uses to buy Bitcoin and whatever app they use the spend it can easily generate the necessary paperwork. The companies have hundreds of millions of dollars on the line that require Bitcoin to be easy to use. They're going to do it.

The most important one is that merchants generally want USD, not BTC. Instant Exchange is a really important feature of Coinbase, and so even if we did support bare addresses, they would still be generated through Coinbase anyway, because giving our merchants USD is killer. Since Balanced isn't interested in getting in the business of holding and selling BTC, we'd need to do that through some sort of service, and Coinbase is the biggest and best one.

Secondly, the UX for Coinbase-only payment is vastly superior to using bare addresses. People are generally familiar with "sign in via Facebook," and Coinbase's OAuth works the same way. Using a Bitcoin wallet to buy something on a site is very strange until you've done it a few times. Enthusiasts will know what's going on, just like any early adopter will. But for most cases, Coinbase only is waaaay better.

Coinbase Coinbase transactions have another special property: they can be off-blockchain. I don't remember offhand if they are for all purchases, but they are for microtransactions, at least. Coinbase can (could?) not wait for the ten minutes to confirm a transaction, since they'd just be updating balances within Coinbase itself. They could build options in that consumers have come to expect, like chargebacks, holds, and other things, that the protocol would not inherently have to support.

Next, we feel that Bitcoin is best thought of as cash. Like, physical, printed notes. Websites don't actually accept USD, for example: they accept Visa, which is a financial instrument that happens to be denominated in USD. You can't mail a twenty dollar bill to most SaaS products: that'd be really silly, for a number of reasons. Using bitcoin-qt is like paying with cash, and paying with cash works great in some ways, but is a pain in others. Chargebacks, for example, are an incredibly important part of the advantage consumers see in using credit cards, and nothing like that exists with 'raw' Bitcoin in any significant capacity.

I guess that could all be summed up with "Most people don't actually use cash, because it's pretty inconvenient. They use a financial instrument on top of cash, because it offers a bunch of advantages for online purchases. A successful Bitcoin will be no different."

But that's... why people want to pay for things with Bitcoins in the first place. They want to give you cash, digitally. If they didn't want the properties of cash, they'd just cash out their bitcoins into a regular bank account, and then use a regular credit card backed by that bank account to pay. That is far, far easier, and far more well-supported by current infrastructure. The fact that they're willing to suffer the vagaries of the Bitcoin system is precisely because they have a problem with using a "financial instrument built on top of cash."

Unless you accept Bitcoins with cash-like transaction semantics, you aren't going to get any transactions going through your system that weren't already going through it. Some people will choose to re-denominate transactions they could well have made in USD in BTC, but nobody's going to choose to pay with BTC where they previously wouldn't have paid at all. People who don't spend money unless it's in BTC are doing that because of BTC's cash-like transaction semantics, not because their wealth is somehow immutably denominated in BTC.

1. "Merchants generally want USD, not BTC". Coinbase supports BTC -> USD. It's an exchange. You don't need to use their OAuth to convert BTC to USD.

2. "The UX is vastly superior to using a bare address". If you're using Bitcoin, you better know how to use an address. Not sure how that would be confusing to anyone using Bitcoin. Most sites use bare address + QR code.

3. "You can't mail a twenty dollar bill to most SaaS products". This is what Bitcoin solves! People are using Bitcoin to get away from the credit card paradigm. This is a broken implementation of "accepting BTC". You don't accept BTC, you accept Coinbase.