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Square Market Accepts Bitcoin

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Re: Square Market Accepts Bitcoin

#111

Post by abalone »

meowface wrote: post #91
abalone wrote: post #85

This is a strange case for bitcoin, competing with credit cards. Most consumers would be better off paying with a card: same cost (none), more protections (the ability to dispute bad merchants over defective goods). It's not a bad idea for Square to add it, since some people have bitcoins obtained through speculation, mining, cheap money transfers, and so forth. But even so, they would be a little better served payin…

> I have yet to hear why bitcoin reflects a better choice than cards for the consumer. I think security would be an obvious answer. Credit cards are like symmetric cryptography: there's only one secret (a number), which you must share with everyone you ever want to send or receive money from. Any malicious actor who gets that number can then use it to extract money from your card. Sure, it's probably FDIC insured, bu…

No way is that an obvious answer. The average consumer is massively more at risk of fraud & theft from their hosted bitcoin wallet than via their charge account.

All cards offer protection against theft and fraud including a means of disputing and getting refunds (chargebacks). Definitely not the case for bitcoin wallets.

Here's why. Cards may have weaker authentication but they have an intermediary party involved in governing the transaction. Bitcoin has no intermediary party, which places a heavier burden on authentication, and no recourse in case anything goes wrong.

So, the only way for bitcoin to increase protection against fraud is to ratchet up the level of security around authentication. Two factor, cold storage, all that. All things that are significant inconveniences for consumers. You can point to them and say "it's safer than card numbers" but that's missing the other tier of protection. Overall it's less safe, because if fraud does happen there's no recourse, and the more you inconvenience the consumer the less likely they are to secure things properly not to mention use the thing in the first place.

For everyday commerce, the two-tier level of protection that cards offer is much more amenable: a "decent" level of security at the time of the transaction that's still very convenient for the consumer, and the safety net of chargebacks.

By the way, you mentioned the lack of chargebacks as a security benefit.. but you're confusing merchant benefits (they don't like chargebacks) and consumer benefits (definitely benefit from the ability to dispute fraudulent charges and defective goods).

Re: Square Market Accepts Bitcoin

#112

Post by afterburner »

stuhood wrote: post #108
sillysaurus3 wrote: post #103

Earlier quoted context omitted.

Any malicious actor who gets that number can then use it to extract money from your card. Sure, it's probably FDIC insured, but they still make out with some of your money. Actually, you lose none of your money. The credit card company completely refunds you. Someone once stole my card and got some gas with it, and the next day I got the transaction refunded and a new card issued within 10 minutes. Bitcoin is far les…

Considering that every restaurant, store or bar you've ever used your card at potentially stashed away your secret, how closely have you been monitoring your card for siphoning of funds? It is not in the credit card companies best interest to even acknowledge this type of theft, because they have no way except machine learning to protect you from it. On the other hand, it IS useful for them to acknowledge huge securi…

There's only 30 or so charges on my CC bill for the whole month. It's an online PDF I have to access in order to see how much I owe, so skimming it is both easy and convenient.

Given that a restaurant would face serious problems if they did this, it seems both low risk and not too hard to monitor.

Re: Square Market Accepts Bitcoin

#113

Post by abalone »

stuhood wrote: post #108
sillysaurus3 wrote: post #103

Earlier quoted context omitted.

Any malicious actor who gets that number can then use it to extract money from your card. Sure, it's probably FDIC insured, but they still make out with some of your money. Actually, you lose none of your money. The credit card company completely refunds you. Someone once stole my card and got some gas with it, and the next day I got the transaction refunded and a new card issued within 10 minutes. Bitcoin is far les…

Considering that every restaurant, store or bar you've ever used your card at potentially stashed away your secret, how closely have you been monitoring your card for siphoning of funds? It is not in the credit card companies best interest to even acknowledge this type of theft, because they have no way except machine learning to protect you from it. On the other hand, it IS useful for them to acknowledge huge securi…

"Machine learning" and other techniques have actually been pretty effective at reducing card fraud in recent years -- an overall loss of just 0.07%.

And this is all done with a system that is very convenient for consumers to use correctly for everyday use, without significant risk of a total loss due to getting hacked or having their password or other security factors compromised.

Source: http://en.wikipedia.org/wiki/Credit_card_fraud

Re: Square Market Accepts Bitcoin

#114

Post by afterburner »

lectrick wrote: post #93
abalone wrote: post #85

This is a strange case for bitcoin, competing with credit cards. Most consumers would be better off paying with a card: same cost (none), more protections (the ability to dispute bad merchants over defective goods). It's not a bad idea for Square to add it, since some people have bitcoins obtained through speculation, mining, cheap money transfers, and so forth. But even so, they would be a little better served payin…

> Most consumers would be better off paying with a card: same cost (none) Correction here: There IS a credit card cost, but it is billed to the merchant and passed along to the consumer by being built into product prices . The fact that you think it is "none" when it is merely "hidden" speaks volumes.

Keep in mind credit cards offer 1-2% rewards. So in the end it's probably a 1% effective increase. Bitcoin exchange fees are usually about 1%. And that matters unless the merchant is not ever converting his Bitcoin into other currencies, since he would pass on that cost of business to the customer as well.

Oh and of course they'd have to offer a discount to Bitcoin purchasers since they're covering the additional CC fee cost anyways if it's the same price.

Re: Square Market Accepts Bitcoin

#115

Post by abalone »

awt wrote: post #98
abalone wrote: post #85

This is a strange case for bitcoin, competing with credit cards. Most consumers would be better off paying with a card: same cost (none), more protections (the ability to dispute bad merchants over defective goods). It's not a bad idea for Square to add it, since some people have bitcoins obtained through speculation, mining, cheap money transfers, and so forth. But even so, they would be a little better served payin…

There are many cases where credit cards don't work so well. Traveling abroad for instance. Every had your card denied because of a false positive for fraud? Ever lost your card on a trip? They won't send it to you where you're at. They'll only send it to your home address. You'd be much better off using something like the blockchain.info wallet while traveling. As long as you have web access, you have access to your…

If you can lose your card you can lose your phone too. You're proposing accessing your blockchain.info wallet via someone else's web browser? Sounds like a great way to get your entire wallet stolen.

As for the inconvenience of getting a false positive fraud flag.. that's extremely rare, usually resolvable with a phone call, and probably an overall vastly more convenient way of protecting you than more inconvenient up-front authentication steps for each transaction.

Re: Square Market Accepts Bitcoin

#116

Post by abalone »

lectrick wrote: post #93
abalone wrote: post #85

This is a strange case for bitcoin, competing with credit cards. Most consumers would be better off paying with a card: same cost (none), more protections (the ability to dispute bad merchants over defective goods). It's not a bad idea for Square to add it, since some people have bitcoins obtained through speculation, mining, cheap money transfers, and so forth. But even so, they would be a little better served payin…

> Most consumers would be better off paying with a card: same cost (none) Correction here: There IS a credit card cost, but it is billed to the merchant and passed along to the consumer by being built into product prices . The fact that you think it is "none" when it is merely "hidden" speaks volumes.

Interesting fact: Australia regulated away credit card fees a few years ago. There was no corresponding decrease in consumer prices.

In any case, even if there is an increase, unless merchants offer differentiated pricing by payment type (they generally favor simplicity) then what I'm saying holds: there is no additional cost to using cards.

Re: Square Market Accepts Bitcoin

#118

Post by Lerc »

ycombasks wrote: post #79
Lerc wrote: post #63

Earlier quoted context omitted.

It seems to be following a repeating pattern. * Bitcoin builds infrastructure. * People notice bitcoin isn't going away * Media says Bitcoin will make everyone Gazillionairres * Bitcoin skyrockets until infrastructure comes under strain. * Something involved with bitcoin breaks * Media(not neccisarrily the same media) says Bitcoin is all over, and everybody will lose their bitoin, their home, and their dog. * Price d…

> * Bitcoin skyrockets until infrastructure comes under strain. Source? Unless you consider the failure of Mt. Gox an "infrastructure" problem, then this is not the case.

Not the failure of MtGox, but their day to day operations were significantly impacted during the peak hype.

Other Exchanges had problems, I remember the "you can have bitcoin next friday, when we've got some ourselves" episode (bitinstant perhaps?).

Even the most prepared business are going to have trouble when everyone decides to come knocking on your door in in the space of a fortnight. You can prepare for rapid scaling, but you can't hire and train people overnight.

Re: Square Market Accepts Bitcoin

#119

Post by Lerc »

contingencies wrote: post #80
Lerc wrote: post #63

Earlier quoted context omitted.

It seems to be following a repeating pattern. * Bitcoin builds infrastructure. * People notice bitcoin isn't going away * Media says Bitcoin will make everyone Gazillionairres * Bitcoin skyrockets until infrastructure comes under strain. * Something involved with bitcoin breaks * Media(not neccisarrily the same media) says Bitcoin is all over, and everybody will lose their bitoin, their home, and their dog. * Price d…

You miss many elements with this summary, not the least of which is Bitcoin reaching a point of maturity with regards to regulation and compliance. To a large extent, that's happening next week in DC.

Yeah, It wasn't meant to be a detailed analysis.

Having said that, I'd be inclined to put regulation and compliance milestones under the heading of infrastructure.

If you mention Bitcoin now, People also don't assume you're a crazy Libertarian buying drugs off the internet (your parent's might still). In a funny sort of way that's infrastructure growth too.

Re: Square Market Accepts Bitcoin

#120

Post by FatalLogic »

abalone wrote: post #113
stuhood wrote: post #108

Earlier quoted context omitted.

Considering that every restaurant, store or bar you've ever used your card at potentially stashed away your secret, how closely have you been monitoring your card for siphoning of funds? It is not in the credit card companies best interest to even acknowledge this type of theft, because they have no way except machine learning to protect you from it. On the other hand, it IS useful for them to acknowledge huge securi…

"Machine learning" and other techniques have actually been pretty effective at reducing card fraud in recent years -- an overall loss of just 0.07%. And this is all done with a system that is very convenient for consumers to use correctly for everyday use, without significant risk of a total loss due to getting hacked or having their password or other security factors compromised. Source: http://en.wikipedia.org/wiki…

>an overall loss of just 0.07%.

No, that's only the direct loss for credit card issuers.

It's not surprising that the companies that control the system limit their own losses as much as they can, by passing on the costs to others. The losses to merchants, etc are far greater.

In fact that figure understates even the card issuers' total losses, because it doesn't include billions of dollars in "fraud solutions expense, IT, staffing, outsourcing, and outside data/investigation expenses"

The report from which 0.07% was taken indicates immediate losses that are about 15x higher. In other words, around 1%

The report makes it extremely clear that the 0.07% figure is a severe underestimate of the real costs. In fact, that is really the main topic of the report. It's unfortunate that all that research has been ignored and the almost meaningless number has been cherry picked for Wikipedia.

Link to the report (PDF) which is the source of the 0.07% figure: http://web.archive.org/web/20091229101826/http://www.sas.com...

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