Why I'm Interested in Bitcoin

Hi, I work for Balanced Payments, a payments company for marketplaces, YC W11. You can track our plans for cryptocurrency support here: https://github.com/balanced/balanced-api/issues/204

> In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail.

I'm not sure how you are getting this. Bitcoin is absolutely susceptible to various forms of fraud. Let's make this a bit more concrete: assume eBay accepts BTC. I could sign up for a seller account, make some auction listings, once some people buy them, never ship the goods, and disappear. I could set up a fake seller account, list some fake items, and then also make a fake buyer account, purchase the fake goods with my fake buyer account from my fake seller account, report that everything went well, and now I've laundered some money. That kind of activity can cripple a business.

As a consumer, the irreversability of BTC transactions is a bug, not a feature. You only need to look at the incredible amount of fraud that's happened in the Dogecoin community to see how fraudulent activity can be rampant, and can harm consumer confidence. Consumers expect the ability to be able to initiate a chargeback when fraudulent activity happens. You can't do that with just plain old BTC. When I was home over the holidays, the local TV station ran a story about how you should be using credit cards rather than debit cards to purchase things online, specifically because the credit cards' chargeback policies are often better. "With a credit card, you'll have the money taken off your statement, but with a debit card, it could take over two weeks to get your money back." etc.

Bitcoin is digital cash. Online stores don't allow you to mail them an envelope with $20 inside, because that would be kind of ridiculous for all parties involved. It's only when certain financial instruments are built on top of Bitcoin that have the same kinds of consumer protection and regulatory compliance built in.

Does bitcoin actually provide those lower fees?

Hold on, I know you are about to say "yes of course!". But what about the cost of mining? Mining is not analogous to transaction fees, but it is a cost of bitcoin.

Some people are interested in the rising price, some people are interested in the interesting things that can be built with and/or on top of it, and some people are interested in some other aspect of the technology that has sprung up around it.

Before you get too gleeful though, I would wager only a small percentage of people who have ever bought Bitcoins have sustained a loss as of today. Besides, there's nothing wrong with putting money behind a technology and then reaping either a gain or a loss based on how successful it becomes.

My actual point was that you can't look at what the fee structure / usability / etc is today and conclude there's nothing useful there.

This is especially true with the more common argument of, "Sure, I can see why someone would find it mildly useful for use a, b, or c; but I don't think it's useful today for more mainstream purpose x, y, or z, so I think it's worthless." Especially when (so far) the abc list keeps growing and the xyz list keeps shrinking. I'm not sure where that trajectory ends, but I personally think there's a lot of interesting problems that will be solved with crypto-currency.

How much of the 2.5% credit card fees goes towards combating fraud and enabling reversibility of transactions? I assume it's a significant fraction because you get a better rate if you use services like "verified by visa", no? Is there any reason to believe that fraud rates will be lower with bitcoin?

And as far the programmable money idea goes, I'd like to see more compelling applications than M of N transactions or escrow. The examples I've seen so far seem rather unexciting.

ed: Maybe cdixon's real point is that the technology behind bitcoin is disruptive to the financial industry? I can get behind this, and I'm waiting to see how the government-backed bitcoin clones fare.

Maybe this is an issue for you, but I don't see this as compelling advantage.