BitInstant Continues Bitcoin Paycard Plan 152
judgecorp writes "Virtual currency exchange BitInstant says its BitCoin credit card is still on track. even though Mastercard denied any involvement with the plans yesterday. BitInstant says it is applying through a third party bank which will broker a Mastercard application. BitInstant is still taking signups for the card. Oh, one clarification: the card will not be anonymous."
the card will not be anonymous (Score:4, Insightful)
And the advantage using it is what then? If this catches on, I'll be watching intently how the revenuers treat this.
What I was waiting for! Best of both worlds! (Score:5, Insightful)
It's not a credit card, it's a debit card (Score:5, Insightful)
Specifically one re-loadable with Bitcoins.
From what BitInstance has said it either works by simply converting your BTC into USD or some other currency when you deposit the BTC to the address on the card, or they've done some clever thing where they convert the appropriate amoun of the BTC balance associated with the card it as you make a transaction. (depositing the currency to the actual account associated with the card just in time for the payment to go through) Credit is never offered.
Of course, this is why they don't really need much help from Mastercard: the technology powering the card is already common for branded payment cards like those ones you can get to give as gifts, just without the crazy fees and with a much more reasonable %1 currency conversion fee and the flat $10 or so fee to buy the card. That conversion fee being pretty similar to what you'd pay at a regular bitcoin exchange anyway.
Ultimately this is like Paypal's debit card: just an easy way to spend your Bitcoin balance. If you happen to have a lot of coins for whatever reason, be it you run a business, mine, or invest in them, this card might be for you. Otherwise don't complain that a niche product doesn't make sense for you.
From a security point of view it's a very easy product to offer. When Bitcoins are sent you can almost guarantee the transaction has gone through, no charge-backs, after one confirmation, or an average of 10 minutes. That rises to essentially guaranteed after six confirmations. (I'm pretty sure no-one has ever managed an actual double-spend with even one confirmation) The rest of the process is subject to the exact same risks as any other pre-paid debit card, hence the transaction limits they've said they'll apply of something like $1000 a day. Basically they just want to limit losses if someone steals/clones your card, or they screw up somewhere.
Faxes, anyone? (Score:5, Insightful)
Who bought the first fax machine?
I mean, the very first fax machines were expensive (around $2000), and the first person to get one had no one to send things to, and no one to receive from. Were fax machines ever really that unlikely to succeed?
There's lots of things that have value in proportion to the number of people who use it - it's called the network effect [wikipedia.org]. In a few instances (fax machines, telephones, the internet) the value is zero if no (or very few) people are actually using it. That doesn't mean that telephones or fax machines or the internet didn't come into common, everyday usage.
Is this a valid concern? Should I, as an intelligent adult, claim that something will never be of value simply because no one uses it right now?
It 'kinda seems like there's a flaw in that reasoning. Wouldn't you be better off with a different argument?
Re:Thank God (Score:5, Insightful)
It's called "follow-up on your stories". We're sorry if you don't want to read about it, next time you might try not clicking the link.
Re:Wish it was yesterday (Score:4, Insightful)
Really the value of Bitcoin is based on the velocity of money, and speculation. The latter is just a matter of supply and demand, it's the former that's more interesting. Suppose Alice, in the USA, wants to transfer value to Bob, who lives in Germany, using Bitcoins. The actual exchange of value is going to look like this:
Now if this goes on over and over again, Charlie is going to be short of Bitcoins, and Dan short of Euros. So on Charlie's exchange the price of Bitcoin relative to the US dollar will rise, and on Dan's exchange, it'll fall. Enter Anna, are arbitrage trader:
Why didn't Alice just wire Euro's? Well, bank wires have high fixed fees, so Anna can amortize the fees over one huge wire transfer in a way that Alice can't. Also, Anna doesn't care if either side know who she is, but Alice might.
The key thing is that all these steps take time, which means Bitcoins are tied up in the system, reducing the supply. So by basic supply and demand, the price goes up, based on how useful it is to use Bitcoins to transfer value between people, and how fast the whole process can happen. Some people find them very useful to do this, especially pseudo-anonymously, notably the drug trading site Silkroad. Note how curiously a more efficient Bitcoin market, in terms of fiat conversion, will lead to a lower Bitcoin price.
The key thing is that Alice and Bob don't actually care that much what the price of Bitcoin relative to other currencies is. They just care that the price doesn't change fast enough that one side or the other gets ripped off during the time it takes to complete transaction. The faster those transactions happen, the less of an issue this is. If either side can quickly buy and sell their coins, something made easier by things like BitInstant's new paycard, they don't have to worry about exchange rate volatility as much. And speaking of, while people in the US don't have this problem, ask someone in, say, Iceland, with its tiny economy and its own currency, how stable the value of the Krona is relative to other currencies...
As for what happens if cash systems collapse... frankly if that's true, chances are something is seriously wrong with society. If the internet is still functioning Bitcoin might still be working well enough as a technological project that your coins are going to be worth something. If the internet isn't work, well, you're coins are going to be worthless because people can't transfer them. Of course, if you're in such bad straits that what you really want is goats and chickens, you might also quickly find out that you can't eat gold...
Re:Faxes, anyone? (Score:4, Insightful)
Re:I'm curious... (Score:4, Insightful)
Re:Wish it was yesterday (Score:2, Insightful)
Of course stagnation is setting in. Bitcoins have a fixed supply and thus are a deflationary currency. They were designed that way. It's one of the biggest reasons all the economists snickered when they debuted. Deflationary currencies always result in hording, which is never a desirable feature for a currency system.
No, it's not a desirable feature for an economy. If Bitcoin's main use is transferring value from one person to another, the actual value of Bitcoin at any one time is irrelevant, so long as it's stable over however long the whole transaction takes, from fiat, to Bitcoin, back to fiat. The Bitcoin hoarders can have their fun; the people buying drugs on Silkroad aren't going to care. It's getting turned into fiat currency at the other end anyway.
An economy using only Bitcoin as currency would have serious structural problems I'll agree, but that's way off in the future, if ever.