Driving to work today, I was thinking about the phenomenal run up bitcoin had last night, and how ironic it is that BTC still aren’t useful for the average person.
Thinking about how this could change, I came up with the following app/service. I am wondering if anyone is working on something very similar, or if it exists.
The service would be both an exchange, and transaction app. Like some exchanges, users have BTC balances, with BTC held by the service on their account, but not at a user-controlled address.
Let’s call it Bittle.
Transactions would occur like this:
I buy a cup of coffee for $3. I decide to pay with BTC. The merchant gets a Bittle ID from me, and I approve the purchase. Bittle then sends $3 to the merchant on my behalf, and deducts the equivalent BTC from my account. Bittle sells the BTC on its exchange, and charges a small processing fee.
In short, any merchant with a Bittle account could get USD from people paying with BTC. I imagine the processing fee could be competitive with credit cards.
A lot of people are talking about bitcoin being only the transport protocol for transactions. Just like visa and mastercard use a network to complete a transaction, bitcoin could be used to transfer money. It would work something like this: Give 1$USD -> x Bitcoins -> Receive 1$USD. The whole transfer would be instantaneous (and with less fees). Ultimately both the sender and receiver could select their preferred currency for all possible combinations.
Had the exact same thought a while ago. To be truly useful as a currency for transactions, you would need to remove the speculation from the equation. A merchant accepting BTC would need to convert to cash instantly. Here are the hurdles from what little I know about payment processing. When merchant accounts receive an electronic payment as it is, the money is not immediately available. at least 24 hours but up to 72 (depending on the payment processor and your bank) passes before your funds are available in your merchant account. I believe most of this is for verification of funds between banks and fraud detection, and I don't know how much of that diligence could be cut out given the potential different mechanics of BTC processing. Bottom line is that is far too much time and the value would fluctuate too much. Payment processor compete, and they compete on rates. Their processing fee margins are razor thin, - less than 2% often, which they make up in volume. With BTC, the value fluctuate so rapidly, could this razor thin margin be wiped out in even the shortest processing time? Just what I was wondering when I was thinking about it. Feel like the conversion to USD would have to be as near instantaneous as possible, but the USD side of the equation won't let that happen, and the margin to mitigate might destroy it competitively. Can't say I know enough to say I'm right in thinking that though.
The benefits would have to outweigh the fact that switching to a new system with limited capability is extremely annoying. The two benefits I can see are a) a global currency for those "in the know" -- cutting out exchange rates and messy stuff like that (and maybe making ID theft harder), and b) security. So the way I see it you'd have to focus on having an insanely secure network for this to work. Not sure I'm seeing just a whole lot of use for this at the moment, but as a way to push BTC mainstream I like it.
There's already a few things like this IIRC. I can't recall them off the top of my head, but I have seen something like this around, where you scan a QR and tap "send" it then sends it (through the service) to the other account. All the transactions were handled "in-house" so there were no transaction fees (from regular bitcoin use). IIRC you could withdraw with bitcoin or USD. There's also that ATM in canada(?) that has gotten some pretty good use.
You're right, they have something close. However, this seems to leave the merchant with BTC, which they have to exchange. I would guess that more would be interested in getting USD from the exchange, at least in the near term. Thanks.
https://coinbase.com/docs/merchant_tools/payouts "When you enable "instant exchanges", bitcoin you receive for merchant orders will no longer be sent to your Coinbase wallet. Instead they will be sent directly to Coinbase and exchanged, ensuring that you get the the exact local currency price that you set in the merchant tools. .... Let's look at an example. Suppose you create a payment button with a USD price of $10, and sell ten orders during the day. Your payout at the end of the day will be for $100 USD, regardless of how the price of bitcoin changed during the day. After deducting our 1% fee (plus $0.15 for the bank transfer) you will receive $98.85 to your bank account."
Ah, so there you go. Thanks. Most merchant set prices in their local currency and get paid in their local currency. For this "instant exchange" service we charge 1% plus $0.15 to convert the bitcoin you receive into your local currency (the same price if you manually sell bitcoin). They should really make that more readily accessible. I have to imagine that there are a number of merchants that would love to put a "Bitcoin accepted here" sticker in their window, but don't realize how painless it could be.As a merchant, you never need to hold bitcoin or expose yourself to any exchange rate risk if you don't want to.
Most merchants are extremely hesitant to change anything in their payments process. Even if you told them that there are X number of people wanting to use it and it costs only 1% to process, they'll be skeptical at first. The credit card processing industry was/is overrun by seedy ISO's, tagging on steep discount rates via hidden fees etc. Getting someone to adopt a new revenue stream, via a new somewhat untested currency that is digital in nature would be hard at first. The best way to go would be top down. Sign "Starbucks" and the rest will follow. By the way, this is the route Square went. They got Starbucks to commit to having a number of stores rollout Square acceptance. It was huge news that Square leveraged to get mom and pop coffee shops/small restaurants across the country to sign up. It didn't last long as the product/process had a number of failings and Starbucks pulled the plug.
coinbase allows them to withdraw USD at any time (or so they claim). I'm pretty damn sure I've seen some similar services as well. None particularly stick out though. And nothing is quite yet wide spread. Most use is online, which bitcoin already supports. I could see a service like this (or as you described) becoming popular with "normal" people. Those who just deposit money, and can spend it like usual, with the other end getting USD as well. From the outside it'd look like USD->USD but the middle man would be bitcoin? bitcoin->USD would also be useful. It'd be nice to able to pay for lunch in bitcoin :D