Bitcoin Cash and the 24 Beers Problem

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Avatar for dave_gutteridge
4 years ago

Imagine you're a beer connoisseur, always on the lookout for new flavors. At a new bar featuring imports, the woman behind the counter says they have an amazing craft beer, brewed in a hidden monastery in Tibet, using exotic ingredients brought in from all around the world.

"Sounds great, I'll try it," you say.

"Okay," the woman says, "But the minimum order is a case of twenty four bottles."

Are you still interested? I wouldn't be. I'd want to try it out first, see if I like it.

Bitcoin Cash, and most cryptocurrencies, face a similar problem. Looking around, it seems to me that if I have a credit card and I want BCH right now as I'm surfing the web, the cheapest option is to buy it on Bitcoin.com for about twenty US dollars.

On Memo.cash, a Twitter alternative built on the BCH blockchain, a test post I just wrote right now cost me 0.000003 BCH, give or take, which is around 0.1 cents in USD, at the rate on the day I wrote this. If I was thinking it would be neat to try Memo.cash, and bought BCH with a credit card to do so, the minimum amount of BCH I would have to buy in order to give it a whirl would be enough for about 20,000 posts on Memo. That's a post a day for 54 years. By many measures, that's a considerably heavier buy in than 24 beers when I only wanted one.

Of course, I could buy 20 bucks of BCH, make one post on Memo.cash, and keep the remainder for other stuff. But, I have in mind here a person who doesn't necessarily know what BCH is. They're being attracted by a specific service they want to try, not a generalist sense of interest in cryptocurrency.

Which is how I think people are more likely to be drawn into using something like BCH, or possibly any other crypto. Telling me I should buy some BCH on the off chance that somewhere out there is some purchase I might want to make some day is a very vague value proposition. Especially when I already have regular money and I'm confident in how it works. The circumstances in which I'm more likely to buy into BCH is when I have a specific service or product that's right in front of me, and it seems like BCH is the way to get it.

This is the heart what I'm calling "the 24 beers" problem, where people can't try out BCH services because the minimum amount they can buy isn't small enough to be trivial, and therefore low enough risk to try out just for the heck of it.

You could buy BCH in smaller amounts by buying in person, but, that means you have to know someone willing to sell. Most people don't. You, a person interested enough in crypto to be reading this, like me, probably know lots of people using BCH. But we are very much the exception in today's world. The average person on the street, if they even have a vague notion of cryptocurrency, an echo of when it was making the news in 2017, they almost certainly don't have a personal connection to get some. They are even less likely to want to go through all the hassle of using an online exchange with all it's KYC requirements, assuming they even understand the concept. And a faucet is an insurmountable learning curve for someone who just wants to start using a service they're looking at right this moment.

The model of using your credit card to buy things is familiar to just about everyone on the internet, and that's the model BCH needs to access. It's common practice to buy points, credits, or even just store money inside a walled community for distribution later.

For example, recently, kind of as a test, I bought some "bits" on Twitch. Bits are an internal point system in the Twitch ecosystem that you can give to streamers to support them. Which, just as an aside, you can buy with BCH and other cryptocurrencies via BitPay, but at the moment it makes no difference in terms of cost or ease compared to using a credit card or PayPal.

I was able to buy about 300 "bits", which was was around $2.50 USD, plus about the same amount in fees, for a total of $5 USD. If I had bought 3000 bits, I would have paid the same service fee, so, as is often the case, it's far more economical to buy in volume.

But I didn't want to do that. I didn't want to buy 24 beers. I wanted to try this whole Twitch "bits" thing out. If I decide that supporting Twitch streamers is something I'm interested in, then maybe I'll buy in bulk next time. But for just a taste of how it works, I'm fine with the extra overhead because the overall cost is so low.

For BCH to succeed, there needs to be a way for people to give it a whirl, without committing in a big way up front. By "give it a whirl," I don't mean just having BCH so much as I mean they will want to try out a service or something that they feel they need to use BCH to access. And do it online, and purchase right at the moment of decision with their credit card.

This is the gateway to micropayments online, which is where BCH is has a huge competitive advantage over regular cash.

Services like Paypal, credit cards, and other payment systems will always inject an amount of additional cost to support their infrastructure, making it almost impossible for them to easily handle payments that go less than one or two US dollars. Unless there's some truly radical change that I can't see at the moment, the way that cryptocurrencies can transact with little to no human middlemen, they will always be able to undercut banking institutions that have to pay people to maintain them. And shareholders who expect returns.

Imagine someone out there has a game that everyone falls in love with. The next Angry Birds or Pokemon Go craze. Like so many games, they want to offer in app purchases for customization and abilities and other stuff. If they could do that with tokens built on Bitcoin Cash, that could fuel insane amounts of network traffic on BCH, the kind of traffic that would lead to interest, and adoption, and growth.

It doesn't have to be a game, it could be any kind of killer app. Who knows. The important point is that unlike any one coffee shop accepting BCH at the cash register, an online app or service could explode into millions of users and transactions almost overnight.

Then, it would be pretty easy after that point for subsequent services to say, "our points have the same underlying system as that popular app that everyone's been using recently." Depending on how the tokens are minted and exchanged, people could potentially start exchanging them between apps. In that world, it will become useful to have pure BCH, the universal underlying token, to buy into future services without paying credit card fees each time.

But, if your minimum buy in for that initial app or game is twenty bucks, it's all dead before it starts.

Whether we're talking about a developer who wants to include BCH as the backbone for their internal economy, or just a consumer who has seen some service or something that makes them interested in buying BCH, in either case, there needs to have a way for people to buy BCH in tiny amounts. As low as possible. Even if at the start those small purchases of BCH have large credit card overheads, it's worth it in the long run.

It starts with buying just one beer, and deciding you like it. Later, you buy in bulk.

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Avatar for dave_gutteridge
4 years ago

Comments

I understand the concern, but you're posting this article on a content creation site that you can join for free reducing the cost of funding that micropayment to a decent content contribution. Further, faucets have been around for just about as long as Bitcoin has been around. If memo.cash suggests buying BCH from bitcoin.com instead of picking a wallet and acquiring them some other way to experience cryptocurrency pre-purchase, that seems more like a memo.cash problem than a BCH problem to me.

$ 0.00
3 years ago

I share your views on this. Micropayments are the game changer.

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4 years ago