Bitcoin Cash has already lost at the cash register

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Avatar for dave_gutteridge
3 years ago

I've personally helped a couple brick and mortar shops start accepting BCH, so it's not that I think it's a total waste of time. To the degree that anyone happens across that store and sees a little sticker saying, "BCH Accepted Here," it helps to normalize the existence of BCH in this world.

But, that's about the extent of it. In terms of demonstrating any particular advantage of using BCH over cash or credit, BCH is too late.

There might have been a brief window where the QR code payment system that you use in almost all BCH applications was more convenient than fiddling around with cash and coins, and you could make a case it was easier or faster than a credit or debit card.

But while crypto is constantly developing, cash hasn't stopped evolving either. Now, every advantage that BCH had in practical terms is spread out among lots of competing fiat based services. And those services come with significant advantages that make them much more appealing to use than any BCH wallet.

I say that as someone who supports and believes in BCH. But I don't use it for buying anything at the cash register.

I don't know what it's like where you live, but where I live, right now, in Japan, regular money is decidedly better than BCH for day to day purchases. At least, it is if I use one of the many competing services that are vying to become the defacto electronic money. Here in Japan, they call them "cashless" services, meaning you aren't using paper and coins, even if technically you're still using cash by proxy.

I use two of them regularly. Technically, I use three, but the third one, called Suica, is just an RFID based cash card for storing yen, and the details of how it works aren't so important for this discussion, so I'm going to leave it to the side.

There are two services that I use every day that I want to draw attention to. One is called PayPay, the other is Line Pay. Just like my Bitcoin.com wallet, they use QR codes for sending and receiving. In terms of speed, interface, and ease, it is exactly the same as the Bitcoin.com wallet or any other BCH app.

Better than my Bitcoin.com wallet, though, is that I can charge up PayPay or Line directly directly from my bank account or credit card with the press of a button. Or even set it to automatically recharge if I wanted. Also, I can charge them with physical cash at any convenience store. Without any service fee, either. If I take 5,000 yen from my bank account, then I have 5,000 yen in my PayPay app. No service fees. No trading on online exchanges.

Further, I get discounts, promotions, and incentives to use my PayPay and Line wallets. PayPay ran a campaign that I did very well by, getting up to 20% off all my purchases for a period of about six months. I also won a contest they ran. I still get very minor discounts. The Line Pay app offers similar points back all the time, plus they send me so many coupons that I can't keep up.

This all may change. Right now, in addition to the two I've chosen to use, there are literally dozens of similar "cashless" apps competing to become the standard in Japan. So, all the companies backing them are offering deals to both consumers and merchants in order to push adoption. But, when the market determines who the winners and losers are, there's no reason to suspect at the moment that there will be any significant drawback that makes these services any worse than a credit card, debit card, or any crypto.

And, of course, one huge advantage these "cashless" apps have over BCH is the absence of the volatility of BCH price. Any time I purchase anything with BCH, I partly have an eye on whether or not I'm effectively paying more or less than the price I'm seeing in front of me, because the value could change literally within hours.

Which takes us to the most important point.

Even if the volatility were no longer an issue, then the best BCH can hope for is that it would be the same as how cash works for me now. That's it. No better in any way except maybe some esoteric concern about privacy.

Look, I take my privacy seriously. I use Tor and VPNs and have multiple email accounts for different purposes, so I'm right there with you when you say that people should be mindful of their privacy . But at the same time, I don't give a shit if the CIA knows I bought an oat milk latte from Starbucks to drink while I wrote this. Good security isn't about being constantly militant, it's about knowing what trade offs matter.

At the moment, unless some upcoming feature that I don't know about changes the game, the best BCH can aspire to is to become just one more face in the crowd of payment options. No worse or better, and therefore nothing to drive it's adoption. You don't beat anyone by just being the same as them.

One way to get around this is to try and think of ways that BCH could be better at handling payments at the cash register. But I think that's solving the wrong problem.

I think the better question is to ask, where can BCH naturally win where current payment options struggle?

The answer to that is, and always has been, micropayments online. Banks will always have institutional overhead costs that will make it hard for them to be cost effective at online payments under one US dollar. Cryptocurrency's near complete lack of middlemen can fascillitate payments in fractions of one US cent.

If someone develops a killer app or game using BCH for transactions in some way or another, BCH could rocket into position as the defacto online currency, taking over space that other payment systems don't have any ability to compete with. That's where I believe BCH's future success lies.

Every few days I see a post on r/btc about some restaurant in Australia or Tokyo or somewhere now accepting BCH. Usually in the caption they'll say something about how this means BCH is "winning". I guess it is a small victory, and that's nice.

But if I see people making apps with micropayments handled by a token built on BCH, then I'll know we're really starting to play the game.

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Avatar for dave_gutteridge
3 years ago

Comments

Thanks for such an accurate and honest assessment Dave. I'm so glad to see you have continued to follow the space.

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3 years ago

Glad you appreciate the analysis. It would help creators like me out a lot if BCH could become the default online payment system, so I'm definitely following BCH and have high hopes for it!

$ 0.00
3 years ago

Comparing this early evolution of crypto to the highest evolution of fiat fintech is defeatist, not to mention apples and oranges. Fiat fintech apps have plenty of limits, including KYC, random freezings, hidden fees, etc. The statist worldview will only lead it to having even more limits in the future, in the name of AML, anti-terrorist-funding and financing the latest free-lunch schemes.

That said, we definitely need to think beyond the cash register and address the inflows challenge. See the following:

https://read.cash/@georgedonnelly/merchant-adoption-is-pointless-without-regular-growing-inflows-8e8446d2

Micropayments is also interesting.

Let's criticize without exaggerating and maintain the focus on the positive. Bitcoin Cash is uncensorable, unstoppable, increasingly paperwork-free and incredibly cheap to use probably getting cheaper. We can match everything fiat does, and we can do a lot more. Never forget it.

$ 0.45
3 years ago

There is nothing "defeatist" about considering various avenues of adoption and offering a reasoned opinion on which ones may have less returns than others.

$ 0.00
3 years ago

damn! talk about "hard" truth, lol

but you live in Japan; a 1st world country; so your arguments are kinda moot; as we KNEW that already .. the power of BCH will come to those who are UNBANKED; and when THAT happens, then I'LL be talking about how crypto is WINNING..

still think its pretty cool what's poppin' out in JP .. would love to spend some time out there; I've only had a layover in Narita 😒

$ 0.10
3 years ago

You are right that unbanked people would see more advantage in BCH than someone like me who has a wealth of options to choose from.

However, I would not be so confident that fiat currency will never be available to those people the way it is not so available now. The services I mention above don't require a bank account. You can go to any convenience store and charge up a PayPay or Line Pay account, no KYC of any kind required.

Which means that at any time if fiat based services feel that the currently unbanked people are a growing market worth competing for, they will step in and could very conceivably complicate BCH's adoption potential.

$ 0.25
3 years ago

at any time if fiat based services feel that the currently unbanked people are a growing market worth competing for

you're right! i just don't understand why they haven't yet; and seemly have NO plans to do so.. i really have no idea know why they haven't, but I'm "guessing" it has to do with the installation of infrastructure that isn't worth the return on investment..

my feeling is that crypto, p2p money, would be more "grassroots", and wouldn't require the same infrastructure investment; and thus could penetrate those areas (still quite profitable) that others simply ignore..

it's just a theory ;-)

$ 0.00
3 years ago

I recently read a book called "Factfulness" that had a chapter about how many investors and entrepreneurs tend to think of the world in stark divisions of "developed" and "undeveloped". Because of this inherent assumption of wealth division, they tend to think all the opportunities are in the wealthy countries, and everywhere else is in need of charity.

However, the reality of wealth distribution around the world is that it is more of a bell curve, with the majority of people in between the extremes of privileged wealth and abject poverty. That market of not destitute but not priveleged is also not static, but slowly moving toward higher purchasing power.

I think that market has remained invisible to many of the money services we're speaking about because of out of date perceptions. However, they won't stay out of date forever. If BCH or crypto does not capture that market soon, they will lose first mover advantage and be just one of many options.

$ 0.25
3 years ago

I think that market has remained invisible to many of the money services we're speaking about because of out of date perceptions.

from my experience, regulations also play a significant role in this as well .. i'm slowly moving into the "it's better to ask for forgiveness than permission" state of mind

$ 0.00
3 years ago

Bitcoin is a payment system and a monetary system in one. You take away one of the 2 features you end up with either something like BTC (which doesn't do payment well) or with something like paypay (which isn't a money). Having both is the killer app... always has been.

$ 0.10
3 years ago

I tottaly agree to author lets all support bch if you have small business accept bch as payment little contribution but big impact on platform... I plan to start my little business soon ill accept bch or other crypto as payment 👍

$ 0.00
3 years ago

Unpopular opinion time: BCH (and perhaps even cryptocurrency in general) is not an effective solution for high-frequency micropayments. The market for micropayments is highly unlikely to prefer a decentralised trustless solution that requires a small fee for each transaction, compared to a semi-trusted service with dramatically lower costs and periodic aggregated transactions.

Rothbard talked about this in abstract terms in Man, Economy and State:

"The major long-run factor counteracting this tendency and tending toward a fall in the demand for money is the growth of the clearing system. Clearing is a device by which money is economized and performs the function of a medium of exchange without being physically present in the exchange... suppose that A and B deal with each other quite frequently during a year or a month. Suppose they agree not to pay each other immediately in cash, but to give each other credit until the end of each month. Then B may buy shoes from A on one day, and A may buy a watch from B on another. At the end of the period, the debts are canceled and cleared, and the net debtor pays one lump sum to the net creditor."

This is essentially the mechanism by which cryptocurrency is traded now on exchanges, and it is very effective. Even a cryptocurrency like Nano, where the cost of a transaction is even lower than BCH, is nowhere near as "cheap" as updating a row in a SQL database. There is no point in doing a decentralised, trustless cryptocurrency transaction for each minute or second of Netflix that I watch. It's dramatically cheaper and simpler to allow Netflix to keep a centralised tally and then bill me once per month in either crypto or fiat. If Netflix abuses their centralised control over the database, creates phony transactions and overcharges me, then I will cancel my subscription and go to a competitor.

Because clearing works equally well for crypto and fiat, and microtransactions will always tend to use a clearing system, crypto has no advantage over fiat for micropayments.

$ 0.15
3 years ago

Until people start to get banned from the third-party paying network.

For example, the government could mandate that people who do not receive the eventual COVID-19 vaccine be excluded from the payment network. I feel that one way or another, such similar exclusion are coming.

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3 years ago

There's a lot to unpack there, but fundamentally I think you're downplaying the costs of being the person who runs that SQL database with all the transactions. The security, the staff, and so on. There's a reason PayPal and credit companies charge as much as they currently do, and why they don't provide any options for service fees less than about a dollar or so.

$ 0.25
3 years ago

I actually do run a SQL database full of financial transactions at my day job ;) 1000+ businesses, with dozens or hundreds of customers each, all purchasing services daily that are priced by the minute. The businesses all bill weekly or fortnightly. Customers' bank accounts are debited at most once per week. A given customer might have 20 transactions that week in our SQL database, all of which get listed in detail on their account statement, but their bank only processes one aggregated fiat transaction for their weekly balance outstanding.

That one fiat transaction per customer per week could be marginally cheaper with crypto, sure. But those 20 internal transactions which we track and then aggregate still need to be in a relational SQL DB somewhere, so that we can run business-intelligence queries across that data. If the data needs to be in a DB table anyway, there's not much benefit to also paying 0.3c/tx to store a backup of it in the public BCH chain.

$ 0.00
3 years ago

I'm sure your business does well, but whatever it is you're doing, you're not talking about handling the kind of microtransactions that BCH has the potential to handle.

The cheapest PayPal charge is 2.9% + $0.30. That's too much overhead for doing the kind of microtransaction that happens on this very site. One of the supporters gave me $0.01, which I'm happy to have, and that's impossible with PayPal.

If you have the ability to undercut PayPal, I suggest you do so and make a killing.

$ 0.00
3 years ago

I think a worked example will make this much clearer. Take a service like DigitalOcean. They charge hourly rates for VPS instances (https://www.digitalocean.com/pricing/#Compute). $0.007 per hour, which works out to $5.00 per month.

If you create an instance, run it for 10 hours, then destroy it, you will be charged $0.07. But you won't be charged until the end of the month. That is because the cost of processing the credit card transaction makes it much cheaper to bill monthly, even though pricing is hourly. We agree on that so far.

So what if DigitalOcean started offering BCH as a payment option? If the payments could be automated (so that you didn't have to unlock your phone every hour to authorise them), would it then make sense for DigitalOcean to bill you every hour? It would have one advantage, in that you would always be square. They would get their revenue sooner, and you would never be hit with a surprise bill at the end of the month that was higher than you were expecting. But what about the cost?

Let's say it costs $0.003 to process a transaction. If you run a VPS on DigitalOcean for a full month, that's 24 hours per day times 30 days in the month = 720 hours per month. If you a transaction every hour, you would pay 720 x $0.003 in transaction fees, which equals $2.16.

As the customer, do you want to pay $2.16/month (nearly half of the cost of the VPS itself) for benefit of being billed hourly? Wouldn't you rather just get billed monthly and pay only one $0.003 fee?

The problem only gets worse if the business tries to absorb the transaction cost (in order to have round numbers for their pricing, etc). For DigitalOcean to eat that cost would mean $2.16/month/customer. If they have 100,000 customers, that's $216k in transaction fees instead of $300 in transaction fees each month.

The point is, even at the very low cost of a BCH transaction, it still makes way more fiscal sense to aggregate recurring payments, rather than to stream them continuously.

$ 0.00
3 years ago

You are right, but you talk about micro direct debit, and if the monthly debit is done on BCH the fee will be about 0,0015 USD. Now, I step into a shop and buy something which cost half an Euro. I cannot pay with my credit card; The merchant will refuse because the Visa fee; But he can accept 2,5 mBCH as he'll pay nothing as fee... This is a micro payment, where BCH is effective.

$ 0.00
3 years ago

you are kinda right, but this was not a good example, because payment channels exist. Also, there needs to be a difference made between micro ($0.50) and nano ($0.05) transactions.

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3 years ago

I think you're still talking about an entirely different use case.

For example, I purchase multiple apps from the Google Play store, but at a frequency so low that I do not want to store up those transactions and pay them off at the end of the month or year. I want to just pay my five dollars now, and not think about if I might ever use them again.

That is the use case that your system gives no advantage on.

$ 0.00
3 years ago

While there are certainly places other than cash registers where BCH still wins by default, it seems a bit premature to call a loss at cash registers. For instance, to counter two of your main points: I can't imagine it being a leap for a company like Bitcoin.com to store your CC/bank details and let you "recharge" your BCH balance with a press of a button. Moreover, outside of legal interference, if a BCH payment is beneficial to a vendor, they can pass that benefit on to you. I don't know whether or not any laws or terms prevent it in Japan, but "cash discounts" aren't unheard of in the US. Assuming volatility doesn't matter or has been solved for and there isn't some anti-competitive legal hurdle in place, a vendor could choose to provide a "BCH discount" which could elevate BCH by combining the convenience of electronic payment with the savings of cash payment.

$ 0.10
3 years ago

Any suggestions regarding the micro-payments solution? Are we talking about something similar to what Brave is doing?

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3 years ago

That's something I'm planning on writing about in future articles. Hope you'll check them out!

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3 years ago

That's great, I agree with your points 100%.

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3 years ago

This is avery nice and elaborate articke regsrding bch and its adoption.thnks man

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3 years ago

I totally agree with everything you write here. The problem is also that many countries have outdated tax laws (that seems to be purposely kept), meaning that even if some service for refilling one's BCH "account" from a bank account existed, the price volatility coupled with those tax laws make it sometimes/some places directly hazardous for normie users.

$ 0.00
3 years ago

There is no way crypto currencies can compete with fiat in utility for the short term. When most of the values in the world are created in fiat, simply there is no competition. There were problems with fiat 5-10 years ago when the payment was slow and costly. However those drawbacks are mostly mitigated recently, even with international payments, where there are small fees or even no fee on the cross-border transactions. And the transactions are mostly instantaneous. However, as many pointed out, crypto currencies are fundamentally different vs fiat. I believe gradually when people realize the limitations of fiat, and there are sound alternatives like BCH, it will eventually moves on.

$ 0.00
3 years ago

We are largely in agreement. I think people tend to forget that while crypto is evolving, fiat is not standing still. It's going to be a lot harder to supplant, not just because of how well it is established, but because it can also adapt to meet consumer demands.

To be honest, though, I think for most consumers the advantages of crypto are largely too esoteric to viscerally appreciate. They'll only come over when there is some kind of killer app that drives demand.

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3 years ago

the killer app is separation of money and state - allowing bitcoin to be better than state fiat can be

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3 years ago