Overheard at CES 2012: "Bit-Pay/Bitcoin is the most innovative thing we have seen at this show."

Bitcoin's business leaders took to the Venetian in Las Vegas last week for CES 2012, with multiple booths advocating Bitcoin, including representatives from Bit-Pay, Casascius, Mt.Gox and a Bitcoin ATM.

Bit-Pay and Casascius gave us the play-by-play over at the Bitcointalk forums, with some exciting revelations over the course of the week:

Bit-Pay:

The show is really busy and we are seeing alot of traffic in our booth. I've given demos already to people from Citibank, Diebold, and First Data.

We have talked to a lot of really big decision makers at some major companies. These deals will take time to follow up on and complete, but look for an explosion of Bitcoin in 2012, in ways you can't imagine; some of these ideas we had not even thought of!

We spoke to pretty much every major bank, VC firm, and retailer that you could think of. Most of them specifically sought us out. Many of them were very interested in us, and some of them specifically said "this is the most innovative thing we have seen at this show." That is quite impressive considering all the gadgets that the media is all hyped up about.

Square was getting alot of attention at the show as well. When people came to our booth after they talked to Square, they were really impressed with what Bitcoins could do. We have, hands down, the most business friendly payment system in the world. We got that point across to some very influential people this week.

Casascius:

What keeps me excited are the people who came up to the booth and said things like "Hey! I've heard of Bitcoin. I don't yet know what it is, but I heard (whatever), and want to ask questions, because we do (this) and (that), and I was wondering if Bitcoin could help us do a better job of (this)". These are people who are already well-situated in a career where their buyoff on Bitcoin can be a major part of a big company's decision to take a real look at it. Those are the ones who will make a serious difference when they get home.

A shot of the Bit-Pay booth and its friendly hosts at CES 2012.

Part of the display at the Bit-Pay booth.

Alison Skipper, Bit-Pay's spokesperson, demonstrates a Bit-Pay deposit card.

And to top off a fantastic week for Bitcoin publicity, the "Bitcoin for Dummies" episode of "The Good Wife" airs on CBS tonight!

Read more »

SOPA and Bitcoin

I'm going to blatantly steal from this thread.

From the proposed the Stop Online Piracy Act (SOPA):

(b) Denying U.S. Financial Support of Sites Dedicated to Theft of U.S. Property-

(1) PAYMENT NETWORK PROVIDERS- Except in the case of an effective counter notification pursuant to paragraph (5), a payment network provider shall take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after delivery of a notification under paragraph (4), that are designed to prevent, prohibit, or suspend its service from completing payment transactions involving customers located within the United States and the Internet site, or portion thereof, that is specified in the notification under paragraph (4).

3) DESIGNATED AGENT-

(A) IN GENERAL- Each payment network provider and each Internet advertising service shall designate an agent to receive notifications described in paragraph (4), by making available through its service, including on its Web site in a location accessible to the public, and by providing to the Copyright Office, substantially the following:

(i) The name, address, phone number, and electronic mail address of the agent.

(ii) Other contact information that the Register of Copyrights considers appropriate.

(B) DIRECTORY OF AGENTS- The Register of Copyrights shall maintain and make available to the public for inspection, including through the Internet, in electronic format, a current directory of agents designated under subparagraph (A).

If you were running a website served by PayPal, and PayPal received a notification that you were somehow in violation of copyright in accordance with SOPA, an "agent" would be contacted at PayPal and all payments to your site would be blocked.

So, the question becomes, what would happen if your payment processor was Bitcoin?

It would not be possible to stop Bitcoin payments to your site. Even if it was possible, most Bitcoin e-businesses already generate a new address for each payment. With such a setup, it would not even be possible to associate your site with a Bitcoin address.

There would be no "agent" for the authorities to contact, as Bitcoin isn't run by any organization and has no employees.

Could they have the site shut down instead? That's a whole other problem, but technologies like Namecoin, TOR, and Meshnet will help in that regard.

So, if you're running an online business and you're worried that you could be affected by SOPA, you should probably start reading up on how to begin accepting Bitcoin payments. It's quite simple, really, and with the assistance of applications like Bit-Pay, you wouldn't have to worry about currency risk, either.

Read more »

Okpay Launching Bitcoin Merchant Services Next Week

These guys move quick and are obviously serious about Bitcoin. Thanks to our friend Osmosis from stuffexists.com for poking them for the info!

Read more »

One of Three "Wagner Criteria" Met

If you remember my interview with Bruce Wagner, back in August, you'll recall that he outlined three hurdles that Bitcoin had to overcome before mass adoption could take place. While there has been much controversy surrounding Bruce Wagner, his reasoning was sound:

"I've been saying that the three major hurdles for Bitcoin are security, liquidity, and currency risk, and all three problems will be solved in three months, maximum. Once these hurdles are dealt with, Bitcoin will roll out as fast as Facebook has."

With StrongCoin, Wagner Criterion number one, "security," has now been met, though at a cost of one percent on outgoing transactions.

Bruce incorrectly used the term "liquidity" to mean the ease with which you could purchase Bitcoins (I've made the same mistake, myself). Regardless, it is still quite difficult to acquire Bitcoins. Inroads have been made on facilitating Bitcoin purchases, with services like BitInstant, but it's a symptom of the archaic financial system we live with that it may never become "easy" to purchase Bitcoins, especially in the United States. That being said, with improvements like Mt.Gox's arrangement with Chase Bank, it gets easier every day.

Currency risk to merchants has been mostly solved, with bit-pay, but again, at a price.

Each day we get closer to meeting all three Wagner Criteria. The three-month time frame might have been a little optimistic, but it is definitely safer, easier, and less risky to transact with Bitcoins, today, than it was when I spoke with Bruce.

Read more »

The Bitcoin Factor

Let's take a look at costs incurred through what I will call a "Bitcoin Business Cycle" for a merchant using a MtGox and a Paxum account, versus a merchant doing business with a typical credit card company.

Assumptions:

I'm using the MtGox market rate at time of posting ($8.88/BTC). In this example, the merchant uses the Paxum Mastercard and withdraws from his account by ATM, once per month over the course of a year. I'm also assuming that over time, a merchant will be able to average out their profits and losses when converting their BTC to USD, such that no additional costs are incurred. I can see how this would be a controversial assumption, but as a Bitcoin trader and investor, I believe a savvy merchant should actually be able to avoid losses on their conversions, especially when using a deflationary currency like Bitcoin (this concept will be more obvious as Bitcoin really starts to catch on). There are already merchant service providers, like bit-pay that charge additional fees (2%, at last report) to absorb the conversion risk, which basically wipes out most of the benefit of using Bitcoin as a merchant.

*Credit card fees are estimated based on the example cited at the bottom of this article from the CBC.

The "Bitcoin Factor" is the ratio of credit card fees to Bitcoin Business Cycle fees. At today's market rate, and using the transaction services cited in my example, anyone doing more than 404 BTC in business is already saving money by accepting Bitcoin. Anything more, and a merchant saves more (because many of the transaction costs are fixed). I haven't even considered the cost of chargebacks, which don't exist in the Bitcoin realm.

Of course, there are already many other ways to convert your BTC to cash. If you're not in a hurry, you could even get the USD mailed to you in the form of a cheque and save the cost of using a Paxum Mastercard and ATM. I haven't looked at Dwolla's fees, but they might be even lower.

In a perfect world, a merchant would be able to cover his costs in BTC and not incur ANY additional fees beyond the 0.0005 transaction fee, but certain costs will inevitably remain payable in cash only (taxes and utilities, for example).

In conclusion, every merchant setup is a little different. Whether or not it is beneficial to accept Bitcoin will depend on the services used and the volume of transactions accepted. I hope that I've shown, however, that overall, there is a benefit for merchants to accept Bitcoin.

If anyone wants to use my spreadsheet to make their own calculations, here it is.

Read more »