First "Real Money" Poker Site is Accepting Bitcoins

Switchpoker.com is now accepting Bitcoin as a deposit method, in addition to the usual deposit methods.

Switchpoker does not accept American players and asks for your full contact information before you can deposit, which might catch the average Bitcoin poker player a little off-guard. With Bitcoin, however, your deposit will validate regardless of the validity of your contact info. Since I'm not American, I can't readily verify if they're blocking Americans by IP address or simply using the honor system, though I suspect it would be the former.

At the time of this post, there were 14 real-money players online. We'll have to see how many players are online in the evenings and on the weekends.

All games are denominated in Euros.

As a test, I deposited 20 Euros to the site, using a VISA card via Moneybookers. I was then given the option of converting my Euro balance into a Bitcoin balance. The rate offered at the time was 11.09 BTC for 20 Euro (1.80 Euro/BTC). The Mt.Gox market rate is currently 1.77 Euro/BTC, which means Switchpoker is actually a very decent way of buying Bitcoins by credit card. I'll be curious to see if my credit card, however, has charged me a cash advance fee for depositing to Moneybookers.

Edit: I had mentioned that Bitcoin deposits and withdrawals had to go through Bitcoin247. Apparently that is not the case and you can deposit and withdraw directly from/to your own wallet.

Switchpoker appears to be getting around potential chargebacks by using Moneybookers' "skrill," which has a merchant-friendly chargeback policy.

Although Switchpoker is a tiny site, this event is very important for Bitcoin, as it's the first time a gambling site is accepting normal payment methods and Bitcoin side-by-side.

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Will Mt.Gox Suddenly Become the Number Two Exchange?

The announcement from Okpay is really interesting for a number of reasons.

At the moment, Okpay is not paying very much for your Bitcoins; $2.63 USD when you can sell them on Mt.Gox for $2.95.

Okpay, however, grew its userbase to 300,000 in one year, and that was the number reported six months ago. How many accounts are there now? 500,000? By contrast, Mt.Gox had 38,000 accounts back in June. We're now staring down the barrel of a Bitcoin exchanging businesss that is over ten times the size of Mt.Gox. The only difference is, they don't sell Bitcoins; they only buy them.

What if, next month, Okpay announces that they sell Bitcoins as well? It would make good business sense, because they would avoid the fees associated with selling Bitcoins on an exchange, converting the currency, and transferring the money back to their accounts. They would also potentially become the number one Bitcoin exchange.

What would be the effect on the Bitcoin economy?

Let's say I was a regular Okpay user that carried a balance on the site, and I came across a Bitcoin merchant or service that appealed to me, like, I don't know, a casino or virtual goods marketplace and I wanted to do business with them. I'd buy Bitcoins, of course.

So, in theory, if Okpay were to sell Bitcoins, there would suddenly be tens of millions of dollars, i.e., a sum greater than the current value of the Bitcoin economy (I'm guessing here - assuming $20+/account on average), sitting in an exchange with the potential to be converted into Bitcoins. The number of potential Bitcoin users would also jump dramatically, by hundreds of thousands. At that moment, Mt.Gox would seriously find itself threatened.

Instead of money flowing towards Bitcoins, Bitcoins might now end up flowing towards the money. This would be the small-time equivalent of a bank offering Bitcoins to its customers, which would immediately remove all of the hurdles that people currently have to deal with to get their hands on Bitcoins.

All you investors and traders out there, I recommend you keep an eye on this site; it could represent the tipping point for Bitcoin.

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PayPal Competitor Okpay.com Now Accepts Bitcoin

Online payment processor Okpay.com has today announced that it is accepting Bitcoin deposits.

The site came online in March 2010 and has been increasing in popularity ever since. Alexa shows a very high ranking in Russia of 1,268, 19,411 in the United States (better than Diaspora's 19,825), and 15,516 globally.

The site reported 300,000 open accounts in March of this year.

This is the first serious commercial acknowledgement of Bitcoin's legitimacy as an electronic currency, and will provide Bitcoin users with dozens of additional ways to convert their Bitcoins into cash.

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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.

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Send Money to China with Bitcoin and Save Huge!

Note 1: You may have to be logged in to your Mt.Gox account to see some of the links in the directions below.
Note 2: CNY (Chinese Yuan) is the same currency as RMB (Renminbi).

Step 1) Open an account at Mt.Gox;

Step 2) Open an account at BTC China;

Step 3) Verify your Mt.Gox account by scanning and sending a photo ID and utility bill. This may take a business day or two, but will not have to be repeated for future transactions;

Step 4) Go to a Chase branch and deposit the money you wish to send to your Mt.Gox account using a deposit slip. There is no charge for depositing;

Step 5) Once the funds are added to your Mt.Gox account (this currently takes one business day but will soon be one hour), buy Bitcoins by clicking "trade" and entering your order at the market price. You will be charged 0.6%;

Step 6) Using the withdrawal page on Mt.Gox, send the Bitcoins you bought to your Bitcoin address on BTC China (this will take about an hour to complete, as the Bitcoin network verifies the transaction;

Step 7) Sell your Bitcoins on BTC China for RMB. You will be charged 0.3%;

Step 8) Withdraw RMB via TenPay. Withdrawal fees are on the order of 1 or 2 percent according to this guy;

Your total cost = USD sent - (RMB withdrawn x USD/RMB exchange rate).

Example using Mt.Gox/BTC China/Currency rates at the time of this post:

$100 USD to be sent to China.

Best ask (Mt.Gox) = 2.355 USD/BTC (Determine the number of BTC you can buy, here.)

Bitcoins purchased = 100/2.355 - 0.6% = 42.463

BTC China best bid is 15.21 RMB/BTC. The entire sell order cannot be filled at this price, so we are actually selling for a range of prices. You can place a fictitious order here to verify what you will get for your Bitcoins.

42.463 x (range of bids) = 604.51 RMB - 0.3% = 602.70 RMB

After withdrawal fee (assuming the high end of 2%) = 590.65 RMB

590.65 RMB x 0.1566 USD/RMB = $92.50 USD.

Total fee for sending $100 USD to China, including currency conversion = $7.50!

Overall costs will vary depending on the bid depth on BTC China and the amount you are trying to send. If you were trying to send $10, in this example, the fee would have been 2.4 cents.

I repeat, you can send $10 USD to China, including currency conversion, for 2.4 cents, right now. Previously, this was neither possible nor practical. This is a first...

...and it's only possible with Bitcoin. Got coins?

UPDATE: Here is a handy spreadsheet to see how much your transaction will cost you. This morning, I ran the numbers for $100 USD again and you would actually earn money! Just hit "File... Make a Copy" if you want to make changes to the spreadsheet.

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