I've recently read an interesting book called Digital Gold: The Untold Sotry of Bitcoin by Nathaniel Popper. It was an interesting read, I knew very little about Bitcoin before reading the book. At the same time as filing me in on the colorful history of Bitcoin the book has done a good job at convincing me that the technology behind Bitcoin is solid and well engineered.
I would like in the future to consider accepting Bitcoin as a payment method in the OpenEnergyMonitor shop, do you think there would be demand for this?
Here are the advantages I see of accepting Bitcoin:
- lower processing fees (around 1% compared to 1.5% - 2.9% + 20p per transaction + £20 per month for paypal or credit card)
- No bank charges (we often get charged about £7 per international bank transaction payment)
- No exchange rate headaches
- Potentially easier accounting
- No chargeback issues
- Almost instant payments; international bank transfers can take a week or two to process
- Accepting Bitcoin would help to support this innovative currency experiment.
My concerns are:
- Potentially a high carbon currency due to amount of computing power dedicated to Bitcoin mining? I wonder how this compares to the carbon emissions from the creation of standard currency??
- Volatile price of Bitcoin would mean we would not keep much capital stored as Bitcoin, we would have to convert back to our local currency. Would this devalue the price of Bitcoin,
- TAX? I’m unsure how we would be taxed when using Bitcoin.
Has anyone has experience in using Bitcoin either personal or business? I would love to hear your experiences and thoughts on my potential pro’s and con’s of accepting Bitcoin.
Re: Bitcoin?
The lower processing fees are a boon to you, but a cost to your customers.
With Bitcoin there is a cost to exchange to Bitcoin and a cost to exchange out. So all you've done is move the cost you currently incur at Paypal to your customer who has to get hold of bitcoins for their own currency to be able to buy from you.
With Paypal it is a one-2-one transfer. Your customer pays in Euros and you get GBP - a single exchange cost rather than the two required for Bitcoin (Euros to Bitcoin, Bitcoin to GBP).
Bitcoin is not a currency. It is a highly mobile intangible asset. You can't pay taxes in Bitcoin, so you are at the mercy of your exchange provider as to whether you can actually settle your taxes. (Yes you are taxed on transactions in bitcoin, the same as you are in any other foreign currency, or if you decide to settle your debts in bananas. Transactions within the EU are subject to VAT as well. All of these have to be settled in the coin of the realm which you have to get hold of somehow).
It's the ability to settle taxes that makes a currency a currency.
For me there is little advantage to Bitcoin unless you are permanently within the Bitcoin envelope for everything, ie you can buy stuff from your suppliers in Bitcoins, you can pay your staff in bitcoins, you can buy food at the local Kwikee Mart in bitcoins. Otherwise you are just taking on exchange risk for little benefit.
If you cost analyse it end to end, and factor in the convenience of purchasing with credit/debit cards to your customers then you may find that the costs don't really work out and that the only people that actually benefit are the usual money changers at the temple gates.
As to the carbon cost, standard currency is created by a Bank entering a CR and a DR into their computer systems. (Loans create deposits, ie the currency pops into existence the instant a customer uses their credit card to pay you. They get the loan, you get the deposit. The currency expands and contracts dynamically based upon the amount of trade conducted across that currency). Compare that to the thousands of cycles and huge power required to create a single bitcoin.
The whole bitcoin thing is based upon economic understanding that is 80 years out of date and was proved to be complete rubbish through the depression of the 1930s. It's naturally deflationary and gets more so as more and more bitcoins get saved or lost. It eats its own tail in other words.
So really you just end up with is a system that just replicates what Visa/Mastercard already do - exchange currencies dynamically via a payment system. If you see it as just replacing that process (Euros to GBP) then it becomes a simple cost/convenience argument.
But ultimately Bitcoin is nothing special.
Re: Bitcoin?
Thanks a lot for your detailed reply. Lots of interesting points. I agree, bit coin would only work if everyone was using it and we didn't need to exchange bitcoins. I see it as chicken and egg scenario! Obviously we would still accept conventional methods of payment as well. Yes, I imagine the only people who will use bitcoin as payment will be those who have some bitcoin already.