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Monthly Archives: October 2013

Many brick and mortar small businesses seem to think that accepting Bitcoin is too complicated and not in their best interest.  This happens due to misconceptions about Bitcoin and money, as well as previous experiences with POS systems and the cost of NFC equipment.  As I have written about in my previous post (https://bitbybitbybitcoin.wordpress.com/2013/10/11/why-your-small-business-should-accept-bitcoin-paypal-vs-google-wallet-vs-coinbase-vs-bitpay/), accepting Bitcoin by signing up with an existing Bitcoin payment processor has significantly lower per transaction and monthly fees and restrictions than if you were to use Paypal or an equivalent service.  Furthermore, businesses can choose how much exposure they would like to have to fluctuations in the Bitcoin exchange rate, and a vast majority take their Bitcoin earnings in their native currency at the end of each day via bank deposits courtesy of Coinbase and Bitpay.  While the benefits of a larger consumer base and elimination of overseas internet credit card fraud are more pronounced with businesses with online facing storefronts, accepting Bitcoin at a brick and mortar business such as a restaurant or a bar has little to no setup costs and will increase your revenue and hence your profits by attracting new Bitcoiners eager to spend their money in real life.

 

Both Coinbase and Bitpay have apps for both the Android and IOS platforms as well as tools on their website that make accepting Bitcoin at any brick and mortar business, especially a restaurant or a bar, very very simple.  All that is required is an internet connection and an existing internet enabled device [tablet, desktop, laptop], or a smartphone with 3G or 4G data.  Around the world, these are fast becoming staple items in any business’s arsenal.

 

Even if the business does not have a reliable internet connection and none of the regular employees have smartphones that can the provided applications, Coinbase’s Charles Lee has created an SMS interface to interact with Coinbase that negates the necessity for even a smartphone or internet connection to accept bitcoins.  After setting up an account with Coinbase, a bartender could simply text ‘req customer@drinksheretoomuch.com $20’ to 1 (650) 316-5555 and a request for $20 worth of bitcoins at the current Coinbase rate will be received by the customer.  The customer may complete the transaction via SMS as well or any method he or she may choose.

 

Accepting Bitcoin at your restaurant or bar through a Bitcoin payment processor is the ideal method for streamlining the process by eliminating confirmation time waits and allowing the merchant the option to receive the payment in their native currency, all with significantly lower per transaction fees.  

 

PS: It would not be unreasonable for brick and mortar businesses to require that bitcoins spent at their location come from an established Coinbase wallet if they use Coinbase as their payment processor.  The benefits of this arrangement go to both the business and the customer: Neither have to wait for transaction confirmations and neither have to pay a transaction fee to the miners: this is an example of an off-the-chain transaction that relies on a trusted third party.

 

If your restaurant or bar would like any help accepting Bitcoin, feel free to email me at bitbybitbybitcoin@gmail.com

Don’t forget to buy your ‘BITCOIN ACCEPTED HERE’ stickers: http://www.btcgear.com/bitcoin-sticker-bitcoin-accepted-here

Over the last 12 hours, Bitcoin has taken its largest single day surge in exchange rate value in several months.

On http://www.btcchina.com, China’s largest Bitcoin exchange, bitcoins are now worth over 1000 CNY.

What exactly does this mean?

 

It wasn’t many months ago when Bitcoin broke 100 USD and the 100 Euro mark one after another in a crazy run up to the current all time high of 266 USD/BTC (About 1621 CNY/BTC); however, it became clear to many of us during that… first moon landing… that there was some strength to the claims of psychological barriers associated with these large numbers.  Some sort of bastard combination of Benford’s Law and the Efficient Market Hypothesis led the laggy Bitcoin traders from atop mount Gox to venture down to the giant sell walls and lay waste.

While western traders are scratching their heads in bewilderment, there are many traders in China and HK smiling in their sleep as I type this.

 

This potential third Bitcoin bubble is in the making; and you know, “Third time’s the charm.”

Late yesterday while everyone was inundated with the suspense of spectating the great sport of American brinksmanship, an article was released in China: (http://finance.sina.com.cn/money/lczx/20131017/071917018288.shtml)

This well researched article features an interview with a real life Chinese Bitcoiner, the professional opinions of Economic professors from leading Chinese Universities, and surprisingly even a comment from the China Banking Regulatory Commission (CBRC)

“近期没有出台针对比特币监管政策的计划。”

This has been maybe a little too optimistically translated as:

“no plans to introduce regulatory policies for bitcoin.”

However, the translation more correctly reads:

“As of today, there are no regulatory policy plans directed against Bitcoin.”

This is definitely better than “NO COMMENT;” However, tomorrow is another day.

Western readers must realize that the Chinese government is perhaps even more skilled than the American government in disseminating half-truths.  Don’t be blindsided when the China Banking Regulatory Commission, in the near future, enacts regulation that effects Bitcoin and/or Bitcoin users somehow, likely by targeting exchanges.

Why then, would the CBRC allow their staff to pass on such a statement to the press?

A few months ago, a fellow member of the Alliance for Financial Inclusion (AFI), the Bank of Thailand, allegedly told a Thai Bitcoin Exchange to shutter its doors because under current laws Bitcoin transactions are technically illegal due to an absence of established regulatory policies regarding it.  This led to over-exaggerated claims that Thailand had banned the digital money (http://www.cnbc.com/id/100923551).  In reality, Bank of Thailand Governor Prasarn Trairatvorakul has called for time for the Bank of Thailand to “look at the issue first” and the majority of Bitcoin businesses in Thailand have continued operating without interference from the Bank. (http://asiancorrespondent.com/111332/has-bitcoin-been-banned-from-thailand/)

Whether intentionally or not, the CBRC’s statement has fed fuel to the Bitcoin fire, and set a precedent on how to address the legality Bitcoin in your country and according to your banks.  To all the high level banksters and 3rd world country leaders reading this article: Please take China’s example not Thailand’s example.

The CBRC is one of the more prominent members of the AFI, whose stated goal is to “advance the development of smart financial inclusion policy in developing and emerging countries.”  Specifically, the AFI aims to do this by utilizing a “peer-to-peer learning model to connect, encourage and enable financial policymakers to interact and exchange knowledge on policy initiatives such as consumer protection, mobile financial services, financial integrity, agent banking, formalizing microsavings, data and measurement, and general financial inclusion.”

Given China’s prominent position among developing and emerging countries, It will be interesting to see in the coming months what the other 88 member nations of the AFI release to their public regarding Bitcoin. To this author, “smart financial inclusion policy in developing and emerging countries” and Bitcoin seem like a match made in Heaven.  Whether or not this match has the explicit blessings of the Chinese Government remains to be seen.

Let’s get real here, small business owner/operators care about one thing: Maximizing profits.

The best way to maximize profit is by increasing revenue while decreasing costs; furthermore, it is likely an affinity towards doing one or both of those two things in your particular field that gravitated you towards running a small business.  Obviously, there are other business strategies that can achieve maximization of profits and they go along the lines of increasing revenue more than increasing costs; likewise, sometimes businesses are faced with decreasing costs more than decreasing revenue.  However, it is clear that increasing revenue while decreasing costs is the simplest most effective way.

I will show you how you can decrease costs and increase revenue in the one part of small business that is ubiquitous: Money.  Very simply, merchants can decrease costs by paying less fees to the intermediaries between customer and business.

While many small businesses still operate on a cash only basis and thus do not have an online presence, even those owner/operators are starting to feel the crunch as more and more customers walk into brick and mortar institutions with a wallet full of plastic and/or a phone full of gift cards.  Traditional services offered directly by the bank and CCs are quickly losing traction both from customer and merchant pressure.  It is this area, especially in the online market, that Paypal has left its mark on the world.  However, I believe that Paypal’s mark has become far too overbearing and imperious as is typical of monopolistic firms in a closed market.

Paypal

Paypal currently offers merchants three tiers of payment solutions, the most popular of which is the standard payment solution: 2.9% + $0.30 per transaction, for smaller small businesses that typically deal in payments averaging less than $10 they offer 5% + $0.05 per transaction.  For larger monthly volumes, the per transaction fee percentage goes down.  However, even if your small business has over $100,000 in monthly revenue, your fee is still 2.2% + $0.30.

Additionally, Paypal charges an additional 1% currency exchange for international payments.

Monthly fee: $0-$30
Per transaction fee: 2.9% + $0.30
Bank deposit fee: 0
International payments fee: 1%

https://www.paypal.com/us/webapps/mpp/merchant-fees

Google Wallet

In one month, Google Checkout will be phased out and Google Wallet will be Google’s foray into the payment processing world.  Yet another way for users to send money from their plastic cards without letting the business see the card.  While documentation is scarce, Google has priced their fees to be directly competitive with Paypal’s: 2.9% + $0.30 per credit card transaction.

Monthly fee: 0
Per transaction fee: 2.9% + $0.30
Bank deposit fee: unknown
International payments fee: unknown

 

http://www.google.com/wallet/faq.html#tab=faq-fees

Coinbase

Coinbase allows merchants to sign up for a merchant account that has slightly better rates than individual accounts.  Merchants can use coinbase to create invoices to be paid in Bitcoin, and then receive the bitcoins and hold them as bitcoins for free.  Bitcoin payments can also be automatically converted to USD for a 1% fee.  However, Coinbase currently is offering 0% fees on your first $1,000,000 in payment processing.  The USD in your Coinbase account can be withdrawn to your bank account whenever you please but requires a one time $0.15 ACH transfer fee.  

Unfortunately Coinbase is only available in the USA.

Monthly fee: 0
Per transaction fee: 0%  for first $1,000,000

Bank deposit fee: $0.15
International payments fee: 0

https://coinbase.com/merchants

Bitpay

Bitpay is available in dozens of countries and is continually expanding.  Bitpay also has several tiers of payment processing services like Paypal but the ones of note to small businesses are their Professional package, which will be available starting November 2013, and their Starter package, which is available now.  Bitpay offers settlement to your bank account once a day at no cost.

Bitpay’s Starter package:
Monthly fee: 0
Per transaction fee: 1%
Bank deposit fee: 0
International payments fee: 0

Bitpay’s Professional package:
Monthly fee: $30
Per transaction fee: 0%
Bank deposit fee: 0
International payments fee: 0

https://bitpay.com/pricing

Previously, the only economic reason to not accept Bitcoin was to avoid fluctuations in exchange rate during the processing period.  Accepting bitcoins, sending them to an exchange, then waiting for the exchange to wire $ to your bank account is too much hassle for a busy small business owner/operator.  The potential fluctuations in the exchange rate during your processing period was likely to negate the additional revenue generated by the significantly lower transaction fees.  It is important to note that Bitcoin exchange rate stability is on the rise; but more importantly, the Bitcoin payment processing services have developed to a point that exchange rate stability is no longer a factor.

“So what if the fees are lower, I still don’t believe there are any people out there willing to use their bitcoins”

The exact number of the population of Bitcoin users is inherently hard to pinpoint. There have been hundreds of thousands of downloads of the original Bitcoin client, as well as its most popular lightweight version.  The fact of the matter is that Bitcoiners are out there and their numbers are increasing.

By accepting Bitcoin at your small business you will receive free advertising to all the Bitcoin users in the world.

Local Bitcoiners will seek out your business and patronize it.

What do you have to lose?

Current customers that prefer to use Bitcoin to pay will generate you 1.9% + $0.30 more per transaction, and new customers that use Bitcoin will increase revenue.

 

If your business has decided to accept Bitcoin and would like to take advantage of the free advertising that I have mentioned..
Please email bitbybitbybitcoin@gmail.com and your announcement will be added to a weekly newsletter to be posted in relevant forums.

-bxbxb

If you find any of my rantings useful feel free to donate Bitcoin: 1PgFY3rMQHatBJpQyUPjsypGForW27Yp3z

Donations will be used towards Bitcoin Convention[s] registration, Bitcoin Foundation membership, upgrades to wordpress.

Donations will NEVER be converted to fiat for ANY reason

 

-bxbxb

Let’s take a moment to applaud all the work that The Genesis Block has done to make Bitcoin mining and Bitcoin news more accessible to the masses.

However, in the interest of probity, I must point out the inherent flaw in TGB’s Mining Dashboard which I fear many, many people are overlooking.

http://mining.thegenesisblock.com/

When you input data to TGB’s Mining Dashboard, they only allow for 1 difficulty change per month.  While past data is used to generate a realistic monthly difficulty increase factor, the fact of the matter is that difficulty changes happen at least twice a month, and more recently thrice a month.

Let’s take the month of September as an example:

On 01/09/2019, difficulty was at 65,750,000

Block 256032 on 04/09/2013 at 04:21 marked an increase of the difficulty to 86,933,018
Block 258048 on 14/09/2013 at 23:44 marked an increase of the difficulty to 112,628,549
Block 260064 on 25/09/2013 at 14:09 marked an increase of the difficulty to 148,819,200

A newb with the option to buy a brand new BFL Single rated to run at 60 GH/s off of craigslist at the end of August would have been referred to this mining dashboard by the netizens of reddit and TGB’s mining dashboard would have calculated him/her a cumulative return of ~$1,700 in the first month, which relies on the ridiculous assumption that the difficulty remains stagnant for one month

In reality, said newb would have only mined for 3.5 days at a difficulty of 65,750,000 as opposed to 30 as assumed by TGB’s mining dashboard; then, he/she would have mined 10 more days at 86,933,018 then 11 more days at a difficulty of 112,628,549, and then the rest of the month at 148,819,200.  See the problem now?

TGB’s estimate: ~$1,700

Reality: A lot less

What’s the solution?

It is.. difficult.. to predict the future bitcoin mining difficulty or even when exactly in the 10-14 day period it will change, but The Genesis Block really needs to fix their model to consider bimonthly or trimonthly difficulty increases to match with reality.  With this, TGB’s Mining Dashboard would become the go to guide for accurate difficulty predictions, as opposed to spotty exvel sheets released via bitcointalk.

-bxbxb