You’re walking along the street, minding your own business, when a stranger comes up to you and says, “I’ll give you $10,000 for your hat.” You know the hat is worth at best $25. In fact, there is no love lost were you to part with this hat which you’ve been meaning to replace for months. But this man’s proposal is crazy. Who would pay $10,000 for a cheap hat? And, were you to agree how would he pay you?
If he gave you $10,000 in cash, chances are much more likely the bills would be counterfeit than real. Besides, who wants to walk around with $10,000 in cash on them? A check wouldn’t be worth the paper it was written on. By the time you cashed it this guy would be long gone. You can accept Mastercard or Visa with your smartphone. The fee, though, is 6% or $600.00 in this case. His phone allows him to make a Paypal payment. But you don’t have a Paypal account. What do you do?
You use Bitcoin, of course. You flash your Bitcoin wallet address barcode which his Bitcoin wallet reads and sends you the $10,000 in Bitcoin. You give him the hat. An instantaneous, no-fee, anonymous transaction. You don’t have to pay a processing fee, the transaction happens in the wink of an eye, he doesn’t have to know your name, you don’t have to know his, and it is completely trustworthy. That’s the value of Bitcoin’s trusted, distributed network.
Let’s say you own a website that sells bicycles. Someone seeing your page decides that’s the perfect bicycle for me and decides to order one. At your website, a variety of methods for customers to pay for their orders is provided. All of the usual methods such as credit/debit card, PayPal or check are there. If the customer chooses to pay by check, instructions include the proviso that the order does not ship until the check has cleared. The reason for that is obvious. How will you know the check is any good unless you try to cash it.
The card companies have vetted the customers well enough that they are willing to risk the few bad apples that will thwart careful scrutiny. If a card is stolen, it has not yet been reported. Or, if the customer doesn’t have enough credit and they are unable to stop the transaction, the banks have enough information to successfully pursue payment. In that case, they do not have to assign a waiting period. But, with all of these procedures and devices for ensuring payment, there is still a huge fraud rate in the credit/debit card industry. The recent proliferation of cards with chips has improved the situation somewhat. There is also the enormous expense to the merchant by the banks for this money handling. Rates vary from 2.35% to 6%. There are also fees to the customers, though those might be hidden. After all, the merchant fees paid to banks must come from somewhere.
Bitcoin does away with all of that. If your site accepted Bitcoin, the customer would read you address into his Bitcoin Wallet and send you Bitcoin. The Bitcoin would arrive instantly. The transaction would be complete. It’s that simple. Done. Over. Finished. No fees. No waiting period. No risk of non-payment. No lack of credit. No bounced checks. That’s the beauty of Bitcoin.
During a heated discussion with some Bitcoin newbies, I pulled up a website to help them visualize Bitcoin’s popularity. There are many sites clever programmers have created using the publicly accessible Bitcoin data that make the data stream visual. Check out http://www.bitlisten.com. Wow. I love the sound. Each Bitcoin transaction is represented by a bubble proportional in size to the amount of Bitcoin being exchanged, with a musical tone which also responds to the sum of the transaction. The larger the number, the deeper the sound. It’s very impressive to watch the size and frequency of the Bitcoin transactions, live, in real-time.
It reminds me of a story Elon Musk told when he was involved in creating Paypal. Someone in his office set up a computer which would chime every time a new Paypal member joined. In the beginning, it was a beep, here and there, every once in a long while. As Paypal got more and more popular the beeps started coming more and more regularly. After a while, it was almost a continuous bing, bing, bing, bing, bing, bing. That is already what BitListen sounds like. Check it out.