171002 Here’s the Problem

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.

170929 Jamie Dimon Yells “FAKE!”

When Jamie Dimon said Bitcoin was a FAKE, the market paused and many took notice. In fact, the fall in the price of Bitcoin for the next two weeks could be directly attributed to his comments.  But, think about it.  What else could he say?  Just eighteen months earlier he was quoted at a meeting of bankers as saying “Bitcoin will eat your lunch.”  He is not naive regarding Bitcoin’s potential.  As the de facto chairman of the banking industry, today he must defend the realm.  Of course, he is going to call Bitcoin a fraud.

Do you believe the CEO of Exxon Mobil when he says there’s no such thing as global warming?

No, but we watch our coastal cities sink beneath the waves, while these thieves pursue the all-mighty dollar.

Our global commerce is hourglass shaped and banks are at the neck of the funnel taking their toll on everything that passes through.  We are moving to a cashless society and MasterCard and Visa are positioned to take their fees on every single financial transaction everywhere, all the time.  The transfer of funds, bearer instruments, the international exchange rates, the currency exchange, loans, certificates of deposit, savings accounts, stocks and bonds, all must pay the banks a fee simply for being.  Of course, Jamie Dimon warns Bitcoin is to be feared. He knows Bitcoin will eat his lunch.

170916 Micropayments

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Micropayments are very small monetary transactions for goods and services that may only be fractions of a cent.  One reason for micropayments is to be able to charge a fee for work that is truly in proportion to the size of the work done.  Instead of paying an author for a complete book, pay by the word, for example.  Though the author would have received thousands of dollars for writing a complete book, the author can now get paid, even when just a few words are written.  If the writing of a book were to receive $10,000. and the book was 200 pages in length, it would typically have about 55,000 words.  With micropayments, an author could receive pay equal to the rate for which she writes a book but only for a few words at a time.  The author would receive $0.18 cents per written word.  That would be a form of micropayment.  There are many online activities that are ideally suited for this type of financial arrangement.

A company could sell computer processor time by the cycle.  A cycle could only last a millisecond and the fee could be $0.0001 cents.  The processor could be used throughout the day but only for a few milliseconds at a time.  Nevertheless, the thousands of milliseconds could add up to a sizable sum.  This type of arrangement, though desirable, never quite worked properly because credit card accounts such as Mastercard and Visa charge a processing fee of $0.30 plus a percent of the amount of the transaction.  Even though the amount was very small, there would still be a $0.30 fee which made this type of arrangement difficult to handle with credit cards.

Some companies have tried to find a way around the minimum payment problem by using an account which accumulates fees until there is an agreed-upon sum.  Then, and only then can a credit card payment be made.  Amazon, Facebook, and Google tried various ways to pay owners for advertisements placed on their websites.  There would be very small amounts and often added up to pennies even when the web-traffic was good.  Amazon, for example, found it prohibitive to make frequent payments and so Amazon partners were paid a minimum of $25.00 at a time. With bitcoin, each and every payment could be made for the exact amount required with a small mining fee attached to every transaction.  Bitcoin might be the solution micropayment opportunities have been looking.