back to article Whaddaya mean, No refund? But I paid in Bitcoins! Oh I see...

Don’t tell anyone but I think I might have made an arse of myself again. It’s one thing to show oneself up among one’s peers but another to demonstrate publicly how thick I am front of people who are smarter, sharper, more successful and frankly a damn sight wealthier than me – a sector of society I generally refer to as "other …

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  1. EddieD

    It's a step forward, apparently

    Fiat money was sufficiently comprehensible that after the last crash we were able to look (with hindsight) at the smoke and mirrors that the financiers had thrown up to conceal bubbles that they had created to obscure the fact that the money had run out (been put into their pockets). Crypto-currencies will do away with that last iota of comprehensibility, so that the next time we get shafted, we won't even have the vaguest idea of how it was done.

    1. Anonymous Coward
      Thumb Up

      Re: It's a step forward, apparently

      I would guess Mark Karpelès has fingers crossed that this is exactly how it is going to work.

  2. Trollslayer

    Silicon roundabout at its' err... best?

    Usual entitled self indulgents think they are above the law.

    Frankly if you indulge in Bitcons you deserve to get Bit.

  3. Josco

    Always entertaining

    I'm pleased that I am not the only one out of step with the rest of humanity.

  4. Anonymous Coward
    Anonymous Coward

    Easier fraud?

    I don't know. I'm not even going to pretend I complete follow crypto currency or the way a one dollar deposit somehow enables a bank to lend a gazillion against it, but the Mt Gox story seems to amount to "as usual, we've taken a lot of your money but we have an even less understandable explanation why this isn't our fault". I guess that's true innovation for you.

    If I ever make a fortune I'll probably store in it in gold under my bed (or spend it on women and drink and waste the rest).

    1. veti Silver badge

      Re: Easier fraud?

      The Mt Gox explanation was painfully simple: "We wuz robbed. Since we have no external guarantees and no enforceable contracts, that means you're screwed. Sorry."

      If I ever become a multi-millionaire, I'll buy myself a nice little semi in North London. Because you know the one class of people who are *never* going to be screwed by any sort of financial collapse or reform short of full-blooded revolution? Landowners.

      The golden rule: who has the gold, makes the rules.

      1. This post has been deleted by its author

    2. Suricou Raven

      Re: Easier fraud?

      The bank trick actually isn't that hard. Your bank balance is effectively just a loan - the bank 'owes' you that much cash when you want it. It's easy for them to loan a lot more money then they actually have. This means huge profits for the bank (All that interest on money they don't even have!) and have some benefits for the economy in general (Access to low-interest lending is a powerful driver of economic growth, as it allows for companies to more effectively expand and adjust to changing circumstances). It's almost win-win, except for one small drawback - it introduces the possibility of the bank actually running out of money. Under normal circumstances this would be so unlikely as to be ignored simply for statistical reasons - there's no chance that all the banks customers are going to want to buy a new car simutainously - but it can happen in situations of mismanagement or a sudden loss of confidence - that is, if people believe the bank is struggling they will hurry to withdraw their money while they still can, which can contribute or cause the very collapse they fear.

  5. Anonymous Coward
    Anonymous Coward

    Nice piece.

    I can think of a few more industry 'gatherings' I would like you to visit and write an article on.

    1. Alistair Dabbs Silver badge

      Re: Nice piece.

      Which? I'll go if there are free Pringles.

      1. I ain't Spartacus Gold badge
        Happy

        Re: Nice piece.

        You'd be welcome in many business meeting rooms too. It's always nice to have someone to say the un-sayable. Particularly if it's someone else - given the unpleasant response so often meted out to the tellers of home truths.

        You could be a sacrificial-goat-for-hire. Surely there's a Shoreditch business model in there somewhere. Particularly if you're willing to work for Pringles...

        1. Anonymous Coward
          Anonymous Coward

          Re: Nice piece.

          You'd be welcome in many business meeting rooms too. It's always nice to have someone to say the un-sayable.

          Not welcomed by all in attendance I'd imagine. In a previous role I was regularly taken to meetings with external "stakeholders". Officially I was there to offer technical advice, but in reality my boss wanted me there to say the unspeakable things she couldn't get away with.

          1. Anonymous Coward
            Anonymous Coward

            Re: Nice piece.

            Bet you loved that role, though. I would...

            1. Anonymous Coward
              Anonymous Coward

              Re: Nice piece.

              "Bet you loved that role, though. I would..."

              It's fun, but they don't tend to last too long. Eventually telling people they are Doing It Wrong gets grating for everyone. Especially when heads start rolling and People High Up start making excuses to get rid of the 'troublemaker' - even if it's understood that's the point of you being there. The concept of having someone in to sweep out the weeds is good, until the weeds start appearing to be running the place...

              Anon, because anyone who knows my name knows exactly what role I'm referring to and it's still a job that opens doors for me, so describing it as above might not be too wise ;-)

        2. Anonymous Coward
          Anonymous Coward

          Re: Nice piece.

          You'd be welcome in many business meeting rooms too. It's always nice to have someone to say the un-sayable

          Don't believe him Alistair, I can personally confirm he is being very liberal with the truth about this, for I am "he who says the un-sayable" in so many meetings, emails, telephone calls, conversations. etc. etc. No one wants you to attend their meetings, so they damned sure won't welcome you.

      2. Anonymous Coward
        Anonymous Coward

        Re: Nice piece.

        Brighton SEO. Find out how desperate people are to throw money at Google and how much they are willing to pay firms to help them do it.

        1. Alistair Dabbs Silver badge

          Re: Nice piece.

          >> Brighton SEO

          I've left this a bit late - all conference tickets are sold out. Not to worry, I'm sure everyone there knows what they're doing and their money is being well-spent.

      3. Vizique

        Re: Nice piece.

        I agree, there's a number of things we can point you at to get a developing picture of whats going on in the crypto currency scene.

        Cambridge is about to "hit the map" when it comes to Bitcoin adoption. PM me if you'd like to know more and maybe even an article ...

  6. Thomas Whipp

    Refunds

    First of all - I also don't "get" crypto currencies yet, the big issue to my mind with bitcoin seems to be that its a finite resource (I've seen estimates of when the last coin will be mined), this suggests that there will come a day when the currency simply stops.

    That being said, lets assume it does actually work over an extended period and deal purely with the issue of refunds. I think the suggestion of converting to a reference currency is the only practical approach, certainly it used to be the case that you could only submit a credit card settlement file once per day to avoid people gaming the exchange rate of foreign currency transactions.

    Lets assume for a second that you have to refund the amount of the currency paid in its original form - this would create a very easy way to game the system. I take my bitcoins and buy something with fairly static value and low transaction costs (golds probably not a good example these days but for the sake of argument lets use that). I then wait. if the value of bitcoins rises then I demand a refund, if it falls I sell the gold in another currency.

    Suppose I then buy £100 of this commodity every day (in BC equiv currency) on a rolling 30 day cycle with one purchase and one refund every day - at this point I profit from any rises in the currency but don't take losses from any falls.

    The only way you'd get around this is if you required the merchants to hold the BC in that form for the refund period - but then they are in the position of not knowing the effective price at the point of sale.

    Hence the need to convert to reference currency - which incidentally I believe is also a tax requirement (i.e. profit/loss must be reported in £GBP)

    1. Danny 14 Silver badge

      Re: Refunds

      There is no issue with refunding in cash. In fact you dont need to refund in the same method as purchase. Would you expect a shop to refund you using a cheque if you paid as such? so insofar as refunding in BTC there would be no requirement for doing so.

      You wouldnt really game the system as no retailer would use BTC if the value fluctuated so wildly that they would make a loss (i.e. buy a TV for £400 in 'BTC' wait for the BTC to drop in value and return for refund in GBP, buy more BTC with the GBP refund and rinse repeat when BTC increases). Plus I imagine there are conversion fees attached to the BTC transactions anyway.

      1. I ain't Spartacus Gold badge

        Re: Refunds

        Danny 14,

        Bitcoin isn't a method of payment, like a cheque or card. It's effectively a separate currency. Also it is so volatile that a £500 TV could lose £100 in several hours. There have been at least 2 days this month where Bitcoin has dropped about $100 in value.

        Many retailers buy stock months before they sell it. Bitcoins were worth over $1,000 at one point in December last year. Last week it was fluctuating between $400-$500. So it's unlikely anyone would be paying their suppliers or staff in BTC.

        Therefore if they do accept it, it'll be at exchange rates worked out at the time of transaction. And if they've got any sense, they'll want to sell those Bitcoins as soon as the transaction goes through. Refunds will then be processed in local currency, and converted back to Bitcoin at the point of that transaction.

        Although I think this is all irrelevant. Personally I don't think Bitcoin will work. It looks like a fad to me. But even if it does, it was designed for international internet transactions - where you've got to deal with currencies and transaction fees anyway. That's not really an appropriate model for bricks-and-morter retail. Except maybe airport shops. Even then, you can get zero-weighted credit cards, which use the market exchange rate with no fees to the buyer. For the seller, the card fee is no more than the fluctuation risk of Bitcoins.

        I once looked at the raw data from a Bitcoin exchange. They showed the last 10 tranactions on BitStamp. Now top dog, since deposing Mt Gox. Over about 5 minutes, there were 10 deals, each for either 0.1 or 0.2 of a Bitcoin. The price moved by about $10 (it was about $620 at the time). So the global trading price of Bitcoin moved by nearly 2%, over the course of a few minutes, from about $800 of transactions. What was that you said about not being volatile?

      2. Vega

        Re: Refunds

        Actually, even if the value fluctuated a lot and the merchant only issued refunds in fiat, bitcoin payments would work just fine.

        The example you provide of buying a TV using BTC and then getting a refund in GBP when BTC/GBP drops is no different than speculating on BTC/GBP directly on an exchange.

        The merchant can protect themselves from the exchange risk, if they so wish, by immediately converting their BTC to GBP at the time of the sale. There are bitcoin payment processors (see coinbase, bitpay etc) that already provide this feature.

    2. Goldmember

      Re: Refunds

      You are assuming there that retailers are obliged to accept returns for products bought from their "bricks and mortar" entities. They aren't, as long as the goods are not faulty. Under the Sale of Goods act, a product which is faulty or doesn't last a "reasonable length of time" can be returned for a full refund. However if you go into a shop, buy something and simply change your mind after leaving the premises, the shop is well within its rights to refuse the return.

      Many shops will accept a return anyway and refund cash or store credit as a sign of good faith (Argos' "no quibble" returns etc.) as it's just good business, but there's nothing to stop them refusing returned, fully functional/ usable goods purchased with BC.

      1. Alistair Dabbs Silver badge

        Re: Refunds

        >> You are assuming there that retailers are obliged to accept returns for products bought from their "bricks and mortar" entities

        Goldmember, it's not clear who you're addressing in your comment because no-one else in this thread appears to have made this assumption. However, I'll accept it as directed to me. I did indeed mean refunds on faulty goods: my M&S anecdote (returning *unwanted* goods) was intended only to illustrate the limitations of the "it's like cash" argument. I was just as baffled by the argument that since most of the Bitcoins being spent in shops were being used to purchase food, a refund was unnecessary.

    3. steve11235

      Re: Refunds

      First, I love this article.

      As far as refunds, simply give back bitcoins. The value of all currencies fluctuate. In addition, the buyer and seller are equally at risk, as fluctuations go both ways. Bottom line, doing transactions in a currency whose value fluctuates is simply a risk of using it.

      1. ratfox
        WTF?

        Re: Refunds

        What's this silliness about demanding bitcoins back?? I'm pretty certain that all the places in UK that proclaim to accept Euros give back change in pennies; and if you return the next day to ask for a refund, they'll pay you back in Pounds, not Euros.

        Even though Bitcoins are accepted, that just means you are provided a transparent Bitcoin-to-Pounds exchange at the current rate, and if you ask for a refund the next day, the store may choose to exchange again their Pounds to your Bitcoins, if they wish, and at the current rate again… Whatever that is.

        I don't see how customers could complain about this. Otherwise, you are basically getting the store to buy from you a lottery ticket, which you will buy back the next day only if it is a winning ticket.

    4. Phil W

      Re: Refunds

      The solution is simple and already exists with certain online retailers that accept Bitcoin.

      The answer is simply an arrangement where by the retailer never sees the Bitcoins, that part being handled by a third party payment solutions provider. You click "Pay with Bitcoin" and it's handed off to the payment provided just like a card transaction and the exchange rate is calculated and you pay.

      The retailer gets good old fashioned cash from the payment provider, so should they need/want to issue a refund they can refund you in cash at the effective cash price you paid.

      Of course this methodology is open to exploitation as a way to convert Bitcoin to cash, but I imagine many retailers would catch on if you were returning that many products.

      1. hayseed

        Re: Refunds

        Yes, I think this is obvious, but the real situation is to first set up a system where you can convert from a "home" currency to a currency that the retailer will accept, and then make an electronic transaction. Bitcoin is just a special case of this, it might even be added after people are already finding the system useful to pay a cooperating retailer in (pounds, dollar, euro, "loony") from their (pounds, dollar, euro, "loony") account. It is not the currency that counts, its that you have the network of retailers set up for the transaction, and it makes sense for other currencies, not just Bitcoin. Bitcoin is merely one of the more questionable currencies one could use in this system, or is used as some sort of Pavlovian stimulus for the non-thinking investor.

  7. spider from mars
    Stop

    Bitcoin is strongly deflationary

    Dabbs touches on this briefly at the end of the article, but this is really the biggest problem with Bitcoin qua currency - even accounting for its vast impracticality.

    Simply because it's based on a limited commodity, Bitcoin is strongly deflationary. It's like the gold standard of the turn of the 20th century - there's a reason we invented fiat currency! It's no coincidence that Bitcoin appeals to the same Austrian-economics right wing libertarian cretins as a return to the gold standard.

    But I digress. Those of us that grew up in the 70s (or Germans who are permanently terrified of a return to Weimar economics - i.e. the paymasters of the ECB) are taught that inflation is a axiomatically bad thing. This is, of course, bollocks. Moderate inflation is a good thing - there's an argument that our inflation targets should be closer to 4%, not the 2% we have now.

    Deflation is crippling - just ask Japan. During deflation, the best thing you can do with your money is sit on it. Investment and spending collapses, and your country enters a prolonged depression.

    And if we think we have trouble with an oligarchic elite now, the problem would be so much worse without inflation there to erode inherited wealth.

    In short, Bitcoin economics is awful on every level. It's almost as if it has been designed to undermine the ability of governments to control the supply of money and to heighten the power of entrenched wealth (and let's not forget all that lovely potential for tax evasion). And we, the techies, blindly buy into this agenda because it's shiny and new, and has "crypto" in the name, and we think being free from government influence is great when actually it's the only thing keeping the plutocratic wolves from the door.

    1. DanDanDan

      Re: Bitcoin is strongly deflationary

      "Moderate inflation is a good thing". It's good if you're in debt, yes. If you've worked hard for your money and saved a bit away for a rainy day (like a sensible person is advised to do), then it screws you over. It's a tax on savers. It encourages spending and debt and financial inability. I hate inflation and wish we'd stop trying to curtail it. If we start getting to a point where we're on the cusp of deflation, we can just print more money (like Japan did).

      I don't buy the idea of permanent deflation either - I think it only lasts long enough to deflate whatever bubble has been building up for so long. It's the bubble that's the problem, not the boom. Bitcoin is one such bubble - it's a pyramid scheme by any other name. I don't understand why no-one else seems to notice this. Lack of transparency + technology seems to be the equation for bubble-building these days and it seems like the only sensible thing to do is to buy into it on the basis that govt. will support those who invest unwisely (as has been evidenced multiple times in the last decade).

      Austrian economics is pretty much common sense when you think about it, I don't get why it comes under such fire (well I do, it's because Keynesian economics works on about the same time-frame as political voting systems). Traditional Austrian economics would *NOT* support bitcoin as you seem to suggest!

      1. DanDanDan

        Re: Bitcoin is strongly deflationary

        *I hate inflation and wish we'd stop trying to "promote" it

        *It's the bubble that's the problem, not the "bust".

        D'oh - not proofreading my own posts!

      2. I ain't Spartacus Gold badge

        Re: Bitcoin is strongly deflationary

        DanDanDan,

        Inflation does punish savers. But there's a remedy. It's called interest. Obviously we have to ignore the problem that you can't get any at the moment. That's because we're in recovery from a once-in-a-century (hopefully) financial crisis.

        If savers can make a return which just beats inflation using banks, then the economy has a mechanism which allows for extra growth, by lending. I've seen many people talk about debt as if it's a bad thing. Or savers as morally superior to borrowers in some way.

        Bad debt is a bad thing. Good debt can be a brilliant thing. It's what gave us the industrial revolution. It's what allows ordinary people to buy their house - which can be a way to be financially prudent, even though it's the biggest debt they'll ever take on. Innovation often requires money. Some of the most innovative people and companies don't have enough to innovate. So they have to borrow it somehow.

        I don't buy the idea of permanent deflation either

        Nothing's permanent in economics. But Japan has been in deflation for nearly 20 years. That's as close to permanent as makes no odds. It takes something to break out of deflation because of deflation. If savers can just sit on money and watch it get more valuable, then they have no reason to either spend, or invest. That entrenches the group of people with money even more, because it's even more expensive and risky to borrow - and you just get richer by means of already being rich. This is great for those with money, but not so great for those without, or those who would like to innnovate.

        It's also hard for businesses, because they have to drop their selling prices by 1-2% a year (that's what deflation means), but their debt is still worth exactly the same amount of money. And has to be serviced with the same amount of interest.

        Inflation reduces the value of debts. But then this can be covered by setting appropriate interest rates. Then everyone can win - savers get a fair return for the appropriate level of risk, borrowers can survive, innovators can get finance, business can borrow to invest. One of the major causes of the financial crisis was interest rates being too low. This was partly caused by large global imbalances. Such as China buying $3 trillion of US government debt in order to artificially keep their currency down. This had the side-effect of stoking a bubble in the global economy, as well as the intended effect of allowing China to grow its manufacturing base more than it would have been able to otherwise, by artifically lowering the wages of its own workers.

        1. Anonymous Coward
          Anonymous Coward

          Re: Bitcoin is strongly deflationary

          Interest was and always is fraud, as is indirect partial defaulting on loads via inflation, the word usury was not invented for nothing, and is a valid concept even in secular terms; the whole idea of banking should be obsolete.

          A suggested alternative incentive/compensation for loans is shared ownership, so shared risk (so incentive for the lender to limit the mutual risk) and no loans for spendthrifts!

      3. Bronek Kozicki

        Re: Bitcoin is strongly deflationary

        Inflation punish savers only if you sit on your cash. Deflation forces you to sit on your cash, and as Japan demonstrated, this is very bad thing indeed. You do not want to sit on cash, believe me. A little bit of risk in your live will do everyone good, including yourself.

        As for common sense solutions to economics, just like with other things, they does not always work and can actually make things much worse. Some things are non-intuitive, that's the cost of developed society.

      4. spider from mars

        Re: Bitcoin is strongly deflationary

        "Austrian economics is pretty much common sense when you think about it,"

        There's your problem. "Common sense" is not a reliable guide to the functioning of complex systems.

        1. I ain't Spartacus Gold badge

          Re: Bitcoin is strongly deflationary

          There's your problem. "Common sense" is not a reliable guide to the functioning of complex systems.

          As my economics teacher said to me about once every lesson for half a year... Learning economics is the stupidest I've felt in any activity. Not understanding something when you're tired, or distracted is normal. Not getting complex maths or chemistry, once the equations get too much is normal too. But it took months of trying to catch up, and understanding the odd small piece until there was a eureka moment and things started to fit together.

    2. Jonathan 29

      Re: Bitcoin is strongly deflationary

      There are other crypto currencies that agree that deflation is a bad way to grow a currency. Dogecoin is adopting a 5% annual inflation after its initial mining run comes to an end in January and then gradually tapering it back.

    3. Mark .

      Re: Bitcoin is strongly deflationary

      Well, that's an argument against using Bitcoin as one's national currency.

      But usages such as Internet and international transactions still remain. Currently Paypal is largely used for this, but I don't see people criticising Paypal by considering what the economy would look like if everything (wages, taxes, etc) was done using and controlled by Paypal.

      1. I ain't Spartacus Gold badge

        Re: Bitcoin is strongly deflationary

        but I don't see people criticising Paypal by considering what the economy would look like if everything (wages, taxes, etc) was done using and controlled by Paypal.

        Mark. ,

        No, but then Paypal doesn't have fans who say that it's the future of currency. And I've also had discussions with several Bitcoin fans who have talked about it as an alternative currency, and mentioned how deflation is a good thing as it punishes borrowers and rewards savers.

        Although I suspect that's because many people who push Bitcoin on forums are holding coins, and so hoping that their stock will be the stuff being made more valuable by deflation, as well as more widespread adoption.

    4. Anonymous Coward
      Anonymous Coward

      Re: Bitcoin is strongly deflationary@ spider from mars

      "In short, Bitcoin economics is awful on every level. It's almost as if it has been designed to undermine the ability of governments to control the supply of money "

      Well, governments have done such a good job of managing money supply haven't they? Wouldn't pay to let somebody else have a go, who knows what sort of mess they could make, eh?

      Here's a thought for you: In the past decade global governments have (in practical terms) printed ten trillion more dollars than there has been incremental economic activity. But that money hasn't leaked out to the plebs, nor has it been lent to real productive businesses. Instead it has been held on the electronic registers of the big banks, where investment bankers have wondered whether it would be cheaper to hold it as cash earning no interest, or to speculate on emerging market debt, over-leveraged buyouts, or "invest" in secondary markets (shares), London property, commodities or the like. When the bets go bad, and sooner or later every winning streak comes to an end, then the bankers know they will be bailed out by exactly the people who haven't benefited from all this fake money sloshing around.

      The reality is that central banks controlling the money supply has been EXACTLY the means by which the 1% enrich their pals, and make sure that you and I are the ultimate back stop for their theft. Most ordinary people have seen their living standards drop, prices rise, yet their pay doesn't go up. That's because for central banks and politicians there are two types of inflation: Asset price inflation that makes housing more expensive, and inflates the nominal value of existing excess wealth, that's GOOD inflation for the 1%ers. But the sort of inflation that erodes the value of your and my debts, and results in a pay "rise" each year, that's the BAD sort of inflation.

      As for Japan and deflation, wait for Abenomics to play out. Japan has in three short years doubled the monetary base. The Bank of Japan was, in recent auctions, the only buyer of Japanese government bonds, meaning that the rest of the world is unwilling to lend money for ten years at 0.6% to the government of the third largest economy. This will not end nicely.

    5. Suricou Raven

      Re: Bitcoin is strongly deflationary

      Bitcoin was designed to undermine the ability of governments to control the supply of money. It's popular because the recent financial mess has revealed that between incompetence and outright corruption, people have lost their trust in both government and financial institutions. They are desperate for an alternative system, even if it means looking to something unproven and fundamentally flawed like bitcoin. It's not a good alternative, but it's the only one around.

      1. d3rrial

        Re: Bitcoin is strongly deflationary

        How again is Bitcoin deflationary? I'm pretty sure that deflation means that the supply of money is getting lower, so less money is in existance, on the other hand inflation would mean that more money is coming into existance.

        At the moment Bitcoin is inflationary, due to the mining reward currently being 25 bitcoins. A long time in the future mining will no longer carry an inherent block reward, besides collected transaction fees, at which point Bitcoin will cease to be inflationary. But at this point no supply is lost either. Apart from the one or two invalid transactions here and there, which are usually not confirmed by miners, and maybe a few deaths of careless bitcoin owners, no bitcoins are ever lost, so saying it's deflationary is just plain wrong... Bitcoin isn't as two sided (inflation vs. deflation) as you would try to make people believe, because if supply remains unchanged, bitcoin is neither inflationary nor deflationary.

    6. foxyshadis

      Re: Bitcoin is strongly deflationary

      The real problem with Bitcoin is that it was designed to wildly enrich early speculators, leaving the rest of us with very little reason to use it -- basically transferring our wealth into their pockets upon buying in. So far that seems to be the only impact it's had.

      It's always hilarious reading about people who think inflation shouldn't exist, as if the human population isn't constantly growing. If we were completely stable and stagnant, then zero inflation would work just fine, but aside from that something has to give when more people participate in an economy. This is basically the Bitcoin problem, people who already have some wealth would rather hoard it, since the value of that wealth increases as the economy grows. Inflation helps oil the economy in that case.

  8. John McCallum
    Thumb Down

    Bitcoin

    Is total bollocks I prefer real money you know £/$/€ or even Turkish Lira.Virtual currencies are all very well in SiFy but are a bit dubious in real life.

    1. Naughtyhorse

      Re: a bit dubious in real life.

      Isn't that the real issue.

      When the bank of england was established there was _confidence_ that the bank held enough gold to back the paper money it issued. this was required in the early days of the system, it eliminated the risk. we both know and agree what this piece of paper is worth, that worth exists elsewhere in the world, so we can use it as a safe intermediary in the supply of goods and services.

      Over time the actual 'gold in the vault' was not required as people intrinsically had confidence in the system.

      we all knew what a pound was, and what it was worth, so who needs a pound of gold in a bank somewhere?

      On reading the article, i thought you almost got to the point of stating, there is _NO_ confidence in bitcoin. which will severely impede it's widespread adoption, beyond speculators and the wankers on Si cul-de-sac. Huge volatility and MtGox will do nothing to help this.

      And further should it ever take root. HMRC _will_ take an interest in them and thereby remove the only real reason for their existence. avoiding tax.

      fad, stupid fad, next please...

  9. Anonymous Coward
    Anonymous Coward

    demand for Bitcoin options in shops is still tiny but growing rapidly in certain retail sectors

    I work for a major Point Of Sale software vendor, and we have seen absolutely zero interest in BitCoin or any other crypto-currency. There is some interest in PayPal, since in some ways it's easier for small businesses than regular card payments, but that's about it on the means of payment front.

    1. Vizique

      Then you're doing it wrong, as I've found numerous people prepared to play if the hardware does what they need it to... and the hardware IS out there..... it's why I invested in it

      1. Anonymous Coward
        Anonymous Coward

        Then you're doing it wrong

        No we're not. As shown by the recent trade shows we've attended, absolutely no one is interested in crypto currency support in point of sale software. We're hardly going to develop something that no one wants or is unwilling to pay for - so we'll leave Bitcoin where it is, in the hands of a few neckbeards and tin foil hat wearers.

    2. Fink-Nottle

      demand for Bitcoin options in shops is still tiny but growing rapidly in certain retail sectors

      Humph. These people have obviously never tried to use a Bank of Scotland pound note in London.

  10. Irongut Silver badge

    Sounds like the kind of presentation where the organisers glare at me a lot for laughing very loudly at the presenters.

  11. Paolo 1
    Facepalm

    This isn't hard

    Treating bitcoin as a foreign currency is *exactly* how it should work. You pay 0.01BTC and then get refunded 0.01BTC.

    Just because the BTC exchange rate is massively volatile right now doesn't mean the retailer/credit card/bank should worry about *your* FX exposure, in the same way they don't worry about it now for more regular currencies.

    1. nichomach

      Re: This isn't hard

      And the words "massively volatile" are why I'll happily avoid using it as a currency as long as I have a choice not to.

    2. Anonymous Coward
      Anonymous Coward

      Re: This isn't hard

      You pay 0.01BTC and then get refunded 0.01BTC.

      Nope. You'll pay and get refunded the BitCoin amount comparable to the conventional domestic currency value of the item *at the time you pay or receive a refund*. So the two amounts will fluctuate, just as it would if paying or being refunded in a conventional foreign currency. Why on earth would the retailer want to end up essentially running an FX trading operation without any control (which is what the system you're suggesting would basically be)?

  12. stucs201

    re: Treating bitcoin as a foreign currency is *exactly* how it should work.

    Which most of the time is 'go away and come back with some proper money'. Leave the handling of weird non-native currencies (whether they be paper notes and coins or binary digits) to banks and currency exchanges - let shops get on with actually selling stuff.

  13. I ain't Spartacus Gold badge

    “Whaaaaat?” I heard someone shout in a rough impersonation of Brian Blessed in Flash Gordon. It was me.

    Trying to avoid doing this in meetings is a vital business skill. Not doing so is a great way of losing contracts and/or getting sacked.

    I can still remember my failure in this area. I went to Tate Modern with a friend. Let's ignore the press stereotypes of modern art, and actually go and see some. It can't all be pickled sharks and unmade beds surely?

    So I've wandered around a few galleries. And decided modern art isn't for me. Particularly the conceptual stuff. And as I'm looking at another lot of expensive rubbish I realised that I wasn't the only one wondering about the emperor's lack of clothing. "This is all complete and utter bollocks", said someone in a loud voice. I looked around, but couldn't see who. Then I realised that it was me...

    I quickly repaired to Tate Modern's nice cafe. A chastened, lonely figure in search of a reviving cuppa.

    1. Anonymous Coward
      Anonymous Coward

      "This is all complete and utter bollocks", said someone in a loud voice. I looked around, but couldn't see who. Then I realised that it was me...

      Did exactly the same, although in my case the spontaneous outburst got me a slap round the head from the wife. The final straw was some bollocks involving a room that had nothing in it and into which the sound of wind was being piped (although it actually sounded like unfiltered white noise to me). What pushed me right over the edge was the pretentious description by the "artist".

      1. I ain't Spartacus Gold badge

        By this point, I was alone - without anyone to issue the punishment beating. My friend had probably seen the explosion coming, and wisely abandoned me to my fate. Although his reaction must have been similar (though far more polite than mine), because he turned up in the coffee shop about 5 minutes after me. Equally unimpressed.

        I've come to the conculsion that the pretentious description by the 'artist' is the actual art. It's not pickling the sheep that's the important bit. It's the persuading other people to accept it as art, and give you large sums of money.

        1. Anonymous Coward
          Anonymous Coward

          I've come to the conculsion that the pretentious description by the 'artist' is the actual art. It's not pickling the sheep that's the important bit. It's the persuading other people to accept it as art, and give you large sums of money.

          Sounds like corporate rebranding. Complete with a toe curling mission statement.

    2. Michael Wojcik Silver badge

      I went to Tate Modern with a friend.... So I've wandered around a few galleries. And decided modern art isn't for me.

      That's rather like reading a few stories out of one of the Faber house collections and deciding modern literature isn't for you. It's just possible that the vast array of art produced during the modern era isn't completely represented by a few galleries of the Tate.

      Perhaps modern art isn't for you. It wasn't for the Pre-Raphaelites, despite the fact that they were arguably creating some of it. And no doubt there are folks out there who deeply appreciate, say, the Lowlands landscape painters but don't care for anything more recent. Hell, I knew a guy who found everything written after Chaucer disappointing. I'm just saying the Tate - or any other museum - isn't really representative of the whole contemporary avant-garde, much less the tremendous range of modern art.

  14. Ossi

    Bitcoin - the new Second Life

    Just like Second Life, there's a lot of noise about it, businesses will get terribly excited, it'll make money for some people...and then it'll more or less go away because in all the excitement everyone seems to have forgotten the Normal Human Being.

    Here's one paragraph from the Wiki:

    "Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain."

    Now explain that to your granny. And then explain why she needs it. We've already got money, which we call 'money'.

    1. Jonathan 29

      Re: Bitcoin - the new Second Life

      There are things that we can do with digital crypto money that we cannot do with traditional payment methods. We can monetise comments on a forum or allow individuals to tip a video or a picture on a website. We can open up a whole layer of nano payments below £1 that would be uneconomic to do in any other way. Whether internet tipping becomes popular remains to be seen, but it is a unique selling point.

      1. Anonymous Coward
        Anonymous Coward

        Re: Bitcoin - the new Second Life

        We can open up a whole layer of nano payments below £1 that would be uneconomic to do in any other way.

        That's already been tried - anyone remember Beenz?

      2. I ain't Spartacus Gold badge

        Re: Bitcoin - the new Second Life

        Jonathan 29,

        You don't need Bitcoin in order to have micro-payments.

        It may not even be possible to have micropayments. Maintaining a global payment infrastructure is not free. And is unlikely to become so in the near future.

        Remember that anyone who says Bitcoin has no transaction costs doesn't understand Bitcoin. Firstly you need to buy the things. Exchanges and credit cards take their cut. Secondly the value fluctuates so wildly that you can lose 10% holding a Bitcoin for just an hour. Thirdly, the miners get paid in BTC. That's a huge transaction cost. The whole Bitcoin economy is giving money to the miners in order to maintain the blockchain.

        What I don't understand is how this'll work after all Bitcoins have been mined. No-one will keep updating the blockchain for free. So presumably there will have to be costs as a reward to process each transaction, or Bitcoin will collapse.

        1. Jonathan 29

          Re: Bitcoin - the new Second Life

          Beenz and every other digital currency pre-bitcoin used a central infrastructure to manage it. Bitcoin-like currencies do not need a 3rd party, do not need central servers, employees, HR, customer service reps or anything else that inflates the cost of the transaction. It is pure peer to peer and you absolutely can maintain an entire global transaction payment system on very low end hardware. Innovative solutions to a 51% attack are being worked on.

          Bitcoin and all crypto has an acquisition problem in that you currently need to use exchanges or invest in mining hardware in order to acquire coins. My hope is that as this technology progresses you will be able to acquire coins as you would acquire traditional money - by exchanging goods and services for them. The crypto Ebays and Craigslists are all a little primitive at the moment, but it seems like these would be a good entrance route for many.

          1. I ain't Spartacus Gold badge

            Re: Bitcoin - the new Second Life

            Jonathan 29,

            Bitcoin-like currencies do not need a 3rd party, do not need central servers, employees, HR, customer service reps or anything else that inflates the cost of the transaction. It is pure peer to peer and you absolutely can maintain an entire global transaction payment system on very low end hardware.

            Your post makes no sense. Bitcoin transactions do need a third party. In fact several third parties. The miners who create the blockchain. Without the blockchain Bitcoin transactions don't happen. You can't do mining on low-end hardware. Even graphics processors aren't enough now, and they're onto custom designed chips with no other use.

            This works until all the Bitcoins have been mined. At which point the miners will stop. And then there will be no further Bitcoin transactions. Well I assume that isn't true. I've read that there's a plan to carry on - I just don't know what it is. I assuming it's that every Bitcoin transaction will have to be paid for. The miners will get a small percentage of each transaction as their reward for maintaining the blockchain. At which point it will be just like using a credit card, or PayPal.

            1. Jonathan 29

              Re: Bitcoin - the new Second Life

              I ain't Spartacus

              I am interested in all crypto not just bitcoin. New coins are experimenting with ways to limit expensive mining operations. Hull City council for example are experimenting with a new Crypto that will be centrally mined and distributed for community work. They will be doing all the mining on a couple of gaming machines. Other coins are experimenting with different algorithms or community funded mining operations which may run at a loss. Even in bitcoin the miners are essentially a utility rather than a 3rd party. I don't think any coin has found the right balance yet, but give it time.

            2. d3rrial

              Re: Bitcoin - the new Second Life

              @I ain't Spartacus

              The plan is simple and it's already being carried out...

              With every Bitcoin transaction you make you have to attach a fee if your transaction is larger than a specific size (I don't know it from the top of my head, but I think it was 1 KiloByte). The minimum fee you have to attach to your transaction for the network to relay your transaction is 0.00001 Bitcoin which is currently around 0.005USD. This number is expected to be lowered further in the future. The current system lets the miners prioritize transactions by their fees. Miners compete for high priority transactions (those with the highest fees) because that means they get to keep these fees themselves, which means that miners will consider transactions with higher fees more important than transactions with lower fees. That's why a small part of a block is reserved for high priority transactions and a bigger part is reserved for lower priority transactions. Some miners (like Eligius for example) allow you to create fee-less transactions and invalid transactions and will still include them in the blockchain if you are directly connected to their node.

              When no new coins are created anymore, the idea is that the transaction fees will cover the miners expenses, currently this is not the case, as the daily transaction volume is still very low, so for this to work Bitcoin has to be accepted more widely.

              1. I ain't Spartacus Gold badge
                Thumb Up

                Re: Bitcoin - the new Second Life

                d3rrial,

                Thanks for that explanation. I knew there was a way to prioritise, so you could get high-value trades confirmed more quickly - so people couldn't run off with your stuff before the transaction was confirmed. I just hadn't got round to reading about how.

    2. Mark .

      Re: Bitcoin - the new Second Life

      Try explaining public key encryption to your grandmother (or grandfather). I guess that means no one will ever buy anything on the Internet?

  15. Vizique

    Sadly I couldn't make that gig as it sounds like a lot of fun and good people to meet. On the subject of Terminals though,I will be bringing the Coinkite Terminals to Cambridge this year ...keep watching El Reg....

  16. Scott Broukell

    Excellent article, as ever, but those 'shops' and 'retail outlets' you speak of are actually 'Fulfillment Centers', don'tcha know.

  17. Anonymous Coward
    Anonymous Coward

    I'm impressed that this article recognises a legitimate use of Bitcoins - for purchasing - rather than just as a get rich quick scheme.

  18. Paul Smith

    Pissed again?

    So you were not only technically, intellectually and sartorially outclassed at this networking event, you got pissed as well. I have to assume that you hadn't sobered up when you wrote this excuse for an article.

    Let me try to explain it as I would to a five year old.

    The old fashioned pound sterling used to be a pound of sterling but people who were rich enough to own one were too posh to carry them, 'cause they were bloody heavy at almost half a kilo each. After a while, they came up with the idea of a paper version which was simply an IOU to say that you would be given the actual pound if you asked for it, but in the meantime, they would keep it in a safe place for you. It was just as good for paying for things and was easier to carry around so it became popular. Of course there were a few problems when people asked for their actual pound back, but nothing a standing army couldn't handle.

    Crypto is just a little word for big mathamatics so a crypto currency is one based on a pound of crypto. Instead of carrying around big computers to do the maths on the spot, you just carry the token that shows you (or someone else) did the math.

    Your confusion regarding refunds seems to be, how can I put this politely, fucked up?

    If you order a £5 cup of fresh sewage and get raw sewage instead, you ask for a refund and get your £5 back. You don't get exactly the same £5 back, the one your granny wrote 'happy 1st communion' on. You get 'a' £5 note, or perhaps 5 pound coins, or any other combination of monetary tokens that add up to a fiver. What doesn't happen is that people to not pretend the transaction never happend. The transation of them giving you a cup of sewage in return for your fiver was recorded on a journal and written to a ledger and sealed when the cash drawer closed. If another transaction is needed, to cancel the sewage and refund the fiver, it also has to be recorded in the journal and written to the ledger. It doesn't matter if the fiver was a promise for a pound of silver or a token for 600 Flops.

    1. Richard Jukes

      Re: Pissed again?

      True and I fully agree with you.

      However what I think the point that the OP is trying to make is that the refund will need to go through and that the customer will have to pick up the cost of any fluctuation in the conversion rate.

      Then there is the further problem of monetary controls, inflation is a very handy tool in a governments tool box. Bitcoins do not do inflation, once the last bitcoin is mined then there will never be any more.

      In my eyes it is all a very well thought out and well hyped scam, and having no infrastructure in place to process the bitcoin chain once the coins are mined somewhat proves this.

    2. I ain't Spartacus Gold badge
      Facepalm

      Re: Pissed again?

      Paul Smith,

      Whooooosh!

      Congratulations, for doubly missing the point. Firstly, Dabbs articles are not meant to be taken too seriously. They're usually humorous rants. Although he does tend to pick deserving targets.

      Secondly, the bit on refunds is entirely justified. In the real world, people don't deal entirely with bitcoins. Neither retailers, nor consumers. Therefore one party in the transaction has to bear the currency risk - I.e. Changing into and out of bitcoins. Why would the retailer wish to accept this risk? This presents a further problem when it comes to refunds, because of the massive volatility of bitcoin prices.

      Finally, the worst part, is that the speaker's answer to this difficult problem was to ignore it! Rather than deal with a difficult area, his answer was simply to ignore the law.

      1. Paul Smith

        Re: Pissed again?

        "The speakers answer"? Surely you mean the drunkards recollection of what he thinks someone else might have answered to a witty and clever question which the author cant quite recall in full detail at this time?

        Whoosh right back at you.

        There is absolutly nothing different about a refund in bitcoins from a refund in Pounds, Euro, Dollars, gold, pork bellies or any other unit of exchange. The one and only thing you can not do with bitcoins, which you can sometimes do with other currencies, is pretend that it never happened.

        Buy a gold ring or any other volitile commodity from your local pawn shop tomorrow, and take it back the next day for a 'refund'. Maybe you will get one, and maybe they will offer to but it back from you at its new price.

        1. I ain't Spartacus Gold badge

          Re: Pissed again?

          Now you're just being silly. The article isn't supposed to be a serious piece - and yet you're choosing to make childish points about, "the drunkards recollection of what he thinks someone else might have answered" - even though this has been pointed out to you. Perhaps you made a mistake originally, and came to a piece thinking it was serious? Or perhaps you're just desperate to defend Bitcoin?

          As for the argument about refunds, it's perfectly valid. BItcoin has many problems. And one of the biggest is transaction costs and exchange rate risk. Bitcoin transactions may be 'free', in the sense that nobody pays as money is printed to pay the transaction processors, but getting money into and out of BTC definitely does cost. And while almost nobody is paid in Bitcoins, the only realistic way to get them is to buy them, thus introducing currency risk into the equation. Risk in a currency that fluctuates wildly. Therefore in any transaction there's a serious risk that someone will lose 10% of their stake just for holding the Bitcoin for an hour too long.

          The Bitcoin price collapsed by 20% in a day last week - so transactions over long than a few minutes can become particularly tricky. This is much less of a problem when buying something volatile like gold, because gold is the thing you're buying. Whereas Bitcoin is supposed to be the medium of exchange. One of the main characteristics of a good medium of exchange is stability. Bitcoin doesn't manage this, and therefore isn't a good medium of exchange. Which is one of the reasons it's still a niche hobby, played with on the internet. And therefore a good reason that it's not suitable for deployment in consumer-facing retail, which is bound by quite onerous consumer protection legislation.

          1. d3rrial

            Re: Pissed again?

            I'm not a big fan of consumer protection myself. I live by this: Caveat Emptor. If I buy shit, it's my own fault, not the merchants. If I want something to be of quality, I will have to research the matter, this is not only educating but also helps making better decisions.

            The trick is not to see Bitcoin as an intermediary between fiat (€/$/£), but as its own currency. Currently the forex rate changes drastically because it's currently driven by speculation, not adoption. This will continue for another few months to years at least, but at some point the speculation will die down and adoption-driven valuation will take over.

    3. Alistair Dabbs Silver badge

      Re: Pissed again?

      Thanks, Paul. I enjoyed that. It was great.

  19. IHateWearingATie

    still no reason for 99% of people in the UK to bother with bitcoin

    Why the chuff would I pay for anything except, ahem, questionable items with bitcoin. My credit cards and debit cards work perfectly well, with the benefit if someone tries to swindle me I can avail myself of the current legislation and get my bank or credit card company to pay me back. Like the vast majority of the population of the UK I hardly ever make international transactions, and the convienence of doing so using my existing cards far outweighs the transaction fee.

    The only current benefit of bitcoin I can see is not having my bank or credit card company having a record of my transactions - which I don't care about. At all. And if the public reaction to the Snowden revelations is anything to go by, nor does hardly anyone else.

    The currency fluctuation is HUGE, the hassle of setting up a wallet and exchanging some cash is not small and I can only see a benefit for a vanishingly small number of people. Tell me again why any retailer would pay for a machine to take bitcoins except for publicity purposes?

  20. PeterM42

    Mmmm - Bitcoins reminds me of SAP

    You know the SAP system which will "revolutionise your business". (by making it unworkable). Just ask nPower - they can't now issue bills!! For a company who don't do much more than issue bills and take your money, that is a bit of an embarrasment!

  21. John Lodge

    That was a cracking good article. I cannot for the life of me see the point of crypto currency - this is caveat emptor writ large.

    I don't think you're stupid by the way, just sort of normal.

  22. Count Zero

    Well, I don't know about you guys, but everything I've seen so far suggests that bit-coin is more like a commodity than a currency. That's certainly the impression I got watching all the shenanigans last year.

    An unregulated market, that produces nothing but more dosh until its all runs out... wait I minute. Would this market be shaped like a triangle?

  23. Anonymous Coward
    Anonymous Coward

    "It’s one thing to show oneself up among one’s peers but another to demonstrate publicly how thick I am front of people"

    Did you mean " in front of people" ????

  24. Black Road Dude

    10% Volatility a problem?

    I agree that a 10% change in the value of Bitcoin seems pretty large. This is mostly due to the fact its a reasonably new currency compared to any fiat version. I think we need to think about exactly what the benefits for the merchant might be in the refund scenario. Obviously this is relative to the cost of the transaction but for the coffee refund scenario a £2 cup of coffee paid for in bitcoin would cost less than a penny in fees where as if it was paid for via a credit/debit card it would cost the merchant (again this depends on the size of the retailer as the larger retailers can get better deals) anywhere in the region of 8p - 17p plus the monthly charges for renting the chip and pin machine and accessing the service. An additional charge would be a business bank account which has a monthly charge. Which is why lots of small retailers who sell relatively low value merchandise cant afford to offer digital payments at all and instead use cash. (which has its own costs such as collection by a security vehicle and again a business bank account.) So it is quite possible that 10-20% of the initial (non-bitcoin) transaction cost would be for the sole purpose of paying the banks for their service.

    So if I bought a £2 coffee with bitcoin the merchant would have potentially already gained 10% profits (by avoiding the bank transaction "TAX") so would/should be willing to take the refund risk.

    Also the (non-bitcoin) refund its self would have its own transaction fee doubling the already very high cost to the merchant.

    Ive seen paypal mentioned but their fees are just as bad if not even worse at 20p + 3.4% per transaction.

    This obviously does not cover every scenario as higher value purchases would have significantly lower transaction fees and therefore overall transaction fee percentages.

  25. Henry Wertz 1 Gold badge

    Refunds?

    I'm just not seeing the problem here -- I am a tad dubious that bitcoin transcations in brick and mortar stores will become popular, but in terms of refunds, wouldn't one just get the refund in (since you are in Britain) British pounds? Or perhaps a store credit?

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