“We Accept Bitcoin” Campaign
I don’t care if you accept Bitcoin, I care that you accept whatever I consider money. Bitcoin can be used most effectively in the short-term as a medium of transmission, while offering the typical shopping experience consumers are used to. In the near term, the market will focus on driving Bitcoin’s adoption as a payments medium, not a payments endpoint. I believe this will occur naturally in the competitive market, since Bitcoin-backed payments processors will enjoy much lower transmission and conversion fees than “traditional” payments processors that rely solely on the legacy global financial apparatus.
Credit cards were invented in the 60s as a way to productize consumer debt. We don’t normally think about it this way: the credit card is a product in itself. Now that everyone has one, it’s easy to forget that there is an intricate and complex electronic process that occurs every time we swipe our card somewhere; we pay a service fee, between 1-3% for the convenience of not carrying wads of cash around everywhere. We became our own banks. We feel powerful. And we have no idea how any of it actually works.
We all know what Bitcoin good for: making instantaenous and provably secure transactions. Blockchain technology is totally new system for decentralized transaction verification, and its value derives precisely from the fact that the existing global financial apparatus is not a critical infrasture component; this isn’t just a nice side effect that allows our neo-anarcho-capitalist friends to dodge taxes and shun the grid. This core long-term strength of bitcoin poses the largest near-term challenge. How do we convince consumers that they should use internet nerd points to buy important things and keep it as a store of value?
Broad end-consumer adoption is not necessary or even desirable in order for Bitcoin to become utterly ubituitous. Bitcoin adoption will not occur because of any clever PR campaign to get your local used record store to accept Bitcoin. Consumer adoption will occur invisibly. Payment processors will have to utilize Bitcoin at some level in order to compete effectively with new, upstart market disruptors.
In the modern service economy, no one actually knows how all of our products work. I take my car to a car expert when it makes funny sounds; I call a contractor when my roof starts leaking; I go to the doctor when I don’t feel well. Most people similarly have no idea how credit cards work, what The Federal Reserve actually does, and why we even need Wall Street. This is all fine, because we’ve used our credit cards enough times and for enough years to trust that they basically work. Familiarity almost always beats expertise. People will usually rely on gut feeling over data.
Consumers are increasingly using the internet to buy more products. The payment system on the internet is already reliable and invisible as far as consumers are concerned. If I type in my credit card number, hit Pay, the thing I paid for shows up at my front door. Bitcoin can be used in this same way to underlie the existing internet payments system. Businesses will benefit from decreased fees and increased security, and consumers will benefit by retaining their familiar way of doing things.
Medium vs. Endpoint
Bitcoin will begin as a medium. PayPal will utilize Bitcoin to make cheaper currency exchange transactions, for example. Square might use it to reduce overhead for small payments. Bitcoin and its underlying technologies will first be facilitators of transactions – a neat competitive edge that will nudge incumbent players to adapt. Adopting Bitcoin as a medium in this way is inevitable. What is unclear is whether or not Bitcoin will be used by your average consumer to purchase a gallon of milk at the grocery store. This might happen eventually, but a bet on this kind of adoption pushes the return on your investment too far into the future to be very interesting.