Bitcoin Establishing a Role in Online Payments Realm

Bitcoin is the first time consumers have truly been able to own a unique unforgivable digital asset.

To be clear, online payments never existed before Bitcoin. Previously, instructions were made online for offline settlement later, and always through intermediaries. Bitcoin is the first time consumers have truly been able to own a unique unforgeable digital asset without needing to trust that an intermediary is keeping good books and records.

Bitcoin as a means for online payment is one of its most compelling use cases. Bitcoin is the first time we have had online payments that settle directly from payer to payee. With Bitcoin, online payments can be made to and from anyone in the world faster, cheaper and with no chargebacks (chargebacks are when a payment is unilaterally reversed by the sender, and the receiver finds themselves out of pocket for the amount). Currently, there are over 100,000 merchants accepting Bitcoin (though in most cases this is somewhat of a marketing ploy as they immediately have the Bitcoins received turned into Fiat for offline settlement) and the use of the cryptocurrency has saved them millions of dollars, in credit card transaction fees and by eliminating fraud and chargebacks.

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What mainly differentiates Bitcoin and the traditional means of online payment is that it is truly global. You are not subject to the whims of your third party payment processor supporting a specific country or payment network. Neither merchants nor consumers need to have bank accounts to participate, and transaction fees currently paid to bank intermediaries are no longer necessary.

One compelling use-case I can think of is a group of smart developers in the Philippines who created an addictive online game, trying to monetise it. Previously they may not have had access to a bank account, so there was no way to accept funds. Now with Bitcoin, the bank is less relevant, as they would simply accept Bitcoin into their own wallet: from anyone, anywhere in the world. Of course, until local shops accept Bitcoin, they would need a way of “cashing out” to pay for expenses and salaries, and this is already possible by using the network of village-to-village salesmen who sell cigarettes, pre-pay phone credit and Bitcoin.

Another use-case is at the consumer’s end: People living in countries that have a bad fraud reputation, such as Nigeria, are tarred by the broad-brushed approach taken by payment processors – often entire countries are blacklisted, despite the majority of consumers being honest. Honest consumers can spend Bitcoin online, as the payment is final and can’t be unwound. Merchants can be confident that they aren’t being scammed, as opposed to taking risks accepting credit card based solutions.

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