Was Satoshi Nakamoto right about Bitcoin payments?
Let’s be clear. In the official document, Nakamoto clearly meant that Bitcoin would be used for online payments, not for speculation. In particular, by creating a context to explain his electronic money system, he contrasts it with credit card networks.
He begins by mentioning “online commerce” and its reliance on “trusted third parties to process electronic payments.” These institutions “cannot avoid dispute resolution”, so online payments are “reversible.”
In these excerpts, Satoshi paints a picture of how online stores connect to their customers through the Visa and MasterCard card networks, which (by the time Nakamoto wrote) have long had a stranglehold on the online shopping sphere. By reversibility, Satoshi means how card networks allow cardholders to dispute purchases, and the card company “charges a refund” from the seller if it is believed that he is at fault.
Has his vision of Bitcoin come true?
In a sense, Nakamoto was badly wrong. Thirteen years later, Bitcoin is little used for payments. Rather, it is in most cases used as a speculative tool that offers tempting potential to raise (and lower) prices. There was nothing about speculation in Satoshi’s white paper. Or was it?
But if Satoshi didn’t expect Bitcoin to be used mainly for speculation, then he was right about one thing.
Unlike many Bitcoin enthusiasts, Satoshi did not think that his electronic money system was designed to replace conventional money. The card system works “well enough for most transactions,” he admitted in an official document. Instead of overthrowing the system, Nakamoto seems to have assumed that the PTC would serve as a backup payment for online trading.
This part of Satoshi’s vision of electronic money has been fulfilled. Bitcoin, although it is not its main function, is used from time to time as a means of payment. In part, this applies both to illegal goods, such as drugs and child pornography (according to the haters of the BTC), but also to legal use. Even a cursory review of law-abiding online stores shows that some of them provide customers with the opportunity to pay with Bitcoin, along with cards and PayPal. From time to time, you can even find a retailer working only with cryptocurrency, but this is rare. Do not forget about Tesla, which worked with the BTC.
Thus, Bitcoin seems to continue to fulfill the role assigned by Satoshi as a kind of niche means of payment.
Nakamoto’s official document describes in detail what auxiliary role, in his opinion, Bitcoin can play. Since card networks cannot avoid “dispute mediation”, and mediation requires resources, the costs of using cards are high. Satoshi believes that these transaction costs do not allow buyers and sellers to make “small random” transactions.
In addition to small transactions, Satoshi outlined another backup role for payments in the military-technical complex. According to him, the reversibility of payment by card leads to fraud. An unscrupulous buyer can purchase digital goods, wait for them to be received by email, and then cancel the transaction. In the end, they keep both money and goods, leaving the merchant without means of livelihood.
Bitcoin transactions are irreversible. If the merchant expects that the card user may commit chargeback fraud, he may instead ask for payment in Bitcoin.
Was Nakamoto right?
The small number of legitimate retail Bitcoin payments that we are seeing doesn’t really match Nakamoto’s vision. Bitcoin fees were quite high, so small transactions are not economically feasible. At the same time, the volume of transactions in card networks is decreasing, which makes cards more convenient for small purchases.
As for reversibility, consumers show no signs of dissatisfaction with standard cards, and they especially appreciate the opportunity to dispute a transaction if sonething went wrong.
When online stores accept BTC, it is often a last resort. If a law-abiding business has not been able to access the card network, cryptocurrency is often their only choice to connect with the clientele. For example, RocketStars is a porn site that hosts unusual materials. It was created specifically to prevent card processors from censoring materials due to concerns about damaging the brand of card networks. RocketStars uses cryptocurrency for payments.
And it’s not the only industry that relies on Bitcoin and other cryptocurrencies. Visa and MasterCard refuse to process payments for Kratom and Salvia Divinorum Industries that sell these legal but questionable drugs.
Finally, white supremacists who publish legal but repulsive materials have been banned by PayPal and often have difficulty finding card processors willing to connect them to card networks. They also turned to cryptocurrency. In principle, so are the supporters of black.
Thus, instead of reversibility or a small transaction, it is the direct censorship of the card network that pushes legitimate businesses to accept payments in cryptocurrency.
There is also a second type of acceptance. From time to time, large online vendors with access to the card network also accept Bitcoins and other cryptocurrencies. Japanese online store Rakuten accepts it. It’s the same with sports teams like the San Jose Sharks and Oakland Athletics. As already mentioned, Tesla was accepting the BTC for several months, and Microsoft for several years.
Why would an ordinary online store accept cryptocurrencies such as BTC if most people will just use their MasterCard or Visa card anyway?
The calculation underlying their solution works as follows. A large percentage of the population holds cryptocurrency for speculative purposes. All speculators who own cryptocurrency appreciate the good news, as it can increase the value of their speculation. By announcing that Bitcoin will be an acceptable payment option, a retailer can receive free positive engagement from the cryptocurrency community.
Despite the fact that it is unlikely that anyone will actually use Bitcoin to make purchases, the additional public relations that the company receives more than outweigh the initial costs of creating a crypto payment gateway.
When the effect of the announcement passes after a year or two, the company quietly stops payments in Bitcoin. It’s just a marketing ploy, or a form of affinity marketing.
The calculation of this marketing trick does not always work. As Bitcoin is increasingly associated with negative issues, such as environmental damage, the marketing benefits of its adoption are far from unambiguous.
In the end, Satoshi was right that card systems work “well enough for most transactions,” and therefore Bitcoin plays only a small role in payments.
But he was wrong when he said that Bitcoin could be useful to retailers for small payments and irreversible retail payments. Instead, the PTC has turned into a payment system of last resort for legal entities censored by card networks.
And in the case of large companies that have access to the card network, they are looking for “ad effects” of Bitcoins to take advantage of the hype. According to Coinmarketrate.com , with an asset value of more than $60,000, this is a fairly profitable trick.