PLEASE ACCEPT BITCOIN AS A PAYMENT OPTION!!!

Discussion in 'Archived Topics' started by shep, Aug 17, 2014.

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  1. Satyr Hatter

    Satyr Hatter Avatar

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    Cross posted from my developer forum post per request from Bitcoin detractors

    There are several posts regarding Bitcoins in several other threads, most of them have devolved into a exchange revolving around why Bitcoins are imaginary and people dabbling in them are stupid. I am creating this thread in an effort to educate a bit about currency and processing as well as bring Dev attention to a pretty simple and immediate revenue source to Portalarium, if you are going to comment, I simply ask that you read the post in its entirety and do a minor amount of research, this is going to be a lengthy post.

    Disclaimer: I have no dog in this fight, I am not trying to sell exchange services or anything Bitcoin related. My profession is a corporate investment banker and a big part of my job is setting up treasury systems for large companies that rely heavily on merchant (credit card), currency (FX), and other exchanges. I have experience in this field and I know what I am talking about.

    Arguments for Bitcoin use

    1) It's easy to set up
    2) There are immediate and multiple exchange services available to convert coins to USD
    3) Bitcoin users are the same demographic as most gamers
    4) Documented revenue gains associated with other retailers
    5) Exchange rates are significantly less than credit cards
    6) There are no chargebacks in Bitcoin transactions
    7) Number of Bitcoin users are growing exponentially.

    Arguments against Bitcoin use

    1) Why doesn't the customer simply convert their coins to USD and then buy goods with dollars
    2) Money laundering concerns and heightened due diligence.

    Arguments for Bitcoin use

    Easy set up and exchange services:

    Setting up the ability to accept Bitcoins is fairly simple, I am going to assume Portalarium doesn't want to hold the coins themselves (and rightly so), therefore they would use a Bitcoin processor to convert Bitcoin transactions to dollars. This is significant and important for two reasons.

    1)At no time does Portalarium hold any Bitcoins or Bitcoin risk, the exchange company holds the Bitcoins and exchanges them for USD, Portalarium never sees a Bitcoin, they only see dollars hitting their bank account. This is the primary reason why several online retailers are allowing Bitcoins

    2) The transaction happens immediately with the processor taking on any risk associated with storage and accounting of the Bitcoin post transaction.

    Common Bitcoin processors: Bitcoin, Bitpay, goCoin, Coinbase, Paypal subsidiary braintree (soon)

    Bitcoin Demographics:

    According to several surveys, the average Bitcoin user is Male, between 20 and 44 years old, with full time employment and often wealthy. The typical MMO gamer is usually male (although, I will diverge here, the male demographical edge is much less in the MMO split at around 60% male and 40% female versus 92% male re: bitcoin usage), between 26 and 40 years old, with full time employment.

    Additionally, research indicates the current Bitcoin community to be a tight knit one that patronizes projects and companies that adopt and accept Bitcoins. Marketing to this demographic could be highly targeted and very effective.

    Revenue gains for other retailers applied to SOTA, accounting for one year of user base growth, and adoption in 2015.

    Disclaimer: These numbers are very subjective, I am making an attempt to quantify market opportunity, if you want to argue with my numbers you will probably be right on several accounts, I am simply using this as a baseline to demonstrate, if Bitcoin is released earlier the numbers could change, etc etc. This is simply what the numbers are, and what they are projected to do. Bitcoin could crash tomorrow and it would go to 0, but it is not showing signs of that yet, and if it did, SOTA would have no risk to the currency (outlined above)

    A case study (Overstock, Newegg, TigerDirect, etc) reveals that Bitcoin acceptance typically provides an immediate pop in revenue equal to around 2% of weekly sales of a retailer type company, regular 1% increases in revenue with a tapering off and consistent .3% increases in revenue. However, this data was gathered in an environment with a significantly less prolific Bitcoin user base. Jan 2014. 950,000 users (I will use number of my wallet users, I realize this is not a customer count, but it's a trackable demographic.) compared to today with 2,170,315 users, and a projected 5-11 million users by the end of 2014 (okay that number is very volatile and subjective, but if we keep the same growth rate over 9 months (2.28x) and we expect SOTA to release a year from now, and let's say SOTA will do 4 million revenue in that year( who knows, throwing it out there, seems like a reasonable projection as we get closer to release, candidly, it'll probably be MUCH higher once they have a finished product, but again, let's be conservative), we would expect to have 4,948,318 users by next June and 6,531,779 by release (6.87 times the user base at overstock launch) (yes, I applied the remaining 3 month multiple to 4,948,318, I feel that's slightly more accurate since I am vastly underestimating projections)

    After release, with those revenue numbers, with the adoption of Bitcoin, as a percentage of revenue with that user base we could expect to see weekly sales at that point (4mm/52) of SOTA be 76,923. We would expect an immediate pop of 13.74% that number or 10,569, then 6.87% for the next few months or 5,284 per week (63,415 over 3 months), then 3 months later we would expect roughly 1.8% ongoing increases in revenue or 1,384/week. (49,846 over 9 months). In total, $123,830 in new revenue, Mind you actual Bitcoin projects are for wildly exponential growth, not a static 2.28, this is less than my initial 200,000 guess, but I'm using much more conservative user base growth numbers than posted on the internet.

    Exchange Rates:

    Typical merchant (credit card) exchange rates have three points where they charge 1) the card issuer (VISA, etc) gets a cut 2) the issuing bank (Chase, etc) gets a cut 3) the merchant processor (First data, Paypal, etc) gets a cut. Altogether it's about 3% of every transaction.

    Bitcoin averages 1-1.5% of an exchange fee, so it's actually more profitable to accept Bitcoins in this manner, as the only one in the chain who gets a cut is the processor.

    Chargebacks:

    Additionally, with credit card transactions, there is a window by which the card user can allege fraud and therefore chargeback the merchant, this percentage is small, but it does exist, and the merchant typically takes a big loss in card not present transactions.

    In Bitcoin transaction, there is no opportunity to charge back, so it is better for the merchant and worse for the consumer.

    User growth

    As outlined in detail above, Bitcoin user bases are growing at somewhere between 2.28 and 6.1x per year.

    Arguments Against Bitcoin use:

    Why doesn't the user convert their bitcoins to USD and use those to buy goods?

    1) It creates an extra step for the customer, if you had to send a check or use specific credit cards on ebay it would impact their bottom line, customers want a simple way to do business with an entity.

    2) it is more expensive to the merchant (Portalarium) for them to do that 1.5% exchange versus 3%

    3) Consumer protection allows for chargebacks in credit card transactions, not in Bitcoin transactions.

    4) The processor ALREADY DOES THIS, instantaneously, Portalarium at no point has to convert anything.

    Isn't there Money Laundering risk associated with Bitcoin transactions? Currency risk? etc?

    Yes there is, but since Portalarium is simply using a processor to convert the currency, they are not treated as a Money Service Business. The processor is treated as one and has to enact enhanced due diligence. Additionally, since transactions would associate goods with a particular user ID, potential laundering would be foolish as it would create a paper trail on a cryptocurrency (bad).

    Conclusion:

    Portalarium has no risk in adding Bitcoins, it will take them little to no time to do it, and they will recognize revenue gains. It may not be a hell of a lot initially, but the user base is growing very quickly, and acceptance of Bitcoins is growing as well. It's cheaper to them since there are less people involved in the transaction, and they have (in my opinion) less fraud risk since the user can't allege fraud. If Bitcoins go to hell, the processor takes all the risk, and Portalarium is not on the hook for anything.

    All upside, no downside, quick, and easy.
     
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  2. adaamhimself

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    So, if someone does launder money through Portalarium, are Portalarium's assets subject to siezure?
     
  3. Satyr Hatter

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    Knew someone would latch onto that :)

    Not at all, they don't have risk, it's the same as any risk in a retail transaction, only the bit coin processor (as do all merchant processors by the way) has to register as a money service business (MSB). The risk to portalarium in this regard is the same as accepting a credit card.
     
  4. adaamhimself

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    Your numbers and reasoning lack context.

    You cannot compare a niche product like Shroud of the Avatar to online retailers like Newegg or Tiger Direct. There is some overlap but the markets are absolutely not the same, and if you think they are you're either fooling yourself or you're trying to sell a bill of goods.

    Your numbers are also complete fiction. You're assuming a guaranteed market based on a number of users. This is ludicrous for a niche product. There might be 300 million people in the United States, but that doesn't mean that the market for Shroud of the Avatar is that large. You also have to account for the fact that those who are willing and keen to invest any sort of money into this project have already done so and done so with real money.

    Now, I am in no way saying that Portalarium should not accept payments processed through a third party. That's not the point. This started with a simple question that you, Scotch, twisted into a long winded bitcoin sermon. I regret now giving you the fuel to enable your preaching. At any rate, if Portalarium wants to soak a few bitcoiners for a few lower level pledges worth of cash then they can go right ahead.

    My problem, however, lies with the fact that you're blatantly trying to mislead people into thinking that bitcoin is some kind of golden goose with a lot of fast talking and faulty assumptions.
     
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  5. Satyr Hatter

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    I outlined what the numbers were based on, and that they include a lot of assumptions, I've even spelled out the assumptions I've made. You've outlined your disagreements with me and I accept that. I simply think you're wrong, and I have detailed my rationale. I take particular offence at you attacking my character and say that I am purposely trying to mislead people. If you want to continue debate that Is fine, but you're not providing anything to this debate other than, "Nanananana,you're wrong" no facts, no numbers, nothing other than you're wrong because I say so. So if you've got nothing substantive to add to this thread kindly step out of the way with your objections noted and Portalarium will make their own decisions on the matter.
     
  6. Jhorus

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    Because for the "bitcoiner", sending bitcoins natively takes less time than to send a paypal payment. Converting to USD takes effort. (yes, I have done this method)
    1. you must go to a site that people buy/sell bitcoins
    2. find someone willing to buy (not always possible locally, and not always using your preferred method, so you sometimes have to wait a while finding someone)
    3. keep looking to find the best deal from a reputable person
    4. do the transaction.
    5. If they're not online at the time, you're looking at potential hours
    6. Get USD, either in cash or transferred to your account (depending on site and person you're trading with)
    7. Next business day deposit cash into bank
    8. Do transaction with Portalarium
    (note, the payment processor does the above steps as well, all the hard work is done by them)

    Doing so natively is as follows:
    1. When checking out, select bitcoin option
    2. Copy/paste address into your bitcoin client
    3. Type amount
    4. Hit send
    5. Most large companies using bitcoin accept the payment within milliseconds, smaller companies/individuals may wait for the transaction to be verified by the network (10 minutes average, I've found)


    There is a small amount of effort for Portalarium setting up their accounts initially (but no more than for a credit card company) to accept payment from a payment processor, but when they do, they get the USD the very next day (situation listed above at top of my post). But using a credit card, they don't get their cash until a few days later, and someone like bitpay charges only 1% fee (at least they did when they first started, I think they have a free option now), whereas a credit card company charges 3%. As noted above, all the hard work is done by the payment processor, who buys/sells bitcoins.

    So less fees for Portalarium, faster turn-around time for a "bitcoiner", no legal hassle for Portalarium.

    I'm curious what beef you have with people who want to spend money and make Portalarium more money?
     
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  7. Satyr Hatter

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    I'd also point out that the demographics for bitcoin and gaming are MUCH more aligned than bitcoin and a general retailer market(included in the post) It's very probable for a much higher percentage of adoption than would be in the case of a retailer. I didn't not put that assumption into the thread because I thought a more conservative approach to be more acceptable. At the very least I stand by that percentage of adoption or for a higher percentage of adoption.
     
  8. adaamhimself

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    So people would rather not purchase Portalarium's products than to spend time and convert their bitcoins? Doesn't seem like a very motivated market.

    I have no problem with Portalarium accepting bitcoiners money. I've said as much.
     
  9. Duke Death-Knell

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    Bitcoin has an issue they lock down the exchange and freeze your money. Some people still have not gotten their money back from the last time.
    No currency backing it.
    Company would have to be open to actually losing the money associated with bitcoin.

    NO THANKS!
     
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  10. Jhorus

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    I'm just saying it takes effort, and depending on the amount of effort, a person has less motivation to completing a transaction. 90% of my bitcoins transactions have been direct, but I personally have sold bitcoins and used the money for SotA. It's why I have a Knight Marshal account instead of my original Adventurer pledge. But it did take effort, and I had to do it in chunks (usually because the person selling locally would only do so with small amounts), and it was semi-frustrating. If bitcoins were accepted right now, I would be pledge Lord or higher as we speak. :)

    Also, people using foreign currencies get an extra fee in converting their standard currency into USD (whether they pay with credit card or paypal). If they use bitcoins, they gain the money they would have lost in that conversion fee.
     
  11. Jhorus

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    The only people losing money would be bitpay (or coin base). Portalarium gets their cash daily.
     
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  12. Koldar

    Koldar Avatar

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    Merged duplicate threads.

    EDIT: I have also removed much off topic banter. Consider this your warning if your post was moderated.
     
  13. Dermott

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    While Portalarium COULD hop on the Bitcoin train (disclosure: I'm testing it out myself, mainly to see if I can get something going based on time/effort and not a monetary investment), but the BTC owners can also convert to Dollars (or whatever) and purchase directly already.

    Plus there are probably tax issues and so forth that need to be worked out before they set something up via BTC, so it's probably best that Portalarium takes the time to determine all of the legal issues involved, find above-board BTC systems and partners and so forth.

    Finally, Lord British has been on video in favor of BTC as a concept, so it may not be a lost cause.

    As someone starting out on the BTC Train, Portalarium accepting BTC or not isn't THAT big of an issue although it would be interesting to see how they do it, but I also understand there are cautions to take regarding the currency and some of the issues that have arisen both legal (taxes, fluid exchange rates, etc) and illegal (Dark-Web sites like Silk Road, etc).
     
  14. Satyr Hatter

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    Dermott,

    I imagine they'd use a processor to exchange bit coins for dollars, in which case they'd tax it as ordinary income and be squeaky clean
     
  15. Satan Himself

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    Curious to know the developers' view on this issue. I imagine they'd accept Bitcoin if they didn't have any meaningful costs of time and money. But my guess is that they won't want to deal with it.

    Still don't understand why some people feel ..... almost entitled ...... to use Bitcoin, and that merchants who don't accept it are somehow stupid and flawed. Is it really so difficult to just pay the way 99.9% of the world pays?

    And I don't buy, at all, the idea that anyone will actually shun this site if it doesn't accept Bitcoin. Hence no lost revenue. Hence no need to accept Bitcoin.
     
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  16. Phredicon

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    If you haven't seen it, and I'm not sure if it's been linked to in this thread already, but LB at least has spoke about his thoughts on bitcoin in an interview:

    https://shroudoftheavatar.com/forum...bitcoin-interview-with-richard-garriott.7875/

    Also, several people who seem quite educated on the two sides debate it's pros and cons generally.

    ETA - Damn you Smack for beating me to it!
     
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  17. Satyr Hatter

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    As much as I disagree with some of the posts here, there has been good discourse and it's given the devs plenty to think about. I personally sit on the pro bitcoin side, but your right, it's a topic they'll need to research before moving forward. Mark my words though, I bet sota eventually accepts bitcoins
     
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  18. adaamhimself

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    The ironic bit here is that even if Portalarium does accept bitpay and bitcoiners are able to purchase pledges through it you're still implicitly conceeding that USD is still preferable and desired; also that the straight exchange of bitcoins for pledges is undesirable and risky.
     
  19. Satan Himself

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    I bet Bitcoin falls even further out of favor, and SOTA never accepts them.

    Starting bet = 1 snowball (symbolizing Bitcoin's chances in hell of surviving as a viable currency).
     
  20. adaamhimself

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    Shhh. This is a good way for bitcoiners to exchange their funbucks for actual things of value!
     
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