Last week I wrote about the big Apple payments reveal and how I believed it was a net negative for Bitcoin. I’ll double down on that argument today in the wake of the introduction of the iPhone 6, Apple Pay and Apple Watch (which I’m more excited about than the iPad, although I’m sure the first version will suck), and I’ll explain why mobile commerce and point-of-sale retail will probably be crappy areas for bitcoin companies to invest in going forward — especially if they operate in a developed economy.
But first, the good news…
Apple is going to have a monumental impact in converting people from their leather wallets to mobile ones. That will be true for both mobile purchases and PoS commerce. Tens if not hundreds of millions of global consumers are probably going to use the iPhone’s new mobile wallet in the future and thousands of large merchants will invest in the mobile and physical infrastructure to capture that new business.
So thank you Apple for helping mobile wallets “tip” to the mainstream. That’s good for your company, good for your users, and maybe even good for bitcoin, the currency, which could easily become another Apple Pay payment method in the future.
It’s not so good for bitcoin as a payment rail, though.
In fact, I had to scratch my head a bit at the derision so many bitcoiners directed towards Apple in the wake of the formal announcement today. At first glance, Apple’s new bet on “tokenization” systems from leading payment technology companies like FirstData, TSYS and Visa appears to solve many of the same security issues as bitcoin. Apple added a “secure element” chip to its new phone, which encrypts card credentials and spits that information out to merchants via near-field communication in the form of new randomly generated account numbers - kind of like bitcoin’s public keys. Apple never touches the information (although I’m sure the NSA will make them create a backdoor), so the transaction information settles between the merchant and the user’s bank as it normally would - with a drastically reduced risk for fraud or theft.
Anonymous? No. Secure and convenient? Yes.
How quick we are to forget that killer apps in payments are about speed, convenience and security, not anonymity per se. Most of us (myself included) won’t care that our banks can still track our spending habits. I just don’t want Target losing my card info, and I want my breakfast burrito 30 seconds faster at the McDonald’s drive thru.
Apple Pay is going to allow a) instant transactions with b) better security at c) cheaper costs to merchants (my bet), and you’re telling me that bitcoin still has a shot at being a better B2C payment rail anytime soon? I’m not buying it.
All this said, there are some pretty big caveats here.
I still believe there are many other applications for which bitcoin is superior - particularly in the developing world and for the underbanked. There is also a massive B2B opportunity to build applications which facilitate cross-border transactions that require currency conversions. Even though remittance applications might still be some time away from regulatory or legal viability, bitcoin is still a pretty sweet peer-to-peer, informal settlement method as well. In a world with Apple Pay, it would be nice to see the major bitcoin wallets and payment processors focus on these applications in addition to the niche B2C mobile experiences that bitcoin is uniquely qualified to handle - micro-transactions, m-of-n transactions, etc.
I just don’t see Bitcoin payment technology taking off otherwise as a non-gimmicky B2C payments solution. I got a pretty big kick out of Xapo’s Wences Casares and his quote from his recent interview with The Verge where he called B2C bitcoin commerce a “side show for idiots.” I hope that sentiment becomes more mainstream. It’s healthy because it’s true.
I, for one, plan to use Apple Pay — not bitcoin — for next year’s Uber rides. Apple has simply done it better.*
There’s an obvious part two to this post, which is also a good follow-up from my post yesterday. It has to do with bitcoin’s health as an investment. I’ll work on it tonight and shoot to post Thursday. Tomorrow I’m going to talk about our friends at NYDFS.
Speaking of bitcoin companies and Apple, I’m interested to see how / whether Gyft gets integrated into Apple Pay given First Data’s recent acquisition. I have no idea. Haven’t given it much thought, but seems like there could be interesting possibilities.
Final thought on bitcoin for B2C commerce. It’s going to take a while to actually gobble up the raw merchant data, but I think Overstock presents an early and telling case study about the over-optimism of bitcoin as a sustainable source of commerce. Remember when Patrick Byrne said that he expected bitcoin to drive $15-20 million in year one sales for Overstock back in the first quarter? He did scope shift earlier this summer by highlighting that bitcoin would add $0.04 to earnings, while quietly updating his bitcoin sales forecast to “as much as $8 million.” That’s a 50% reduction at least and it reflects anecdotally what we already know to be true: merchants get a bitcoin marketing bump initially, but it might not be a sustainably attractive payment method.
Final, final thought. I’m still a bitcoin mega-bull, but I’m also a realist.
Money 20/20 (November 2-5 in Las Vegas)
Money20/20 is the world’s largest event enabling payments and financial services innovation for ‘anywhere, anytime’ connected commerce at the intersection of mobile, retail, marketing services, data and technology. With 6,500+ attendees, including more than 500 CEOs, from over 2,250 companies and 50 countries, Money20/20 is critical to realizing the vision of disruptive ways in which consumers and businesses manage, spend and borrow money. The next Money20/20 will be held on Nov. 2-5, 2014 in Las Vegas, and will be preceded by the Money20/20 Hackathon, which runs Nov. 1-2. Register here!
Inside Bitcoins Conference (September 15-16 in London and October 5-7 in Las Vegas)
The CCN has partnered with Inside Bitcoins to offer 50% discounts on conference passes to students! Just use the code COLLEGECRYPTOSTUDENTS. (You will need to provide info that you are a full-time student, so send an email to firstname.lastname@example.org with copy of your student pass after registering.) Inside Bitcoins London and Las Vegas are the latest Media Bistro conferences on the calendar following shows this year in Berlin, Hong Kong, and New York. For more information on the London show, visit here. For more information on Vegas, you can sign up here.
Jobs, Jobs, Jobs
Have a position you’re dying to fill? You can pay to post it here, in the Bit’s new jobs section.
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Today’s Tid Bits
A Hacker Has Taken Over Bitcoin Founder Satoshi Nakamoto’s Email
A hacker, named Jeffrey, has allegedly taken over Satoshi Nakamoto’s email, saying he will sell Nakamoto’s secrets for 25 bitcoins. The hacker has been in correspondence with WIRED and claimed Satoshi’s email messages date back to 2011. The email address is email@example.com, and the hacker claims the primary gmx address made Satoshi’s email an easy target. Jeffrey has not yet provided any evidence to support his claims, and it is not yet clear what information the hacker really has.
OKPay ‘Ordered’ to Hand Over Customers’ $6.1 Million to Mt Gox
OKPay, a payment-processing firm, has recently been forced to pay $6,014,910 to Mt. Gox, the now defunct bitcoin exchange. The roughly $6.1m consisted of individual deposits from OKPay customers to Mt. Gox, in the period preceding the exchange’s collapse. Following the collapse, the money sat in limbo in a Mt. Gox owned account. OKPay intended on returning the deposits to its customers, but due to a court decision in the British Virgin Islands (where OKPay is registered) the amount now legally belongs to Mt. Gox.
Blockchain Adds Digital Currency Expert and Boy Band Star Marco Santori as Global Policy Counsel
Blockchain has retained Marco Santori, a well-known legal expert in digital currencies, as its first in-house lawyer for its global policy counsel. Santori will be moving to the law firm Pillsbury Winthrop Shaw Pittman from Nesenoff & Miltenberg. Santori is also the chairman of the Bitcoin Foundation’s regulatory affairs committee. Santori will be working to get government officials and regulators comfortable with bitcoin and the Blockchain.
Bitcoin Mining Company GAWMiners Sold More Than $1 Million in 24 Hours
GAWMiners sold $1 million in digital cloud miners, Hashlet Solos, in 24 hours. The Hashlet Solors were created, according to CEO of GAWMiners Josh Garza, to “tip, the scale back in favor of individual miners.” Now, GAWMiners is planning to release the Hashlet Gensis SHA-256 miners to enhance individual bitcoin mining profitability in the cloud.
BitVC Kicks Off Bitcoin Futures Platform with Trading Contest
The BitVC platform, owned by bitcoin exchange Huobi, will be launching a bitcoin futures trading feature. The site will be hosting a 10-day simulated trading competition to publicize the launch. The top 50 traders in the competition have the possibility of winning prizes, but winners must turn their earned winnings, which will be in real trading accounts, intro profits to actually pocket the prizes.
BitPay Opens Larger Amsterdam Office, To Deal With Growth
Yesterday, BitPay announced that they would be opening a larger office in Amsterdam, Netherlands to deal with explosive growth in Europe. The new office will be the headquarters for BitPay’s European operations. BitPay has processed over 28 million euros worth of bitcoin payments in the past year. BitPay now has five offices internationally with about 75 employees. BitPay also announced that a former Senior Compliance and Risk Consultant at PWC will now be working as a Compliance Specialist for BitPay.