Re: Nothing backs Bitcoin
Excellent Response Dandrick!
The issue is partly the monopoly status of the main payment networks, but more so the ease with which international transactions are completed in Bitcoin. I'll give you a real world example:
I sometimes buy commodity computer hardware from China for my evaluation lab or for other purposes like iPhone repair. Until the advent of cryptocurrency, I typically used Western Union for these transactions, which while effective, imposes an even harsher vigorish than credit card processing transactions.
I don't fully understand the hostile microeconomic climate in other nations that drives them to use services like western union over credit card payments, but the feedback I get is that these vendors have a very difficult time dealing with fees and security measures that seem trivial to US customers, so they use privatized currency exchanges with large fees rather than just accept my card. Yet these same vendors would, before the recent collapse in value, accept Bitcoin happily. Chinese acceptance of Bitcoin is skyrocketing, and a part of that has got to be the underdeveloped or individually inaccessible nature of payment processing networks, even in economically robust countries like China, never mind developing nations in the third world.
The world is getting smaller economically, and while existing international financial frameworks work acceptably for big businesses who can shoulder the fees, responsibilities and obligations of accepting international payments, the small company or individual continues to work against signficiant difficulty in conducting legitimate business worldwide in the context of our existing financial framework. Nevermind transactional anonymity, the present discussion is about usability and global trade.
The Euro, problems inclusive, has done wonders for facilitating commerce in EU countries, but as we move toward an increasingly global economy, we need payment frameworks that allow individuals to deal with one another on a fair basis, without pejorative fees, anywhere in the world. This is my hope for Bitcoin and other cryptocurrencies: that they will come to fill a much needed niche in international trade economics not just between organizations but between individuals. This is also why I see intrinsic value to the idea of Bitcoin, even while maintaining concerns about the widespread adoption and regulation of cryptocurrencies in general.
To your point about competition, I am also enthused by the idea that Bitcoin may shake up credit processing frameworks. As a small business owner, I cringe at the transaction fees paypal assesses when I collect invoices electronically. Other small businesses for whom I consult feel similarly: the cost of credit processing transactions is "perfect" from a payment processor standpoint: it's high enough that they make excellent money handling transactions and just barely low enough that small businesses will grudgingly swallow the losses. The credit card payment processing market is stagnant and well controlled by a small group of insiders, unorthodox value structures like Bitcoin challenge our assumptions about how transactions must be conducted and inject vital competition into a stagnant market.
Bitcoin asks us to think: are we happy with these structures? Are these organizations adding value? Could we do this differently? And in that respect it provides a much needed catalyst for innovation in a needy and immature international market.
Nobody can assert that Bitcoin doesn't have a long way to go in satisfying the needs of a robust, global, ubiquitous and secured trading currency. But Bitcoin is just the first iteration of a government agnostic, international, value based trade currency. Even if Bitcoin fails to survive as a viable international currency or to lower payment processing rates domestically, it has still shown the world that the way we do things today isn't the only way, and that there is most certainly room for improvement.