I just visited a retail marijuana store that uses Litecoin to accept debit cards
After all this time watching cryptocurrency from a distance, I have finally seen a real world use case.
Marijuana is legal in this US state, however national banks are not allowed to service the marijuana industry due to federal law. Therefore all card processing is not available to the retail outlets. It’s only cash transactions at the retail level.
Until today. Today I was asked if I wanted to pay with a debit card. When I asked how, he said they used litecoin. So I imagine that the card is being run by a company which then converts it to litecoin to pay the merchant. Anyone have any clue on what that might cost the merchant as far as percentage?
I thought I would share this because after hearing all hype rollercoaster regarding cryptocurrency, I have finally seen a somewhat legitimate use of it in the real world.
Do you see any other use cases of crypto out in the wild these days?
One of the main theoretical benefits of cryptocurrenty is that it can offer a transaction cost that is fractions of a percent, severely undercutting all other forms of payment. It can also do this worldwide with total anonymity for both parties in the transaction. Even if the payment processor is charging a mere 2% fee, they'll still be able to undercut say Visa, which I believe is around 3% and one of the lowest out there - and that 2% is almost pure profit for the payment processor. That reduction in cost and ability to end-run around all forms of regulation regarding payments and remittance is the most attractive thing about cryptocurrency, and one of the most dangerous since the typical protections are also missing.
Crypto transactions are irreversible by design, as irreversible as leaving a briefcase full of money on a train platform - if someone walks off with it, you're fucked. If you fail to protect your wallet or lose the keys, you're fucked. If you enter into a bad transaction and get ripped off, you're fucked. There are no chargebacks, there is no protection. Frankly, most people have never had that level of responsibility for their own money in this modern era and they aren't well prepared for it. They abdicated their financial security to banks and governments and promptly forgot it existed.
You'll find it's being adopted more in places that lack existing banking and payment systems - which is exactly why your dispensary was using it. They aren't permitted to use the traditional systems, so they opt for crypto. It's also on the rise in underdeveloped nations lacking the same institutions (or those lacking trust in those institutions, like Greece). Once some form of low-cost low-bandwidth wireless network appears, crypto begins to emerge to service the needs of those without reliable banking.
I've seen it in the wild myself, for a while it was making the rounds at some bars I visited - mostly as a neato new toy rather than a necessity. Many point-of-sale vendors have begun to integrate it into their systems as well, so in the future it'll become ubiquitous without setup hassles. I expect crypto will quietly seep in like that everywhere, and one crypto is pretty much the same as another at this level, so supporting all of them and any new future coins is really no more difficult than building in the support for the first one (which has been primarily BTC and LTC thus far).
All that said, I don't expect most people to become familiar with this stuff and use it regularly unless they haven't got other options. Someday, someone will solve the 'wallet problem' with something secure and user-friendly (grandpa-friendly, not tech-geek-friendly which is all we have now). Some new-era payment processor will go on the rise supporting this stuff, and we'll all get to sit back and enjoy the chaos as the major financial institutions grapple with this new threat to their business models.
The colossal failure of early crypto institutions (like MtGox) has put that all off a bit by shaking confidence. Turns out real security has jack shit to do with the crypto itself, and none of the early players took world-bank and wall-street levels of security seriously. Those are $300k+/yr programming and security jobs, and not something a kid in his pajamas can make serious inroads with. When real money is on the line, the real hackers will come for it, and those systems will be under constant sustained attack for the entirety of their existence by some of the most highly skilled attackers out there. So far, no crypto payment processors have risen to that level of challenge - but someone will, someday.
Ah, that's pretty interesting. I've seen plenty of use for crypto out in the real world - from cafes and restaurants to new apps coming out with crypto microtransactions. The nice thing about the latter is that those are two-way transactions - the time/crypto you spend on these apps/games can be used to get crypto items which are then tradable with other crypto apps/games. So it's almost like creating a micro-economy of crypto apps.
I wonder how your dispensary gets taxed though - both the litecoin income and the litecoin valuation are two separate taxable events (I think).
I'd be interested to see how often those cafes and restaurants have actually been paid with bitcoin. I saw this post by a locksmith in the UK a couple of months ago, saying that they've been able to accept bitcoin for about 4 and a half years and nobody has ever used it.
Even in much more technical areas, it still doesn't seem to get a significant amount of use compared to the traditional options. There are a lot of cryptocurrency enthusiasts on reddit, but when we implemented the ability to buy reddit gold with bitcoin, I posted some stats a few months later, and bitcoin only represented about 3% of transactions/revenue. As Yishan said in his original stats post:
That matches with my experience as well. The places I've seen using it are doing it for the novelty, and not much for real business. I do know one bartender who retired this way, though - by saving all the bitcoins he got paid when it was $20/coin and selling when it was well into the thousands. While that makes for a nice get-rich-quick story, it's not exactly a compelling case for day to day financial transactions.
As I understand it, the tax codes where they exist to deal with crypto are a colossal mess, made by people who have little to no understanding of crypto attempting to shoehorn this new paradigm into an existing framework. There are plenty of people who use it specifically because their wealth can't be tracked or taxed or frozen or even ascertained by third parties, and that isn't likely to change no matter what laws are made. Technology rarely cares about the law, and by the time the law catches up, the tech has moved on yet again, bit of a catch-22.
Moving to a more sales and property oriented tax system would help get around this problem, as the crypto can be taxed when it is spent through the payment processors and converted to/from other crypto and fiat currencies - and property can't be hidden, unlike crypto itself. That doesn't address the investment-like nature of some cryptos, though. Frankly, I expect the tax man to have about as much success here as the RIAA/MPAA have had shutting down piracy. Crypto is a nuclear option when it comes to wealth much like bittorrent is for copyright.
Once crypto is more widely adopted, laundering services will arise on the networks that'll make any sort of address-tracing into an impossible computational problem. Imagine every bitcoin (or fraction thereof) spent in the next ten minutes, by everyone spending it worldwide, all goes into a big bucket, and then everyone draws out the exact same amount they put in - but it's different coins than the ones they put in, like dollars with different serial numbers.
That can still be traced in theory, if you have NSA-levels of computing and don't mind a severe time lag deciphering it all - but the bigger that pot, the more people using it, the harder that becomes, until it eventually outpaces even theoretical hardware - and that's without the laundering service providing additional levels of obfuscation, which they certainly could do. This is I think why governments and banks are so leery of crypto - it represents a loss of control over finance, even more than cash itself since you can't send cash anonymously through the air to the other side of the planet to someone you don't even know, or randomize your cash's serial numbers and perfectly conceal all associated accounts while spending it.
Crypto is going to have to invent its own paradigm. I expect that'll arise far from anywhere that central banking is prevalent, as people without banks re-invent banking for themselves. Meanwhile it'll be branded as a tool for criminals by governments and bankers, at the same time it leads to big improvements in the lives of people without reliable banks and governments.
Solving the crypto tax problem is important, just like solving the piracy problem. We now know that convenience beats piracy. I wonder, could convenience and ease of use make the same inroads with tax systems? Time will tell.
If the day ever comes where crypto becomes ubiquitous enough that no one needs to use fiat currency, so that no one ever needs to convert to or from government-backed money, that's doomsday for the world of finance. That conversion point is currently inescapable and it is really the only place the powers that be can exert real control. If crypto becomes the standard (which would imply that everyone has wireless internet and a mobile computer much like everyone has a credit card or debit card today) the only rules that will exist are the ones baked into each crypto itself... and right now, that's not much.
Don't you just love emerging tech and paradigm-upending grey areas? ;)