The digital currency website CryptoCoinsNews posted a nice infographic about the benefits of BitCoin as a digital currency. They also delved into the future of marketplace transactions, but the problem with these types of infographics is that there’s too much information packed into a densely formatted poster-sized image. By the time you reach the P2P / BlockChain / Cryptography section of the poster, your eyes begin to glaze over (or you nod and scroll if you’re already a Bitcoin convert). There’s one aspect of the poster that I wanted to pull out so that it didn’t get lost:
When you buy something with a credit card, the merchant has to pay a transaction fee of around 3% for this privilege. That’s because credit card companies like MasterCard and Visa own these networks. The 3% is not only for upkeep of the digital network, but for fraud reimbursements, providing card member benefits, etc. The customer might think it’s a good deal for them, as it’s the merchant who is bearing the brunt of the transaction cost. But these transaction costs are calculated into the cost of doing business by the merchant, and what the customer might not realize is that what they have just purchased already has the transaction charge calculated into the price. That’s why furniture stores / electronic stores (stores that have purchase prices typically greater than $500) often give a cash discount from the published price.
Now contrast that to the same purchase made with Bitcoin. The merchant gets all the money, while the consumer pays a negligible amount as a fee for the miners to upkeep the Bitcoin network (.0001 btc is 6 cents at current exchange rates). This transaction cost is negligible and doesn’t cause the price of the underlying item to increase in price just for the privilege of using the payment network. The Bitcoin transaction network is P2P and is more fair / less taxing than those of credit card companies. If there’s one thing I hope Bitcoin revolutionizes, it’s the onerous nature that both banks (with their overdraft fees) and credit cards exert on the average consumer. In 5 years time things will look very different for consumers, hopefully for the better.