Consumers Begin Revolting, Bitcoin Is Not Visa

Gavin Andressen stated early on in his pursuit of a hard limit that he wanted Bitcoin to scale to Visa levels, stating the payment network's transaction throughput as a frame of reference. There is a common misconception about the structure of traditional electronic payment networks – this has caused the lemmings of the Bitcoin world to set an unrealistic goal of competing with an industry that is filled with holes. Bitcoin's decentralized ledger prevents it from ever being utilized as a retail payment network directly.

The biggest misconception is about Visa itself. Visa does not settle account balances nor does it adjust the available balances of card holders and merchants. VisaNet, as it has come to be known, is a financial institution intranet that allows payment processors to easily communicate with one another and the financial institutions that hold merchant and consumer funds. When a customer swipes their debit card at a merchant point of sale system, the merchants card terminal contacts VisaNet to contact the payment processor of the card issuer to authorize the transfer. The card issuer's payment processor responds to Visa's request authorizing whether or not the card holder has the funds to cover the transaction or if the card is flagged as stolen. This message is passed back through VisaNet to the merchant's payment processor and inevitably to the point of sale. Every night all of the transactions submitted to a payment processor through VisaNet are reconciled with batch jobs to schedule an ACH settlement between the institutions holding the funds to be transferred. After funds are released from the clearing house the ledger balance of the accounts are updated. This process can sometimes take days depending on backlog.

Gavin, Hearn and their vocal band of consumers are not comparing like things. They instead live in a world where the alternatives are "do this and hope it works or do nothing at all". They don't compare like things, like sane people.

It is merely coincidental Bitcoin can be used for retail payments right now in its youth, but this may not always be the case. This was predicted and explained on Trilema:

On a third hand, from a technical perspective Bitcoin is neither designed to nor capable to support retail level transactions. The credit card processors (Visa, Mastercard, AmEx etc) cleared something to the tune of one billion transactions in 2010. At an average size of a very conservative 600 bytes per transaction that would have added 600 Gb to the blockchain. At roughly 1% of that for its entire 4 year history Bitcoin is already too heavy, causing serious problems for people trying to start a new client. Moreover the year of 2010 contained about 50k blocks, which at most may carry 1 Mb each : even if each block was full Bitcoin could have at most carried 10% of that sort of volume.

For the reasons noted and for many other reasons I am pretty much satisfied that Bitcoin is not nor will it ever be a direct means of payment for retail anything. You may end up paying for a month's worth of coffee vouchers at your favourite coffee shop via Bitcoin (so shop scrip built on top of Bitcoin), you may end up settling your accounts monthly at the restaurant in Bitcoin (so store credit built on top of Bitcoin), you will probably cash into whatever local currency from Bitcoin (be it Unified Standard Dubaloos or Universally Simplified Dosidoes or whatever else) but all that is entirely different a story.

Bitcoin's value proposition lies in its fixed inflation. No number of dollars meeting the market can increase the supply schedule. Trilema clearly explains:

There's pretty much literally nothing those extra dollars nobody wants can do to increase the Bitcoin supply. It's very, very inelastic, and consequently the only stability point is when equilibrium is reached. Two billion dollars divided by 600`000 Bitcoins comes to three thousand dollars and change per Bitcoin.

Bitcoin is faced with hitting another inelastic limit in its maximum transaction volume. Consumers have come to expect to get what they demand – "the customer is always right". As such consumers have begun to revolt due to them not getting their demand of Bitcoin competing with Visa or as Trilema predicted in 2013:

…one of them is that consumers revolt, entrepreneurs intervene, before the end of 2015 there's about a thousand to a million different Bitcoin forks, each with its ten million-ish monetary base worth about a dollar, on global average. The size of the inter-Bitcoins market, the complexity and confusion ensuing makes pretty much everything unmanageable for the "ordinary person". Hedge funds and banks (the ones a little ahead of using Excel) that trade in this murky complexity make a killing and become the principal driver of economic growth worldwide. Not only is the consumer about as screwed as is currently the case, but to everyone's benefit he has just been clearly proven yet again that revolt = being fucked in the ass harder, longer, with a thicker implement with sharper barbs on it. Also conveniently, the thing to revolt at has become much more vague and intangible. On the balance of probabilities this would seem the most likely outcome, strictly because history unerringly flows in that direction which most cruelly rapes the "average person".

Many consumers have exclaimed they will leave Bitcoin to go to an altcoin which suits their "needs" if they don't get their way in Bitcoin being perverted into a system to compete with Visa. What they don't realize is the consequences they will face if they choose this option.

4 thoughts on “Consumers Begin Revolting, Bitcoin Is Not Visa

  1. It's worth noting that Visa does not provide a unit of account. Also that the company is well situated to provide off-chain settlement services.

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