Feature Friday: US Dollar Wallet
My colleague Joel told me he doesn’t own any bitcoin right now. Instead he has a “USD Wallet” on Coinbase and when he needs to spend or send bitcoin, he just does that out of his USD wallet.
So I decided to set one up myself. I now have three accounts on Coinbase. A bitcoin denominated wallet, a USD denominated wallet, and the vault where I keep most of my bitcoin (I don’t own much, around 30 bitcoin in total).
The recent slump in price for Bitcoin revives the issue for many of the price volatility of owning bitcoin. Some want that. They are speculators who think the price of Bitcoin will increase substantially as the technology is broadly adopted. That may well happen. But others, like me, hold bitcoin so that I can use to it spend money and send money. For them, having their bitcoin denominated in dollars makes a lot of sense. Joel is one of those people. I could become one, but for now I’m happy to do it both ways.
Coinbase has had a USD wallet since October 2014, but it has not been available in many states as a result of regulatory issues. Coinbase recently added New York State customers to the USD wallet which is why I was able to add it to my account.
If you own a lot of bitcoin and are concerned about price volatility, you might consider putting it in a dollar denominated account on Coinbase. You can still do everything with your bitcoin you want to do, but you can now do it in dollars. If you have stayed away from bitcoin because of the price issues, you now have a way to “pay with bitcoin” without taking price risk.
If you want to try it you visit your account or set up an account at Coinbase.
Rather than a way to “own bitcoin” I would have said “pay in bitcoin” without taking price risk (of owernship)
good edit. i will adjust. thanks!
What is the advantage to paying in bitcoin? You have way more legal protections paying with a crefdit card. You have liability for fraud (not just improper charges, but you can legally challenge the charge / dispute if the service is horrendously terrible / not as advertised etc.). The only economic efficiency that I see (could be off base here) is in theory bitcoin could reduce transaction fee from around 2.25-2.75% that is current. My understanding is coin base and other wallet providers or players in the ecosystem charge around 1% correct? That 2.25-2.75% could easily be reduced to .5%-.75% if mastercard, visa, amex didn’t have so much power (the reason is they have perverse incentives to keep interchange fees super high, which account for about 1.5-2% of the charge). Its really a regulatory / market capture that causes fees to be high… and debit cards are not much less expensive transaction wise right? (with the fed capping the maximum charge 2 years ago or so). I might be missing something?
Bitcoin has a place however as a merchant accepting credit cards and paying even a +-3% fee is a no brainer vs. operating an accounts payable department and hounding people for money. Collecting money is essentially “he who has the gold rules”. Anyone who has ever had to collect money in a business can tell you how aggravating and anxiety provoking it is.Keep in mind that just as mentioned with my deadbeat tenant in another comment, the issue is he doesn’t have the money. So telling him to pay by bitcoin won’t work. The point is allowing him to use a credit card shifts the risk to the credit card company. In this case I am using paypal for added protection and he is paying the 3% fee (or whatever it is 2.9% or something).
A couple of months ago I clicked a button in Quickbooks that allowed my wholesale accounts to pay an invoice by pushing a button on the invoice that I email them. It required that I add intuit’s merchant account, which has “standard” cc processing fees, but it lowered the friction of collecting money so much that I would have actually paid a premium for the integration. Intuit feels a bit like the Apple of accounting – they have very strong lock-in/integration effects.And then I get calls from my bank trying to sell me on their merchant services. They don’t get that saving me 1%, but requiring that I re-build all of my existing and functioning systems, doesn’t provide me with any value.
And then I get calls from my bank trying to sell me on their merchant services. They don’t get that saving me 1%, but requiring that I re-buildExactly.An angle that is often lost when big-er corporations try to sell to small business. Small business, the decision maker, is not looking to reinvent the wheel and is wearing many hats and is always short on time. They need something easy, turnkey, foolproof, that doesn’t require reading and/or any attention. They have to be confident enough (since they can’t point fingers and it’s their problem) to make a switch. Because if they’ve been around any length of time they’ve been burned. As such they will often stay with something undesirable just because “it’s the evil that they know”.Another thing that any person who is in this category knows is that whatever a company promises and what they end up doing are often two different things. So the fact that you ask a question and someone answers it a certain way really doesn’t mean much. Good luck even if you have the name of the person that you spoke to. What are you going to do exactly when they tell you to pound sand?
As Omar said in the Wire — money don’t have owners, just spenders…
It does remove the voodoo stigma of owning Bitcoin.But the bigger mental jump for average users is having to “manage” their own wallet. These new types of crypto wallets are also your own bank. They are more than just wallets, and we aren’t used to all that power in a wallet.
this is a really good point William.3 signs that your innovation will not be adopted:- it has a lot of pieces- those pieces are provided by a large number of separate entities- your benefit makes a currently simple process more complicatedI am warming to the BTC as a Like+$. Its fractionally has impossible to replace utility in that spot. Someone like GumRoad should working hard to provide this gateway online.
Good points. That describes more or less where we’re at today with Bitcoin and consumers.
I like the sentiment, but from my (basic) understanding, I would maybe change your statement to say that crypto wallets are “potentially” your own bank. Just like a paintbrush is potentially a tool for great art – The role of developers therefore is to make the use of that tool easier for the common man (ME! :))
well, if you just use a cryptocurrency wallet to pay for things only, or transfer money, that’s only scratching the surface of what you can do with a cryptocurrency wallet.i think it’s part education and part UI / capabilities.
“A crummy commercial…”
as the guy who sits behind me at the Nets game always says (at least 30x a game), “can’t make em all”
Can you get a rebate?That’s like a 30% negation in game enjoyment.
Noooooooo. He’s the best. Color commentary at its best
I will take your highly regarded opinion on what adds NYC colour to that type of event.Sounds like a real character.
“…but it has not been available in many states as a result of regulatory issues. Coinbase recently added New York State…”50 Untied States of America
My first thought on this is that, in 5 years, there will be headlines about HFT in digital currencies, with people worrying about ‘the death of money’ because of the fluctuations in currency valuations.I seem to have predictions on the brain this week – http://www.jameshrh.com/blog/
you’re branching into science fiction now? 🙂
I am planning on becoming Tech’s Michael Crichton!That being said, I do think that some odd places like Indianapolis are going to sprout a Unicorn startup and that the founders will not be 20-somethings.
Neal Stephenson even better.He was on the board of a company of mine back when. Amazing thinker. Snow Crash was required reading for everyone.
I hit the Wiki for that book and got this quote – Like many of Stephenson’s other novels it covers history, linguistics, anthropology, archaeology, religion, computer science, politics, cryptography, memetics and philosophy.Ok, then.The explanation for Snow Crash is cool as well.Michael Crichton was clearly more willing to dumb down / gloss over the science…..
Crichton is a novelist. Stephenson futurist and technology visionary with storytelling as his platform.
huh? no price risk? currency maybe, but still…
This is great, never owned bitcoin because of the price volatility. Cared more about using bitcoin and getting a better feel for the blockchain, tech, etc. But never wanted the economic exposure and price swings of a currency I don’t know how to price. Going to sign up now.
Can I get it in Swiss Franc? Not sure if anyone was paying attention but the Swiss Franc had a 30% move against other currencies yesterday when the Swiss government removed the artificial caps it had enacted. Currency brokers around the world are being wiped out as we speak. Many of them allowed customers to margin accounts. They will never chase down the money they lost.The Russian ruble blew up late last year. Bitcoin doesn’t even have that kind of volatility.Going to blog about what margin really is today.
Yep. Deflation at its finest 🙂 Also, great analogy for margin (and almost the same as certain option trading – primarily the “selling side”) is “picking up pennies or dimes in front of a steam roller”. You sure juice returns and look like a genius but if you are naked on your margin or options with out hedging, you can win 100 times and get steam rolled on the next one. But it is insanely hard to get humans (the irrational creatures we are) to realize this, especially after that person just had it go there way 10+ times… but all you can try to do is educate!
There are only a special set of traders that can pick up nickels ahead of the steamroller. In the past, it was floor traders. That’s why seats traded close to $1M. Today it’s HFT. No one else. If you had any position on yesterday you never saw it coming, and you never had a chance. Total annihilation.
Do you know what is typical margin levels / ratios on some of these options or currency accounts? I know stocks often start out at 2:1 leverage (50% collateral from some of SEC basic rules I believe) but each financial institution can change somewhat. In these cases if someone was doing a “carry trade” on the Swiss Franc if levered 3:1 they could have literally lost everything possibly? Just curious since you seem to have a good bit of knowledge on the trading and mechanical aspects.
In an understatement of the year the Head of the IMF Christine Lagarde, called the move “a bit of a surprise”.She said she was also surprised that the governor of the Swiss National Bank had not contacted her, and said she hoped he had communicated the plan to his fellow central bank governors.Meanwhile, Thomas Jordan, the head of the Swiss National Bank, explained, “If you decide to exit such a policy, you have to take the markets by surprise.”Second understatement of the financial year!It’s these types of announcements which are qualitative like “We’re exiting the redundant cap and peg policies” which the quant-based HFT and risk arbitrage AI systems aren’t going to be able to plug numbers into fast enough because they can’t parse those qualitative statements when they hit the exchange and brokerage systems newswires.
yup. She’s pissed because normally they’d call her and she could give her cronies a heads up.
she could give her cronies a heads up.Hey is what you are saying really true or just conjecture and/or joking? She doesn’t come across as “that type”. To me she seems like an “Elizabeth Warren” at least from the little that I know about her. (Shows how non cynical I am about people that I don’t know about.)
No, crap like that happens behind the scenes all the time. Congress and their staff are allowed to insider trade for example. When the Fed decides to move on interest rates, it won’t be a surprise to certain trading rooms on Wall Street. They will get the order, and sell ahead of it. Sounds conspiratorial, but it does happen.
Oh yeah I know all of that. I was just wondering if Mrs. Long Face in particular had a shady side that I wasn’t aware of.I had a case many years ago where I made a complaint to a regulatory type agency of the US Government and was quite surprised at how they bent the rules for me just because I asked a question. Really surprised me in particular because the person who did that was viewed as very well regarded and didn’t seem the type.
No idea, my comment about LaGarde was tongue and cheek. There is a real possibility that the Swiss going cowboy on policy screwed up future policy moves for the EU. My friend Yra Harris speculates about that at http://yragharris.com/2015/…
wow. Interesting times.
Cool. Now combined with seller side, you have two-way payment APIs for bitcoin. Clever idea.Make it simple. Check. Bu still perceptions of it opaqueness and “Silk Road/underground” feel need to passMake it useful. Coming soon with increased adoption, but still early as perceived need and urgency is still low.Make it 10x better than existing alternatives. This may have to wait for a Minsky moment regarding fiat currencies
I am not a currency trader (considering that akin to walking a tightrope 10 miles above the Earth in a 200+ mph wind with both arms broken), but wouldn’t Bitcoin denominated in Dollars just be holding USD? I mean, Coinbase itself establishes an exchange rate of sorts by offering this, no?Feel free to beat me about the ears if I am way off base on this. TNX.
If Coinbase controls the private keys to your bitcoin wallet, then they own the bitcoin. What you have is an account with Coinbase denominated in btc or usd. They offer multi-party signatures for btc wallets, though, so you can exercise some additional control over your Coinbase btc wallet.I think of them as a wrapper around payment solutions, with a convenient web UI. They handle order matching of btc/usd when you buy or sell, and go looking for liquidity on the exchanges or perhaps private secondary market when there’s insufficient volume to match trades solely between coinbase customers. They presumably have a relationship with a bank, and use some legacy payment system such as ACH to effect usd payments from your “usd wallet”.
that is largely correctthe vault product works a bit differently, particularly multisig vault its worth checking out Zeke
I use coinbase to buy small amounts of bitcoin, and have used my account to make a small purchase (Deckbound crowdfunding). I have used a lot of different e-wallets and “exchanges” and get a creepy feeling from most of them. Coinbase is different for me, not just from UI and technology, but more importantly I trust that the founders are honest and competent. Sadly, this is not the case of most other “startups” that host e-wallets. I’ve had bad experiences with almost every hosted wallet I’ve used — fraud and incompetence are the norm in this business.My hesitancy in trusting any third party (even coinbase) with large btc deposits is that however secure they are physically and digitally, as the value of btc rises, the present an increasingly high value target. If there is a flaw in security, there’s a big incentive for bad people to exploit it.
yupppand that was our exact experience from 2010 to 2012 looking for a team to back in this spacewhen i met brian at YC, i knew we had found the team to back
Glidera.com, multi sig, and you control your Bitcoin.
Again, another non-bitcoin believer (maybe I am obtuse on understanding as well), but I think you are right, with the importance difference that bitcoin supporters , Fred in this case, are saying / implying you might want to hold it here to gain access to the other benefits of bitcoin. Lower transaction costs, more anonymity, in theory not subject to bank credit worthiness (although FDIC insurance is up to $250k) etc. I think that is the argument at least.
You do not get anonymity if you’re using Coinbase, b/c Coinbase knows who you are. I think of Coinbase in its ideal incarnation as a payments concierge, if you will.Almost mistyped that as “coincierge” — perhaps a good name for a scammy bitcoin startup? 🙂
Ok. You can get it with bitcoin in general.. just not a wallet company like Coinbase? Correct? (or maybe you could with a wallet company.. but they wouldn’t have to verify your identity? I am not sure this would make sense.. just trying to better understand where the anonymity is lost )
They have to verify your identity b/c of the Bank Secrecy Act and state money transmitter laws.
Boom. Thanks. Love when a commenter drops serious specific knowledge. Appreciate the response!
When is Coinbase going to start supporting Litecoin wallets already?! 😉
do you think they should?
I think that in the long run, coinbase could be a wrapper around many different forms of value. Whether it makes sense to support any one asset in particular right now, I couldn’t say. They said at one point that they’d support LTC when it’s traded on bitstamp. Not sure if that is still necessary, or if they could source their own liquidity. Of course, I am speaking out of self-interest here due to the impact on LTC value this move could have.
you are rightbut they also need to focus on what they are doing right now and nail that always a tough call for an entrepreneur
In terms of building their user base, not sure how much incremental growth would be achieved just by adding LTC. Every LTC nut is also a BTC nut. The big value comes when coinbase eventually a one-stop shop. I suppose the counter-argument is that coinbase has a special relationship with the LTC developers, and could possibly have more influence over the progress of that software if there’s some feature they want.
Our mission is to bring a more efficient payment network to the masses and Bitcoin is the clear leader right now. The technological breakthrough Satoshi came up with was a 100x+ improvement from what existed previously. Litecoin and every other protocol that followed bitcoin have essentially been forks of Bitcoin with some minor improvements.Our perspective is that bitcoin is confusing enough to mainstream consumers right now. Adding another digital currency like litecoin adds to the complexity and confusion for mainstream consumers. With that said, our lead product engineer Charlie Lee created Litecoin and we are fans of Litecoin as well, so it could happen some day 🙂
I have a question slightly off topic. It seems they charge only 1% and have already raised 35M in VC money. How are they planning to be profitable with 1% only. Some payment processor companies like Square who charge 3.5% are still not profitable. Again off topic but since the company seems interesting wanted to understand the business model as well.
think of them like a bank and brokerage firm. most banks don’t charge at all for a checking account but make money in many other ways
Banks make money from Mortgages, Credit Cards fees, Investments, Securities and loans. Are those in the long term plans for companies like Coinbase?I always think companies like Coinbase are pure play payment companies.
they have no plans for any of those things right nowbut my point was that they have lots of business model options to pursue when and if they emerge as a winner in their category
they have lots of business model optionsThat’s always one of the difficulties in any outsider (peanut gallery and/or talking head) evaluating business potential. We don’t know all the things that may be in the pipeline and therefore can only speculate on what we do know about and what we see. To me it doesn’t seem to be a stretch at all that if bitcoin is even mildly adopted that business opportunities and profitability will follow for coinbase. When you start any business you are never able to predict things that you end up doing but if you hustle there are all sorts of things that end up happening. Then again there was that google glass announcement the other day..
I think if they are able to nail what they are doing now they will get aquired by some bank.They probably wont have to go all the way up to displace banks in what they do best.too much competition and federal mess(some of it self created)
If they didn’t they wouldn’t be singing from the Native Monetization Songbook.
Square doesn’t get to keep the 3.5%, most of it will go to Viseca.
Ok! That makes it harder to be profitable!
Who does coinbase use as a custodian?
I have some advice that may sound controversial. 1/ Don’t buy bitcoin. Instead, find a way to earn it. 2/ Don’t just buy a cup of coffee with bitcoin. Use it for something you couldn’t do before, eg Tip on this blog using the Coinbase icon, or send a friend some millibits on a tweet (using ChangeTip), or implement an automatic payment (in an advanced wallet) with someone based on proof of delivery, And I wished we had more new use cases today (they are coming, eg escrow, contracts, wagers, etc.)Point is we need to move from Bitcoin being “cool” to being “useful”, in order to make it sustainable for the long term. (That applies for any cryptocurrency btw).Bitcoin is not a replacement for money; it’s a lot of new ways to “use” money and do business.
The sweet spot seems to be fractional payments.What can BTC do that other forms of payment cannot? Transfer really small amounts w a service fee cost that is very, very close to 0.
Microtransactions is one aspect of Bitcoin that makes it perfect for that. I’ve said it before: there shouldn’t be *any* transaction on the Web under $10 that shouldn’t go on Bitcoin. The credit card companies look like thieves for merchants at under $10, the transaction fees eat up too much of your margin.Here’s an idea. If all e-commerce merchants were to only accept Bitcoins for anything $10, then we’re talking. It would boost the transaction volume on Bitcoin, its price, and it would be a good thing!
I have never seen that post from you, but sometimes I glaze over when BTC debates get hot & heavy.That sounds like your first Bowling Pin Mr. Moore.
What are your top favorite ways to earn BTC? My current favorite is microlending. A diversified portfolio of loans can be done at ridiculously small loan amounts and there are a number of sites that allow you to participate in pick up loan syndicates.I participate in BTCJam and have gotten some decent results. https://btcjam.com/?r=d8a44…
I hear good things about BTCJam. if you have a services or product business, then you could invoice your clients in Bitcoin- that’s a straightforward way. but there will be other ways when the Dapps and DAOs start to emerge.
So its like a USD wallet that you can convert to crap? Sign me up!
The good news is Fred, Bitcoin insiders remain optimistic. According to Hedgeable, the 1 Year estimate is $367- https://www.hedgeable.com/r…
it is way easier to keep a little money at coinbase. same with paypal and venmo.
It takes about 10 days to buy Bitcoin via a credit card on coinbase right now (I assume to ensure that the transaction clears before awarding the Bitcoin)…so you can’t wait until the last minute you want to use it to buy it.
i guess we are differenti keep money in all of themdifferent strokes for different folksdoesn’t make you right or me right
I use Paypal on things like Amazon sometimes.
Paypal is well integrated with ebay. Also some customers sometimes prefer to pay by paypal. We have no issues with it. The UI is stuck in the 90’s of course. Separately, I have a deadbeat tenant and the only way I could get money out of him the past few months was to allow him to pay by paypal (so he could use a credit card). I actually set up a brand new paypal account just for him. (Even got him to pay the paypal fee as well.) I didn’t want to have paypal yanking the money back because they have ACH access to the other accounts (which are for different purposes anyway). I also didn’t want to run the credit card through the card account (for the same reason just stated). Possession is 9/10ths and all of that (note I haven’t fully vetted this protection “scheme” however I know it’s better than the alternative where I have considered the downside).
i still use paypal all the timethere are many sellers out there who still want to get paid that way
This is undoubtably a step in the right direction and what is missing from the consumer side equation is exactly what merchants have been loving for over a year or two – not having to own BTC but still being able to interact with the ecosystem.The next step needs to be autoconversion to USD for those who want it.More broadly however, for bigger ticket items or more everyday use, it is a hard sell to beg the existential question of “should I have my USD in chase or wells Fargo or citi or … [BTC Co.] ” we need to be able to truly spend without the friction of moving funds around to do it. I.e. if i can spend using my debit card
To wit, below, one of many paypal accounts that I use this one is exactly for that purpose.
Why not call it something people can understand, bitcoin debit cards.*Without a revolving credit feature, credit card use would fall off a cliff. That said, starbucks pulls this off without a hitch.
Since cc charges can bounce way down the line (several months we’ve had as long as maybe 3 months) I’m wondering how 10 days really does any good. What am I missing?
Do you have the paypal acct liked to your checking acct?
I don’t understand that specific delay either…so not sure…can tell you that it’s depressing to watch in the current crash…I bought one Bitcoin at $280 a week or two ago and by the time it was available in my account the price was already at $195 — they charge you the price at ‘click’ not at ‘available’ which is a whole different gripe I currently have (though I guess you would argue the opp. if price was rising) 😉
Because of the following:a) I’d have to setup a square account which I’ve never done before. So it’s quicker to setup another paypal account. I avoid any new thing unless there is a particular compelling reason to do so. And I already use paypal. That said I might setup square for another reason I just don’t need to do so right now. Stick with what works and what you know.b) I am guessing that Square would want bank account information and I just want a check cut (as mentioned don’t want any issues with chargebacks).  Now of course I haven’t checked any of this which is my point. I want to go at full machine speed I don’t want to reinvent the wheel 5 times a day. I’ve been accepting credit cards for various things way before the internet. And have had extensive conversations with the people who handle chargebacks (who told me all sorts of stories). Rights are firmly on the side of the cardholder and they can and do say all sorts of things to wiggle out of payment. Since I’ve already marked this particular person as being in financial distress I will assume the worse case scenario (which you sometimes should do anyway).
And if you do any sales volume at all, Paypal’s merchant rates are as good as (or better than) any bank’s offerings. Definitely better then the other web 2.0 offerings.Their UI isn’t great, but it’s also accurate (on the merch side). You get per transaction details. Meanwhile, with nearly every other merchant account they’ll take a day’s transactions and give you a batch deposit, which requires that you or a bookkeeper break those all apart to allocate payments to certain invoices. It’s incredibly idiotic. And usually more expensive.As far as e-commerce/merchant services, I don’t see why paypal doesn’t own that entire market.
Why do you ask?
After hearing your reply my guess is that statistically given the dollar amount they have decided that 10 days covers 99.9% of the issues which is probably correct. Also they most likely limit the dollar amount. Escrow.com does the same thing. You can use a credit card but they limit it to $5000 so that’s the most they can lose (plus they have a vig on the transaction).
Stay tuned. Harder to do than you might think
I also use PayPal, haven’t had any issues with them for buying or selling.