It's interesting to think what announcement like this have in aggregate on the price of bitcoin. Counter-intuitively the price of bitcoin should face downward pressure as merchant adoption of this sort increases. Expedia doesn't hold any of the bitcoin they receive. The bitcoins are instantly converted to dollars on a market exchange. This means that holders of bitcoin, especially those who are sitting on large capital gains, now have a new outlet to realize their gains.
On the other hand merchants who choose to accept bitcoin using Coinbase (or Bitpay) and who also choose to keep some fraction of their profit in bitcoin (thereby exposing their profits to currency volatility, which may even be a good thing for growth of their profits) will tend to increase the market price of bitcoin.
Overall it seems like most merchants accepting bitcoin are not holding any of the bitcoins they accept. It would be great to see more merchants choosing to keep some fraction, however small, in bitcoin itself.
I suspect that, arguably more counter-intuitively, it will push the price up, fed by increased speculation due to apparent signs of Bitcoin "going mainstream" that will far exceed any actual Expedia transactions taking place.
I'm more intrigued by the commercial decision from Expedia's perspective. Presumably they've done a back of the envelope calculation and decided "group of people more likely to pick Expedia over other OTAs if they can use Bitcoin" > "group of people that will be sufficiently confused by an additional payment option to abandon their cart"
I think this reasoning is mistaken. Yes, bitcoin-accepting vendors act as a new sink for supply, but for that reason they also increase the incentive to leave bitcoin sitting in your wallet, ready to spend on something you would like to buy (much as we keep money in our checking accounts so we can draw on them at will). In aggregate, if (big if) lots of people are using bitcoin as money, then speculative demand may decrease, but currency demand could increase dramatically.
I think it will happen when their suppliers accept Bitcoin as payment. The chain has to start somewhere, at the moment they have nowhere to spend them.
When I first read this I thought, why would they start with hotels? may be because the big profit they make out of reservations?
Then I remembered what an accountant friend once said to me: "Hotels are big portals between the black and white worlds".
So you may have black money in bitcoins (and a Hotel which is your "legal business"), and want to "wash" it? now you can do it through Expedia (they having a bite in the process, hence their motivation).
As an entrepreneur in the travel space, my guess is that this move is primarily a PR move, and actual Bitcoin transactions aren't expected to move the needle in any substantial way.
If its primarily a PR move, the reason for starting with hotels is simple: Expedia, and all the OTAs (Online Travel Agency), make the VAST majority of their profit from hotel bookings* due to two factors:
1) Airlines pay extremely small commissions (starting with when Delta announced 15 years ago they wouldn't pay commissions on flights)
2) Hotels pay extremely high commissions, since unsold hotel rooms disappear as inventory the next day
Assuming the goal is PR, Expedia cares much more about getting consumers to think of Expedia as a place to book hotels than they do booking flights- thus they are "starting" with hotels.
*For example, in 2013 Priceline sold 270M hotel nights and 7M airline tickets. Of their $7B in revenue and $2B in profit, very very little came from airline ticket sales.
>> "Hotels are big portals between the black and white worlds".
When I read that, I thought of people making trips that they would prefer no one finding out about. Affairs, etc. I guess that's also a legitimate use case for adopting BTC.
Which bodes extremely well for them. They may quickly become the PayPal of bitcoin for providing a solid service allowing businesses to interface with BTC; as PayPal did for giving businesses and individuals a solid service to transact using the internet.
Does coinbase sit on the Bitcoins, or turn around quickly and convert to USD somehow (where?)?
Holding thousands of bitcoins as a startup seems like it would introduce a lot of volatility, even if the long-term prospects of bitcoin are good (still need to pay the employees).
And in Australia to a far lesser degree, Coinjar. I think VC-backed business in the Bitcoin space will be what eventually drives it forward, short of an amazing new concept that people can't resist such as social network, gambling, whatever.
We started with the speculation, then these companies will keep pressing business to support Bitcoin and then potentially it reaches a tipping point and has its own momentum.
Well it seems that Expedia did a great thing by allowing you to use Bitcoin to pay for hotel bookings. So that means I don’t need to use my credit card any longer when I check into the hotel?
If you read down in the comments you see hotel workers saying they will still apply a 2X block on the daily rate of the room to your credit card, even if you've paid for the room with Bitcoin. A block that can take up to two weeks to be released.
Obviously the standard hotel procedures will need to be revised but until then Bitcoin buyer beware ;<(.
Think of it this way: you're paying by Bitcoin, but you're guaranteeing that you won't drink the minibar dry or trash the room with a credit card. This won't change until there's a well-established Bitcoin credit facility.
This seems good. But at the heart of it I fear it defeats the whole point of Bitcoin the payment system.
Why? I thought the whole point of Bitcoin was to create a decentralized payment system. And here is Coinbase (or Bitpay) becoming centralized payment systems...
Yeah, I hear you. I am hoping they are just crutches to bootstrap bitcoin adoption. If bitcoins become popular, perhaps we can lose the crutches. Or perhaps we'll have tons of competing escrow businesses.
What is it with humans' tendency to centralise anyways? Here is democracy... now here's an all-powerful president and congressional oligarchy. Here is the industrial revolution to facilitate transportation of goods all around the countryside... now here are the giant megalopolises in which most of us now live. Here is the internet... now here's Gmail, the single location to email, and Facebook, the single location to put all of your personal data. Here are DVCSes... now here is github, a place to centralise all of our DVCS work.
Maybe there's just something fundamentally ingrained in human psychology that makes us converge like this.
I've found that the-whole-point-of-isms are almost always wrong.
It's not the whole point of Bitcoin to be a decentralised payment system. It's part of the point, sure, but there are many other points, such as being an asset with a predictable inflation rate, and allowing the storage of value protected by cryptography.
A few centralised actors offering service to those who choose to use it does not negate those points of Bitcoin.
Now I can travel to another country and book a hotel through this service (if they allow this in their terms of contract) with my Bitcoins without involving any banks or credit companies on my side and nobody is in-between (except the Internet). Seems pretty de-central to me. If they choose to handle the Bitcoin clearance through an intermediary is none of my concern, so I don't see any fundamental principle violated here.
Almost all of these merchants are receiving USD and they do need some party to handle the exchange risk. Coinbase/Bitpay do this and their fees are substantially lower than credit card companies.
The real problem is trustworthy BTC -> USD. Expedia can't pay their employees with BTC, and the executives don't want their bonuses in BTC either.
Coinbase is a solution to this problem. And it's better to have one trustworthy, rather than a bunch of mtgoxes. Yes, it makes it 'centralized' but it's the best solution in this case. Without it, BTC is just internet points.
The real service Coinbase is providing is the conversion of bitcoins into government currency. I can't think of an immediate way to decentralize that, because moving government currency between people requires centralization (short of mailing physical cash, which obviously has its own issues).
It's fairly trivial to simply accept bitcoins in a decentralized fashion. That's just what normal Bitcoin transactions are.
Expedia accepts Coinbase, not Bitcoin. This is no different than accepting PayPal. Did you pay with PayPal balance, credit card, or bank account - it doesn't matter. You implement PayPal APIs and you receive dollars from PayPal. The rest is just speculation, but seems that price is dropping as "acceptance" like this can only lead to selling pressure if it ever gains any traction, of course. I'm really surprised all these merchants implementing Bitcoin for the PR, but confusing their checkout routine. The path to checkout should be as short as possible with as little decisions to be made along the way. Any distraction can lead to abandonment. Is the cheap PR all worth it? I personally doubt. It's obvious that the general public is not interested in Bitcoin and is, in fact, getting bored. I keep polling non-techie friends, the common theme is "Bitcoin is a scam". Even most tech people aren't much interested except the small share who invest in stocks, i.e. the speculator by nature.
Has there been much talk about how stores using Bitcoin reduces the anonymity of Bitcoin by tying IDs in the transaction of acquiring that coin to the person that ultimately uses it?
I'm sure the uber nerds were already aware of this but has it been brought up enough that the general community thinks this through? One booking on Expedia and you've revealed any possible Silk Road or other curious transaction you've ever made, right?
How does this work, exactly? I use a unique address each time I receive bitcoins. Then I sometimes move money between more unique addresses in plausible-looking ways. I always use Tor for talking to the bitcoin network.
True anonymity is not a feature or a design goal of Bitcoin. It's pseudonymous, so it's better than a credit card and worse than cash. A lot of care must be taken to keep yourself anonymous on the Bitcoin network, and anyone who cares about that certainly shouldn't be buying airline tickets with Bitcoin unless they have completely disjoint wallets.
The common thread is coinbase creating a low-friction opportunity for merchants to accept another form of payment, but to be paid in - most likely - USD as far as they are concerned.
This does nothing to disperse bitcoin into many little places. In other words, accepting bitcoin by online merchants everywhere doesn't make many people want to go trade fiat for a volatile currency with all the inconveniences inherent. You need a frictionless means and stimulus for many swathes of people and organizations to accept and hold BC instead of wanting fiat conversions immediately.
"We take Discover/American Express etc." only really got so far to help with consumer adoption of those networks. This keeps coming around to a currency without a country is a PITA.
What are return policies around goods bought with BC? Do you get BC back or fiat? Do you get spot prices at time of return request, etc?
That's okay though. As bitcoin proliferates large businesses will eventually start cutting out the middle man.
But currently, with the drastic swings, it's not a sound economic move (especially publicly owned) to actually have holdings in bitcoin. It requires infrastructure for cash exchanges too. Is Expedia going to pay its dividends with its bitcoin reserves?
That's the thing here: Coinbase is just another payment processor. Most businesses are used to having to accept "some extra payment processor".
Since you get to do some sort of announcement, which more most companies means you get to be in the news in a semi-positive way, why not? It's risk free for them - or at least only as risky as their ability to sue Coinbase for missed payments.
Side note, I'm noticing a lot of merchants accepting bitcoin asking for more information than they should need.
For example I tried to buy an ebook recently and it required my home address.
For Credit cards I believe that's required to verify the billing info, but there's no reason bitcoin purchases should need it for non-shippable products. And it cancels out a lot of the benefits of using bitcoins (fast purchase, anonymous from marketers)
Credit card address verification comes down to a risk/reward calculation. You don't have to verify the address. At some processors, doing AVS (address verification service) to some degree is worth ~1% off interchange, due to the implicit reduced fraud risk. Address verification is a fiddly beast, and returns one of about ~15 codes rather than the binary you might naively expect. (It covers cases like "Street address matched but 5 digit zip did not" or "Foreign card; we're clueless".)
It also gets used in merchant risk processing, separately from risk regarding the payment itself. Some bitcoiners are of the opinion that bitcoin means the end of risk from the merchant side of the equation. This is, broadly speaking, not true. There are plenty of transactions where "X happened but at least we got paid the agreed amount" is a failure condition.
We sell digital services (ebooks count), and require the customers address (or part of) to determine the VAT status of the sale.
Even though buying an e-book for Bitcoin seems like you shouldn't need any personally identifiable information, quite often merchants do need to collect it.
These is very good news overall, taking into account that we are now in the first-stage-of-adoption of bitcoins, where the most important is to spread the info about bitcoins and increase its usage.
In a later stage, when bitcoins are more diseminated and people feels bitcoin more "domestic", then there will be a interest for "personal-wallets" and "business-wallets", which may be hardware-wallets, or multisig-insured-online-services...
TLDR; this is a good-first step toward bitcoin adoption, further later will be another step towards personal-wallets.
How does this deal with damage deposits? Why would I pay with bitcoin when many rewards cards pay out extra when you use them for travel-related use?
Honestly, the cynic in me says the use case for spending bitcoin is a quick way for speculators to "cash out" in a way that makes it easier to hide earnings from the tax-man.
Honestly, the cynic in you may say everyone buying a kitchen knife plans to cut a child throat, but that won't decrease the usefulness of kitchen knifes.
Damage deposits - not something Expedia does with credit cards or PayPal, hotels have to ask their clients for a credit card at check in.
Rewards - it's just a matter of time for Bitcoin rewards schemes to appear.
[+] [-] vijayboyapati|11 years ago|reply
On the other hand merchants who choose to accept bitcoin using Coinbase (or Bitpay) and who also choose to keep some fraction of their profit in bitcoin (thereby exposing their profits to currency volatility, which may even be a good thing for growth of their profits) will tend to increase the market price of bitcoin.
Overall it seems like most merchants accepting bitcoin are not holding any of the bitcoins they accept. It would be great to see more merchants choosing to keep some fraction, however small, in bitcoin itself.
[+] [-] notahacker|11 years ago|reply
I'm more intrigued by the commercial decision from Expedia's perspective. Presumably they've done a back of the envelope calculation and decided "group of people more likely to pick Expedia over other OTAs if they can use Bitcoin" > "group of people that will be sufficiently confused by an additional payment option to abandon their cart"
[+] [-] DavidSJ|11 years ago|reply
[+] [-] oska|11 years ago|reply
Overstock keeps 10%.
Source: http://www.reddit.com/r/IAmA/comments/24kbc0/im_patrick_byrn...
[+] [-] TomGullen|11 years ago|reply
[+] [-] avd74|11 years ago|reply
Then I remembered what an accountant friend once said to me: "Hotels are big portals between the black and white worlds".
So you may have black money in bitcoins (and a Hotel which is your "legal business"), and want to "wash" it? now you can do it through Expedia (they having a bite in the process, hence their motivation).
[+] [-] onwardly|11 years ago|reply
If its primarily a PR move, the reason for starting with hotels is simple: Expedia, and all the OTAs (Online Travel Agency), make the VAST majority of their profit from hotel bookings* due to two factors:
1) Airlines pay extremely small commissions (starting with when Delta announced 15 years ago they wouldn't pay commissions on flights)
2) Hotels pay extremely high commissions, since unsold hotel rooms disappear as inventory the next day
Assuming the goal is PR, Expedia cares much more about getting consumers to think of Expedia as a place to book hotels than they do booking flights- thus they are "starting" with hotels.
*For example, in 2013 Priceline sold 270M hotel nights and 7M airline tickets. Of their $7B in revenue and $2B in profit, very very little came from airline ticket sales.
[+] [-] gedrap|11 years ago|reply
When I read that, I thought of people making trips that they would prefer no one finding out about. Affairs, etc. I guess that's also a legitimate use case for adopting BTC.
[+] [-] malandrew|11 years ago|reply
[+] [-] doctoboggan|11 years ago|reply
[+] [-] ixmatus|11 years ago|reply
[+] [-] jwcooper|11 years ago|reply
Holding thousands of bitcoins as a startup seems like it would introduce a lot of volatility, even if the long-term prospects of bitcoin are good (still need to pay the employees).
[+] [-] prawn|11 years ago|reply
We started with the speculation, then these companies will keep pressing business to support Bitcoin and then potentially it reaches a tipping point and has its own momentum.
[+] [-] rmason|11 years ago|reply
Not exactly:
http://www.reddit.com/r/Bitcoin/comments/27vc4x/expedia_star...
If you read down in the comments you see hotel workers saying they will still apply a 2X block on the daily rate of the room to your credit card, even if you've paid for the room with Bitcoin. A block that can take up to two weeks to be released.
Obviously the standard hotel procedures will need to be revised but until then Bitcoin buyer beware ;<(.
Rick
[+] [-] jpatokal|11 years ago|reply
[+] [-] kleer001|11 years ago|reply
[+] [-] jordigh|11 years ago|reply
What is it with humans' tendency to centralise anyways? Here is democracy... now here's an all-powerful president and congressional oligarchy. Here is the industrial revolution to facilitate transportation of goods all around the countryside... now here are the giant megalopolises in which most of us now live. Here is the internet... now here's Gmail, the single location to email, and Facebook, the single location to put all of your personal data. Here are DVCSes... now here is github, a place to centralise all of our DVCS work.
Maybe there's just something fundamentally ingrained in human psychology that makes us converge like this.
[+] [-] haakon|11 years ago|reply
It's not the whole point of Bitcoin to be a decentralised payment system. It's part of the point, sure, but there are many other points, such as being an asset with a predictable inflation rate, and allowing the storage of value protected by cryptography.
A few centralised actors offering service to those who choose to use it does not negate those points of Bitcoin.
[+] [-] skriticos2|11 years ago|reply
[+] [-] cliftonk|11 years ago|reply
[+] [-] gedrap|11 years ago|reply
The real problem is trustworthy BTC -> USD. Expedia can't pay their employees with BTC, and the executives don't want their bonuses in BTC either.
Coinbase is a solution to this problem. And it's better to have one trustworthy, rather than a bunch of mtgoxes. Yes, it makes it 'centralized' but it's the best solution in this case. Without it, BTC is just internet points.
[+] [-] baddox|11 years ago|reply
It's fairly trivial to simply accept bitcoins in a decentralized fashion. That's just what normal Bitcoin transactions are.
[+] [-] kolev|11 years ago|reply
[+] [-] bequanna|11 years ago|reply
Do you have any proof to backup this statement?
Bitcoin related growth abound. The number of My Wallet Users has doubled in the past 6 months.
http://blockchain.info/charts/my-wallet-n-users
[+] [-] stevehawk|11 years ago|reply
I'm sure the uber nerds were already aware of this but has it been brought up enough that the general community thinks this through? One booking on Expedia and you've revealed any possible Silk Road or other curious transaction you've ever made, right?
[+] [-] jordigh|11 years ago|reply
How easy is it to de-anonymise me?
[+] [-] baddox|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] pistle|11 years ago|reply
This does nothing to disperse bitcoin into many little places. In other words, accepting bitcoin by online merchants everywhere doesn't make many people want to go trade fiat for a volatile currency with all the inconveniences inherent. You need a frictionless means and stimulus for many swathes of people and organizations to accept and hold BC instead of wanting fiat conversions immediately.
"We take Discover/American Express etc." only really got so far to help with consumer adoption of those networks. This keeps coming around to a currency without a country is a PITA.
What are return policies around goods bought with BC? Do you get BC back or fiat? Do you get spot prices at time of return request, etc?
[+] [-] malloreon|11 years ago|reply
Nope. They let someone else do it and just accept real money.
[+] [-] codyb|11 years ago|reply
But currently, with the drastic swings, it's not a sound economic move (especially publicly owned) to actually have holdings in bitcoin. It requires infrastructure for cash exchanges too. Is Expedia going to pay its dividends with its bitcoin reserves?
Not yet!
[+] [-] dustcoin|11 years ago|reply
[+] [-] Mangalor|11 years ago|reply
[+] [-] jordigh|11 years ago|reply
Now if only I could make it easier for people to pay me in bitcoins for small freelance work...
[+] [-] XorNot|11 years ago|reply
That's the thing here: Coinbase is just another payment processor. Most businesses are used to having to accept "some extra payment processor".
Since you get to do some sort of announcement, which more most companies means you get to be in the news in a semi-positive way, why not? It's risk free for them - or at least only as risky as their ability to sue Coinbase for missed payments.
[+] [-] mrfusion|11 years ago|reply
For example I tried to buy an ebook recently and it required my home address.
For Credit cards I believe that's required to verify the billing info, but there's no reason bitcoin purchases should need it for non-shippable products. And it cancels out a lot of the benefits of using bitcoins (fast purchase, anonymous from marketers)
[+] [-] patio11|11 years ago|reply
It also gets used in merchant risk processing, separately from risk regarding the payment itself. Some bitcoiners are of the opinion that bitcoin means the end of risk from the merchant side of the equation. This is, broadly speaking, not true. There are plenty of transactions where "X happened but at least we got paid the agreed amount" is a failure condition.
[+] [-] TomGullen|11 years ago|reply
Even though buying an e-book for Bitcoin seems like you shouldn't need any personally identifiable information, quite often merchants do need to collect it.
[+] [-] cpach|11 years ago|reply
[+] [-] justme123|11 years ago|reply
In a later stage, when bitcoins are more diseminated and people feels bitcoin more "domestic", then there will be a interest for "personal-wallets" and "business-wallets", which may be hardware-wallets, or multisig-insured-online-services...
TLDR; this is a good-first step toward bitcoin adoption, further later will be another step towards personal-wallets.
[+] [-] coryking|11 years ago|reply
Honestly, the cynic in me says the use case for spending bitcoin is a quick way for speculators to "cash out" in a way that makes it easier to hide earnings from the tax-man.
[+] [-] rational-future|11 years ago|reply
Damage deposits - not something Expedia does with credit cards or PayPal, hotels have to ask their clients for a credit card at check in.
Rewards - it's just a matter of time for Bitcoin rewards schemes to appear.
[+] [-] taariqlewis|11 years ago|reply
They will HODL and continue to buy their air and hotel with fiat cash which will be cheaper, faster, and easier.
[+] [-] abc123xyz|11 years ago|reply
[+] [-] vundervul|11 years ago|reply