There are two common questions I get about bitcoin from friends and family. No. 1: What the heck is it? No. 2: Why would anyone ever use it to buy stuff?
Both are good questions. I won’t bore you with my attempt at answering No. 1.
As for No. 2, I usually respond that purchases made with bitcoin really only make sense for people who bought bitcoin low and are now cashing out high. In essence, it’s like they’re using free money to make purchases.
I also explain that, in theory at least, businesses could eventually choose to offer discounts for purchases made in bitcoin, since bitcoin transaction fees charged to merchants are typically much lower than fees associated with credit card purchases. They essentially pass some of the savings on to the customer.
Now, Coinbase, the Andreessen Horowitz-backed company that helps businesses process bitcoin payments, is trying to make it easy for businesses to give discounts to shoppers who pay in bitcoin. The company is today unveiling a tool that automates the discount, so businesses can check a box to deduct, say, one percent or five percent from every single purchase made in bitcoin.
Coinbase doesn’t charge its merchants any transaction fee for the first $1 million in bitcoin sales, so most if not all of their business clients are saving some money when someone buys with bitcoin. Coinbase charges one percent after $1 million, which is still less than the average two percent to four percent in fees that merchants get hit with on credit card charges.
Will this lead to a lot more people buying stuff with bitcoin and a lot more businesses accepting it as a form of payment? Coinbase sure hopes so. At a minimum, it’ll help businesses answer this question for customers: Why the heck would I buy something with bitcoin?