Bitcoin tulips

"If you are a legitimate business, why would you want to be paid in Bitcoins rather than in dollars, euros or pounds?"

I know at least two reasons:

(1) Elimination of credit card fraud risks.

(2) Elimination or immense reduction of transaction fees.

There are simple and effective ways to mitigate CC fraud. As for the processing costs, we happily tip ten percent in restaurants and taxis, yet complain about two percent "payment service charge". If your Bitcoin loses half of it's value overnight, how would you feel about it? If your Bitcoin wallet gets hacked, do you have any protection against that? If your Bitcoin transaction goes wrong, what number will you call? Free cheese is typically not in a fridge.

If there are simple and effective ways to mitigate CC fraud, none of the banks I bank with seems to be aware of them. All I've been getting from them are CVV, then VbV, now Mobile OTP. With phone trees and long hold times, banks have made it very painful to contact them if my transaction goes wrong. Against this backdrop, I'd give BitCoin a decent chance for transactions with low-to-medium ticket sizes. While on the subject, one great use case I came across for BitCoin is the introduction of a new feature by a leading T&E solutions provider for settling T&E claims with BitCoin. Having already spent the money, many people - me included - treat reimbursement as "funny money" and don't mind taking a gamble on its true worth. With its innate nature of being a currency having a fluctuating value, BitCoin panders to this behavior very well.

The funny thing is, Bitcoin has nothing to do with money or payments as such. It's no more a "currency" than any other crypto tool.

If I were to attach a banknote to a pigeon and sent it to you, would I be using BirdPay or BirdCoin? Ultimately, we still want our dollars, euros and pounds back in our hand, not some Bitcoins in our (vulnerable) wallet.

BTW, speaking of fraud, Bitcoin is not immune - your Bitcoin wallet can be hacked and your "stored value" is gone forever. With traditional payment rails there is always a trail.

1 US$ held in PayPal or Google Wallet or leather wallet and tranferred by CHAPS or FPS or pigeon is always worth US$ 1. However, 1 BitCoin is worth wildly differing amounts of US$ from one day to another. Therefore, it seems to me that BitCoin is as much a currency as JPY or INR or AED. Just to clarify, in the limited use cases of T&E reimbursement and others mentioned by me, I'm ultimately happy to keep my BitCoin as BitCoin. If the parallel system goes bust, I don't mind seeing my BitCoin proving worthless. On the other hand, if the primary system becomes shaky - remember Cypress - my BitCoin might prove to be a multibagger some day. That's the calculated risk I'm willing to take.

There are many things that change their value over a period of time, long or short - that doesn't make them "currencies". Likewise, a bunch of oranges have some value, that doesn't make them "currency" either.

Take M-Pesa. What is the "currency" their? What do people actually send/exchange with M-Pesa? Is is based on "limited supply"? Does it matter?

Wikipedia and other Top 3 Google SERP results call "BitCoin" a currency. No one calls oranges currency, besides they're perishable and anyway don't meet the durability prerequisite for a currency. M-PESA is clearly not a currency, it's a method of payment that is used to transfer the regular local currency (KES, Kenyan Shilling). That said, that there could be a rigorous definition of the term "currency" that BitCoin doesn't fulfill, but that doesn't reduce its appeal in the limited context I've described.

That was exactly my point, Ketharaman.

If I create an encrypted file with some data inside, how much is it worth? Nothing. At all. Does it represent something? Nothing. At all.

If you and me and N other people agree that the file can be exchanged for $100 dollars, does it become "currency"? In a way. A payment method? Sort of. As long as the ecosystem is in balance.

If Bitcoin pegged the value to, say, US dollar, then Bitcoin would be more usable (disregarding inflation). "Cryptodollar" if you like, with other Bitcoin functions still there. Ukash did that in the UK, and it works well.

As Bitcoin is run by geeks, not economists or financiers, the whole system is broken. Money and currency is not (just) about crypto algos or "limited supply".

Ah, looks like I'm not the only one who has seen the multibagger potential of BitCoin:

"At Draper University of Heroes, we accept Bitcoin payment of tuition because it is a promising currency with appreciating value. For the time being, we still accept dollars, too,” said Tim Draper, founder and managing director at Draper Fisher Jurvetson and founder of Draper University." 

http://www.businesswire.com/news/home/20130611006142/en/Draper-University-Educational-Institution-Accept-Tuition-Bitcoin

I bet DFJ has some BTC companies in their portfolio...

Not yet, but this could be a "preemptive strike".

Brilliant catch!

Before my motives are questioned, here's the full disclosure: I have absolutely no personal or professional vested interest in BitCoin. 

http://www.theequitykicker.com/2013/03/08/bitcoin-the-future-of-money/

Ditto.