My thoughts:



It’s been incredible the pace at which Merchants are signing up to Accept Bitcoin. Companies such as Coinbase have been doing a remarkable job onboarding as well as taking big steps forward with letting Merchants offer discounts of up to 25%.



I want to look however, at the impact on consumer adoption of Bitcoin with a thought experiment and expand from there.



If US companies accepted Euros, would mainstream consumers start buying Euros to spend at these stores? Not really.

Yes, to make a remark on consumer adoption by substituting Bitcoin with Euros may not be correct as there are benefits such as privacy and access etc with Bitcoin.



Overall though, Bitcoin consumer adoption only increases greatly in situations where it is a substantially preferred or exclusive form of payment. This is why Silk Road and various Gambling sites have been more active than Merchants thus far.



Merchants offering discounts for paying with bitcoin is where Bitcoin starts to look more attractive than the ‘Euro’. In theory, the maximum 'risk-free’ discount that a Merchant can offer is around 2%. While it’s not bad, it isn’t as if you can’t find Promo Codes or Coupons that offer comparable if not greater savings. For existing bitcoin holders, Merchants may be a valued source of liquidity. For potential newcomers, even a 2% discount seems unlikely to move the needle considering the time and cost involved to understand Bitcoin, acquire it, and to give up the habit of using credit cards.

Mentally, for many mainstream consumers, the act of linking up a bank account or credit card in order to spend real money to buy bitcoin feels speculative, foreign and risky no matter how pretty the app interface. To try and capture that 2% discount, the consumer needs to bear a not insignificant carry risk between the price at which the Bitcoin is acquired vs. the price at which it is received and spent on at the Merchant. It’s also unlikely that a consumer will do fiat-bitcoin exchange before each purchase. This demonstrates that a prerequisite to consumers using Bitcoin as a payment option at Merchants is being convinced by Bitcoin as a Store of Value.



As a result, most purchases at Merchants I suspect are by those old-hands who have a healthy amount of bitcoin and are not by recently converted mainstream adopters.



All of this may explain why we’ve had a displacement in the numbers for retail adoption (60,000+) and consumer adoption.



To make it easier to reach mainstream consumers who have heard of Bitcoin and are interested but just can’t get over the mental barrier of handing over 'real money’ for bitcoins,

What if Credit cards offered a bitcoins back option instead of cash back?

It would allow consumers to keep all of the 'benefits’ of purchasing with a credit card and offers the consumer a chance to accumulate small amounts of bitcoins without 'paying’ for bitcoins themselves. Eventually, this card can transition to have a greater dual role as a Bitcoin debit card.

Along the same lines, later on I could see Wall Street offering 100% Principal protected structured product notes that offered upside exposure to the Winkleross Bitcoin ETF or savings accounts where the interest is paid in Bitcoin.



What are your thoughts and comments?

TLDR: In addition to a Pull method of adoption via Merchant acceptance and discounts, there may be high potential in possibilities of a Push method of adoption via Credit cards that offered Bitcoin back, and various financial instruments that gave mainstream consumers exposure to Bitcoin without an 'upfront outlay of capital’.