reason #16
BITCOIN is money for the internet
What is the current money of the internet? To answer that question you need to go back to the 1950s and the invention of the credit card. The Diners Club card is known as the first modern-day credit card. The idea came from Frank McNamara, a businessman who'd forgotten his wallet while out to dinner in New York. He and his business partner Ralph Schneider would soon invent the Diners Club card as a way to pay without carrying cash. The internet was invented in 1983 and eleven years later we saw the first online transaction. In August 1994, Dan Kohn sold a CD of Sting's "Ten Summoner's Tales" to a friend in Philadelphia. Amazon then transformed the e-commerce space. At first, it allowed customers who were nervous about entering their credit card numbers, to send them by fax and Jeff Bezos and his team would manually capture this data and process the payments.
In 1998, Elon Musk, Peter Thiel, Ken Howery, and several other investors founded a company called PayPal. PayPal, considered to be one of the first companies to specialize in online payment systems, became a game-changer in the online payment environment. PayPal now dominates the online payment market boasting almost 300 million users. The global online payment market was close to $100 billion in 2021 and is expected to grow to almost $400 billion in 2030.
The problem with this market is that we are still using old-school money on new-school technology. Sure, it comes in a shiny digital rapper (aka wallet), but these platforms still link into traditional banks and there is friction in the transaction. Let's look at a typical credit card transaction. You have the following players
The Customer: The person who wants to use their credit card to pay you for your goods or services
The Merchant: Any company that enables customers to purchase goods or services using a credit or debit card.
The Issuing Bank: the entity or bank that grants credit to a customer and issues a credit card. The issuing bank typically partners with Visa or Mastercard. Discover and American Express are examples of private label cards that a customer applies to directly. These institutions also issue payment to the merchant bank (also called the acquiring bank) on behalf of its customers, the buyers in any given transaction.
The Card Network: Visa, MasterCard, American Express, and Discover make up what is referred to as the card network. Card networks sit at the center of the payment industry, facilitating transactions among consumers, merchants, processors, and banks. These companies supply electronic networks that allow all the players to communicate and process transactions. For their trouble, they charge fees to the financial institutions involved in transactions based on total transaction volume (rather than on a per-transaction basis).
Payment Processor: A payment processor is an intermediary that enables transactions to flow through the system to obtain authorizations and deposits via the card network. There are several major payment processors that facilitate this movement. In most cases, merchants do not choose their payment processor. It is usually determined as a result of which bank or financial institution your bank or merchant provider represents; however, this is transparent to you.
Payment Gateway: A payment gateway is a software service and set of APIs that enable the merchant to access the systems needed to transmit a request for payment. The moment card data is received via swipe, key, dip, or tap, the payment gateway securely transmits the information via the Processor to the Issuer for authorization. The issuing bank returns the authorization back to the payment gateway through the payment processor. Payment gateways include PayPal, Google Pay, Apple Pay, and Amazon Pay.
Then we have companies that combine intermediary roles. For example, Stripe and Square combine the functionality of a merchant account and a gateway in one, which means you only need Stripe to accept payments and deposit funds into a bank account. You cannot use existing merchant accounts or gateways with Stripe, as it functions as both already.
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Bitcoin is an open monetary network that enables anyone with an Internet connection to store, send, and receive money in digital form. You can think of bitcoin as money for the Internet. Bitcoin operates as a decentralized, peer-to-peer network maintained by voluntary participants scattered around the globe.
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