Abstract
Individuals and businesses make numerous payments every day. They sometimes have choices about what forms of payment to make or accept, and at other times are effectively forced to use a particular form. Often there is an asymmetric power relationship between payer and payee that raises the issue of whether one side unfairly exploits the other. Is it unethical exploitation for an employer to pay employees with a fee-laden payroll card over other more convenient forms of payment? Does the fee structure of payment networks such as Visa and MasterCard unfairly exploit merchants? The bitcoin payment system is an ethical as well as technological evolution as it was designed to be an electronic payment system that does not rely upon trust. Can an entire payment system like bitcoin be “evil,” as charged by Krugman (2013)? Payment tools as such are ethically neutral, but can be used in an ethical or unethical manner.
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Notes
For the curious, these are: American Express, Bill Me Later (but only for U.S. billing addresses), Carte Blanche, Diners Club, Discover, MasterCard, PayPal, TeleCheck (U.S. billing addresses only), United UATP, Visa, Cash, (at an airport ticket office, United ticket office or a Western Union location) http://www.united.com/web/en-us/content/reservations/online/fop.aspx, Accessed October 4, 2013.
Although Graeber (2011) disputes the relative role of barter in the history of money and credit, it is clear that barter did play a major rule in trade even if the relative size can be debated.
See Odongo (2013). One of the authors personally knows a Ugandan who paid 20 cattle for his wife, although the cattle were more for traditional ceremonial reasons rather than a mercantile exchange.
For more information, see https://disneyworld.disney.go.com/faq/parks/using-disney-dollars/.
Cell phones for payments with text message-based products like M-Pesa, or specific app-based systems like Starbucks.
For example, see www.parkmobile.us.
For example, United Airlines states on its web site “Credit and debit cards are now the only form of payment accepted on United flights for all in-flight purchases.” http://www.united.com/page/article/0,6722,51501,00.html.
The name Satoshi Nakomoto appears to be a pseudonym and the identity of the real author or authors is unknown as of this writing. For ease of exposition, I will use the pronoun he to refer to Satoshi Nakomoto when he could well be a she or a they.
On May 12, 2014, Blockchain.info reported that it was connected to 476 nodes, which approximates the number of miners at that time. http://blockchain.info/connected-nodes.
The technology behind bitcoin is actually quite elegant and has many other potential uses. More information about the can be found at www.bitcoin.org and www.coindesk.com.
More information on fees can be found at https://en.bitcoin.it/wiki/Transaction_fees. As of May 12, 2014, the exchange rate between bitcoins and dollars was approximately $432 BTC/USD, making a .0001 transaction fee worth about 4.3 cents. Bitcoins are divisible down to .00000001 BTC, a unit known as a Satoshi.
Coindesk.com (2014) reports that bitcoin-related ventures have received $154 million in venture capital as of the first quarter of 2014.
Cardfellow.com reports average credit card transaction fees in the range of 1.95–2 % for transactions where the payment card is physically swiped, and 2.3–2.5 % for transactions where the card is not present, such as online transactions. http://www.cardfellow.com/blog/average-fees-for-credit-card-processing/.
Mims (2014) provides an example of the concern over such an attack.
There are many skeptics about bitcoin from many dimensions.
Hayek (1990), however, makes some compelling arguments that a monetary system in which the government does not have a monopoly on the production of money would be beneficial. Just for clarity, the authors are not expressing an opinion here on monetary policy.
See, for example, the Congressional testimony at http://www.hsgac.senate.gov/hearings/beyond-silk-road-potential-risks-threats-and-promises-of-virtual-currencies.
See 29CFR531.34 for details.
See 31 USC 5103 and the U.S. Treasury discussion of it at http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx. As the statute states “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.” There appears to be no exception for small coins, leaving a loophole for those who wish to pay large bills with small coins. Also TB Tropes (2014) provides a list of tropes in the media in which large bills are settled with coins. For a real life example of a man who paid his electric bill in pennies, see McGee (2009) as well as http://www.paywithpennies.com.
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Angel, J.J., McCabe, D. The Ethics of Payments: Paper, Plastic, or Bitcoin?. J Bus Ethics 132, 603–611 (2015). https://doi.org/10.1007/s10551-014-2354-x
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DOI: https://doi.org/10.1007/s10551-014-2354-x