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Cupcakes meet bitcoins

Bitcoin-themed cupcakes are one custom creation at Cups and Cakes Bakery in San Francisco. Shop owner Jennifer Longson accepts bitcoins as payment and has even brought cupcakes like these to bitcoin meet ups.

 

Jennifer Longson doesn't only accept bitcoins as payment, she has even whipped up bitcoin-themed cupcakes at her San Francisco bakery, Cups and Cakes.

You know the cupcake rage of the past couple of years? A cynic might even call it a bubble. Okay, keep that in your back pocket and think about bitcoins, the cyber currency that's been quite bubble-iscous itself this past month or so.

Roll them together and what do you get? A cup-cakery that takes bitcoins.

Jennifer Longson owns Cups and Cakes in San Francisco. Her husband works in the tech industry and was enthusiastic about bitcoins. In the retail store, she uses an iPad as her cash register, so it didn't take much to become bitcoin friendly.

"We just bring up the BitPay app and we type in how much they owe us. Up pops a QR code, and they scan it with their online wallet with their phone," Longson says. "And in about 30 to 60 seconds, it pops up that it's confirmed."

Initially Longson only had one or two bitcoin customers per month. Now it's up to three to five per week. She's not too worried about the volatility, as she is leaving the bitcoins where they are.

As for whether the cupcake bubble has burst, Longson is similarly optimistic.

"I mean, the first cupcakery opened like 15 years ago. Is that a bubble?" she asks. "My business is as good as usual, if not better."

She points out that unlike large chains like Crumbs that expanded quickly, her shop is small.

"It's just two employees, plus me."

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

Jennifer Longson doesn't only accept bitcoins as payment, she has even whipped up bitcoin-themed cupcakes at her San Francisco bakery, Cups and Cakes.

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I refer you to the famous quote from P.T. Barnum.

Badcoins is self-contradictory, likely trolling for fun. Nevertheless, I'll address his comments. He's clearly holding an agenda, all currencies -- USD, Gold, Euro -- and ideas for that matter have their detractors. I think it's important to realize that bitcoins didn't exist 5 years ago and is the first of its type: a crowd-created, open, transparent, distributed currency. The offical bitcoin client is version 0.8, not even the 1.0 release! So it's in its nascent stages and some growing pains are to be expected, but with that said, I don't think badcoin makes a single valid point. I'll respond to their points piece by piece for clarity.

"When a business accepts BitPay, it's like they're accepting PayPal - in the end they receive USD. In other words, BitPay handles the exchange between bitcoin and USD, and then sends the USD to businesses. This lets people claim they accept Bitcoins but they really do not, directly. Which is really a good thing, they are so bad. This means when the value of bitcoins drops 50% overnight that leaves BitPay out to hang, not real businesses, at least."
Yes, BitPay offers instant USD conversion, but the shopkeeper didn't opt for this feature. She keeps the proceeds denominated in BTC. Is it wrong for a company to sell widgets and accept Euros? To later convert them to dollars? Or perhaps keep them as Euros in a safe? Nobody would bat an eyelash at any of these practices... Holding onto bitcoins (or converting them to your native currency) is no different.

"A true BitCoin transaction can take upwards of 30-60 minutes to be "confirmed" by enough BitCoin users for it to be irreversible, which renders it completely unusable as a real currency. There is such a thing as a "Double Spend" attack -- if I pretend to send you a bunch of bitcoins, and you believe me after just one or two other people confirm I really sent them -- then I can turn around and send those same bitcoins to someone else, and you end up getting ripped off. Can you imagine going to Starbucks, ordering some coffee, then having to wait an hour before they confirm you really did pay them, before they can even safely give you your coffee? BitPay exposes themselves to quite a bit of risk by offering to be the man in the middle there, as well as the insanely fluctuating exchange rate, which surely is not sustainable long term."
99.999% of bitcoin transactions are confirmed within 30 to 60 seconds. These are referred to "0-confirmation" transactions, but nevertheless, are still extremely reliable. In fact, they're SIGNIFICANTLY more reliable than a credit card transaction, by orders of magnitude! Bitcoin developers are phobic of reversed transactions, and that's why there hasn't been a single one of note! BitPay knows this most of all, if someone reverses the transaction by an act of sophisticated subterfuge, the merchant still gets paid. Yes, one should wait longer for high value transactions to be sure, but how long does it take to move 20,000$? 100,000$? In fact, try to send someone in your country 100$ today -- you might be able to. Okay, now send someone in Mexico or Thailand 100$ -- suppose a traveling relative in need -- within 3 days. You'll have a hard time and the fees certainly won't be negligible. So complaining about a 60 second wait time seems unfounded -- we've all waited longer for a credit transaction. A credit transaction, by the way, which any customer can dispute via a chargeback upto 270 days after the transaction date. The merchant doesn't have the money -- with 100% certainty -- until 9 months after the transaction! BitPay assumes no risk, as they can exchange bitcoins for dollars instantly on many exchanges. The exchange rate will stabilize with time, as the USD-BTC exchanges are regulated (a good thing!) and a properly functioning derivatives market (shorting, futures, options) emerges. BitPay is doing well now -- they have had multiple up rounds of funding and are doing so well -- and will likely be doing even better then.

"Additionally BitCoin was recently brought to its knees because more than about 1700 transactions per minute were going on, which broke the system completely. They then tried to make everyone upgrade to a fixed version, but not everybody upgraded, which led to a "fork in the blockchain", which led to even more people being ripped off for thousands of bitcoins. Compare this to PayPal or Visa which process millions and millions of transactions a minute. BitCoin is completely unprepared and unsuited to be a real currency."
Scalability has been addressed ad nauseum in technical/academic circles and the consensus is bitcoin is VERY scalable -- it is possible to scale to ten-times the number of transactions of VISA in a day with current hardware and a modest budget. Nobody was ripped off of any bitcoins during the blockchain fork. The situation was resolved within half a day. If you were on vacation for two days you wouldn't have noticed. You are fear mongering. 1700 transactions per minute -- a number I find dubious -- is a testament to bitcoins use as a real currency.

"Not to mention the fact that the past few years of BitCoins have mostly involved dozens and dozens of failed ponzi schemes, and "Exchanges" getting hacked and losing everyone's money, like the Magic the Gathering Online Exchange (aka "Mt. Gox", yes, it really was a kids card trading game site before it started wreaking havoc on the bitcoin exchange market!). It's really quite interesting, libertarians who absolutely hate "big government" most of the time, suddenly threaten class action lawsuits and contact law enforcement after their magic internet funbux are stolen, but of course nothing ever comes of it, since it's not real money.

Those are just a few of hundreds of reasons why BitCoins are insecure, and prone to scamming and completely, and it will never be used as a real currency except by Libertarians, drug dealers and child pornographers, which make up 99% of the people using it today.

I'm just an amateur "read about why Bitcoins are bad" person. I encourage you to seek out some true experts who really know about BitCoins and can explain these and the many other critical flaws in the BitCoin system on air!"

Yes, as with all other currencies, bitcoins have been involved in scams and hacked. Despite it's flaws, it is very promising and very interesting. What other start-up currencies have nobel laureate economists writing about it? If a tiger is bad at dancing, it is still remarkable that a tiger is dancing at all. By the way, now you say bitcoin is a "real currency."

Anyhow, it's still the wild-west, so to say. Look at the internet in 1995: "nothing but porn and pop-up ads!", one might say, but now it has revolutionized the world over. Bitcoin has this same potential to revolutionize payments the world over: money-over-IP. Dozens have devoted their careers to making that happen, let us see if they can pull it off -- perhaps one cupcake bakery at a time.

PS. The preferred nomenclature is "Bitcoin" for the payment network, "bitcoins" for the currency, and never "BitCoin" or "BitCoins.

No sane vendor would want to hold BitCoins for more than a fraction of a second, due to their volatility. Otherwise they would go out of business, if they can't afford to throw away money when the exchange rate crashes overnight. Apparently this cupcake business is ok with potentially losing 30-50% of the value of the "3-5 cupcakes a week" they sell for bitcoins, but any serious business selling expensive products can't take that risk.

So your other big point is Bitcoins are great for vendors, because customers can't do a chargeback. That's great for vendors, bad for customers. Chargebacks are a good thing for consumers, and reputable businesses deal with them on a daily basis just fine. There is no dispute process for bitcoins other than getting a red "SCAMMER" tag put on your forum account on the main Bitcoin forum which is laughable.

My 30-60 minutes for a real 100% confirmation statement still stands. You have to wait for a good 6 or 7 confirmations before you can truly trust you aren't getting ripped off. Your 60 second "0-confirmation" item is exactly what you want to avoid if you want to hold onto your buttcoins, those can easily be faked and countless people have been ripped off that way.

BitCoin is most definitely not scalable in any way shape or form. Besides the 1700/min transaction limit due to the current block size limitation, everyone who runs the client has to download the entire "blockchain", a record of every transaction ever made. It's already over 6GB of data with only a few smelly basement dwellers using it. If they processed even .01% of the transactions Visa processed the blockchain would be terabytes in no time. Completely unscalable.

BitCoin was a great academic proof of concept. Maybe a few of its features will be used when a real sustainable internet currency is invented. In the mean time there's always Liberty Reserve and a dozen other ways to transfer money that can't lead you to getting scammed ten ways from Sunday. The last time Marketplace had someone on talking about BitCoin they even had to admit their wallet had been stolen by a hacker. "No chargebacks" strikes again.

Kai,

I would appreciate it if you could run a correction on this article tomorrow!

When a business accepts BitPay, it's like they're accepting PayPal - in the end they receive USD. In other words, BitPay handles the exchange between bitcoin and USD, and then sends the USD to businesses. This lets people claim they accept Bitcoins but they really do not, directly. Which is really a good thing, they are so bad. This means when the value of bitcoins drops 50% overnight that leaves BitPay out to hang, not real businesses, at least.

A true BitCoin transaction can take upwards of 30-60 minutes to be "confirmed" by enough BitCoin users for it to be irreversible, which renders it completely unusable as a real currency. There is such a thing as a "Double Spend" attack -- if I pretend to send you a bunch of bitcoins, and you believe me after just one or two other people confirm I really sent them -- then I can turn around and send those same bitcoins to someone else, and you end up getting ripped off. Can you imagine going to Starbucks, ordering some coffee, then having to wait an hour before they confirm you really did pay them, before they can even safely give you your coffee? BitPay exposes themselves to quite a bit of risk by offering to be the man in the middle there, as well as the insanely fluctuating exchange rate, which surely is not sustainable long term.

Additionally BitCoin was recently brought to its knees because more than about 1700 transactions per minute were going on, which broke the system completely. They then tried to make everyone upgrade to a fixed version, but not everybody upgraded, which led to a "fork in the blockchain", which led to even more people being ripped off for thousands of bitcoins. Compare this to PayPal or Visa which process millions and millions of transactions a minute. BitCoin is completely unprepared and unsuited to be a real currency.

Not to mention the fact that the past few years of BitCoins have mostly involved dozens and dozens of failed ponzi schemes, and "Exchanges" getting hacked and losing everyone's money, like the Magic the Gathering Online Exchange (aka "Mt. Gox", yes, it really was a kids card trading game site before it started wreaking havoc on the bitcoin exchange market!). It's really quite interesting, libertarians who absolutely hate "big government" most of the time, suddenly threaten class action lawsuits and contact law enforcement after their magic internet funbux are stolen, but of course nothing ever comes of it, since it's not real money.

Those are just a few of hundreds of reasons why BitCoins are insecure, and prone to scamming and completely, and it will never be used as a real currency except by Libertarians, drug dealers and child pornographers, which make up 99% of the people using it today.

I'm just an amateur "read about why Bitcoins are bad" person. I encourage you to seek out some true experts who really know about BitCoins and can explain these and the many other critical flaws in the BitCoin system on air!

Your critique would be better if it had sources.

OK, I'm just an amateur "thinks Bitcoins are good" person. Citations for your claims would be helpful. If I go to http://blockchain.info/charts/avg-confirmation-time , I can see that average transaction confirmation times are ~ 10 min.

So sure, this still isn't fast enough for immediate transactions... However, for over-the-counter purchases, some sort of intermediary payment processor could be involved to carry the risk that the spender will "double-spend" his BTC after the transaction. This is not an un-solvable problem. ALSO, I think there might be a mechanism for "transaction fees" inside the Bitcoin protocol that can speed up the transaction, but I'm not an expert.

Your other claim, 1700 transactions per second, needs a citation. In the recent hype/deflation cycle, Mt Gox (a Bitcoin currency exchange) had some problems related to network issues and/or DDOS attacks. They *claim* to have fixed these and are back up and running. However, to my knowledge *none* of these issues affected the core Bitcoin protocol itself, which went blissfully along. Right now, the exchanges are the weak points in the system. But again, this is a "solvable" problem, and as we speak silicon valley VC's are swooping into place to build a better infrastructure.

Finally, there are libertarians, drug dealers, and child pornographers (Oh My!). You forgot one important class of people, and that's the developing world. Now in the future, any time there is a currency crisis, whether in Cypress, Argentina, or wherever, Bitcoins will fill in for the failures of fiat currency. Sure, it's just on the periphery now. But Rome didn't fall in a day. ;)

Sneeze,

I actually happen to know the lady in question, and she's far from a bored housewife. She's worked hard to run a small business for some time now, and managed to keep it going in fine shape, despite some deploring the idea of cupcakes (especially a bakery who specializes in them) as a so-last-year craze.

So, all in all, aside from her husband handling the bitcoin transactional aspect of the work, I'd say she actually counts as a "Real Businessperson".

She doesn't even know how many bitcoins she's taken in nor, evidently, has she ever tried to convert them into real money.
How about interviewing a real businessperson about bitcoins instead of a bored housewife whose rich husband bankrolls her hobby?

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