One of bitcoin’s oft-touted advantages is the speed at which payments can be collected from purchasers of goods and services. While credit card or electronic check payments usually take between three and five days from the time the payment is submitted until the point at which cash is available to be spent, bitcoin payments are essentially instant.
Cashflow management is a major concern for many small businesses. Money “in transit” cannot be used by the merchant pay bills or retire debt. Bitcoin seems like a natural solution, except when the supporting infrastructure breaks down.
Case in point: Last week, Coinbase notified customers that withdrawal requests submitted during the last week of August would be delayed by a few days. To wit:
Last week, we experienced a rare issue while processing deposits for some customers. While these deposits were delayed, we can confirm that they are now in transit to your account. Depending on your bank’s deposit policies, they will post within 2-4 business days.
Given that Monday, September 1 is a US holiday (Labor Day), we expect that you should receive these funds in your bank account no later than Friday, September 5.
We understand that this has been inconvenient for you and would like to sincerely apologize. Going forward, we have implemented several measures to ensure this does not happen again.
As this was entirely our fault, we have credited your account with a refund of your transaction fee ($0.65), PLUS an additional $0.65. This refund has been credited to your Coinbase account in bitcoin (0.0025597 BTC).
Again, we are very sorry for this issue. We appreciate your patience and understanding while we work to perfect our services.
The most likely explanation for withdrawal delays is a temporary shortage of cash, though I have no way to confirm my suspicion here. This is ironic, since a cash crunch is exactly the kind of situation that bitcoin’s fast processing time is supposed to help prevent.
Industry Wide Problems
This isn’t the first time that Coinbase has delayed orders, nor do the problems seem to be confined to sales. Most, if not all, of the major online services seem to have intermittent problems of all kinds. Here is an example from BitInstant. Here is an example from Cryptsy. I tend to write about Coinbase more often than other bitcoin processors because my firm does business there, not because they are uniquely good or bad.
Hard core bitcoiners will be quick to point out that servicers like Coinbase, BitPay, et al are irrelevant because they are unnecessary for bitcoin to function as a medium of exchange or store of wealth. However, they are necessary for the GROWTH of the bitcoin economy.
Adoption Rate Is Still Very Low
Merchant acceptance is the key factor driving adoption. Since merchants have a need for fiat money (and will continue to need it for the foreseeable future) to deal with their own vendors, pay salaries and pay taxes, the ecosystem needs a reliable means of converting from bitcoin. Most merchants won’t hold a substantial amount of bitcoin for a variety of reasons, but primarily due to volatility.
In order for bitcoin to continue to grow, it must create value that potential adopters would recognize. This means that the infrastructure must function better than other forms of payment. Unexplained or persistent transaction delays automatically put bitcoin behind its competitors, since most merchants would gladly pay a little more for security and predictability. The slight savings realized in lower transaction fees are easily wiped out by a late payment fee or interest charged caused by a delay like the one cited above.