One of the most annoying things about Bitcoin is that it’s so convenient to make payments with it that sometimes it is extremely tempting to spend it and avoid the hassle of using dollars. One of the ways to help deal with the temptation to spend is to demand a Bitcoin discount at any store that accepts Bitcoin. This is perfectly reasonable because not only is the store lowering its own costs by using Bitcoin, but it is asking me to give up an inherently superior commodity.

Hoarders are more important than merchants. If a restaurant downtown starts accepting bitcoins, this does not necessarily create an incentive for anybody to buy more bitcoins. Why would anyone bother if they can still just use a credit card? If you can convince a merchant to accept bitcoins and stop accepting dollars, then I’ll be impressed.

Unless a merchant is offering something that cannot be bought for dollars, or at least offering a discount, he is only benefiting Bitcoin to the extent that he encourages more hoarding. If he immediately converts the bitcoins he receives as payment into dollars, and if his customers only buy bitcoins so as to spend them at his shop shortly thereafter, then neither has much direct effect on Bitcoin’s demand. The real hero is the hoarder behind the scenes who buys from the merchant and enables him to convert his payments into dollars.