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e-gold and eBay
It would appear that I spoke too soon when I said that eBay "made e-gold practical and desirable." eBay has a new "safe payments policy" that they announced sometime late last year (October, I think) and goes into effect approximately as I'm writing this post.
eBay has decided to specifically prohibit e-gold, along with several other payment methods including Western Union.
I sent them the following e-mail on Friday, referring to their new policy, and I'll post the response when they write me back:
I'm sure that when (if?) they reply, they will cite user complaints about being defrauded through the various prohibited payment methods. But this is irrelevant, because no payment method is immune to fraud. If someone auctions an expensive computer they don't have and can't deliver, it doesn't matter what payment method you use — you're not going to get the goods!
The real reason they're prohibiting e-gold and other competitors to PayPal is because … they're competitors to PayPal. When eBay bought PayPal, it ceased being merely an auction venue with no interest in what payment methods were used by auction participants. With the purchase of PayPal, they acquired a vested interest in PayPal's revenue stream. Competing payment systems with higher fees than PayPal aren't much of a threat, but those that are less expense than PayPal threaten to take business and revenue away from PayPal.
First is the e-gold fee schedule. Depending on how much e-gold is being spent, one of five different formulas apply. The maximum fee is 0.05g, which you'll pay whenever you send 5g or more. Yes, the fee to send 10g is the same as the fee for sending 10kg.
This is plotted with logarithmic scales to illustrate both very small and very large payments.
All the rest of the charts will be in dollar terms, assuming a gold price of $500/toz. (It's about $550 as I write this, but it's been above $500 for less than two months.)
Next let's compare the PayPal and e-gold fee schedule. As you can easily see, e-gold is always less expensive than PayPal.
Most people won't make enormous transactions, so let's focus on a "typical" payment size of $100 or less. Also, I'm switching to linear scales so the chart is easier to read.
As you can see, the maximum e-gold fee — less than a dollar — is reached for a transfer of approximately $80. PayPal's fees keep growing along with the transfer size.
Here are charts expressing the fee as a percentage of the amount transferred. The first uses log scales and covers all transfers up to $1 million. The second uses linear scales and ends at $100.
Notice that over almost the entire range of "typical" transactions, the e-gold transfer fee is 1%, while PayPal's is over 3%. Most auction transactions will be within this range. This is e-gold's advantage over PayPal. This is what eBay is afraid of. And that's why they've moved to prohibit e-gold.
I received the following response from eBay. It restates the policy but doesn't answer any of my "why" questions that were seeking a justification for the policy. In that respect my prediction was wrong — I thought they would try to justify the policy but by using irrelevant reasons. No, they didn't even try:
I followed the second link and sent the following note in as a suggestion (not as a question):
I also submitted this question for eBay's next Town Hall (1/26):
Do any of my readers work for eBay? Could you e-mail me and tell me if I'm correct about the motivation for the policy? I'll keep it sub rosa.