What is preventing USD from being used in this way? It seems to me to only stumbling block are regulatory and security restrictions. If that is the case, wouldn't future bitcoin regulation put an end to this type of use case?
Or is the real benefit of your proposed use case the distance of bitcoin value from perceived financial value (ie you are willing to tip X bitcoin but have second thoughts when looking it as X cents)?
Micropayments is a really tough business. Basically it's too risky. Chargebacks are often anywhere between $15 to $35 per transaction.
When you earn a small percentage of a $5 transaction, which a sender claims to have sent by mistake (or he/she requests the money back due to different reasons) 2 things happen:
A. You lose your % of $5
B. You get charged $35.
Not a pretty situation to be in when you are scaling and about 15-30% of your sales get charged back.
Bitcoins are irreversible, so at least they mitigate your risk as a micropayment provider (or as a seller).
It's fairly easy to send USD online if you own a credit card and bank account, but receiving money is a whole lot harder. It's also harder to do it with the degree of anonymity that Bitcoin provides and without the risk of your payment provider freezing your funds or banning you from using their service.
An IP address is light-years from a real-life identity. Without a warrant, there's not a chance of figuring out even the account holders name-- which could be different from the person who actually performed the transaction. It could be a neighbor, a friend, a roommate, anyone else who ever had the wifi password, the possibilities are endless.
If anonymity is a concern getting a court order doesn't sound like a big deal. Even if not, you vastly overestimate the anonymity an IP provides, and if anonymity is a concern legal deniability isn't a big win either. You also ignore that you could potentially get dozens or hundreds of IP addresses. Anonymity, like security, is hard, and has layers.
Anonymity is not a binary variable which is why I worded it "degree of anonymity". I think it should be obvious that credit cards and bank accounts are vastly less anonymous than Bitcoin.
> It seems to me to only stumbling block are regulatory and security restrictions.
That's correct, but those are humongous only's.
> If that is the case, wouldn't future bitcoin regulation put an end to this type of use case?
Short of large-scale Internet traffic examination, the only thing regulations can hope to do is restrict the exit points: the exchanges between Bitcoin and some government-controlled currency.
Or is the real benefit of your proposed use case the distance of bitcoin value from perceived financial value (ie you are willing to tip X bitcoin but have second thoughts when looking it as X cents)?