Topic: bitcoin is failing in replacing fiat in physical shops - page 2. (Read 8612 times)

Bitcoin is a perfect replacement for fiat on online shops (aka e-commerce), who cares if it takes 10 minutes for your transaction to be confirmed when you buy eg. a book on Amazon?

But by design bitcoin will never be as comfortable as fiat or debit and credit cards at physical POS like super markets or the grocery store down the block.

They will get the mining revenue. If you accept that some people will mine for profit, surely it makes sense that others will mine for profit and to help secure the network?

The earlier post mentioned 20%. That to me seemed like a large percentage. Where-as if just 1% of miners are fraudulent, then the chances of a successful double-spend become quite low, compared to the meagre profit from ripping off the kind of merchants that would accept zero-confirmation transactions, and the cost of setting up the mining farm, and the damage to reputation when you get caught. I think we can get to a situation where it's irrational to try. I appreciate that doesn't mean no-one will, but it will be extremely rare.

I also appreciate you are saying that some merchants have such low tolerance for the risk that even "extremely rare" won't be good enough for them.

In my view, one of two things will happen. Either Bitcoin will become a viable alternative to gold as a store of value, or a service will be built on top of Bitcoin that will allow it to facilitate instantaneous transactions. This would be something like Coinbase or a bitcoin bank, with apps on phones which allow this to happen.

Alternatively, Bitcoin will remain a store of value, but another currency like NXT will become the standard for rapid retail transactions.

Actually the way to go is free competition between private monies. All players, be it the users, the exchanges or even the makers of hardware wallets, should try to support more than just one coin. Gox is underscoring this atm.

Then, it would be up to the user and the merchant which coin wins. In practice you would walk with BTC, and maybe 1-2 altcoins in your hardware wallet. Then, at Starbucks for instance, they might require 1 confirmation minimum - BTC LTC and DOGE accepted - and it would be your decision how to pay them and how long to wait.

free competition between private monies  

The issue isn't that all miners would be fraudulent but rather a small % would.  I certainly do think merchants may organize to better control tx processing but that doesn't eliminate the risk of a fraudulent miner.  Depending on the risk profile and the profit margin 0-confirm may simply not be viable for all merchants in all situations because the chance of a fraudulent miner intentionally including the double spend in the next block can never be guaranteed to be 0% and merchants running a transaction processing pool can't make that 0% either.

No one in his sane mind will devote "mining" for the sake of the Bitcoin network. It is a cost intensive operation and without a prospect of profit it is meaningless. Moreover, others are already in control of a big chunk of the network. So "mining" is not going to mitigate any risk because the final cost for the sellers are going to be higher than the expected benefit.

Do you not think large retailers might mitigate that risk by becoming miners themselves? If Bitcoin succeeds, I would expect many entities to be willing to devote some resources to mining, to make it harder for others to control a sizeable fraction of the network. With that goal, they don't need to make a profit, although any mining income will help defray the costs.

I do not understand why people are so stubborn.
It is good to be stubborn to some extend but if you are seeing you are going to loose, why you guys stay still in a sinking ship?
There is better alternative to BitCoin - WorldCoin. Fast transactions without any further mess, the merchant can lock the exchange rate from the exchange almost immediately because WorldCoin gets confirmed in a heartbeat.
Using BTC is like using VHS-recorder to watch movies. Out of date.

The later is more likely.  Grocery business is a very low margin business.  It also has almost no credit card fraud (relatively speaking) and enjoys some of the lowest interchange fees among all business categories.  The "real" cost (fraud, compliance, fees) for a grocery store to get paid by credit cards is <1% and may rival cash so these merchants have the least incentive to switch.  

The "risk profile" for a business doesn't just depend on the price of goods or services but also its margin.  Online casinos for example have very high fraud rates but they also end up taking 50% to 70% of player deposits or more.  The high margin allows them to operate at a level of fraud which would bankrupt most other businesses.  It doesn't take much fraud for a grocery store to lose money.


In general? Yes however every business is different.  

Online digital goods has credit card fraud approaching 10%, when you add in the merchant fees, fraud prevention costs, and chargeback costs it can reach 15% or more of gross revenue.  That is the low hanging fruit.  Even if 5% of 0-confirm tx were fraudulent the companies would pocket billions in additional revenue.  On the other hand some businesses (like grocery store) have very low margins, and have already negotiated very low interchange fees.  That combined with low existing fraud rate means it is possible 0-confirm actually increases fraud rates relative to credit cards.

On a long enough timeline I think "fraudulent" miners are all but an inevitability.  I could see an entity with say 20% of the network willing to accept out of band double spends for a hefty fee (either flat rate say $10 per tx, or a % of the tx amount).  Would that impact retail stores?  Lots of crimes are crimes of opportunity.  In bad economic times and when gas prices rose the number of drive offs increased.   If there is an app you download that gives you a 20% of having a free purchase with no risk and money is tight, I think the number of people that would rationalize their theft away is non-zero.  

I don't want you think I am trying to predict the future.  The risk may end up being overstated and maybe grocery stores just end up accepting zero confirm transactions straight on the blockchain with no other assurances.  I honestly don't know.  I am just pointing out that might not be the case.  Among all possible businesses grocery stores probably have the least to benefit from Bitcoin and conversion on a large scale would require near zero fraud rates.  I am not sure if zero confirmation (without a trusted third party) can guarantee that.  Given the ease that the double spend risk can be mitigated with identification or backup payment I think that is certainly possible.   Case in point many places ask for ID if you want to pay by check.   A 0-confirm tx has a risk profile similar to a payment by check.   Once confirmed it is like a cleared check.  Of course waiting for confirmation at point of sale is no more possible then waiting for a check to clear.  How do businesses today mitigate the risk of checks?  They ask for identification.

Thank you for the thoughtful comments, DeathAndTaxes.

I agree with most of the points you made, but could you clarify why you think $300 grocery purchases may be too high a risk for zero-confirm transactions?  Assuming that malleability is eliminated in the future, how could a customer using a mobile app cheat the grocery store cashier [assuming the grocery store has a well-connected listening node]?  My understanding is that the fraudster would either need to coordinate a Sybil attack, or he would need to pass the fraudulent double-spend over a non-public back-channel to an unethical miner that controls a great deal of global hash power.  

Both these attack methods seem like a lot of work for groceries, neither method is guaranteed to succeed, and the fraudster risks getting caught and charged with a crime.  (Despite what Augusto Croppo says, as bitcoin becomes more mainstream, we will begin to recognize these shenanigans as a crime similar to using counterfeit bills or stolen credit cards).

I imagine that in a "bitcoin future" there will be less zero-confirm fraud using bitcoin [malleability aside] than purchases with counterfeit cash or stolen credit cards.  Do you disagree?

It depends.  I don't think there will be a single solution for all merchants in all situations all the time.

Some merchants can probably just accept 0-confirm txs (solving the mutability issue should be a priority).  For an entity like starbucks if they "listen" for double spends the risk should be lower than credit cards.   Lets say starbucks pay 1.5% average for CC, and losing another 1% due to CC fraud.  If Bitcoin offers a cost & loss rate of less than 2.5% the company improves their bottom line.  There is no significant economic incentive to try and defraud starbucks given the costs and complexities that the fraud will involve.  Bitcoins doesn't have to be perfect, it just has to be better.   Vending machines, fastfood, parking meters, move theaters are not going to be high value targets for hackers.

For high value transactions, transactions will need confirmations.  For some types of in person sales this is a non-issue.  An example would be buying a car or boat.   It is going to take you a couple hours to do all the paperwork anyways.  Plus you have to hand over all kinds of personal documents for title and registration purposes.   Any retail shop which does delivery fits in well with Bitcoin.  If you go to Home Depot and buy a washer and dryer most of the time it is shipped from the warehouse to your home.  For this type of transaction retail is no different than internet mail order.

Some transactions will already require the merchant to verify your identity anyways.  For example say redbox took Bitcoins.  How do they ensure you return the movie (unless you are willing to put a deposit of the value of the movie in Bitcoins)?  They do so because when you created an account and signed up they verified your information and you agreed to have your CC charged if you fail to return the movie.  Redbox could take 0-confirm tx tomorrow with no additional risk.  Why? if you double spend they just charge your CC.  If your CC was fake/stolen why do the double spend to begin with.  Their risk profile isn't worsened by taking 0-confirm txs.

The most complicated category would be moderately sized, low margin transactions, in a time sensitive physical retail environment. The archetypical example is a grocery store.  With transactions possibly exceeding $300 the fraud risk becomes material.  0-confirm probably can't be relied upon.  This will require some off the blockchain solutions.  One would be to use an off block-chain payment processor but another would be to simply get a backup payment method.  You register a credit card with the store when they enable bitcoin payments.  If you double spend then they charge your credit card plus say a 1% penalty.   In return if you pay with bitcoins the store saves ~1.5% so they give you a 1% discount off the total and they still save 0.5% off the top.  A win-win.  I could see a small grocery chain in a tech friendly area doing something along those lines. Maybe you have an option of providing a voided check (for ACH authorization) instead of debit card at the time of the authorization.  While Bitcoin is small it may need to co-exist with traditional payment options and this is one way to do so.

Wow D&T that was a giant wall of text.  Yeah more than I originally intended but the broader view is there is no one "solution to rule them all".  Each merchant (or processor) will need to tailor their acceptance to the risk profile of their business.  

When you talk about a customer having an account with a retailer, that's not the same as a customer owning bitcoin. The account with a retailer is part of a "formal banking, brokerage, or business relationship established to provide for regular services, dealings, and other financial transactions" with that retailer. Bitcoin is more like cash. It's not a relationship with any one individual or institution. You might as well say dollars are an account you have with the American government and/or its people.

If you are saying I might have an account with my retailer that I settle in bitcoin, then I agree, but I suspect you are not saying that.

If they can take cash, and have an internet connection, they can take bitcoin. Bitcoin has many advantages over cash for the retailer and the customer. It has some caveats, but those can be managed. Loyalty cards and retail accounts will be layered on top of that, for those that find them convenient.

You guys need to start supporting WorldCoin.

AnonyMint.... just wow.

You are eitehr one serious troll or trying to contribute to pushing BTC even further down. Not sure which, but I am sure that you're not actually this retarded.

1. payment processors are no problem - they are needed anyways as long as shops need to operate on a fiat basis.
2. should the time come when shops do not wish to convert their coins into fiat anymore, the obvious solution is this:

a) BTC being the equivalent of a Gold coin (e.g. Roman gold aureus) - used for large transactions like buying a horse or a car, where waiting as absolutely not a problem

b) some fast confirming altcoin being the equivalent of a Silver coin (e.g. Roman sesterce) - used for small transaction like buying a beer in a tavern

For centuries Gold coins have never been used to buy small stuff and the BTC is no exception.

This does also solve the blockchain size issue.

This does also solve the issue of having to use very small fractions of a BTC for a small purchase, which is absolutely not helping the average Joe.

http://en.wikipedia.org/wiki/Silver_coin

"Because silver is not nearly as valuable as gold, it is much more practical for small everyday transactions."

What? Bitcoin has been used in many different shops from large names to local shops Bitcoin is not failing one bit.

d00d, there is no "could", "perhaps", "might", etc.

One transaction of two will be accepted if it is valid, whatever are the confirmation number for that transaction.

Relax, listen to some jazz music, it helps to visualize the process.

ROFL.

d00d, relax, it is not even a "coin". It is just some spare digits heavily encrypted bloating computer hard disks. I fail to understand why people like you get nuts because something so ephemeral. It is a revolutionary medium of exchange, but it is not a matter of life and death. Why you got so emotional?

Because then he gets the product for free and keeps his money too.  


Incorrect. I did not make that assumption in any of my posts on this issue.

I think you made a blunder. You said the Bitcoin network would reject the two transactions from a double spend attempt. This perhaps is possible in theory, however that is not how the transactions are processed by the nodes and then included in the blockchain. The first transaction received by the majority of nodes is always accepted, even if majority means just one node. This is stated in Nakamoto's paper:

https://bitcoin.org/bitcoin.pdf


Let me remind you that 0 confirmation just means the transaction was included in 0 blocks. That do NOT means the transaction was rejected.

https://en.bitcoin.it/wiki/Confirmation


So your case scenario of a seller accepting a transaction with 0 confirmations, one of the transactions will be accepted while others could be rejected. Otherwise, attempt of double spend would be meaningless. Why would an attacker try to double spend his BTC if both transactions would be rejected anyway?