Topic: Do bitcoin debit cards help with scalability for now? (Read 239 times)

I have the impression that many understand BTC as a substitute for FIAT money and that it needs all banking products as well as FIAT money, which is in total contravention of the idea of BTC being created as a decentralized currency!

all the fuss for the past 9 years have been because we wanted to build a decentralized payment system that doesn't require any kind of third party. in short some people name it "be your own bank". which means in my opinion any method that will require third parties (such as Coinbase and debit card issuers) is not bitcoin and why would you even want to use them instead of using banks? if you are ok with a third party and the fact that you will rely on them then continue using regular debit cards and regular banks instead of bitcoin debit cards and coinbase-bank so that you are not even facing the volatility of bitcoin.

From strictly a scalability standpoint, I don't think so. Bitcoin debit cards are usually used for services that don't accept Bitcoin to begin with, so there wouldn't be on-chain transactions anyway with or without their help. I guess it could be argued that they make fiat conversions less frequent, but a person can just as easily just convert a big amount directly to fiat all at once.


For now. They at least provide alternative mode of payments by making Bitcoin compatible (and I use this word very loosely) with legacy systems. If things go well, they'll be obsolete in the future.


I'm not sure about Coinbase's service, but you normally use Bitcoins to top them up and you end up with a fiat balance. It functions as a normal prepaid card from that point on.


Still the banks. You're using a run of the mill payment card as far as the merchant is concerned.

LN is not bitcoin

LN is a separate network that multiple coins will use.
and guess what.. you do need to pre plan LN

funds in LN are locked. you need to pre plan how much you want to lock up and also divide it up into multipl channels to get, hopefully the best chances of making payments should:
one channel be temporarily unavailable
not have enough funds themselves to pot potato payments
other partners of partners be offline
destination offline
one of the partner of parters closes their channel
the list goes on

put it this way.
imagine your bob (b)
wife is Alice(A)
charlie(c) is someone you usually have coffee with

ok you put in $130 into 2 channels. $65 to your wife and $65 to a channel with charlie because he has connection to starbucks.
A[0.01 : 0.01]B[0.01 : 0.01]C[0.01 : 0.01]starbucks

imagine your wife went on a coffee date with loads of her friends and she had a $65 bill with starbucks
A[0.0 : 0.02]B[0.0 : 0.02]C[0.0 : 0.02]starbucks
great your wife paid starbucks $65

and now you have nothing you can pass to charlie if you ever want a coffee yourself
see the downside of the routing yet?? where others can raid you dry before you spend funds yourself

but although between you and your wife and you and charlie. you appear to have the same combined value..
but that funds is not split between the 2 channels. its now offset in your wife channel allotment to you

now you know ur wife just raided you. and you have 2 choices. give some of your 0.02 to your wife and hope she knows someone who knows someone thats connected to charlie or starbuck if you ever want to taste coffee this month.

or close the channel with your wife. get your funds (one onchain tx close) and then put the funds back in so that you and charlie have funds to play with(another onchain to add to BC channel)

..
LN devs have seen these issues and are now inventing factories
...
where instead of direct depositing into your channels.... with direct onchain proof in the channel
you deposit fund $130 into a factory(fortknox) and the factory gives you a unbroadcast(offchain) TX that you use for your channel with your wife and channel with charlie. thus now charlie, you and your wife are trusting the factory to honour itself
instead of trusting the blockchain

and then if your wife raided BC.. you then get the factory to disavow the funds from AB(without broadcasting) and give out fresh unbroadcasted tx's to resplit the funds.

but now you cant broadcast a tx at a later date because the channel funds are not directly yours, they are factory owned. so you need factory, your wife and charlies permission if you ever were to exit LN. by again disavowing the currnt balance and then get the factory to honour a tx where the funds go to an address you solely own that you want broadcast

in short
LN is becoming the whole fortknox of 19th century gold. locking it up and letting people play with unaudited promissory notes in the hope you never request your gold back into your own sole control..... sound familiar to banking strategy of 19-20th century

..
yea i know i went double dep into the whole LN concepts.. but much easier instead of the hot potato games of LN and the factoriy issues that fortknox plagued the gold banking era.. but its much easier if your planning to spend $130.. just buy some giftcards with them merchants.. job done

you can't really compare LN with debit cards and talk about them as if they were one. a debit card is going to 100% rely on a third party, and you WILL give up control over your money and open up an account that the third party will control and allow you to use. it will also be on a different centralized database held by that third party.
however using LN you will be in full control of your money, you will not need any third parties and there is no centralization involved nor any separate database holding your funds. it will be all bitcoin, bitcoin private keys, bitcoin transactions and it will be on top of bitcoin blockchain while happening on a different network of nodes.

The only problem I have with that is that I can't pre-plan small expenses like meals or gas and not all gift cards are available online.

I keep the vast majority of my funds under my sole control. I have the private keys (and no one else) and I keep them safe.

I don't see why having a few millibits over at coinbase is really a problem. I may lose them, but I fully accept that risk and my main stack will be unaffected.

Would I prefer my local grocery shop accept bitcoins? Hell yeah! But I know the managers and their managers and directors will not accept bitcoin for at least another decade or until it becomes truly mainstream.


As for the lightning network, those are some valid criticisms but it's really the only viable solution if we want bitcoin to scale. The whitepaper itself mentioned micro-payments which are now impossible due to transaction fees. While not part of bitcoin itself, the lightning network is as compatible to bitcoin and the philosophy behind it as anything else.

I've noticed that you franky1, don't like the LN, if everyone uses it one big advantage is that you're not going to have to use it yourself.

Pre-planning expenses can certainly get you far. Say that you only buy gas from Sam's or Costco. You can definitely do one transaction for 3 months of gas and then have them remove the funds as needed. But then you're giving control of 3 months worth of gas funds to your gas station operator.

The LN would allow you not to have to do that. So what's your solution? Alts? 1 transaction per month? Escrow?

How is Escrow really different (or not inferior even) to the LN?

How is using alts a safe alternative? Isn't pre-paying also locking your funds away from you?

In my country using bitcoin in every day transactions is quite difficult to do since we were not supported by bitcoin debit card or even coinbase. But for me I think it's really useful having a bitcoin debit card especially if the market will really adopt cryptos as a mode of payment, there's no need to cash out or convert into fiat. I just hope sooner my country will also allow this kind of mode of payment.

putting funds into a service where they have co-control is not hlping bitcoin.. if you dont hold sole possssion of the private keys. you might aswell just open a fiat bank account, because your missing the point of bitcoin

same goes for LN

so if you want to deposit some btc into a service so you can buy coffee whenever you like.. here is a solution. just buy a starbucks gift card in 1 transactions. and then you can buy multiple coffee's later without needing onchain tx's per coffee.

job done
the things like LN and debit cards are not bitcoin features. they are separate services branded as bitcoin related. however these debit cards and even LN will be used for other coins too. all offering to lock funds up so that you can spend later off chain.. the reality is that you are giving permission over to banks/channel partners. to manage the funds with you. and they all end up having terms and conditions of allowing you to spend via them

EG
LN: channel partner needs to be online. their route needs to have sufficient funding.. the end destination needs to be online. your channel partner, anyone else on the route and the destination need to sign the payment.
and if you try to exit early using a different than agreed payment amount. the co-manager can revoke all your funds (same as a chargeback)
LN is actually worse then services like coinbase. because LN requires more than one channel(account) just to have a reliable service. meaning you have to split funds up an hope everyone is online and well funded themselves just to spend what you think is still your funds

so its just easier to give starbucks $30 worth of btc to get a $30 giftcard so you can buy 10 coffee's.. rather than depositing funds into side services and trying to get authorisation off chain per payment for each coffee

Short answer: No.

Coinbase inter-account transaction are not Bitcoin transactions. Those surely could help to reduce on-chain tx volume, but can't be considered as a scalability model.


Yes. Anything that involves trusting 3rd party gets a lot of hate here, but as long as such services remain optional and you can still transact on-chain - I see no problem.

I believe that debit cards will be able to attract a sufficiently large number of participants to the cryptocurrency ecosystem. Ordinary people are used to the fact that they have cards to pay. When bitcoin or other alternative coins introduce debit cards into their system, we will see another rise in bitcoin and altcoins.
Of course, many do not understand what decentralization is and they will not care that the cards will lead to centralization, but it will be a new wave of growth and demand for crypto currency, which they will not be able to miss.

as far as scalability goes, there is probably some overall benefit because coinbase handles the fiat conversion in-house. so there are no on-chain transactions required past the initial deposit into your coinbase account. if they had to process it through eg bitpay, that wouldn't be true.

i prefer to be my own bank. i really don't like keeping any BTC on exchanges---USD is justifiable while waiting to buy back in, plus it's FDIC insured. i wouldn't worry about the effect of your own transactions on scalability. i think users should just be rational and pay as little as possible. that's how bitcoin is supposed to work.

for now, their debit card seems pretty cheap: no transaction fees on domestic transactions for a limited time and no conversion fees. that might change in the future and it might not be economical.

It will reduce the decentralized meanings. Right now we should focus on segwit adoption instead only focusing on the lightning network or other suggestion. Segwit is already shown to improve the transaction cost. Well, it does not solve the scalability issue but it helps the network before the LN arrive.

Still, I think that until the lightning network is up, we can prevent a lot of transactions from hitting the blockchain, lowering the cost of transactions for everyone and our own personal cost and time.


I think it helps for now, but will hopefully become a useless way of doing business.

The Bitcoin debit cards I've used exchange the Bitcoin at top up into fiat currency.
The cards are, internally, VISA/Mastercard pre-paid cards. You pay fiat money to the merchants, like on any VISA/Mastercard.
Who get the PoS fees? VISA/Mastercard/banks, as usual, I guess.
Does this help scalability? Nope. It's just a facile way to spend Bitcoin in a fiat governed world.

The idea is not bad, it's just another possible way of doing it.

I believe that a wallet can be developed that interacts with some reader sellers have. It could in fact be something really alike, making sure that you are keeping your coins secure by yourself.

It could be done in a lot of ways but the most important part about innovation is that we need to start paying a lot more attention to security than our predecessors did.

Essentially, I think that you're suggesting the fact that people use third party hosted wallets instead of actually storing your own private keys on a desktop wallet like Electrum.

Even though yes, you might save a few mBTC on transaction fees, it's really not going to be that different considering that to save on transaction fees you actually need others to have coinbase accounts as well to conduct the off chain transfers. Besides, bitcoin transaction fees are extremely low right now that I don't even think it makes that much of a difference.

But the real question you need to ask is why would anyone give over control which is one of the major benefits of bitcoin, of decentralisation? Bitcoin debit cards doesn't help scalability on-chain scability at all.

Since you only have to do transactions to put a balance on coinbase and then can spend it over multiple transactions, does that help scalability?

I firmly believe in keeping your own private keys but I think it's an acceptable cost to give up ownership of a small fraction of your bitcoins and trust coinbase so you can do a few everyday transactions.

I don't know where exactly to draw the line but it would be 0.5-10%. Obviously a lot less if you have a large amount of bitcoin.

Are those services good for the ecosystem in total? How does it all work? Who gets the processing fees from the merchants running the Point of Sale?