Hello,
I'm thinking about the following issue:
Paying cash at a POS should take only a few seconds.
On the other hand, a Bitcoin transaction needs approximately 10 minutes to be confirmed.
To use Bitcoin in this situation, the confirmation of a transactions should be just as fast.
Of course, this can not be done by the mining process.
But maybe some kind of a trusted confirmation service could help.
Are there any ideas?
Bitcoin transactions only take a few seconds. Confirmations take 10 minutes (on average). Credit card payments aren't confirmed until 30 days and one could look at that as just 1 confirm as they can still be reversed up to 180 days later.
Do credit cards have a 0% fraud rate? No.
Do merchants still use CC despite a non-zero fraud rate? Yes.
Will 0 confirm in person Bitcoin transaction have a 0% fraud rate? No.
Is it difficult to execute a double spend in person against a well connected mechant? Yes.
If fraud from 0-confirm in person transaction is lower than the fraud losses for CC transactions is that a problem? ..... The million Bitcoin question
Bitcoin has less of a competitive advantage for in person transactions and I think that area will be developed much later. Ecommerce, gambling, virtual goods, and international fund transfers are the low hanging fruit. Those areas will be developed more aggressively than in person POS systems as that is where Bitcoin provides a significantly superior system. For many areas 0-confirm transactions are likely viable. A vending machine for example can be fooled by counterfeit money or stolen credit cards far easier than a merchant however we haven't seen vending machine companies go out of business. Who steals credit cards or counterfeits $1 bills to get free sodas? Who will attempt an in person double spend to get a free soda?
If you absolutely feel that tx must be confirmed (zero fraud) you are limited to centralized solutions but solutions are possible. Some ideas to get you thinking:
a) customer prepays. Customer on way into grocery store deposits Bitcoins. By the time he checks out funds are confirmed. Payment at POS is actually Merchant -> Customer being the balance between the deposit and amount purchased.
b) backup payment method. Customer pays with BTC but is required to swipe a CC as well (which authorizes but not collects payment). If Bitcoin transaction is reversed customer agrees to be charged. Once merchant confirms payment the CC authorization is released without payment.
c) eWallet provider. Yes it is centralized. Say coinbase gets physical merchants to accept payments from coinbase accounts. The merchant doesn't need to trust you, they just need to trust coinbase.
d) multi-sig. A bitcoin "bank" of sorts has 1 of the 2 keys required to sign transactions. The bank will sign anything you sign as long as it isn't a double spend. If the merchant trusts the bank to not allow double spends they can accept 0 confirm without risk.
