Bitcoin as a micro-payment solution for virtual goods

[Bimmerhead]

I'm brand new here and haven't read through all the threads so pardon me if this has been discussed.

As someone who was involved in the development of several Facebook applications, it seems to me that Bitcoins are the solution to a problem we repeatedly came across: how to monetize our applications through very small payments from our users in return for us providing virtual goods.

What we ended up doing, of course, was what everybody else developing on Facebook also did: join something like Offerpal and allow our users to earn game credits by filling out surveys, signing up for offers, or by sending money through PayPal or credit card.  The problem is that the transaction costs of PayPal precludes allowing people to spend very small amounts.  A few users would spend $5 - $20 at a time, but people who would have been willing to spend 1 cent, 5 cents or 50 cents understandably wouldn't pony up a $20 bill when they only wanted to buy a couple virtual goods.

I'm no programmer, but it seems to me that bitcoins solves this problem:
1) transaction costs are zero
2) transaction amounts can be very small

Bitcoins are a Facebook developers dream.

I see on another thread there is talk about building a bitcoin game for Facebook. 
Can I suggest that a project with more potential to expand the bitcoin universe and cause it to grow virally is building a plugin that ALL Facebook developers could access that allows them to use bitcoins to replace whatever virtual currency they are currently using in their games.

With 500 million users on Facebook and thousands upon thousands of applications...

Is there a big hole in my idea somewhere?

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[jgarzik]

I'm no programmer, but it seems to me that bitcoins solves this problem:
1) transaction costs are zero
2) transaction amounts can be very small

1) Transaction fee may be 0.01 BTC.  Also, cost accounting should include your bitcoin client setup, if you are going to hook directly into the bitcoin P2P network.

2) Transaction amounts smaller than 0.01 BTC incur a 0.01 BTC transaction fee.

Currently, 0.01 BTC is equivalent to 0.0006 US dollars.

[Bimmerhead]

Thanks for the info jgarzik.  I didn't realize there were transaction fees.  When/where are those fees incurred?

Even at 0.01 BTC though this would still be a viable solution for the vast majority of Facebook developers.  Unless BTC rapidly appreciated vs. USD and the transaction cost didn't fall accordingly.

[jgarzik]

Thanks for the info jgarzik.  I didn't realize there were transaction fees.  When/where are those fees incurred?

There are no fees on your average transaction.  However, see https://www.bitcoin.org/wiki/doku.php?id=transaction_fee for specific details.

Even at 0.01 BTC though this would still be a viable solution for the vast majority of Facebook developers.  Unless BTC rapidly appreciated vs. USD and the transaction cost didn't fall accordingly.

Absolutely.  I think bitcoin is definitely a viable microcurrency for facebook and similar apps (such as mobile apps).

[Anonymous]

I'm brand new here and haven't read through all the threads so pardon me if this has been discussed.

As someone who was involved in the development of several Facebook applications, it seems to me that Bitcoins are the solution to a problem we repeatedly came across: how to monetize our applications through very small payments from our users in return for us providing virtual goods.

What we ended up doing, of course, was what everybody else developing on Facebook also did: join something like Offerpal and allow our users to earn game credits by filling out surveys, signing up for offers, or by sending money through PayPal or credit card.  The problem is that the transaction costs of PayPal precludes allowing people to spend very small amounts.  A few users would spend $5 - $20 at a time, but people who would have been willing to spend 1 cent, 5 cents or 50 cents understandably wouldn't pony up a $20 bill when they only wanted to buy a couple virtual goods.

I'm no programmer, but it seems to me that bitcoins solves this problem:
1) transaction costs are zero
2) transaction amounts can be very small

Bitcoins are a Facebook developers dream.

I see on another thread there is talk about building a bitcoin game for Facebook. 
Can I suggest that a project with more potential to expand the bitcoin universe and cause it to grow virally is building a plugin that ALL Facebook developers could access that allows them to use bitcoins to replace whatever virtual currency they are currently using in their games.

With 500 million users on Facebook and thousands upon thousands of applications...

Is there a big hole in my idea somewhere?

This is something a lot of people have thought about. Ive looked into this myself however there is one major issue which you cant get around to use bitcoin as a virtual currency. The problem is that it is a cash equivalent. The fact it is means it breaks the terms of service of sites and applications such as facebook and super rewards. However I may have a solution for this problem if you want to go over it privately.

[FreeMoney]

It's not a cash equivalent. Unless I don't know what cash equivalent means. What does it mean?

[Anonymous]

It's not a cash equivalent. Unless I don't know what cash equivalent means. What does it mean?

You can buy goods and services with it in the real world. You can also cash it out with paypal etc.

[Ground Loop]

I don't get it..  Anything that has value is then "cash equivalent".

[hugolp]

It's not a cash equivalent. Unless I don't know what cash equivalent means. What does it mean?

Bitcoin can be considered a cash equivalent from an economic point of view.

[Anonymous]

I don't get it..  Anything that has value is then "cash equivalent".

http://www.bitcoin.org/


bitcoin=digital currency


It says so on the faq page that satoshi wrote. What do you think a company will do as soon as you mention bitcoin as a "virtual" currency?

[Bimmerhead]

Even if bitcoin is currency and even if Facebook doesn't allow app developers to use real currency bitcoin still is a micropayment solution for Facebook developers.  It just adds an additional step to the process.

Let's say I'm Developer John Doe with an application called Art Collector.  Art Collector allows users to build a collection of virtual masterpieces by winning them, buying them and trading them with other users.  Art Collector application currently has it's own game currency called "ducats".  Users are currently acquiring ducats by sending the application developer real US$ through PayPal.  The application then credits their Art Collector ducat account based on how much money they transferred.

Assuming a player using US dollars as his home currency, it looks like this:
1. User opens PayPal account
2. User transfers US $ from credit card or bank account to PayPal account
3. User transfers US $ from PayPal account to Art Collector developer's account
4. Art Collector developer credits user's ducat account within Art Collector
5. User buys virtual art to add to his virtual collection

The problem is the difference the price the game developer can get for his virtual goods is very small, while the amount necessary to make a PayPal transaction viable could be 10x to 20x larger.  If a piece of virtual art has a market value of 10 cents but a user has to spend at least $2 through PayPal to acquire ducats, that user must be very committed to Art Collector to make a positive buying decision.  He must also have a reasonable expectation that he will eventually find enough virtual art that he likes to spend his $2 worth of ducats.

On the other hand, if developers start accepting BTC in exchange for their own virtual currency, they should see increasing engagement in their applications and greater profits.  In a BTC economy the process would look like this:
1. User opens PayPal account
2. User transfers US $ from credit card or bank account to PayPal account
3. User transfers US $ from PayPal account to one of the Bitcoin exchanges accepting PayPal payments
4. User buys BTC from the exchange
5. User transfers BTC to Art Collector developer's account
6. Art Collector developer credits user's ducat account within Art Collector
7. User buys virtual art to add to his virtual collection

Now the application user is able to make very small purchases from the Art Collector game.  He is also able to spend his BTC in other applications without incurring more PayPal charges.  In both cases he is incentivized (word?) to take the leap and join the virtual goods economy, and Facebook developers will see more transactions through their games.  Of course the user may have a way of acquiring BTC without incurring PayPal charges at all.  This just represents a worst case scenario.

[Bimmerhead]

So, any Facebook developers out there want to take a stab at this?

[mizerydearia]

[Bimmerhead]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

[kiba]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

It look like the bitcoin feature is unimplemented at this time.

How you find this?

[Bimmerhead]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

It look like the bitcoin feature is unimplemented at this time.

How you find this?

It is listed here: http://www.bitcoin.org/trade

[Kir]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

It look like the bitcoin feature is unimplemented at this time.

How you find this?

It seems that there were problems with our bitcoind daemon (it leeks much part of memory).
Now it works correctly.

[kiba]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

It look like the bitcoin feature is unimplemented at this time.

How you find this?

It seems that there were problems with our bitcoind daemon (it leeks much part of memory).
Now it works correctly.

I presume that you're the developer of sweepmines?

[Kir]

ha ha very clever mizerydearia

So here is an application that already accepts Bitcoins, though I couldn't get the transfer to work.  Is the developer on this forum?

http://apps.facebook.com/sweepmines/

It look like the bitcoin feature is unimplemented at this time.

How you find this?

It seems that there were problems with our bitcoind daemon (it leeks much part of memory).
Now it works correctly.

I presume that you're the developer of sweepmines?

Yes, I am.

[Kir]

Hi!

I did bitcoin acceptance for sweepmines game and I would like to share this.
This is very simple payment acceptance logic. You can find use cases here.

To my mind shop should be notified about payments values. So I tried to minimalize shop participation in payment logic - but shop service should store users income amount (storing users id as bitcoin address label is not a problem), because of bitcoin knows about total receives only. And shop should transmit its value to payment system while waiting for incoming payment.

Therefore, disadvantage is that shop service should store users income amount to receive delta from payment system. I implemented PS logic and if there will be proper remarks, it will be redesigned and shared.

Lets discuss this.