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Author Topic: A Bitcoin-tailored credit card  (Read 1502 times)
amincd
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July 11, 2011, 09:56:06 AM
 #1

Here's a way bitcoin transactions can be sped up at the PoS:

You have a virtual bitcoin credit card stored on your mobile phone, that you give to the merchant via NFC or a QR code at the point of sale. Giving them the credit card merely means giving them an authentication code that lets them use your credit card one time for a sale. The merchant connects to the credit card company, uploads your credit card authentication code and sees that you have enough credit to make the purchase (he doesn't actually see your credit limit, only that it can cover the sale). He presents a NFC interface or QR code to you, you scan it with your mobile phone, see the bill for 5 BTC, then send the amount from your mobile phone wallet.

The merchant's PoS system automatically notifies the credit card company that the payment has been sent, and from which bitcoin address it's being sent from.

You walk out of the store with your merchandise and the transaction at 0/unconfirmed, and the store owner is secure in the knowledge that the money will arrive, because the credit card company insures it. For this insurance, the merchant pays a fee of 0.1% of the value of the sale to the credit card company.

After six confirmations, the credit card company, which is now tracking the transaction, marks your payment as sent, removes the debit from your credit card account balance, and increases your credit limit by a small amount.

Your credit builds up as you show that you are reliable in paying what you promise, and this gives you an incentive to remain honest (e.g. not attempt a double-spend).

This allows for instant transactions while letting people control their own money instead of needing to store it with third parties, and keeps small transactions within the bitcoin network which will help provide transaction fees for block generation.
"I'm sure that in 20 years there will either be very large transaction volume or no volume." -- Satoshi
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cbeast
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July 11, 2011, 11:36:09 AM
 #2

I think escrow and wallet services will perform that function like clearcoin was supposed to be. OTOH it probably won't be long before bitcoin is simply adopted by mainstream banks as a way to accumulate bitcoins to maintain their stranglehold on society.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
amincd
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July 11, 2011, 01:54:08 PM
 #3

I'm not sure third party payment intermediaries are necessary with bitcoin. With physical currencies they are useful in allowing for digital transfers, but bitcoin already allows that, and with bitcoin, the security risk from a third party being hacked is pretty big. I think if the user has sufficient security measures in place, he is better off spending bitcoins stored on his own media, and storing encrypted backups with third parties.

An escrow service is obviously a place where a third party would be useful though..


cbeast
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July 11, 2011, 11:10:30 PM
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At the rate electronics are shrinking, it probably won't be long before we have credit card thin smart phones and PDAs capable of mining and spending bitcoins.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
onesalt
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July 11, 2011, 11:35:20 PM
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At the rate electronics are shrinking, it probably won't be long before we have credit card thin smart phones and PDAs capable of mining and spending bitcoins.

You can mine and spend bitcoins on smartphones and PDAs right now, its just that it reduces the battery life to less than ten minutes due to thrashing the cpu at 100% trying to outdo deepbit.

PoS bitcoin transactions are never going to happen because of the inherent risk in them becuase of the time delay in getting a transaction autherised. I don't want to buy something and have to sit around in the store for 10 minutes waiting for the next block to get mined.
amincd
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July 12, 2011, 01:03:53 AM
 #6

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PoS bitcoin transactions are never going to happen because of the inherent risk in them becuase of the time delay in getting a transaction autherised.

That's why I'm suggesting a credit card could be used to insure that your payment will confirm, so that you don't need to stick around until it's confirmed. This would allow instant PoS transactions with bitcoin, and wouldn't require that the credit card company handle any of your money.
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July 12, 2011, 03:48:01 AM
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PoS bitcoin transactions are never going to happen because of the inherent risk in them becuase of the time delay in getting a transaction autherised.

That's why I'm suggesting a credit card could be used to insure that your payment will confirm, so that you don't need to stick around until it's confirmed. This would allow instant PoS transactions with bitcoin, and wouldn't require that the credit card company handle any of your money.

"insure" is the problematic part. Bitcoins are anonymous. Not sure how that would work, but small transactions are no problem https://en.bitcoin.it/wiki/FAQ#Do_you_have_to_wait_10_minutes_in_order_to_buy_or_sell_things_with_BitCoin?

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
amincd
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July 12, 2011, 04:01:39 AM
 #8

Yes, your anonymity would be reduced insofar as all the transactions you make with that credit card would be linked to one identity. One option would be to use the old-fashioned bitcoin transaction for purchases you want to remain anonymous and use the credit card for every thing else.

My main point is that this credit card method would be better than the third party payment processor option in at least one respect: you never have to trust another party to hold your funds. It keeps the peer to peer payment model that I think is more robust.

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If that turns out to be the case, then all the better.
RandyMarsh
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July 12, 2011, 04:10:59 AM
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so what happens if you do double spend? or the transaction is invalid for some reason? you just get away with it?

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amincd
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July 12, 2011, 04:13:17 AM
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If you double spend, the credit card company covers the cost for the merchant, and you lose your credit with the CC company.
RandyMarsh
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July 12, 2011, 04:30:20 AM
 #11

ohh i see, quite an interesting idea

Stan?! STAN?!?!
amincd
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July 13, 2011, 06:56:18 AM
 #12

I just saw that casascius already proposed this:

http://forum.bitcoin.org/index.php?topic=22901.msg288271#msg288271
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