offline bitcoins + NFC = the end of era of current financial system (?)

[alex04210]

Hi

Let's discuss the potential of bitcoins to change drastically the current financial system!

Imagine if bitcoins could me used not only within PC and Internet but like real money. In such way that real money could totally substitute physical money -M0 (banknotes and coins).

If people could bit by bit to refuse using traditional banknotes and coins preferring instead offline bitcoins...

Let's assume  how offline bitcoins should look like in order to substitute  traditional money:


BTCMedium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange.

BTCUnit of account
To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again.

BTCFungible
that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money.

BTCStore of value
To act as a store of value, a money must be able to be reliably saved, stored, and retrieved – and be predictably usable as a medium of exchange when it is retrieved.

BTCStandard of deferred payment
 is an accepted way to settle a debt – a unit in which debts are denominated, and the status of money as legal tender, in those jurisdictions which have this concept, states that it may function for the discharge of debts.

BTCMeasure of value
Money acts as a standard measure and common denomination of trade and its most important usage is as a method for comparing the values of dissimilar objects.

BTCAnonymity
This is the feature which belongs to traditional money (banknotes and coins). If you see money usually you can exactly say whom do they belong to.

As we see bitcoins have all of mentioned function and I marked them  as BTC


But there is another one important feature of traditional money (banknotes and coins) is MOBILITY
 

It is the feature which let you store money in the pocket, wallet or safe and easily transfer them from place to place any time you want. This is feature which let you give anyone and anytime any amount of money.

So this is the point!

I would like to discuss the ways to provide this feature in bitcoin system. And here it is my point of view.

[beeblebrox]

This is already being implemented.  The first release was just this week.  https://bitcointalk.org/index.php?topic=321085.0  .  

However NFC exchange is yet to come-- although very easy to implement.  At the moment you have to take a photo of a QR code on the recipient's phone (I think) to set up the exchange (this is probably safer than using NFC anyway and not that much less convenient).

PS: It surprises me that no-one here has been talking about this project since it is the biggest technological advance in Bitcoin in the last year or so.

[Sitarow]

Those that takes advantage of the simplicity of NFC will have greater success as more people begin to use this tech to share and interact.

NFC along with direct wifi help people share at a files fast and at a private level and requires little technical knowledge its users.

I am disappointed that Apple have been so resistant in implementing such tech in their own phones.

[Meuh6879]

WHY do you want a NFC chip ... when BITCOIN can use camera to pay !???
It's useless !

If you have a NFC chip, you must have a camera in your phone...

[P_Shep]

WHY do you want a NFC chip ... when BITCOIN can use camera to pay !???
It's useless !

If you have a NFC chip, you must have a camera in your phone...

QR codes hold too little data.

[lnternet]

Good. No more dirty bills being passed along while not giving up anonymity like using a card.

[alex04210]

I was thinking for two weeks and "Eureka"!
How we can do that bitcoins could be really offline. Let's see my proposed algorithm:



1. First, user separates some amounts of bitcoins in his wallet. It's like en exchange of banknotes and coins. You have one banknote then you divide it into small banknotes and coins. So user makes new records it general register and sign them digital signature




2. Then user transfers this records (bitcoins) to his NFC-wallet.




3. When paying user connects his NFC-wallet to the active receiving NFC device and orders to pay the possessed amount of bitcoins. For example if earlier he transferred 1 Bitcoin and 0.5 Bitcoin, he can pay only this amount:
0.5,
1 or
1.5.

But no other variants (no 0.75 or 1.25....) of there is no Internet on the receiving device (offline transaction). If it has connection - he can pay any amount.




4. The  receiving device when getting this records verifies them according to its database (it should be synchronized) checking digital signature of the records.
if database is up to date and  digital signature is ok the  receiving device confirms the transaction. if  the database is not updated (records where made after the receiving device last synchronization) the receiving device decline the transaction.




Its essential that  the  receiving device should have all bitcoins records locally.

Of course it is not so convenient but I think this problem can be solved too. I shall write about it later.

 

[sidhujag]

This tech still needs to be flushed out.. I think there are still bugs in android
wallet ie nfc doesnt record timestamps and therefor you will need to redownload entire blockchain to earliest checkpoint if your missing a transaction.

This also means that checkpoints cannot
be updated after release so in the future
the large presetup time is still a nagging nuisance.

Overall this with open transactions for grandma will be a big step forward.

[x86Daddy]

It's a neat concept... is there some solution to the double spending problem though?

If an attacker generated multiple NFC Wallets with the same .1 BTC, and went to a bazaar with no Internet access, could the attacker spend those NFC wallets with various vendors, handing each of them a duplicate of that .1 BTC, resulting in only the first vendor to transfer it upon gaining Internet access keeping the coin and the rest being denied?

Is the idea here that the NFC device itself holds a certain value (the hardware value itself), and the normal accepted values of BTC stored in such a device would preclude such fraud from being a profitable exercise?

[sidhujag]

It's a neat concept... is there some solution to the double spending problem though?

If an attacker generated multiple NFC Wallets with the same .1 BTC, and went to a bazaar with no Internet access, could the attacker spend those NFC wallets with various vendors, handing each of them a duplicate of that .1 BTC, resulting in only the first vendor to transfer it upon gaining Internet access keeping the coin and the rest being denied?

Is the idea here that the NFC device itself holds a certain value (the hardware value itself), and the normal accepted values of BTC stored in such a device would preclude such fraud from being a profitable exercise?

nope its the same thing as accepting txs with 0 confirmations to a trusted node.

And no undos

[remotemass]

3. When paying user connects his NFC-wallet to the active receiving NFC device and orders to pay the possessed amount of bitcoins. For example if earlier he transferred 1 Bitcoin and 0.5 Bitcoin, he can pay only this amount:
0.5,
1 or
1.5.

But no other variants (no 0.75 or 1.25....) of there is no Internet on the receiving device (offline transaction). If it has connection - he can pay any amount.
 

I filled a patent in 31/DEC/2007 that accounts for this issue:
Subdividing the total amount in money cards 
http://worldwide.espacenet.com/publicationDetails/originalDocument?CC=GB&NR=2456000A&KC=A&FT=D&ND=&date=20090701&DB=&&locale=en_EP

[alex04210]

It's a neat concept... is there some solution to the double spending problem though?

If an attacker generated multiple NFC Wallets with the same .1 BTC, and went to a bazaar with no Internet access, could the attacker spend those NFC wallets with various vendors, handing each of them a duplicate of that .1 BTC, resulting in only the first vendor to transfer it upon gaining Internet access keeping the coin and the rest being denied?

I am thinking on this issue...

Maybe someone has any ideas?

I have thoughts that the only way to secure double payments is to attract mediators to offline transactions.

If user wants to pay offline he goes to a mediator asking to provide his offline coins with his digital signature. Each recipient decide for him self does he trust this mediator or not.

Who is mediator? This is public entity which offers bitcoin owners to sing their offline bitcoins with its digital signature. Mediator publicly guarantees that his offline bitcoins singed by him shall be reimbursed if recipient find out his bitcoins been counterfeited

Such Mediators shall likely demand users to be fully authorized (ID and so on) and to pay commission and the most important offline user should pay pledge until made  offline transactions been verified.

This is question of trust...


But I hope that the real solution for this issue can be found by applying some software algorithms not Mediators!

any ideas?

Is the idea here that the NFC device itself holds a certain value (the hardware value itself), and the normal accepted values of BTC stored in such a device would preclude such fraud from being a profitable exercise?

can you  explain your thoughts?

[alex04210]

3. When paying user connects his NFC-wallet to the active receiving NFC device and orders to pay the possessed amount of bitcoins. For example if earlier he transferred 1 Bitcoin and 0.5 Bitcoin, he can pay only this amount:
0.5,
1 or
1.5.

But no other variants (no 0.75 or 1.25....) of there is no Internet on the receiving device (offline transaction). If it has connection - he can pay any amount.
 

I filled a patent in 31/DEC/2007 that accounts for this issue:
Subdividing the total amount in money cards 
http://worldwide.espacenet.com/publicationDetails/originalDocument?CC=GB&NR=2456000A&KC=A&FT=D&ND=&date=20090701&DB=&&locale=en_EP

Great!
would you join to the development?

[x86Daddy]

I am thinking on this issue...

Maybe someone has any ideas?

I have thoughts that the only way to secure double payments is to attract mediators to offline transactions.

If user wants to pay offline he goes to a mediator asking to provide his offline coins with his digital signature. Each recipient decide for him self does he trust this mediator or not.

Who is mediator? This is public entity which offers bitcoin owners to sing their offline bitcoins with its digital signature. Mediator publicly guarantees that his offline bitcoins singed by him shall be reimbursed if recipient find out his bitcoins been counterfeited

Such Mediators shall likely demand users to be fully authorized (ID and so on) and to pay commission and the most important offline user should pay pledge until made  offline transactions been verified.

If the attacker with bad intentions played along with this scenario, I'd expect them to make the duplicates right after the mediator signs the offline coin, leaving us with the same problem.

This is question of trust...

But I hope that the real solution for this issue can be found by applying some software algorithms not Mediators!

Trust, via some form of web-of-trust network, can augment the use of Bitcoin greatly... If I'm about to go shopping in the offline bazaar, I link my public trust profile to the bazaar the day before, so that my public profile, rating, and key can replicate through their network via a nightly sync or some such.  When I visit, if I hold my private key, I can sign a message, proving I am the trusted profile holder, and someone safe to do business with.  Web-of-Trust in general, offline or not, is going to revolutionize commerce as much as Bitcoin has, in conjunction with Bitcoin, but maybe we're overthinking this...

Bitcoin couldn't have been so useful prior to pervasive Internet connectivity... Perhaps there's no way around that.  However, if the "offline" bazaar I described earlier had an intranet, it could run standard Bitcoin software to relay transactions among vendors, shoppers, etc... if those involved at least had electronic devices and wifi.  If only one vendor had Internet access, this problem vanishes... or if one vendor had intermittent Internet access... the problem is also greatly reduced.  Then again, if the attacker brings his own Internet connection and does the first double spend right before his first intranet transaction, boom, lotsa invalidation.  That's only mitigated by not knowing when the honest vendors have their scheduled Internet sync occuring, so with each act of fraud, he increases his chance of being caught in the act...?

The solution here might just be standard Bitcoin protocol, plus the advent of pervasive Internet connectivity everywhere on the planet, but meanwhile, that doesn't help with the offline idea.

Is the idea here that the NFC device itself holds a certain value (the hardware value itself), and the normal accepted values of BTC stored in such a device would preclude such fraud from being a profitable exercise?

can you  explain your thoughts?

If these NFC tokens have a hardware value of .0025BTC (unfunded), and the maximum traditionally accepted value, per token is .01BTC, enacting such a fraud would have a maximum limit on the rewards-to-risk ratio, which might incentivize would-be crooks to go back to standard shoplifting, etc... instead.

[xDan]

I filled a patent in 31/DEC/2007 that accounts for this issue:
Subdividing the total amount in money cards 
http://worldwide.espacenet.com/publicationDetails/originalDocument?CC=GB&NR=2456000A&KC=A&FT=D&ND=&date=20090701&DB=&&locale=en_EP

Congrats on somehow managing to patent the concept of subdividing units of currency...

...

I think an intermediate step to all this is allowing transactions when just the merchant has internet access. Does this exist yet?

(So, I just wave my phone at some NFC thing, and it downloads the small amount of blockchain data necessary to sign and create an offline transaction, which is passed to the merchant for propagation to the network.)

There's a huge amount of premises which might have wired internet yet have no suitable mobile coverage or wireless internet for the customer to use.

[x86Daddy]

Continuing to think on this... I think I have the answer to preventing fraud at an "offline bazaar."  It doesn't help offline individuals privately transacting, but a shopping area with spotty Internet connectivity or an intentional lack thereof can work just fine using NFC tokens, or even plastic or wood tokens, etc...  The offline bazaar runs its own alt-coin.  The vendors hold the 51%, and the front desk runs an Internet connected exchange between Bitcoin and OfflineBazaarCoin.

This method is tried-and-true: arcades that offer their own tokens or mag-stripe cards, renaissance fairs issuing doubloons, "Disney Dollars."  It even provides another benefit to to those running the Bazaar: they usually have an agreement to take a cut of each vendor's proceeds, as part of that vendor's membership in the Bazaar... they can enforce this with a fee at the altcoin exchange itself.

[remotemass]

Great!
would you join to the development?

Sure, I am very willing to help in what I can. But I am still getting to grips with understanding the bitcoin protocol and code. I'm stuck because there are no books. The IRC dev-channel is quite helpful but what I really miss are some books that could help in undertsanding the code and the protocol.
There is not even one...
The best we have that I am aware of are the wiki articles and the "Satoshi's Original Bitcoin Client - An Operational View" posts/articles.
A bit helpful... but...

Congrats on somehow managing to patent the concept of subdividing units of currency...

Thanks, mate!

[odolvlobo]

I am not optimistic. You are essentially proposing Bitcoin without a public ledger. You are going to run into the same problem that blocked the predecessors to Bitcoin, and that is the double spend problem.

[beeblebrox]

I think you guys don't realise that ability to do off-chain transactions electronically already exists: https://bitcointalk.org/index.php?topic=321085.0

It is quite easy to extend this system to do off-line NFC transactions also (in fact the creator of the project intends to implement this I believe).

The way these off-chain transaction work is basically an electronic equivalent of a Casascius coin.  A Casascius coin is a physical token with a private key that remains hidden (unless revealed- in which case the reveal will be evident) so that the token can be exchanged like a normal fiat coin.  Whereas in this system linked above the private key is stored on an SD card and remains hidden on the card .  To perform a transaction the SD card will copy the key to another similar SD card without ever revealing the key to anything else and deletes its original copy.  To reclaim the money on the blockchain the SD card will reveal the private key and deletes it own copy.  

The important thing to notice about this above system it that it is off-chain, completely anonymous and totally free to make the transactions.  However, currently the software that handles the exchange does need to be aware of the current state of the block-chain (the SD card itself only stores the private key so it doesn't know what balance- if any- is associated with it) so the software needs to determine what the balance is by looking at the blockchain or by using a 3rd party such a blockchain.info.  Although, even this requirement will most likely be lifted in future revisions of the software because at the time of loading the SD card with the key the software can electronically sign the balance that is associated with it.  At this point it will be: off-chain, off-line, completely anonymous and totally free.

[alex04210]

I think you guys don't realise that ability to do off-chain transactions electronically already exists: https://bitcointalk.org/index.php?topic=321085.0

It is quite easy to extend this system to do off-line NFC transactions also (in fact the creator of the project intends to implement this I believe).

The way these off-chain transaction work is basically an electronic equivalent of a Casascius coin.  A Casascius coin is a physical token with a private key that remains hidden (unless revealed- in which case the reveal will be evident) so that the token can be exchanged like a normal fait coin.  Where-as in this system linked above the private key is stored on an SD card and remains hidden on the card .  To perform a transaction the SD card will copy the key to another similar SD card without ever revealing the key to anything else and deletes its original copy.  To reclaim the money on the blockchain the SD card will reveal the private key and deletes it own copy.   

The important thing to notice about this above system it that it is off-chain, completely anonymous and totally free to make the transactions.  However, currently the software that handles the exchange does need to be aware of the current state of the block-chain (the SD card itself only stores the private key so it doesn't know what balance- if any- is associated with it) so the software needs to determine what the balance is by looking at the blockchain or by using a 3rd party such a blockchain.info.  Although, even this requirement will most likely be lifted in future revisions of the software because at the time of loading the SD card with the key the software can electronically sign the balance that is associated with it.  At this point it will be: off-chain, off-line, completely anonymous and totally free.

It's interresting idea but definitely  not the same.
To describe the OtherCoin idea figuratively let's imagine the cloakroom. You put money inside, close it with only one key. Then you just transfer this key.

But as I wrote in the first massege there are some required features of money (if a thing does not posses at least one of this features it means that we can't consider it as full featured money)

"Unit of account
To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again".

As I understood from the description user can't divide them (it is in the cloakroom!) . There is no small coin feature. Maybe only if you make many smartcards with different nominal value...
I'm not sure it's a good idea. It's better to have one card (NFC) with small coins inside