bitcoin is failing in replacing fiat in physical shops

[OceanWhispers]

AnonyMint.... just wow.

You are eitehr one serious troll or trying to contribute to pushing BTC even further down. Not sure which, but I am sure that you're not actually this retarded.

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[Jomppe]

This whole malleability fiasco has shown once again that zero confirmation transactions can not be trusted.

since its not practical waiting for 10 minutes for a payment to clear when buying coffee it seems to me that bitcoin will never go mainstream in physical shops.
any solution involving a third party to clear payments defeats the whole purpose of bitcoin.

any third party will effectively turn into a bank along with all the classical fractional reserve practices we have today.

You guys need to start supporting WorldCoin.

[Brangdon]

Whenever you don't pay with physical cash(paper money) you are paying with an account - either charging to a store account or a debit account or a credit card account.

When you talk about a customer having an account with a retailer, that's not the same as a customer owning bitcoin. The account with a retailer is part of a "formal banking, brokerage, or business relationship established to provide for regular services, dealings, and other financial transactions" with that retailer. Bitcoin is more like cash. It's not a relationship with any one individual or institution. You might as well say dollars are an account you have with the American government and/or its people.

The emergence of Cryptocurrencies on the scene will not change this. You will still be paying from an "account" - it will just be a cryptocurrency account.

If you are saying I might have an account with my retailer that I settle in bitcoin, then I agree, but I suspect you are not saying that.

We will not see blockchain transactions at the point of sale on any kind of scale (e.g. large stores and supermarkets) where there is a high turnover of sales.

If they can take cash, and have an internet connection, they can take bitcoin. Bitcoin has many advantages over cash for the retailer and the customer. It has some caveats, but those can be managed. Loyalty cards and retail accounts will be layered on top of that, for those that find them convenient.

[DeathAndTaxes]

We will not see blockchain transactions at the point of sale on any kind of scale (e.g. large stores and supermarkets) where there is a high turnover of sales.

If they can take cash, and have an internet connection, they can take bitcoin. Bitcoin has many advantages over cash for the retailer and the customer. It has some caveats, but those can be managed. Loyalty cards and retail accounts will be layered on top of that, for those that find them convenient.

It depends.  I don't think there will be a single solution for all merchants in all situations all the time.

Some merchants can probably just accept 0-confirm txs (solving the mutability issue should be a priority).  For an entity like starbucks if they "listen" for double spends the risk should be lower than credit cards.   Lets say starbucks pay 1.5% average for CC, and losing another 1% due to CC fraud.  If Bitcoin offers a cost & loss rate of less than 2.5% the company improves their bottom line.  There is no significant economic incentive to try and defraud starbucks given the costs and complexities that the fraud will involve.  Bitcoins doesn't have to be perfect, it just has to be better.   Vending machines, fastfood, parking meters, move theaters are not going to be high value targets for hackers.

For high value transactions, transactions will need confirmations.  For some types of in person sales this is a non-issue.  An example would be buying a car or boat.   It is going to take you a couple hours to do all the paperwork anyways.  Plus you have to hand over all kinds of personal documents for title and registration purposes.   Any retail shop which does delivery fits in well with Bitcoin.  If you go to Home Depot and buy a washer and dryer most of the time it is shipped from the warehouse to your home.  For this type of transaction retail is no different than internet mail order.

Some transactions will already require the merchant to verify your identity anyways.  For example say redbox took Bitcoins.  How do they ensure you return the movie (unless you are willing to put a deposit of the value of the movie in Bitcoins)?  They do so because when you created an account and signed up they verified your information and you agreed to have your CC charged if you fail to return the movie.  Redbox could take 0-confirm tx tomorrow with no additional risk.  Why? if you double spend they just charge your CC.  If your CC was fake/stolen why do the double spend to begin with.  Their risk profile isn't worsened by taking 0-confirm txs.

The most complicated category would be moderately sized, low margin transactions, in a time sensitive physical retail environment. The archetypical example is a grocery store.  With transactions possibly exceeding $300 the fraud risk becomes material.  0-confirm probably can't be relied upon.  This will require some off the blockchain solutions.  One would be to use an off block-chain payment processor but another would be to simply get a backup payment method.  You register a credit card with the store when they enable bitcoin payments.  If you double spend then they charge your credit card plus say a 1% penalty.   In return if you pay with bitcoins the store saves ~1.5% so they give you a 1% discount off the total and they still save 0.5% off the top.  A win-win.  I could see a small grocery chain in a tech friendly area doing something along those lines. Maybe you have an option of providing a voided check (for ACH authorization) instead of debit card at the time of the authorization.  While Bitcoin is small it may need to co-exist with traditional payment options and this is one way to do so.

Wow D&T that was a giant wall of text.  Yeah more than I originally intended but the broader view is there is no one "solution to rule them all".  Each merchant (or processor) will need to tailor their acceptance to the risk profile of their business.  

[Peter R]

The most complicated category would be moderately sized, low margin transactions, in a time sensitive physical retail environment. The archetypical example is a grocery store.  With transactions possibly exceeding $300 the fraud risk becomes material.  0-confirm probably can't be relied upon.  

Thank you for the thoughtful comments, DeathAndTaxes.

I agree with most of the points you made, but could you clarify why you think $300 grocery purchases may be too high a risk for zero-confirm transactions?  Assuming that malleability is eliminated in the future, how could a customer using a mobile app cheat the grocery store cashier [assuming the grocery store has a well-connected listening node]?  My understanding is that the fraudster would either need to coordinate a Sybil attack, or he would need to pass the fraudulent double-spend over a non-public back-channel to an unethical miner that controls a great deal of global hash power.  

Both these attack methods seem like a lot of work for groceries, neither method is guaranteed to succeed, and the fraudster risks getting caught and charged with a crime.  (Despite what Augusto Croppo says, as bitcoin becomes more mainstream, we will begin to recognize these shenanigans as a crime similar to using counterfeit bills or stolen credit cards).

I imagine that in a "bitcoin future" there will be less zero-confirm fraud using bitcoin [malleability aside] than purchases with counterfeit cash or stolen credit cards.  Do you disagree?

[DeathAndTaxes]

My understanding is that the fraudster would either need to coordinate a Sybil attack, or he would need to pass the fraudulent double-spend over a non-public back-channel to an unethical miner that controls a great deal of global hash power.  

The later is more likely.  Grocery business is a very low margin business.  It also has almost no credit card fraud (relatively speaking) and enjoys some of the lowest interchange fees among all business categories.  The "real" cost (fraud, compliance, fees) for a grocery store to get paid by credit cards is <1% and may rival cash so these merchants have the least incentive to switch.  

The "risk profile" for a business doesn't just depend on the price of goods or services but also its margin.  Online casinos for example have very high fraud rates but they also end up taking 50% to 70% of player deposits or more.  The high margin allows them to operate at a level of fraud which would bankrupt most other businesses.  It doesn't take much fraud for a grocery store to lose money.

I imagine that in a "bitcoin future" there will be less zero-confirm fraud using bitcoin [malleability aside] than purchases with counterfeit cash or stolen credit cards.  Do you disagree?

In general? Yes however every business is different.  

Online digital goods has credit card fraud approaching 10%, when you add in the merchant fees, fraud prevention costs, and chargeback costs it can reach 15% or more of gross revenue.  That is the low hanging fruit.  Even if 5% of 0-confirm tx were fraudulent the companies would pocket billions in additional revenue.  On the other hand some businesses (like grocery store) have very low margins, and have already negotiated very low interchange fees.  That combined with low existing fraud rate means it is possible 0-confirm actually increases fraud rates relative to credit cards.

On a long enough timeline I think "fraudulent" miners are all but an inevitability.  I could see an entity with say 20% of the network willing to accept out of band double spends for a hefty fee (either flat rate say $10 per tx, or a % of the tx amount).  Would that impact retail stores?  Lots of crimes are crimes of opportunity.  In bad economic times and when gas prices rose the number of drive offs increased.   If there is an app you download that gives you a 20% of having a free purchase with no risk and money is tight, I think the number of people that would rationalize their theft away is non-zero.  

I don't want you think I am trying to predict the future.  The risk may end up being overstated and maybe grocery stores just end up accepting zero confirm transactions straight on the blockchain with no other assurances.  I honestly don't know.  I am just pointing out that might not be the case.  Among all possible businesses grocery stores probably have the least to benefit from Bitcoin and conversion on a large scale would require near zero fraud rates.  I am not sure if zero confirmation (without a trusted third party) can guarantee that.  Given the ease that the double spend risk can be mitigated with identification or backup payment I think that is certainly possible.   Case in point many places ask for ID if you want to pay by check.   A 0-confirm tx has a risk profile similar to a payment by check.   Once confirmed it is like a cleared check.  Of course waiting for confirmation at point of sale is no more possible then waiting for a check to clear.  How do businesses today mitigate the risk of checks?  They ask for identification.

[Jomppe]

I do not understand why people are so stubborn.
It is good to be stubborn to some extend but if you are seeing you are going to loose, why you guys stay still in a sinking ship?
There is better alternative to BitCoin - WorldCoin. Fast transactions without any further mess, the merchant can lock the exchange rate from the exchange almost immediately because WorldCoin gets confirmed in a heartbeat.
Using BTC is like using VHS-recorder to watch movies. Out of date.

[Brangdon]

On a long enough timeline I think "fraudulent" miners are all but an inevitability.  I could see an entity with say 20% of the network willing to accept out of band double spends for a hefty fee (either flat rate say $10 per tx, or a % of the tx amount).

Do you not think large retailers might mitigate that risk by becoming miners themselves? If Bitcoin succeeds, I would expect many entities to be willing to devote some resources to mining, to make it harder for others to control a sizeable fraction of the network. With that goal, they don't need to make a profit, although any mining income will help defray the costs.

[augustocroppo]

On a long enough timeline I think "fraudulent" miners are all but an inevitability.  I could see an entity with say 20% of the network willing to accept out of band double spends for a hefty fee (either flat rate say $10 per tx, or a % of the tx amount).

Do you not think large retailers might mitigate that risk by becoming miners themselves? If Bitcoin succeeds, I would expect many entities to be willing to devote some resources to mining, to make it harder for others to control a sizeable fraction of the network. With that goal, they don't need to make a profit, although any mining income will help defray the costs.

No one in his sane mind will devote "mining" for the sake of the Bitcoin network. It is a cost intensive operation and without a prospect of profit it is meaningless. Moreover, others are already in control of a big chunk of the network. So "mining" is not going to mitigate any risk because the final cost for the sellers are going to be higher than the expected benefit.

[DeathAndTaxes]

On a long enough timeline I think "fraudulent" miners are all but an inevitability.  I could see an entity with say 20% of the network willing to accept out of band double spends for a hefty fee (either flat rate say $10 per tx, or a % of the tx amount).

Do you not think large retailers might mitigate that risk by becoming miners themselves? If Bitcoin succeeds, I would expect many entities to be willing to devote some resources to mining, to make it harder for others to control a sizeable fraction of the network. With that goal, they don't need to make a profit, although any mining income will help defray the costs.

The issue isn't that all miners would be fraudulent but rather a small % would.  I certainly do think merchants may organize to better control tx processing but that doesn't eliminate the risk of a fraudulent miner.  Depending on the risk profile and the profit margin 0-confirm may simply not be viable for all merchants in all situations because the chance of a fraudulent miner intentionally including the double spend in the next block can never be guaranteed to be 0% and merchants running a transaction processing pool can't make that 0% either.

[leopard2]

I do not understand why people are so stubborn.
It is good to be stubborn to some extend but if you are seeing you are going to loose, why you guys stay still in a sinking ship?
There is better alternative to BitCoin - WorldCoin. Fast transactions without any further mess, the merchant can lock the exchange rate from the exchange almost immediately because WorldCoin gets confirmed in a heartbeat.
Using BTC is like using VHS-recorder to watch movies. Out of date.

Actually the way to go is free competition between private monies. All players, be it the users, the exchanges or even the makers of hardware wallets, should try to support more than just one coin. Gox is underscoring this atm.

Then, it would be up to the user and the merchant which coin wins. In practice you would walk with BTC, and maybe 1-2 altcoins in your hardware wallet. Then, at Starbucks for instance, they might require 1 confirmation minimum - BTC LTC and DOGE accepted - and it would be your decision how to pay them and how long to wait.

free competition between private monies  

[5flags]

This whole malleability fiasco has shown once again that zero confirmation transactions can not be trusted.

since its not practical waiting for 10 minutes for a payment to clear when buying coffee it seems to me that bitcoin will never go mainstream in physical shops.
any solution involving a third party to clear payments defeats the whole purpose of bitcoin.

any third party will effectively turn into a bank along with all the classical fractional reserve practices we have today.

In my view, one of two things will happen. Either Bitcoin will become a viable alternative to gold as a store of value, or a service will be built on top of Bitcoin that will allow it to facilitate instantaneous transactions. This would be something like Coinbase or a bitcoin bank, with apps on phones which allow this to happen.

Alternatively, Bitcoin will remain a store of value, but another currency like NXT will become the standard for rapid retail transactions.

[Brangdon]

No one in his sane mind will devote "mining" for the sake of the Bitcoin network. It is a cost intensive operation and without a prospect of profit it is meaningless.

They will get the mining revenue. If you accept that some people will mine for profit, surely it makes sense that others will mine for profit and to help secure the network?

Moreover, others are already in control of a big chunk of the network. So "mining" is not going to mitigate any risk because the final cost for the sellers are going to be higher than the expected benefit.

The more honest people mine, the harder it is for dishonest people to get a significant fraction of the network. I think (and hope) we'll return to the original vision of a large number of miners, each with a small fraction of the network; but instead of the myriad miners being fan boys early adopters running mining rigs in their bedrooms, they will be corporations and governments. And this will happen because as those corporations and governments increasingly depend on Bitcoin, they will also look into mining and see it as a strategic need as well as a potential profit centre and good public relations.

The issue isn't that all miners would be fraudulent but rather a small % would.

The earlier post mentioned 20%. That to me seemed like a large percentage. Where-as if just 1% of miners are fraudulent, then the chances of a successful double-spend become quite low, compared to the meagre profit from ripping off the kind of merchants that would accept zero-confirmation transactions, and the cost of setting up the mining farm, and the damage to reputation when you get caught. I think we can get to a situation where it's irrational to try. I appreciate that doesn't mean no-one will, but it will be extremely rare.

I also appreciate you are saying that some merchants have such low tolerance for the risk that even "extremely rare" won't be good enough for them.

[Gulinborsti]

Bitcoin is a perfect replacement for fiat on online shops (aka e-commerce), who cares if it takes 10 minutes for your transaction to be confirmed when you buy eg. a book on Amazon?

But by design bitcoin will never be as comfortable as fiat or debit and credit cards at physical POS like super markets or the grocery store down the block.

[Peter R]

The issue isn't that all miners would be fraudulent but rather a small % would.

The earlier post mentioned 20%. That to me seemed like a large percentage. Where-as if just 1% of miners are fraudulent, then the chances of a successful double-spend become quite low, compared to the meagre profit from ripping off the kind of merchants that would accept zero-confirmation transactions, and the cost of setting up the mining farm, and the damage to reputation when you get caught. I think we can get to a situation where it's irrational to try. I appreciate that doesn't mean no-one will, but it will be extremely rare.

I also appreciate you are saying that some merchants have such low tolerance for the risk that even "extremely rare" won't be good enough for them.

Some half-baked thoughts on this topic:  

Very roughly, the % lost due to fraudulent double spends is proportional to the percentage of hash rate controlled by a fraudulent mining group willing to accept out-of-band transaction AND the percentage of the population that will download an app (and thereby knowingly engage in fraud) to transmit the out-of-band double spend.  Mathematically:

    % loss on 0-confirms  = (% hash power controlled by fraud miners) x (% of consumers engaged in fraud).

If we assume 20% of the hash power is fraudulent (much more than I would expect) and that 10% of consumers will attempt to cheat every time (much more than I would expect), then the % loss on 0-confirms is 2%:

    % loss on 0-confirms = (0.2) x (0.1) = 0.02 = 2%.

Like DeathAndTaxes said, 2% is too much for a grocery store, but not too much for Naughty America.  However, I think more reasonable numbers would be that only 5% (or less) of the hash rate is fraudulent, and that perhaps only 2% of consumers (or less) would attempt to cheat.  With these numbers we get only 0.1% losses (or less):

    % loss on 0-confirms < (0.05) x (0.02) = 0.001 = 0.1%.

Some other interesting things I noted:

1.  If the % of hash power accepting out-of-band double spends is 25%, double-spenders would receive one quarter of their purchases for free [of course, they still risk getting caught and charged with a crime, similar to using a stolen credit card or counterfeit bills].  However, as the % of hash power controlled by the "fraud miners" decreases, this service becomes a lot less tempting.  If they only control 1% of hash rate, then double-spenders only succeed 1% of the time, in which case I think very few would even bother and the problem mostly disappears.

2.  Another note is that it probably won't be a single group accepting the out-of-band double spends.  A good double spend app, however, would want to transmit the fraudulent transaction to all the knowingly-complicit hash power, in order to maximize the odds of a successful double spend.  Now, these fraud miners need to stay on the down-low, which means they will be moving around lots, etc., and the apps will need to be constantly updated with the latest info.  But this confusion means that honest people have an opportunity to pose as fraud miners, just so that they can broadcast (i.e., leak) the double spends onto the network and neutralize the double-spend threat.  In other words, the double-spend threat can be neutralized by leaking the fraudulent transaction.

It will be interesting to see how it all develops....

[Lauda]

After the issue gets fixed you should be fine.

[Gameroid]

Bitcoin is not failing and why are you here speading fud to lower the price of Bitcoin?

[Peter R]

Bitcoin is not failing and why are you here speading fud to lower the price of Bitcoin?

Over the last several pages, we've been having an intelligent conversation about the risks vs rewards of accepting 0-confirm transactions at brick-and-mortar stores.  Perhaps you were speaking to the OP 7 pages back?

[balanghai]

The op has suggested that Bitcoin is "failing" and is not the same as failed already. Maybe the good question to ask is, how can we make it more successful? Run campaigns, marketing, intro classes? Anyone?

[cbeast]

Bitcoin is used in Germany more than Zimbabwe dollars. I would say that makes Bitcoin bigger than a fiat currency in physical shops.