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Author Topic: Bitcoin vending machine - something that could really make it happen  (Read 1669 times)
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Mike Caldwell
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The Casascius 1oz 10BTC Silver Round (w/ Gold B)


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November 09, 2011, 10:54:13 PM
 #1

I wanted to share an interesting technology that I came across while surfing the Internet, and how it could easily be applied to make a real life Bitcoin acceptance possible with the state-of-the-art of Bitcoin even today.

There is a system for validating physical tokens called "X-Mark".  It is an anti-counterfeiting system for game/vending/slot machines that accept metal coins.  The X-Mark system is sold and can be installed into vending machines today.  (in vending machines, the coin validation mechanism is removable and interchangeable, that's how game machines are reconfigured to accept tokens instead of quarters etc.)

Basically, the X-Mark system checks a lot of physical attributes of an incoming coin as it's passing through besides just its diameter.   Special three-dimensional grooves are minted on the coin at different angles, the pattern being unique to each buyer of X-Marked tokens, and it is likely that the metal alloy composition is magnetically checked as well as other properties they may not disclose.  The tolerances are very small and precise (e.g. the diameter must be correct to 0.001" or else it's rejected.)  These are claimed as trustworthy enough that casinos use them for chips denominated as high as $5000.

http://www.idxinc.com/xmark.htm

Such a system would probably require a trusted issuer of bitcoin-valued coins, which would only have value as long as the issuer was solvent and available to redeem the token.  It would basically work the same way as dollars or tokens, with a central issuer involved, but would be backed by bitcoins instead of dollars.

Just wanted the existence of this technology to be in the back of people's heads if they were considering any sort of machine where it could be used.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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RandyFolds
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November 09, 2011, 11:15:00 PM
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Such a system would probably require a trusted issuer of bitcoin-valued coins, which would only have value as long as the issuer was solvent and available to redeem the token.  It would basically work the same way as dollars or tokens, with a central issuer involved, but would be backed by bitcoins instead of dollars.


Lucky for us, we have just the man... Wink

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November 10, 2011, 12:02:48 AM
 #3

Could someone design a vending machine which just scans or recieves bitcoin from a smart phone? Since the machine would not need a coin mechanism in it, it could be cheaper to produce/maintain then ordinary vending machines.
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November 10, 2011, 01:13:51 AM
 #4

Right now two reasons you don't see Visa/MC/Amex payment card networks with vending machines (for low value goods) is the high fees that those networks charge and also because of the need for a data connection to accept the payment card.  Bitcoin would eliminate the prohibitive fees issue but would have the same data connection requirement.  I know bitcoin wasn't architected to be a microtransaction (e.g., in the $1 range) payment system but Bitcoin's low fees almost ensure that the bitcoin network will see some significant use as a microtransaction payment network.

Also, I wonder if Bitcoin's characteristic of being a triple-entry accounting system presents an opportunity.

For instance, I was at a facility where the break room is in a shared common area used by multiple startups and small companies.  I could see the employer wishing to give a perk of free (or subsidized) purchases to its own employees by reimbursing them for their purchases from the same vending equipment that the other tenants and visitors use.

Here's a little info on "triple entry accounting"
 - http://iang.org/papers/triple_entry.html
 - http://financialcryptography.com/mt/archives/001325.html

The ability to sign a message using the private key from the wallet (as built into the bitcoin client v0.5) makes it relatively easy to prove that those purchases were yours.  

This could work for other systems that are shared as well -- to reimburse for parking, as an example.

Bitcoin is so flexible, with just so many different ways that this technology can be used.

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Gerald Davis


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November 10, 2011, 07:17:10 AM
 #5

Right now two reasons you don't see Visa/MC/Amex payment card networks with vending machines (for low value goods) is the high fees that those networks charge and also because of the need for a data connection to accept the payment card.

The vending machines at my office have taken CC for years now.

http://www.usatech.com/eport/

My understanding is VISA/MC have "special rates" for alternate product classes like vending machines, tollbooths, utility bills, etc.   They can price vending machines cheaper so they are at a price point that makes sense.
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November 10, 2011, 07:21:04 AM
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Right now two reasons you don't see Visa/MC/Amex payment card networks with vending machines (for low value goods) is the high fees that those networks charge and also because of the need for a data connection to accept the payment card.

The vending machines at my office have taken CC for years now.

http://www.usatech.com/eport/

My understanding is VISA/MC have "special rates" for alternate product classes like vending machines, tollbooths, utility bills, etc.   They can price vending machines cheaper so they are at a price point that makes sense.

Confirmed.  We have the same type of systems on vending machines in my office.  They charge a $0.25 fee, iirc.
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November 10, 2011, 07:22:03 AM
 #7

IMO: Bitcoin vending machine == Displays bitcoin address as qr-code on lcd, and accepts transactions without confirmations.

First they ignore you, then they laugh at you, then they keep laughing, then they start choking on their laughter, and then they go and catch their breath. Then they start laughing even more.
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November 10, 2011, 05:55:57 PM
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IMO: Bitcoin vending machine == Displays bitcoin address as qr-code on lcd, and accepts transactions without confirmations.

Very good idea ! How to prevent fraud though ? People opening up / stealing vending machine or vandalizing it etc. ?
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November 10, 2011, 06:04:54 PM
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IMO: Bitcoin vending machine == Displays bitcoin address as qr-code on lcd, and accepts transactions without confirmations.

Very good idea ! How to prevent fraud though ? People opening up / stealing vending machine or vandalizing it etc. ?

That could always happen, of course with bitcoin the wallet could be stored at a secure datacenter and the machines connection be encrypted. As for people stealing the goods... Well that's an issue with any vending machine.

But I expect there already are pretty good security systems for these machines considering they are all around everywhere. And the prototypes would most likely stand inside someones shop/at some hackerspace which limits the amount of people who would be willing to attempt such an act.

First they ignore you, then they laugh at you, then they keep laughing, then they start choking on their laughter, and then they go and catch their breath. Then they start laughing even more.
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November 10, 2011, 06:11:15 PM
 #10

IMO: Bitcoin vending machine == Displays bitcoin address as qr-code on lcd, and accepts transactions without confirmations.

Very good idea ! How to prevent fraud though ? People opening up / stealing vending machine or vandalizing it etc. ?

Easily - the same way my Casascius.com website accepts bitcoins but doesn't ever have to have the bitcoins on the server.

Simply store the private keys elsewhere.  The private keys aren't needed to receive the payments or to detect when they come in.  The keys are only needed when it's time to respend the BTC.

If the vending machine were preloaded with thousands or even millions of bitcoin addresses (one gets dispensed to each customer) and the private keys were kept at the central office, there would be no need to further secure the machine.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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Gerald Davis


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November 10, 2011, 06:33:35 PM
 #11

People opening up / stealing vending machine or vandalizing it etc. ?

How do they stop it now.... have you looked closely at a vending machine.  They are designed to be rather resistant to physical attack.

The only thing you are changing/adding is an alternate payment method. 

1) Take normal vending machine
2) Add QR code to outside of machine.
3) Add display to outside of machine which dynamically updates price in BTC based on market price "Send 0.3 BTC to this address".
3) Inside add a small payment processing module that when it receives a signal from server adds a credit of $1.0 to vending machine.
4) Add a cellular antenna to top of vending machine.

When you send bitcoin payment to the network the "soda server" detects it and send an encrypted signal over cellular link to vending machine.  The user sees the display on machine indicate there is a credit of $1 and picks the soda he/she wants.

Nothing is stored inside soda/vending machine except product.  It actually makes it a less attractive target because people breaking into soda machines are often going for the cash.  The largest machines can hold 400+ sodas =$400+ cash when empty.
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November 10, 2011, 07:03:44 PM
 #12

2) Add QR code to outside of machine.

QR codes are easily scanned off the cheapest of monochrome LCD displays... I tried it and it worked.

However, having a static QR code jogged me into one idea that would keep the cost down: if each machine had a static Bitcoin address, the machine would not even need 2-way communication with a server.  It could have 1-way communication (e.g. a pager) and the pager network could be used to "message" credits into the machine when the BTC transaction arrived at a central server.  This one-way communication could also send updates to the displayed BTC price.

Pager networks (the old school kind) have a significant signal penetration advantage because they are high-energy broadcasts from big powerful towers, which are strong enough to get into many buildings and basements that cell phones simply can't.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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November 10, 2011, 07:10:27 PM
 #13

Easily - the same way my Casascius.com website accepts bitcoins but doesn't ever have to have the bitcoins on the server.

Simply store the private keys elsewhere.  The private keys aren't needed to receive the payments or to detect when they come in.  The keys are only needed when it's time to respend the BTC.

If the vending machine were preloaded with thousands or even millions of bitcoin addresses (one gets dispensed to each customer) and the private keys were kept at the central office, there would be no need to further secure the machine.
That solves that side of the equation, now how do I actually send bitcoins from my wallet to the address show to me by the vending machine?

A couple options come to mind.

1. Have a smartphone bitcoin client that you can load with a small quantity of bitcoins. It would be capable of sending payments, but would not download the block chain or process any received payments.  To buy something from the vending machine, a QR code is displayed, you scan it with your phone, and send payment via your lite client.  Product is dispensed with zero confirmations.

2. Have a bitcoin client (or other app) that is capable of generating machine-readable bitcoin vouchers in a standard format that you would print, carry with you and insert into the vending machine.  The client would generate an address/private key, load it with your desired quantity of bitcoins and print it out.  It would also contain a "return" address.  You would print out a bunch of these in your desired denomination. To buy something from the vending machine, you insert one (or hold it up to a scanner), it receives the full amount, and if you are due any change, it is sent to your return address.

BTC: 1CDCLDBHbAzHyYUkk1wYHPYmrtDZNhk8zf
LTC: LMS7SqZJnqzxo76iDSEua33WCyYZdjaQoE
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November 10, 2011, 07:15:09 PM
 #14

2) Add QR code to outside of machine.

QR codes are easily scanned off the cheapest of monochrome LCD displays... I tried it and it worked.

However, having a static QR code jogged me into one idea that would keep the cost down: if each machine had a static Bitcoin address, the machine would not even need 2-way communication with a server.  It could have 1-way communication (e.g. a pager) and the pager network could be used to "message" credits into the machine when the BTC transaction arrived at a central server.  This one-way communication could also send updates to the displayed BTC price.

Pager networks (the old school kind) have a significant signal penetration advantage because they are high-energy broadcasts from big powerful towers, which are strong enough to get into many buildings and basements that cell phones simply can't.

This isn't your first time at the vending machine rodeo, is it?

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Gerald Davis


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November 10, 2011, 07:21:56 PM
 #15

2) Add QR code to outside of machine.

QR codes are easily scanned off the cheapest of monochrome LCD displays... I tried it and it worked.

However, having a static QR code jogged me into one idea that would keep the cost down: if each machine had a static Bitcoin address, the machine would not even need 2-way communication with a server.  It could have 1-way communication (e.g. a pager) and the pager network could be used to "message" credits into the machine when the BTC transaction arrived at a central server.  This one-way communication could also send updates to the displayed BTC price.

Pager networks (the old school kind) have a significant signal penetration advantage because they are high-energy broadcasts from big powerful towers, which are strong enough to get into many buildings and basements that cell phones simply can't.

Well when I said "cellular" I should have clarified these aren't 3G networks.  They are ultra low bandwidth, low frequency (able to penetrate buildings) networks.  So the issue of access is already solved w/ existing CC vending machines.  Still you are right.  That is an interesting concept of only needing one way communication.
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Let the chips fall where they may.


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November 10, 2011, 08:31:19 PM
 #16

Do the fancy 3g smartphones support those low-bandwidth connections?

The "one way" connection for bitcoin credits won't work well if the customer has to climb 5 floors to the roof to deposit money, then go back down to the basement to retrieve the product. In other words: if the customer has Internet access, so should the machine.

I think physical tokens will always be problematic for "bitcoin" vending machines. For example, the casascius coins can never be fully validated until they are opened up to make sure the private key matches the public key fragment listed on the face.

If I have to use a token issued by a cetral authority, what not just use government-issue coinage? One difficulty may be that governments change the shape and composition of their coins over the years, so you can keep better track of changes in the tokens you are using with privately-issued tokens. I have had a self-serve check-out reject a penny two or three times, then register it as a dime!

James' OpenPGP public key fingerprint: EB14 9E5B F80C 1F2D 3EBE  0A2F B3DE 81FF 7B9D 5160
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Gerald Davis


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November 10, 2011, 09:25:05 PM
 #17

Do the fancy 3g smartphones support those low-bandwidth connections?

The "one way" connection for bitcoin credits won't work well if the customer has to climb 5 floors to the roof to deposit money, then go back down to the basement to retrieve the product. In other words: if the customer has Internet access, so should the machine.

I think physical tokens will always be problematic for "bitcoin" vending machines. For example, the casascius coins can never be fully validated until they are opened up to make sure the private key matches the public key fragment listed on the face.

If I have to use a token issued by a cetral authority, what not just use government-issue coinage? One difficulty may be that governments change the shape and composition of their coins over the years, so you can keep better track of changes in the tokens you are using with privately-issued tokens. I have had a self-serve check-out reject a penny two or three times, then register it as a dime!


Well the article in the OP deals w/ physical tokens.  Is casino can trust those machines to validate $500 tokens then I think they could be trusted to validate 0.25 BTC pieces.  Still I am not really interested in physical tokens.  Eventually 3G access will continue to improve.  If someone standardized it would be possible to pay via smartphone generated QR code private keys.  Say keep a dozen or so 1 BTC addresses to pay someone (or some machine) "offline".  They just scan the private key to import it, validate it against the block chain and then immediately make a transfer to a "secure" address they control.
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