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Author Topic: How do we make Bitcoin work as a global micro-payment system?  (Read 2512 times)
cpt_howdy
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February 15, 2012, 09:18:01 PM
 #1

One of the most liberating aspects of Bitcoin in my opinion, is its potential as a mass micropayment system, for things such as crowdfunding, small digital purchases such as music, films and software, and for charity and all other forms of donation. It cuts out the middle-money-men, eases and expedites the transaction process, and therefore encourages people to give more money in small amounts to the people who deserve it: writers, software developers, musicians, charities etc. instead of feeding it endlessly into the pointless, craven culture vacuum that is the financial industry.

What's holding bitcoin back from being used in this way on a mass scale? The transaction process is much simpler than using, for instance, paypal: you don't have to enter any passwords, you don't need to select a credit card, you don't need to go through extra security checks, and you don't need to worry someone will steal your credit card details. Spending bitcoins isn't the problem, the challenge is in growing the number of people who have bitcoins to spend - right now it's just too hard to get hold of them unless you're an inquisitive, geeky dude with a currency fetish. I really believe that once people have some bitcoins and experience spending them, they will realise quite quickly the huge advantages of the currency, and want to use it more and more.

So that's problem 1, assuming we solved that, then problem 2 follows quickly behind - instability. Suppose you could get bitcoins to people easily, perhaps in the same way as they would top-up their pay-as-you-go phone in a shop, and with low/zero exchange fees. You then have the possibility of the currency devaluing by 50% in the space of a few days, perhaps before you've even spent any of the bitcoins. That wouldn't be a sustainable system. Unfortunately, I can't see how problem 2 can be solved unless the distribution of bitcoin goes much further and wider than is the situation today. However, that broader distribution would probably require something like problem 1 to be solved first, which itself wouldn't work without the solution to problem 2, and well, you get the picture. So it's a classic catch-22.

I really think that the most important use of bitcoin is for it to be used as a secure, global, zero-fee money transmission system, first and foremost. This is purely because of the power it takes back from the financial system, and also from all manner of middle-men, advertisers and marketeers who have - over the course of the 20th century - built a barrier between the people who produce things, and the people who buy them. We don't need anyone in between.
So, I just want to hear opinions and practical ideas on how (or if) we can achieve this with Bitcoin.
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February 15, 2012, 09:24:33 PM
 #2

Please use paragraph break.

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February 15, 2012, 09:35:30 PM
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Everything the op has said is very true and it is happening but very slowly.  I think its going to take another crisis to happen to accelerate this process.  We may be on the verge of that as we speak.
556j
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February 15, 2012, 09:39:34 PM
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It doesn't really cut out the middleman, since in order to get fiat you have to go through a middleman anyway. Most of them are unreliable and charge higher fees than traditional payment processors. The only real benefit I see is no chargebacks. It's not easier to use than paypal, that's just nonsense.

Like you said too, the volatility isn't acceptable right now. I just lost 20% of my income over night due to this dip. Luckily that "only" cost me a few hundred,  imagine people who do huge volume.
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February 15, 2012, 09:49:37 PM
 #5

It doesn't really cut out the middleman, since in order to get fiat you have to go through a middleman anyway. Most of them are unreliable and charge higher fees than traditional payment processors. The only real benefit I see is no chargebacks. It's not easier to use than paypal, that's just nonsense.

Like you said too, the volatility isn't acceptable right now. I just lost 20% of my income over night due to this dip. Luckily that "only" cost me a few hundred,  imagine people who do huge volume.
I say it's easier to use than Paypal.  I didn't have to log in to anything to pay for a copy of the Bitcoin Magazine with BTC through Bit-Pay, and I very much enjoy that aspect.  Was done with the whole process in about 10 seconds, because my browser auto-filled my address information too.
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February 15, 2012, 10:17:43 PM
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It doesn't really cut out the middleman, since in order to get fiat you have to go through a middleman anyway. Most of them are unreliable and charge higher fees than traditional payment processors. The only real benefit I see is no chargebacks. It's not easier to use than paypal, that's just nonsense.

Like you said too, the volatility isn't acceptable right now. I just lost 20% of my income over night due to this dip. Luckily that "only" cost me a few hundred,  imagine people who do huge volume.
I say it's easier to use than Paypal...

I agree... and safer and less expensive and more satisfying.  
And there are getting to be more and more places I can use it instead of paypal and/or a credit card.

I would love to see my favorite musicians put Bitcoin addresses up on their websites so I can send
money to them directly instead of having to go through some parasitic middle agency. I wanted to
do that even before Bitcoin when I would download their music...  even though in most cases I already
bought their music in the form of records, cassettes tapes, cds etc.  

Buy Bitcoin from CoinbaseXapo
Faucets & Earn Bitcoin Sites: FreeBitco.in; BitsForClicks; Moonbit
SgtSpike
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February 15, 2012, 10:27:33 PM
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It doesn't really cut out the middleman, since in order to get fiat you have to go through a middleman anyway. Most of them are unreliable and charge higher fees than traditional payment processors. The only real benefit I see is no chargebacks. It's not easier to use than paypal, that's just nonsense.

Like you said too, the volatility isn't acceptable right now. I just lost 20% of my income over night due to this dip. Luckily that "only" cost me a few hundred,  imagine people who do huge volume.
I say it's easier to use than Paypal...

I agree... and safer and less expensive and more satisfying.  
And there are getting to be more and more places I can use it instead of paypal and/or a credit card.

I would love to see my favorite musicians put Bitcoin addresses up on their websites so I can send
money to them directly instead of having to go through some parasitic middle agency. I wanted to
do that even before Bitcoin when I would download their music...  even though in most cases I already
bought their music in the form of records, cassettes tapes, cds etc.  
Actually, that's a good point.  I should look at putting my music up through bit-pay.  I bet it'd be a lot easier to get some automated digital goods download service going than it used to be...
556j
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February 15, 2012, 10:41:05 PM
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You don't have an encrypted wallet that needs a password? Thats the same effort as a paypal payment. Lets not even mention start up effort to get the client up, working, and secure. Are you considering the effort the vendor has to go through to make use of the money sent? The exchanges are requiring more private info than paypal does, for less money moved. The exchanges are at best, as safe as paypal regarding account freezes. I'm not trying to be a negative Nelly, admittedly I'm a bit upset I wasted all of my time working for free last week because of this price dip. But as a person that's using btc for what it's for (selling services and goods for btc) I have tons of issues with btc that aren't there with traditional payment processors. Mainly revolving around two things-

I can lose a significant amount of my income overnight.

High fees (6% for me to get cash in hand as fast as paypal who charges 2.9% + $0.30)

OR

slow turnaround, where the volatility can screw me, plus money in limbo for up to a month. May lose more than the 6% above like I did this week.

If those two things are fixed btc would be 100x better for me as payment for my goods and services. Right now it's such a huge risk.

and if anyone is wondering why I didn't sell my btc at the time of sale reducing my exposure, well the site I use to cash out said they'd be back up Feb. 12th 0300 UTC but didn't actually start services until a day after that. Just so happened that night btc fell about a dollar. The other place I use to cashout doesn't lock in rates so by the time they got to my order the price had dropped the same aforementioned $1.
hashman
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February 15, 2012, 10:57:48 PM
 #9

Not to rain on your parade but take a look at this paper: the case against micropayments, Odlyzko et al. 

http://www.dtc.umn.edu/~odlyzko/doc/case.against.micropayments.pdf

Yeah micropayments are cool and I also like the ease of use of bitcoin payments and other possible uses (keep up the good work devs) but lets not forget to point out the real breakthrough of the proof of work block chain: for the first time ever (with the exception of a polynesian stone money system?) we can -guarantee- no counterfeiting or other secret inflation of a money supply.

 




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February 15, 2012, 10:58:32 PM
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You don't have an encrypted wallet that needs a password? Thats the same effort as a paypal payment. Lets not even mention start up effort to get the client up, working, and secure. Are you considering the effort the vendor has to go through to make use of the money sent? The exchanges are requiring more private info than paypal does, for less money moved. The exchanges are at best, as safe as paypal regarding account freezes. I'm not trying to be a negative Nelly, admittedly I'm a bit upset I wasted all of my time working for free last week because of this price dip. But as a person that's using btc for what it's for (selling services and goods for btc) I have tons of issues with btc that aren't there with traditional payment processors. Mainly revolving around two things-

I can lose a significant amount of my income overnight.

High fees (6% for me to get cash in hand as fast as paypal who charges 2.9% + $0.30)

OR

slow turnaround, where the volatility can screw me, plus money in limbo for up to a month. May lose more than the 6% above like I did this week.

If those two things are fixed btc would be 100x better for me as payment for my goods and services. Right now it's such a huge risk.

and if anyone is wondering why I didn't sell my btc at the time of sale reducing my exposure, well the site I use to cash out said they'd be back up Feb. 12th 0300 UTC but didn't actually start services until a day after that. Just so happened that night btc fell about a dollar. The other place I use to cashout doesn't lock in rates so by the time they got to my order the price had dropped the same aforementioned $1.
No, wallet isn't encrypted.  I probably should, but... I don't.

Anyway, I was just saying from the customer side of things, Bitcoin is extremely easy to use.  I already had the client set up and running, yes, but I don't have to log in to anything, or browse to multiple pages and get redirected here and there.  It was a single payment page.  I click payment sent, it waits for payment from me, then as soon as it sees a transaction has been created, it gives me a receipt, and I'm on my way.  Easy as pie.

From the merchant standpoint, there is a ton to work through, I completely agree with you there.  Lots more polishing to do.  Exchange rates will stabilize with more usage, but it's going to take a LOT more usage for that to happen.  Like, on-par-with-the-economy-of-a-small-country levels of usage.  Lower fees and more instant-money services will come with more usage, too.

If I was going to set myself up as a merchant with the purpose of avoiding as much volatility as possible, I would have all transactions run through bit-pay, and just set it to the USD 2.99% fees option.  I believe that instantly gives me the USD equivalent of any BTC payment made to my bit-pay account.  And it's only half the 6% fee you are talking about.

Regardless, there is still plenty of room for more competition and improvement in the merchant services area.  Well, and in the client area too.  It will come with time.  Things are always being improved upon here, everyone trying to 1-up each other with better features and stability in their services and features.
Stephen Gornick
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February 16, 2012, 02:11:02 AM
 #11

There are instances of bitcoin used for micro-payments already:

For digital goods:
 - https://strongcoin.com/blog/bitcoin_micropayments_with_strongcoin

For pay-per-action services:
 - http://bitcoinhorn.com

For donations:
 - http://www.youtipit.org
 - Any site with a donation widget or bitcoin address (can accept as little as just a few cents worth of BTCs)
 - http://btctip.com (Send a tip to a wallet that can be claimed by that Twitter username)

For voting (e.g., for upvotes on Reddit):
 - http://coinsmack.com  (and prior to that, Witcoin)

For gambling:
 - http://betsofbitco.in (predictions market)

Stephen Gornick
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March 18, 2012, 05:22:59 AM
 #12

There certainly aren't many other global micro-payment systems out there.  The ones that do exist mostly are for accepting   This new service called Kanzaloo aims to do that but taking a look at it I don't know how "global" it is just yet.  Though they say they support 85 countries, the currency pricing is denominated in EUR, and the mobile phone networks supported looks to be mostly just EU companies:
 - http://www.kanzaloo.com

Incidentally, Bitcoin is already there:
 - http://www.dialcoin.com (21 countries)
 - https://bitcoinmarket24.com/BuyBitcoinsForSMS/InstantBTCforSMS.php (U.K.)

And there are numerous micro-payment systems for paying for gaming:
 - http://pocketchange.com  (though not all like the concept: http://www.androidpolice.com/2012/02/23/editorial-virtual-game-tokens-exist-and-theyre-even-more-evil-than-dlc )

Even PayPal has one (5% + $0.05 per transactoin) but as we know all too well, their restrictions and frozen accounts can be brutal.  Dwolla is U.S. only for now, but they allow don't charge for sub-$10 transactions.  Whether or not they want to see a lot of sub-dollar micro-transactions though I don't know.

Here's the scenario that will probably cause a bitcoin micropayments system to take off.  It will probably be a site that already uses bitcoins internally and then sees its customer base explode for whatever reason.  As a result, the amount held in all of the site's customer wallets gets huge as well.  The service then finds other companies wanting access to these customers and their funds.  So this service adds some API to provide that service and becomes a player in the micropayments space as the result.

Maybe this will be Ogrr?
 - http://www.ogrr.com

There's no doubt though, Bitcoin is becoming more suitable for the task than any alternatives.  Facebook Credits chewing 30% of the sale is one reason we should be confident that Bitcoin is better.  In the U.S., for instance, being able to go down to a bank with $25 and end up with $24.25 worth of bitcoins a half hour later (thanks to BitInstant, in this example) is a tell that the frictions using Bitcoin are becoming less.  And the exchange rate fluctuations appear to be getting less disruptive, at this point in time.

In other words, watch closely -- conditions are becoming ripe for a decent solution to emerge.

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March 18, 2012, 12:31:56 PM
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In other words, watch closely -- conditions are becoming ripe for a decent solution to emerge.

Yes, we will be announcing a very decent solution very soon now..

Gabi
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March 18, 2012, 05:51:21 PM
 #14

The bitcoin client epic fail interface in my opinion is happily helping keeping users away from it. Add to that the management of the wallet (management? there is NO management) and of the blockchain (yeah sure -datadir) and you have the answer.
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March 18, 2012, 05:57:16 PM
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The bitcoin client epic fail interface in my opinion is happily helping keeping users away from it. Add to that the management of the wallet (management? there is NO management) and of the blockchain (yeah sure -datadir) and you have the answer.
You mean the beta version? Yeah, the GUI has a long, long way to go.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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March 18, 2012, 07:10:09 PM
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Yup

Sure, it's still only beta (or alpha), but since new ppl will use it, i think it's one of the reason that are slowing down bitcoin adoption. Ok, there are other clients, but they famous, unless one find them on the forum

But i have to admit that the QR code and sign message thing of the latest version is pretty nice.
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March 18, 2012, 08:14:10 PM
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The bitcoin client epic fail interface in my opinion is happily helping keeping users away from it. Add to that the management of the wallet (management? there is NO management) and of the blockchain (yeah sure -datadir) and you have the answer.

Rome wasn't built in one day..  Roll Eyes  Tongue

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

If however you enjoyed my post: 15j781DjuJeVsZgYbDVt2NZsGrWKRWFHpp
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March 18, 2012, 08:22:22 PM
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True  Cheesy
Stephen Gornick
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March 18, 2012, 09:25:53 PM
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The bitcoin client epic fail interface in my opinion is happily helping keeping users away from it. Add to that the management of the wallet (management? there is NO management) and of the blockchain (yeah sure -datadir) and you have the answer.

Are you aware of InstaWallet?  BitcoinSpinner?  My Wallet (from http://www.BlockChain.info/wallet )? 

For those who hold $25 worth of bitcoins these wallets are all more than adequate. 

Even those with amounts that need greater protection are served by some of these -- as My Wallet, for instance, offers a multi-factor authentication method.

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March 18, 2012, 09:35:40 PM
 #20

Yes i am, but the problem is making new people aware of them.
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