Ten Minute Delay vs POS

[TheAccountant]

I tried searching of this, because I'm sure it has been discussed.  But with the block chain taking about 10 minutes to clear transactions, how does this work for POS?  Having never done a direct bitcoin transaction (there are no vendors in my area accepting bitcoin, yet), I'm curious how it works.

[FUR11]

So, you're talking about POS as in Point of Sale and not Proof-of-Stake, right?
Well, the transaction actually will be accepted immediately (<5s) by the network. If it has reached most of the nodes and the big mining pools, it is effectively about to be accepted in the block chain. For smaller transactions (Coffee, dinner, etc.) this should be perfectly fine. The only thing that takes 10 minutes (average) is the definite act of including it in the blockchain.

[kingama]

It's more likely that POS payments will happen through federated payment processors like Bitpay and Coinbase. They just need to make agreements with one another and settle up several times a day with btc in the background.

[TheAccountant]

Yes, I did mean point of sale. 

It looks to me that it would be possible to double spend/over spend if the goods/services are provided before the payment has cleared the blockchain.  For example, I buy a laptop at the Apple Store, I submit a payment (knowing my wallet doesn't have enough in it).  They see the pending transaction and I leave the store with my product.  Ten minutes later they find the transaction fails on the blockchain.

[Datcracktho]

POW is better, we just need it to be faster, like QUark.

[some1]

I tried searching of this, because I'm sure it has been discussed.  But with the block chain taking about 10 minutes to clear transactions, how does this work for POS?  Having never done a direct bitcoin transaction (there are no vendors in my area accepting bitcoin, yet), I'm curious how it works.

If you are intrested in PoS have a look at NXT: http://nxt.org/

PoS is more eco-friendly than PoW: no GHash of power needed to keep the network running.

NXT generates new blocks at the rate of about 1 per minute, so transactions propagate faster.

NXT is tring to implement instant transactions too...

[RodeoX]

There are ways to mitigate the risk of taking bitcoin without full confirmation. One is scale. Just like when you use your credit/debit card at McDonald's. They aren't really worried about fraud because it would cost more to commit bank fraud than the value of your purchase.  the same could be done for small bitcoin purchases. If I were selling a $5 item, I would be ok with 0 confirmations. If I were selling a $50 item I would want at least 1. If I were selling a car, I would want 6. It should not be inconvenient to wait an hour for a car. One could also use a payment processor like bitpay. They will take on the risk for a fee. In the future I bet there will be even more options.

[lynn_402]

How easy would it be for someone with a mobile wallet to try to send a fake transaction, and get away with 0-confirmation transactions?

[kingama]

Yes, I did mean point of sale. 

It looks to me that it would be possible to double spend/over spend if the goods/services are provided before the payment has cleared the blockchain.  For example, I buy a laptop at the Apple Store, I submit a payment (knowing my wallet doesn't have enough in it).  They see the pending transaction and I leave the store with my product.  Ten minutes later they find the transaction fails on the blockchain.

That sort of problem is impossible because the bitcoin network and all nodes on it will reject a transaction that spends more than it has available. The real issue is the double spend, whereby you have two wallets and have one spend at Apple and another spend the same funds back to yourself at yet another address. The only sure protection is to wait for confirmations. Short of that, merchants can protect themselves by connecting to miners, not allowing incoming connections, and connecting to the Bitcoin network at multiple points to be as sure as possible that the transaction that paid them is the one which gets confirmed.

The proposal to have a "replace by fee" facility would blow away that last type of mitigation leaving only confirmations as the solution. The reason is that a transaction which is seen can be replaced later (but before it is confirmed) by one that has a higher fee. So even if you are looking at the network at multiple points and see only the payment which goes to you, it could be replaced up to 10 mins or more later to send funds back to the thief.

[kingama]

How easy would it be for someone with a mobile wallet to try to send a fake transaction, and get away with 0-confirmation transactions?

An outright fake transaction would not be accepted by any Bitcoin nodes and would not be propogated through the network. Only valid transactions (multiples of them that spend the same unspent transaction outputs) pose any threat of theft.

[Tammy Chan]

POW is better, we just need it to be faster, like QUark.

If you are intrested in PoS have a look at NXT: http://nxt.org/

PoS is more eco-friendly than PoW: no GHash of power needed to keep the network running.

NXT generates new blocks at the rate of about 1 per minute, so transactions propagate faster.

NXT is tring to implement instant transactions too...

Please check post #4 by OP again, the POS in the thread title stands for "Point of sale" rather than "Proof of stake".

[Tammy Chan]

How easy would it be for someone with a mobile wallet to try to send a fake transaction, and get away with 0-confirmation transactions?

Nope you can't send a fake transaction.
You may try to double spend a 0-confirmation tx, but if the first tx has no unconfirmed inputs and has at least min tx fee, the double spending attempt is very very unlikely to be successful.

[lynn_402]

How easy would it be for someone with a mobile wallet to try to send a fake transaction, and get away with 0-confirmation transactions?

Nope you can't send a fake transaction.
You may try to double spend a 0-confirmation tx, but if the first tx has no unconfirmed inputs and has at least min tx fee, the double spending attempt is very very unlikely to be successful.

That's good to hear, thanks for your answer.

[jbrnt]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

[Bizmark13]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

Exactly, and while off-chain transactions do have some associated risk (e.g. a payment system's hot wallet could be hacked into during the ~10 minute timeframe) and invites a degree of centralization regarding payments, the damage would be contained to ~10 minutes worth of transactions and the convenience would certainly be worth it.

For example, I could envision something similar to the old Inputs.io wallet becoming popular. You would have a personal hot wallet which would contain a small amount of coins to be used like an actual wallet which could spend or receive coins immediately. Every ~10 minutes, the payment system would submit changes to its users' balances to the blockchain allowing the off-chain transactions to be cemented into the blockchain forever.

It might not be worth using if you're buying a burger or something, but something like this would allow you to purchase more expensive things like a laptop or a smartphone without having to wait tens or hundreds of minutes for the transaction to confirm.

[TheAccountant]

Thank you to everyone for your replies.  It was very helpful.

[lynn_402]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

Won't we have the same problem that we have now with Paypal though; overpriced transaction fees because of too much middlemen?

[Bizmark13]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

Won't we have the same problem that we have now with Paypal though; overpriced transaction fees because of too much middlemen?

Most of it would probably be automated. And there would be multiple companies competing against each other in the same space for lower fees. Have you ever had a Cryptsy account? You can use trade keys there to instantly transfer coins to other members with no fees and since the whole process is completely internal, all transfers are completely off the blockchain.

[BowieMan]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

Won't we have the same problem that we have now with Paypal though; overpriced transaction fees because of too much middlemen?

Most of it would probably be automated. And there would be multiple companies competing against each other in the same space for lower fees. Have you ever had a Cryptsy account? You can use trade keys there to instantly transfer coins to other members with no fees and since the whole process is completely internal, all transfers are completely off the blockchain.

We'll see how things play out and I also believe that Bitcoin can really remain the mere back-bone-protocol, while actual services for customers are done 'off-chain'. But then again many people praise the blockchain and as soon as the speed or scalability of Bitcoin is discussed they say "yeah, but we can just leave out the blockchain later'

[wasserman99]

When bitcoin is popular enough, there will be a few payment systems that will handle transactions off the blockchain. So, the average 10 minute block time will be irrelevant.

Won't we have the same problem that we have now with Paypal though; overpriced transaction fees because of too much middlemen?

Most of it would probably be automated. And there would be multiple companies competing against each other in the same space for lower fees. Have you ever had a Cryptsy account? You can use trade keys there to instantly transfer coins to other members with no fees and since the whole process is completely internal, all transfers are completely off the blockchain.

This would involve trusting a third party (cryptsy in your example) which is something that is generally against the principles of bitcoin. I think there is very little risk for merchants of a transaction not confirming (and/or a double spend attack) as long as the transaction is under a certain amount. A merchant could also have a rule that a TX must have at least "x" TX fee in order for them to accept it as 0/unconfirmed.