Bitcoin Poker Chip / Physical Coin

[benjamindees]

Just wanted to revive this old idea and add a new concept that I hadn't seen mentioned before.



Embedded RF smart chip.  Query the address (and balance?) from the chip wirelessly.  Add Bitcoins to the chip by sending to the address.

New feature:  button.  Press the button to initiate a wireless transfer of Bitcoins.  Hold down the button to generate a new address.



So, the way I envision this working is that you take your physical Bitcoin into the store to pay for your purchases.  You give the cashier the coin.  He scans it to verify the address and balance and places it in an appropriate spot in the cash register.  For instance, if the coin has 27 Bitcoins on it, there might be a spot for 20-50.  He puts it there.

He takes out another coin with an appropriate amount for change, and scans it to send the net change to the coin.  For instance, lets say the change is 5.67.  So he pulls out a coin from the 1-5 spot, and the coin happens to contain 3.45 Bitcoins.  The register sends the difference of 2.22 Bitcoins.  He gives this coin along with a paper receipt.

One advantage is that since you are exchanging private keys, this adds a layer of complexity to the anonymity of Bitcoins.  The button allows wireless use while preventing unauthorized transfer.

The disadvantage is that the purchaser has to trust the seller to send the correct change.  But that is mitigated somewhat.  And, depending on the procedure used, the seller has to trust the purchaser not to have created a counterfeit chip that can be double-spent.  This can also be mitigated by including an appropriate digital signature and a third party, similar to the MintChip design.  Or it can be completely eliminated by simply transferring the balance of the coin every time and awaiting confirmation.

But in this case that option is left to the discretion of the seller.  Different procedures can be used based on the amount of the transaction or the level of fraud risk at the time.

[Stephen Gornick]

places it in an appropriate spot in the cash register.  For instance, if the coin has 27 Bitcoins on it, there might be a spot for 20-50.  He puts it there.

So he pulls out a coin from the 1-5 spot

Why would these have denomination ranges?

The disadvantage is that the purchaser has to trust the seller to send the correct change.

And that the address the change was sent to (and shown on the receipt) was truly the one generated by this device.

One advantage is that since you are exchanging private keys,
[...]
Or it can be completely eliminated by simply transferring the balance of the coin every time and awaiting confirmation.

That is the only way it would work.  Otherwise how many people would have a copy of that private key?

You are basically describing an electronic version of this:



 - http://bitcointalk.org/index.php?topic=74978.msg831067#msg831067

[benjamindees]

Why would these have denomination ranges?

Basically, so that you can make change by only transferring Bitcoins to the chip, not from the chip.  Just slightly quicker.

The disadvantage is that the purchaser has to trust the seller to send the correct change.

And that the address the change was sent to (and shown on the receipt) was truly the one generated by this device.

Yes, that too.  Though in practice this could be prevented since the address is queried directly from the chip itself so only malicious sellers or seriously malfunctioning terminals would be an issue.

One advantage is that since you are exchanging private keys,
[...]
Or it can be completely eliminated by simply transferring the balance of the coin every time and awaiting confirmation.

That is the only way it would work.  Otherwise how many people would have a copy of that private key?

Only the people who can extract the private key without destroying the chip, which ideally is zero.  You aren't really exchanging private keys, that was somewhat imprecise.  You're exchanging chips that contain private keys.

You are basically describing an electronic version of this:

...

 - http://bitcointalk.org/index.php?topic=74978.msg831067#msg831067

Yes.  Except the private key is hidden from the user, in theory.

[randomproof]

You could use smart cards like the OpenPGP card.  The private/public keys are generated right on the card and it is impossible to get the private key out.  Also the creation of the transaction could happen on the smart card.

[Stephen Gornick]

Only the people who can extract the private key without destroying the chip, which ideally is zero.  You aren't really exchanging private keys, that was somewhat imprecise.  You're exchanging chips that contain private keys.

Sorry, reading comprehension fail on my part.

Ok, I think I get the concept now.  The chips are never spent in normal commerce, only used to transfer value or to have amounts added.  What's the button press for then though?

So If I make a purchase of 8.0 BTC and have in my pocket two chips with 5.0 BTC  each, I give them to the merchant.  The merchant gives back to me a different chip that has exactly 2.0 BTC on it already, or the merchant takes a chip with a smaller amount on it and tops it up until there are 2.0 BTC.

So instead of a merchant just having to manage cash (ensuring there are enough coin and currency to give change and making deposits)  the merchant will also need to manage a supply blank / small-value chips and redeem the ones received and not useful for change.

These chips will have a short lifespan between being blank and becoming too large to be useful.

Also, how do I as the customer remember which chip had what amount on it?

With the ability to buy a functional wi-fi enabled smartphone for $100 or less there's really little room for poker chips, mint chips and smartcard devices.  A mobile app shows your balance, recent payments received and sent, etc.   That's information that a poker chip or smartcard doesn't provide and with my money, yes -- whatever device that gives that information is the device I will use.  There may be a number of ways this will play out  (transfer value on QR code on receipt, or via NFC, etc., depending on the device's capabilities) but the platform (mobile smartphone) solves the problem (protecting a store of value) the best , to-date.

[cbeast]

You could use smart cards like the OpenPGP card.  The private/public keys are generated right on the card and it is impossible to get the private key out.  Also the creation of the transaction could happen on the smart card.

Someone really needs to make a Bitcoin compatible version of this. As long as the user is able to seed it with a deterministic wallet, it could be recovered if destroyed.

[benjamindees]

So instead of a merchant just having to manage cash (ensuring there are enough coin and currency to give change and making deposits)  the merchant will also need to manage a supply blank / small-value chips and redeem the ones received and not useful for change.

These chips will have a short lifespan between being blank and becoming too large to be useful.

What's the button press for then though?

The button press is for transferring all of the Bitcoins off the chip and resetting the value to 0 and then, optionally, resetting the address.  This can be done by the holder.  There is no "redeeming" per se.  But you're right, this may need to be done fairly frequently, as a seller, in order to make change.

And I would tend to think of this as more of a complete replacement for conventional money than a supplement, for the reasons you mention.

Also, how do I as the customer remember which chip had what amount on it?

Good question.  I think in practice the customer wouldn't have more than one chip at a time.