Recently I built a site that allows purchase of items with bitcoin, also paypal and credit cards. In testing I haven been struck by how different the experience of purchasing online with bitcoin is vs. traditional methods. It takes much longer from the point of confirmation of sale to the "acceptance" of the payment (the point after which the workflow can move on to fulfillment). It also takes more user input and action. It's difficult on the surface of it to understand how this can be the case when transferring value from one person to another seems so much quicker and easier than traditional alternatives.

It occurs to me that part of the difference may be due to fundamental differences in what is taking place. Is a credit card transaction directly analogous to a bitcoin transaction, or instead does a credit card transaction only match a bitcoin transaction considered along with the bank and other transfers on either end of it? Are there other differences or considerations to make when comparing the two experiences procedurally? I am unsure.

Coming up with strongly analogous steps between these two procedures of transferring value from a buyer to a seller might reveal choking points/areas of improvement for Point of Sale with bitcoin or highlight the differential value of bitcoin's approach.

So what are the analogous steps between the two experiences?

  • For example, you might consider waiting for confirmations of a Bitcoin transaction to be analogous to waiting for the chargeback time limits to expire for a credit card transaction. That is the time after which you can be confident that the money is absolutely yours. Given that, in some cases, credit card transactions can be charged back over a year later, Bitcoin's 1-hour timeframe no longer seems so bad. Sep 8 '14 at 0:32
  • On another note, I'm unclear what "human interaction" you refer to as part of a Bitcoin transaction. Sep 8 '14 at 0:33
  • One difference in the chargeback period and confirmations from the perspective of the purchaser is that delivery of the good or service is not held back until the chargeback period's completion. So maybe there's an opportunity to go ahead and continue the workflow before the first confirmation? I guess as it's only an hour, delivery won't often take place before there's an opportunity to correct orders with transactions that don't confirm. It's really just a matter of whether the user facing status says "payment received" for that time period. That doesn't seem like a big deal. Thanks! Sep 8 '14 at 1:29
  • Human interaction should more properly be "user actions and input". And the big problem isn't that there is significantly more user action and input, it's more that it's further spaced apart I think. With a credit card, there can be as few as three fields to fill out and one button press immediately after and the process is done. I can see instantly that my payment is reflected and my product will be delivered. Sep 8 '14 at 1:38
  • Same thing with bitcoin? I'm presented a 32 character code to copy. Then I have to go to my desktop and open an app (or go to a website and sign in) to access my wallet. Take 5 min downloading missed transactions. Paste in the address. Go back to the browser and copy and paste the total cost. Send the transaction. Maybe wait an hour for confirmation (though maybe not anymore ;} ). OK the payment should have posted, but how often does the website check? Wait another 5-10 for the website to reflect it. OK finally, we can see the updated order status. Sep 8 '14 at 1:43

I think the answer is that a credit card company is vouching for you when you make a purchase. The seller does not know you, but they know the credit card company, and they know the credit card will give them their funds. The credit card company in turn knows you, and has deemed you credit-worthy. This is why it's called "credit" ... from the latin credere: "to believe" or "to trust". The credit card company believes that you will pay your bill at the end of the month.

Bitcoin is like cash... except that handing over physical cash takes a fraction of a second, but handing over digital cash takes approximately 10 minutes in the case of bitcoin (less with alt coins that add to their block chains at a faster rate).

The seller could decide that if this is a repeat customer (who has bought successfully with bitcoin once or more times before) to extend credit themselves, and just assume the transaction will be validated. Then, at the time of sale, the transaction will be just as quick as a legacy credit card transaction would.

Some alt coins are building in reputation via marking (such as Bitmark) which will go a long way towards allowing sellers to make immediate credit decisions even from buyers new to them. I think this is somewhat analogous to a built-in FICO score for a particular wallet.

  • I agree with this, I would go beyond and say that maybe "extending the credit" should be the default action if possible. Kind of a "blacklist" rather than "whitelist" approach, where so long as you are not high risk for trying to double spend (or any other offense that can take place before confirmation--excuse my ignorance here) you go right through checkout and fulfillment workflow, how this "high risk" determination would be made, I do not know and would like to hear opinions. I think I will implement this on one of my dogecoin sites and see how it goes. Feb 23 '15 at 20:05
  • block.io seems to have a whitelist to attack this problem. as long as an address is a "greenaddress" (on the whitelist) coins sent from it can be used on receipt. Virtually instantly. This is a novel approach to this problem. Apr 1 '16 at 21:07

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