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I pay for some things on a regular basis. They generally fall into two categories:

  • Things I pay for or lose, eg a variety of online services (Spotify for example)
  • Things I'm legally obliged to pay because I've signed a contract (my mobile bill, for example)

In the first case, I suspect recurring payments could be handled relatively easily with upgrades to the original client interface. (Maybe it would be complicated by the desire to have a new address per transaction.)

In the second case, the other party has a stronger vested interest in knowing they will receive the money. Currently, with bank standing orders and direct debits, nothing stops me cancelling regular payments on my end. But companies who receive the payments rely in part on knowing I have to go out of my way to do that. They also rely on knowing that my wages likely go into the same bank account that their payment comes out of.

With Bitcoin, the situation is reversed. I have to go out of my way to make a recurring payment. Even I was using some online service ("Bitcoin bank"?) to make the payments, I'd still have to go out of my way to top up the balance.

With no changes to Bitcoin, if it became a dominant currency, I would predict an increase in the use of debt collection agencies to recover missed contract payments. Good for debt collection agencies, but it would drive up the cost of the services proportionately.

How could recurring payments be implemented in a mutually satisfactory way? Or is the current system inherently impossible to recreate with Bitcoin?

  • The "current system" has no support for recurring payments. How could paper notes be brought out of my physical wallet and driven to the store? This is the current system. – fiatjaf Sep 16 '16 at 17:59
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I think the most obvious way, though perhaps not the best way, is precisely the same way as is done with other currencies. If Bitcoins are adopted as a primary currency, they'll probably be used the same way other primary currencies are.

I am paid in dollars, but no actual dollars transfer unless that is absolutely required. Instead, I have a bank account denominated in dollars from which I can withdraw actual dollars any time I need. These same mechanisms could be implemented with Bitcoins. I could have an account denominated in Bitcoins, I could be paid in Bitcoins, I could pay bills in Bitcoins, but no actual Bitcoins need change hands except where the benefits of doing things that way outweigh the costs.

  • Does this rely on the customer's employer, the customer and the customer's service provider all using the same "Bitcoin bank"? If so, what about the possibility of people operating fractional reserve schemes if bitcoins are not actually transferred? And given the ease of making Bitcoin transactions, why would the end recipient not alway withdraw actual bitcoins? – Ash Moran Sep 5 '11 at 19:51
  • It doesn't rely on the using the same bank, only on the bank's interoperating through a clearing house or the like. Yes, it does enable fractional reserve schemes, though that only works if there are people willing to buy shorts (because of the risk their value goes up, as I explained in the question on shorts). Why would the end recipient not always withdraw actual Bitcoins? The same reason people don't withdraw dollars -- that puts the obligation of managing and securing the funds on them, and it makes it harder to transfer them. So why would they? – David Schwartz Sep 5 '11 at 20:51
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I think the best way to implement this, without modifying the original bitcoin client, is running a separate server that constantly listens to billing requests sent through HTTP. The said server authenticates the requests and talks to bitcoin client to send the payment to destination address. I'm not sure yet if that can be totally secured and if someone has worked on it or not.

Furthermore, that additional server can be run on a local computer along with the bitcoin client so that users can broadcast "debit addresses" on their own, from their own computers, without relying on any hosted third party service.

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