Credit Card authorization guarantees the funds to the merchant.
Signing a bitcoin transaction and broadcasting it to the blockchain does not. Successful confirmation of the tx on the blockchain does, and to be on the safe side the rule of thumb is to wait for 6 confs on the bitcoin blockchain before considering the funds to be guaranteed.
Tx confirmation times are a known problem with BTC in terms of the payment acceptance flow, this is one of the hurdles preventing wider merchant adoption of BTC acceptance.
Not exactly. Credit card authorization happens instantaneously, even though it takes the money a while longer to actually move between accounts. And this is separare from the chargeback mechanism, which can claw the money back after it's actually moved.
A 0-confirmation bitcoin transaction is more like writing down someone's credit card number and charging it later when you have access to your credit card terminal, which was common (in the form of those carbon copy credit card impressioning machines, which are why credit cards have raised digits) in the days before ubiquitous mobile Internet.
You can't compare the two. A confirmed bitcoin transaction represents the final settlement of a non-reversible payment, and is spendable by the merchant immediately after those 10 minutes. Credit card payments are reversible for a period of a few months (so what you really get is a probabilistic payment, which requires fraud detection and risk management to properly handle) and can take 1-4 weeks to become spendable by the seller.
Also, note that zero-confirmation transactions could still be relatively safe for low-value transactions, you don't always need the strong guarantees provided by confirmed transactions. Dealing with zero-conf does require some risk management, though.
Finally, as I mentioned near the end of my previous comment - a write cache based on payment channels is currently being worked on, and will eventually provide us with real instant payments (which are also final and non-reversible, but with a deferred settlement).
The Bitcoin protocol has always had a design that gave 10 minute average time between blocks being mined; which means 10 minutes before you have a single confirmation. It normally considers 6 block (6 confirmations, at an average of 10 minutes each) to be enough to avoid a double spend.
People can accept more risk by allowing transactions with fewer confirmations. But you are never going to get under 10 minutes on average (actually, since the difficulty only updates occasionally, when mining power is coming online fast enough it can go under 10 minutes average for a while; or a bit over if miners go offline).
Bitcoin is not, and never has been, designed for instant authorization. You cannot get global, cryptographic consensus in seconds. Credit card authorization can work by being much more centralized.
If you want fast confirmations of small transactions, you need to use something other than Bitcoin. What Bitcoin is good for is unstoppable bulk transfers of value across potentially unfriendly jurisdictions. It's better thought of as a better alternative to a wire transfer than an alternative to credit cards.
You do not get the same guarantee with a credit card that you do with an irrevocable block chain transaction. Checking the source accounts balance (which is public with BTC) you could quickly verify funds and have high certainty the transaction will proceed. This is in effect how credit card transactions work under the hood as well. Finance still heavily relies on night time batch processing.
A 0-confirmation Bitcoin transaction similarly needs only < 1 sec to be broadcasted to the network. And a 0-conf tx offers as much security as existing payment networks (which are reversible). When I sell computer gear on Craigslist in person and someone pays me in Bitcoin, I only wait ~1 second for the tx to reach my phone's wallet before letting the buyer walk away.
A merchant needs to wait 1-2 business days before he can spend the money he received through these payments networks. With Bitcoin he only has to wait 1 block (~10 minutes), reducing pressure on his cash flow.
A merchant must wait typically 60 days for a CC transaction to be considered irreversible. With Bitcoin he only has to wait 6 blocks (~1 hour).
So, comparing apples to apples, Bitcoin is either as fast as, or MUCH faster than legacy payment networks.
No, payment networks verify that the user can spend immediately. That is full confirmation in a few seconds. Bitcoin fails dismally here...
To call a credit card transaction a full instant confirmation is disingenuous at best. If I were selling goods I'd prefer the 0-confirmation Bitcoin transaction to a credit card transaction. And just like how you might refuse a credit card payment from someone without an id, you might also refuse a 0-confirmation Bitcoin transaction with no or very low transaction fees.
In that case you have no idea if that transaction is actually confirmed and not a double spend (typically Bitcoin requires at least minutes to confirm), that's not equivalent to them paying you by bank transfer in seconds.
That's correct, but it's not a fair comparison for his example, as no one on Craigslist will send a bank transfer to you. Judging from context mrb was comparing it to a credit card transaction, which you can do with PayPal and their free credit card reader that goes into your audio jack. If some stranger on craigslist wanted to buy something from me with either a credit card or a 0-confirmation Bitcoin transaction, I'd chose the Bitcoin transaction. Perhaps you underestimate the difficulty in performing a double spend. Or underestimate the amount of credit card fraud that happens.
You also mention the energy cost as a concern. It was estimated that the energy cost of running the Bitcoin network was $400 million in 2016. Bank of America listed $60 billion dollars in just operating expenses for that same year (and this doesn't include investment losses). Sure there is a lot more going on at BAC, but even if only 10% of that is spent verifying transactions, it still cost more than all of Bitcoin. And that's just one bank.
Since this is just the POW algorithm, increasing the blocksize or using an off-chain solution to increase number of transactions won't cause a scaling in POW energy usage. The POW algorithm costs just as much energy to confirm 1 transactions as it would 1 million. All that energy isn't spent doing math to confirm the transactions, it's confirming the "signature" on the block which lists all the transactions.
complexity meaning average users hand their entire savings over to someone else
Ignoring the fact that you've certainly handed your entire savings over to someone else, I'd like to see the sources for this. Things are so simple now. It's gotten so easy to store Bitcoins on your phone or computer. You don't need to download the entire blockchain anymore, and you can backup your entire Bitcoin wallet with 12 words, which you can choose to memorize or hide somewhere.
... making it extremely vulnerable should it become popular to being targeted and cornered by states or money markets
I would argue it's already become popular. And I think Bitcoin being banned by state entities is probably it's biggest vulnerability at this point, but with so many businesses involved in it, I don't see that happening. In fact, things actually seem to be going the other direction. Bitcoin has officially been made a currency in countries such as Australia and Japan.
... hidden centralisation through miner cartels running the transaction network
If these miners were in America, with 8 to 10 different companies mining the majority of Bitcoin blocks, no one would be saying anything. But when you have the same thing in China, suddenly everyone is afraid of secret miner cartels.
... and a small group of devs/companies producing the complex software required
The core Bitcoin software is open source. It can be inspected for vulnerabilities at any time, and with so much money in Bitcoin, it's being looked at very closely. Being open source also means people can make their own versions at any time. I know of two popular projects hoping to grab the official Bitcoin name right now. And sure if such projects get popular enough, and far enough along, the community could break out into an all out war. Each side trying to find as many vulnerabilities in the others' software as possible. But whoever wins will be the most organized, and the ones who makes the best, most stable, and most reliable code.
... it appears to be designed for something else entirely (to replace fiat cash it seems, which is on the way out anyway).
I do agree that Bitcoin has many traits of cash, such as irreversibility and pseudo anonymity. But I don't think it's "just enough (anonymity) for criminals". Banks can trace serial numbers on bills, and Bitcoin can be traced from transaction to transaction. Both can be traced when spent and you go in person or have something shipped to you.
However, Bitcoin's similarities to cash don't leave it dead in the water. Imagine what people thought when the first printed bills started being used, "Oh too many problems here for this to ever be a thing. What's to stop them from printing double the bills? Coins have intrinsic value and when I receive one I have the value instantly."
The "solution" to the scaling problem spoken about in the article allows off-chain Bitcoin transactions (by fixing transaction malleability). This allows for layer 2 services, and these will have a lot more in common with credit cards. The big one you've probably heard of it the Lightning network, which should allow for millions of transactions per second with complete and full confirmations in < 1 sec, and yes, with no chance of a double spend. There's no reason someone couldn't offer a service that also plays mediator for shoddy goods. Bitcoin might seem rather limited now, but it's by no means hit a technological dead end.
Yup, and that is one of the selling points of bitcoin from the merchant's perspective.
I was specifically talking about funding confirmation times, to claim that CC processing is slower than bitcoin because it takes longer to settle is misleading.
Why is the time obscene? It usually takes 45 days for confirmation if you pay via a credit card. Compare that to about 60 minutes for 6 confirmations on the Bitcoin blockchain, and it's orders of magnitude higher.
You aren't actually comparing the few seconds it takes to swipe your credit card to 60 minute Bitcoin confirmation I hope. It's about 'reversibility' of a transaction - for a Bitcoin transaction to propagate takes about the same time as a credit card swipe to propagate.
Edit: Wow why the downvotes? Seems like people here don't understand the first thing about how payments work in the real world. The funds are not 'confirmed' instantaneously. If someone walks into your store and pays you $1000 with a card, you can't say withdraw it in cash in 2 seconds.
It takes about the same time for a 0-confirmation Bitcoin transaction as an 'unconfirmed' card transaction.
When I've made bitcoin payments, confirmations have usually reached a sufficient threshold in 30 seconds or less. That doesn't mean that your transaction has made it into the blockchain, only that enough servers have validated that your transaction is good based on their state and that they will hold your transaction until it is in the blockchain.
Confirmations are not required for casual purchases. The amount of luck and effort required to double-spend an unconfirmed transaction greatly exceeds the value of casual purchases. Bitcoin confirmations are more akin to the months during which you're allowed to contest a credit card purchase, except instead of months, it's between a few minutes to an hour.
Sitting there waiting for confirmation for a bitcoin purchase for a videogame is like waiting for the credit card company to reassure you that the transaction is now irreversible.
"Confirmed" has two definitions depending on if you apply it to credit cards or Bitcoin:
1 "Confirmed with a certainty that's good enough for values less than 10,000USD" )
Credit cards are good for this basically instantly... unless the register is "taking longer than normal today." It is on the order of seconds. Notice that PayPal doesn't accept credit card payments over 10K AND takes a large percentage. The same is true of Escrow.com, for example. Wires (SEPA in eu) take several hours, but are much more used at these amounts.
With bitcoins, this is true once 90% of the nodes have a transaction in their memory pools which ALSO happens to be on the order of seconds (you can watch propagation of transactions on blockchain.info)
2 "Truly irreversible")
This level of confirmation is true of credit cards after, usually, 180 or 270 days. Whereas with Bitcoin this is true after 4 or 5 confirmations (~40-50 minutes).
Bitcoin's speed gets a bad rep because it is held up to definition #2 and credit cards are only held to a standard of definition #1. This whole non-sense about litecoin solving ANY problems is just that: nonsense. The some members bitcoin community clamored for bitcoin to decrease the confirmation time, but the core devs knew it wasn't necessary. In fact, Charlie Lee, in an effort to satiate these requests created an altcoin, Litecoin, to confirm faster, so that the discussion of bitcoin could regain its track.
TL;DR: Bitcoin is very much confirmed within seconds, just like credit cards. Litecoin's faster confirmation time contributes very little (unneeded) benefit.
A 0-confirmation Bitcoin transaction similarly needs only < 1 sec to be broadcasted to the network.
No, payment networks verify that the user can spend immediately. That is full confirmation in a few seconds. Bitcoin fails dismally here on very limited transaction volume by taking 10 minutes at best for something approaching confirmation and has no chance with the current architecture of POW of ever realistically replacing those transaction networks - both because of energy use and time.
A merchant needs to wait 1-2 business days before he can spend the money he received through these payments networks.
Yes, Bitcoin has the advantage here - you'll get your money faster, though there is no real technical barrier to existing networks paying out faster, the banks are just incompetent and greedy. This does depend how the payment is done - using FPS it's available instantly, using cc it's not (often more like 7 days, not 2).
A merchant must wait typically 60 days for a CC transaction to be considered irreversible.
That is a matter of policy, not tech. If Bitcoin were a serious transaction protocol, customers would demand the same features, or a guarantee in law that they could return shoddy goods - either way, the protocol is not the problem here.
When I sell computer gear on Craigslist in person and someone pays me in Bitcoin, I only wait ~1 second for the tx to reach my phone's wallet before letting the buyer walk away.
In that case you have no idea if that transaction is actually confirmed and not a double spend (typically Bitcoin requires at least minutes to confirm), that's not equivalent to them paying you by bank transfer in seconds. Comparing a zero confirmation transaction from bitcoin to a full confirmation transaction from a bank is disingenuous at best.
That's not even touching on all the other flaws of bitcoin as a method of payment - irreversibility (yes people really don't want that!), pseudo anonymity (just enough for criminals, not enough to stop states), complexity meaning average users hand their entire savings over to someone else, lack of insurance or regulation (yes people really do want that!), lack of backing as a currency making it extremely vulnerable should it become popular to being targeted and cornered by states or money markets, hidden centralisation through miner cartels running the transaction network and a small group of devs/companies producing the complex software required, energy use of POW which means it could never handle enough volume....
Using merkle trees to store transaction ledgers is really interesting, but with the current architecture of bitcoin is not a rival to current payment networks mostly because it appears to be designed for something else entirely (to replace fiat cash it seems, which is on the way out anyway).
You can accept an valid signed transaction with low risk even if it hasn't confirmed yet because in a blockchain w/o regular massive backlogs the chances that it doesn't confirm are very low. So for smaller every day transactions there isn't a need to wait for an actual confirmation.
In a situation as exists with Bitcoin currently it's anyone's guess whether a transaction will ever confirm because there are HUGE backlogs that haven't cleared for several months. A transaction has a high chance of being dropped regardless of the fee being paid because the backlog and fee level required to get confirmed at all is unpredictable. Bitcoin Core also has what they call RBF which increases the chance that a dishonest person can double spend an unconfirmed transaction exponentially. Makes 0-conf transactions unusable on Bitcoin Core.
Bitcoin explicitly does not have instantaneous payments. The standard view is to wait for 6 blocks before considering a transaction as "confirmed" Confirming a transaction at 0 blocks leaves you open to a very low cost double spend attack.
Bitcoin transactions are instant. You get the 0-conf transaction instantly and are able to buy stuff. The 30 minutes for 3 confirmations are basically the 'chargeback' time, which is about 2 weeks with credit cards. In day-to-day business, people usually trust 0-conf transactions, or are able to handle the chargeback.
The recommendation with Bitcoin is to wait for six confirmations before considering a transaction secure. That's about an hour, best case. It might be overly secure for most applications, but that's generally what people use.
Other PoW-based systems have similar recommendations. You can have more frequent blocks, but the economic security offered by each confirmation will be lower.
There are other nifty networks called payment networks which promises instantly secure transactions, the most well known being Lightning. They offer that by identifying cheating and offering both parties to get their money out in case the other party does. They are still pretty experimental but the results are promising.
Definitely false. If you're using bitcoin and want to be uber-safe, then you should wait for six 10-minute confirmations. That's an extreme example though. In practice you can spend right after the first confirmation, which can be seconds to minutes for other cryptocurrencies.
It's been covered lots of times, but essentially, for all transactions whose value is an order of magnitude less than the current block reward, it is considered safe to complete the physical transaction as soon as the Bitcoin transaction arrives at the retailer's system through the Bitcoin network. This usually takes 5-15 seconds, so about the same amount of time as most credit card approvals take now.
This is considered safe because even though there are various tricks you can pull with no confirmations, the hashpower needed to do any of them is so great that you would make far more money turning that hashpower towards legitimate mining than by scamming retailers.
With Bitcoin value, block rewards, and hashrates as they are now, this means that anything less expensive then a car or a boat is okay to complete immediately. Waiting up to an hour for a couple of confirmations for a purchase of $10k or higher doesn't sound like too big of a deal.
Tx confirmation times are a known problem with BTC in terms of the payment acceptance flow, this is one of the hurdles preventing wider merchant adoption of BTC acceptance.
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