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Fixing cryptocoin speed with gift cards

I'm going to lose some of the non-geeks on this one.

I've been playing with cryptocurrency lately. Bitcoin (BTC), Dogecoin (DOGE), etc. It's interesting technology. Essentially, it's a way to buy and sell things without a centrally owned repository (like the federal reserve, or Visa/Mastercard/etc.) In a nutshell, if I want to send you a bitcoin, there's no central authority who approves the transaction (just a consensus that the transaction was valid), so there's nobody who can stop me. It's the same advantage that gold has, but it can be done over the internet.

It has one enormous downside, though: it's SLOW. Because of the way that these currencies are designed, it can take more than an hour for a transaction to go through and be finalized. (You can see that it has started after about 10 minutes, but it's not truly final for about an hour.) Some of them, like Litecoin, have developed ways to speed up the process, but it still takes 10-15 minutes for a Litecoin transaction to go through.

This delay is not so bad for web-based sales, since you can just say "Payment request received. We'll ship after it clears." but it's an enormous downside for any kind of retail activity. Nobody wants to hang around the cash register for an hour waiting for a sufficient number of blockchain confirmations.

However, it seems to me that there's a way to mitigate a lot of the pain: the humble store prepaid gift card. Here's how it might work:

  1. You walk into a nice restaurant and immediately buy a gift card for, say, twice as much as you expect to spend. Let's say that you buy a restaurant gift card worth 0.1 BTC, which is currently around $250. The restaurant gives you the gift card, but warns you that you won't be able to use it for at least an hour. That's okay. It takes a while to eat a nice dinner. This same concept applies for any store where you might be there a while: computers, jewelry, whatever. This is a perfect scenario for a mall gift card.
  2. While you're eating (or shopping), the restaurant processes the transaction. Presumably, after an hour, they have fully confirmed that they have 0.1 bitcoins.
  3. You eat, and when the bill arrives for $100 (0.04 BTC) , you put down your gift card. They take the dinner balance off of the gift card and send back the change (0.06 BTC minus transaction fees)  to your address in BTC. Again, this takes an hour, but presumably, you're willing to trust the restaurant to do the right thing. If they don't, you can go back tomorrow to complain.

For smaller, faster transactions (like a cup of coffee), you could do something similar, but only wait 10 minutes until the transaction has started. The store can see that the intent to pay is there, and in the worst case, the store's only out a cup of coffee, so the risk might be worth it.

You could also choose to leave the change on the gift card. Stores would no doubt prefer this. But, in this case, the gift card is just being used as a buffer for the seller's convenience. It would be reasonable for them to offer to return the difference, even if they don't do that for regular gift cards.


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