Quote from: davout on December 28, 2010, 03:06:39 PM

Quote from: pj on December 28, 2010, 02:58:57 PM

Quote from: davout on December 28, 2010, 02:42:14 PM

That's not realistic, you'll always have trade-offs.

Just because something doesn't seem realistic at present doesn't mean we should not prefer it, were it available.

My point is : I do not think bitcoin will be good at handling lots of micro-payments, it is by design. Nor do I desire this capacity. Of course, if someone removes limitations without impacting the core functionality, sure!

But from my experience and the information I gathered from different sources it seems to me that it can't be achieved in such a way, therefore I think micro-payments will be handled by bitcoin banks, not by the block chain. And from my experience, this position seems to be a consensus amongst the bitcoin community.

In its current capacity and form, I don't think Bitcoin can be used for micro-payments in the manner as being suggested here. I am quite certain that the current restriction on payments less than 0.01 BTC is going to be relaxed... indeed I would make a call for that to happen now simply because when parity hits for 1 BTC == 1 USD that fractions less than 0.001 BTC are going to be necessary simply to function with the Bitcoin economy. I also think that within the standard Bitcoin client there ought to be a way to "adjust" fees and set up rules for how you (or I) would accept transaction fees based on a number of criteria. For the most part, barring some huge crushing load on the Bitcoin network, I would like to hope that a cent would be allowed to be transferred without fees or certainly for marginal fees somewhat less than a cent. It is something I think most miners would be willing to incorporate into their fee structure too.

This is built into the network protocol, but the current standard implementation doesn't permit the inclusion of these smaller transactions and certainly doesn't account for the deflation of the currency as is happening right now. That is a big deal that does need to be addressed.

The current "standard" restriction of charging 0.01 BTC for transactions less than 0.01 BTC is something that ought to change, but that still doesn't deal with very small micropayments that are less than the rough equivalent in 2000 inflation-adjusted U.S. Dollars of less than $0.01 USD equivalent in bitcoins. I think that is the main thing being suggested here on this thread and that is to me indeed something that ought to be included, but it would require a slightly different protocol than currently exists for Bitcoins. Regardless, I see the day that Bitcoin might be used routinely in such a way that miners are going to be expecting fees on the order of what is now about 50 cents or maybe even a buck in terms of the current value of FRNs and it is still useful to think of how to accomplish microtransactions using Bitcoins, because it has value in and of itself.

Two approaches that I can think of basically involve either a peer-to-peer system or a central server for interchange of micropayments. Both approaches essentially follow this basic principle:

Micropayments are "authorized" for a certain Bitcoin address and transmitted to an accounting system of some sort. When somebody "owes" past a given threshold (as established through some sort of protocol... either an agreement of sorts or perhaps the threshold is set by the person receiving the micropayments), their "account" will have to be settled by transmitting Bitcoins in presumably a large enough quantity that transaction fees won't eat up the cost of transmitting the payment.

The idea here too is that those who go past the threshold are simply kicked from the micropayment system, so there is an incentive to settle up accounts. This threshold, if it is kept low enough and depending on what is being offered for the micropayments, isn't going to be the end of the world if somebody simply refuses to pay up. Many on-line services usually have a trial period trying to encourage people to sign up, so you can say that this payment threshold is simply the freebies that you would give away anyway to entice people into using the service in the first place.

In terms of a central server system, the largest problem there is that you give up anonymity as the server at least knows your IP address (discounting proxies and other by-passes.... those can still be traced BTW) and other ways to trace who you are can be done with such a system. In a peer to peer system, anonymity can be stronger but it would also be easier to "cheat the system".

As a way to keep hardcore "cheaters" from gaming the system, you can even have "tiered" services where you must maintain at least some sort of account, where those who routinely settle up accounts can have access to a broader range of services. It doesn't stop somebody from ripping off a whole bunch of people, but you have an investment into your account by doing so and keeping those who would generate random new accounts by the thousands from being able to leech off of the system. In order to get "the good stuff" you need to show at least some resemblance of a history of making payments... a "credit history" as it were and a "credit score" that shows that you can be trusted within the network. A new account would obviously lack such a history.

This is something that I think is important to work on, but it would be outside of the scope of the main Bitcoin protocol except for settling up accounts and acknowledging payment. Payment to a given Bitcoin address certainly can be verified.