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Credit card payment is a '2 phase' process. The second phase you are referring to as settlement - moving funds from the issuing bank to merchant's bank does tak

Credit card payment is a '2 phase' process. The second phase you are referring to as settlement - moving funds from the issuing bank to merchant's bank does take days. The first phase of the process - authorization, when successful not only makes sure the customer has enough credit on their account, it also reduces their buying power by the grand total of the auth thus guaranteeing the funds to the merchant. And it takes 2-4 seconds.

ryanlol 10y ago
Bitcoin works exactly the same, except settlement times are significantly shorter. You authorize (sign) a transaction, broadcast it and the network confirms it. Signing a transaction takes only a fractions of a second, and to the merchant it's a significantly stronger guarantee of settlement than a credit card authorization.
- ChemicalWarfare 10y ago
  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.
  - Natanael_L 10y ago
    Credit card chargeback fraud isn't that rare, and the merchants usually take the hit.
    - ChemicalWarfare 10y ago
      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.
  - ryanlol 10y ago
    >Credit Card authorization guarantees the funds to the merchant. It absolutely does not. Even if the customer isn't actively trying to screw you it's still possible for the hold to expire before settlement. >Signing a bitcoin transaction and broadcasting it to the blockchain does not. With a reasonable fee it's a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you. >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. 6 confirmations makes sense if you're selling a house, surely you wouldn't just rely on a cc auth if you were doing that.
    - ChemicalWarfare 10y ago
      Successful auth is the issuing bank telling the merchant - 'yes, the customer has the funds and the money is yours for the taking via the capture request against this auth.' Which is a GUARANTEE. Yes, as a means of customer protection it expires if the merchant did not request the capture within a certain timeframe which is at least 2 weeks, 4 weeks in most cases. For digital goods (and POS) this is a non-issue since the capture request is combined with the auth request. For physical goods - well if I'm a customer and the merchant hasn't shipped in 2+ weeks it's fair to me to get the hold removed from the funds my bank GUARANTEED to the merchant. 6 conf is a rule of thumb bitpay (and other bitcoin payment processors that I'm aware of) are following before GUARANTEEING the funds to the merchant. sure, if this is a P2P transaction and I was personally selling you $10 worth of merchandise I'd be ok with 1 conf, when talking 'industrial' scale payment acceptance things work just a little bit different. So now in this particular case - steam can revoke the license if the payment eventually fails which is precisely why I think this sort of market is perfect for BTC (I commented on this in this thread). And finally since you're claiming high tx fees are 'a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you' - how would you cheat the merchant after the auth (let alone auth/capture) went through?
      - ryanlol 10y ago
        >Successful auth is the issuing bank telling the merchant - 'yes, the customer has the funds and the money is yours for the taking via the capture request against this auth.' Which is a GUARANTEE. Yes, as a means of customer protection it expires if the merchant did not request the capture within a certain timeframe which is at least 2 weeks, 4 weeks in most cases. That's a pretty shitty guarantee when the bank can deny settlement anyways, and FWIW mine seem to expire in 5 days. >6 conf is a rule of thumb bitpay (and other bitcoin payment processors that I'm aware of) are following before GUARANTEEING the funds to the merchant. sure, if this is a P2P transaction and I was personally selling you $10 worth of merchandise I'd be ok with 1 conf, when talking 'industrial' scale payment acceptance things work just a little bit different. Unless you're talking about transactions worth tens of thousands of dollars it's simply not worth it for an attacker to even attempt such an attack (not that it'd be very likely work anyway). And last I checked bitpay is just fine with 1 conf transactions and will happily tank the risk for you. I'd assume the risk is quite small since I haven't ever heard of such an attack actually happening. >And finally since you're claiming high tx fees are 'a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you' - how would you cheat the merchant after the auth (let alone auth/capture) went through? I could just claim that the transaction was fraudulent. I could contact my bank and forward them a fake email from you claiming that the auth was an accident (done this before, although not with a fake email). Oh, and most shockingly... I could just use a stolen card!

ryanlol 10y ago

Bitcoin works exactly the same, except settlement times are significantly shorter. You authorize (sign) a transaction, broadcast it and the network confirms it. Signing a transaction takes only a fractions of a second, and to the merchant it's a significantly stronger guarantee of settlement than a credit card authorization.

ChemicalWarfare 10y ago
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.
- Natanael_L 10y ago
  Credit card chargeback fraud isn't that rare, and the merchants usually take the hit.
  - ChemicalWarfare 10y ago
    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.
- ryanlol 10y ago
  >Credit Card authorization guarantees the funds to the merchant. It absolutely does not. Even if the customer isn't actively trying to screw you it's still possible for the hold to expire before settlement. >Signing a bitcoin transaction and broadcasting it to the blockchain does not. With a reasonable fee it's a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you. >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. 6 confirmations makes sense if you're selling a house, surely you wouldn't just rely on a cc auth if you were doing that.
  - ChemicalWarfare 10y ago
    Successful auth is the issuing bank telling the merchant - 'yes, the customer has the funds and the money is yours for the taking via the capture request against this auth.' Which is a GUARANTEE. Yes, as a means of customer protection it expires if the merchant did not request the capture within a certain timeframe which is at least 2 weeks, 4 weeks in most cases. For digital goods (and POS) this is a non-issue since the capture request is combined with the auth request. For physical goods - well if I'm a customer and the merchant hasn't shipped in 2+ weeks it's fair to me to get the hold removed from the funds my bank GUARANTEED to the merchant. 6 conf is a rule of thumb bitpay (and other bitcoin payment processors that I'm aware of) are following before GUARANTEEING the funds to the merchant. sure, if this is a P2P transaction and I was personally selling you $10 worth of merchandise I'd be ok with 1 conf, when talking 'industrial' scale payment acceptance things work just a little bit different. So now in this particular case - steam can revoke the license if the payment eventually fails which is precisely why I think this sort of market is perfect for BTC (I commented on this in this thread). And finally since you're claiming high tx fees are 'a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you' - how would you cheat the merchant after the auth (let alone auth/capture) went through?
    - ryanlol 10y ago
      >Successful auth is the issuing bank telling the merchant - 'yes, the customer has the funds and the money is yours for the taking via the capture request against this auth.' Which is a GUARANTEE. Yes, as a means of customer protection it expires if the merchant did not request the capture within a certain timeframe which is at least 2 weeks, 4 weeks in most cases. That's a pretty shitty guarantee when the bank can deny settlement anyways, and FWIW mine seem to expire in 5 days. >6 conf is a rule of thumb bitpay (and other bitcoin payment processors that I'm aware of) are following before GUARANTEEING the funds to the merchant. sure, if this is a P2P transaction and I was personally selling you $10 worth of merchandise I'd be ok with 1 conf, when talking 'industrial' scale payment acceptance things work just a little bit different. Unless you're talking about transactions worth tens of thousands of dollars it's simply not worth it for an attacker to even attempt such an attack (not that it'd be very likely work anyway). And last I checked bitpay is just fine with 1 conf transactions and will happily tank the risk for you. I'd assume the risk is quite small since I haven't ever heard of such an attack actually happening. >And finally since you're claiming high tx fees are 'a far stronger guarantee of settlement than a cc authorization as it's way harder for the customer to reliably cheat you' - how would you cheat the merchant after the auth (let alone auth/capture) went through? I could just claim that the transaction was fraudulent. I could contact my bank and forward them a fake email from you claiming that the auth was an accident (done this before, although not with a fake email). Oh, and most shockingly... I could just use a stolen card!