back to article Whaddaya mean, No refund? But I paid in Bitcoins! Oh I see...

Don’t tell anyone but I think I might have made an arse of myself again. It’s one thing to show oneself up among one’s peers but another to demonstrate publicly how thick I am front of people who are smarter, sharper, more successful and frankly a damn sight wealthier than me – a sector of society I generally refer to as "other …

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  1. Paolo 1
    Facepalm

    This isn't hard

    Treating bitcoin as a foreign currency is *exactly* how it should work. You pay 0.01BTC and then get refunded 0.01BTC.

    Just because the BTC exchange rate is massively volatile right now doesn't mean the retailer/credit card/bank should worry about *your* FX exposure, in the same way they don't worry about it now for more regular currencies.

    1. nichomach

      Re: This isn't hard

      And the words "massively volatile" are why I'll happily avoid using it as a currency as long as I have a choice not to.

    2. Anonymous Coward
      Anonymous Coward

      Re: This isn't hard

      You pay 0.01BTC and then get refunded 0.01BTC.

      Nope. You'll pay and get refunded the BitCoin amount comparable to the conventional domestic currency value of the item *at the time you pay or receive a refund*. So the two amounts will fluctuate, just as it would if paying or being refunded in a conventional foreign currency. Why on earth would the retailer want to end up essentially running an FX trading operation without any control (which is what the system you're suggesting would basically be)?

  2. stucs201

    re: Treating bitcoin as a foreign currency is *exactly* how it should work.

    Which most of the time is 'go away and come back with some proper money'. Leave the handling of weird non-native currencies (whether they be paper notes and coins or binary digits) to banks and currency exchanges - let shops get on with actually selling stuff.

  3. I ain't Spartacus Gold badge

    “Whaaaaat?” I heard someone shout in a rough impersonation of Brian Blessed in Flash Gordon. It was me.

    Trying to avoid doing this in meetings is a vital business skill. Not doing so is a great way of losing contracts and/or getting sacked.

    I can still remember my failure in this area. I went to Tate Modern with a friend. Let's ignore the press stereotypes of modern art, and actually go and see some. It can't all be pickled sharks and unmade beds surely?

    So I've wandered around a few galleries. And decided modern art isn't for me. Particularly the conceptual stuff. And as I'm looking at another lot of expensive rubbish I realised that I wasn't the only one wondering about the emperor's lack of clothing. "This is all complete and utter bollocks", said someone in a loud voice. I looked around, but couldn't see who. Then I realised that it was me...

    I quickly repaired to Tate Modern's nice cafe. A chastened, lonely figure in search of a reviving cuppa.

    1. Anonymous Coward
      Anonymous Coward

      "This is all complete and utter bollocks", said someone in a loud voice. I looked around, but couldn't see who. Then I realised that it was me...

      Did exactly the same, although in my case the spontaneous outburst got me a slap round the head from the wife. The final straw was some bollocks involving a room that had nothing in it and into which the sound of wind was being piped (although it actually sounded like unfiltered white noise to me). What pushed me right over the edge was the pretentious description by the "artist".

      1. I ain't Spartacus Gold badge

        By this point, I was alone - without anyone to issue the punishment beating. My friend had probably seen the explosion coming, and wisely abandoned me to my fate. Although his reaction must have been similar (though far more polite than mine), because he turned up in the coffee shop about 5 minutes after me. Equally unimpressed.

        I've come to the conculsion that the pretentious description by the 'artist' is the actual art. It's not pickling the sheep that's the important bit. It's the persuading other people to accept it as art, and give you large sums of money.

        1. Anonymous Coward
          Anonymous Coward

          I've come to the conculsion that the pretentious description by the 'artist' is the actual art. It's not pickling the sheep that's the important bit. It's the persuading other people to accept it as art, and give you large sums of money.

          Sounds like corporate rebranding. Complete with a toe curling mission statement.

    2. Michael Wojcik Silver badge

      I went to Tate Modern with a friend.... So I've wandered around a few galleries. And decided modern art isn't for me.

      That's rather like reading a few stories out of one of the Faber house collections and deciding modern literature isn't for you. It's just possible that the vast array of art produced during the modern era isn't completely represented by a few galleries of the Tate.

      Perhaps modern art isn't for you. It wasn't for the Pre-Raphaelites, despite the fact that they were arguably creating some of it. And no doubt there are folks out there who deeply appreciate, say, the Lowlands landscape painters but don't care for anything more recent. Hell, I knew a guy who found everything written after Chaucer disappointing. I'm just saying the Tate - or any other museum - isn't really representative of the whole contemporary avant-garde, much less the tremendous range of modern art.

  4. Ossi

    Bitcoin - the new Second Life

    Just like Second Life, there's a lot of noise about it, businesses will get terribly excited, it'll make money for some people...and then it'll more or less go away because in all the excitement everyone seems to have forgotten the Normal Human Being.

    Here's one paragraph from the Wiki:

    "Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain."

    Now explain that to your granny. And then explain why she needs it. We've already got money, which we call 'money'.

    1. Jonathan 29

      Re: Bitcoin - the new Second Life

      There are things that we can do with digital crypto money that we cannot do with traditional payment methods. We can monetise comments on a forum or allow individuals to tip a video or a picture on a website. We can open up a whole layer of nano payments below £1 that would be uneconomic to do in any other way. Whether internet tipping becomes popular remains to be seen, but it is a unique selling point.

      1. Anonymous Coward
        Anonymous Coward

        Re: Bitcoin - the new Second Life

        We can open up a whole layer of nano payments below £1 that would be uneconomic to do in any other way.

        That's already been tried - anyone remember Beenz?

      2. I ain't Spartacus Gold badge

        Re: Bitcoin - the new Second Life

        Jonathan 29,

        You don't need Bitcoin in order to have micro-payments.

        It may not even be possible to have micropayments. Maintaining a global payment infrastructure is not free. And is unlikely to become so in the near future.

        Remember that anyone who says Bitcoin has no transaction costs doesn't understand Bitcoin. Firstly you need to buy the things. Exchanges and credit cards take their cut. Secondly the value fluctuates so wildly that you can lose 10% holding a Bitcoin for just an hour. Thirdly, the miners get paid in BTC. That's a huge transaction cost. The whole Bitcoin economy is giving money to the miners in order to maintain the blockchain.

        What I don't understand is how this'll work after all Bitcoins have been mined. No-one will keep updating the blockchain for free. So presumably there will have to be costs as a reward to process each transaction, or Bitcoin will collapse.

        1. Jonathan 29

          Re: Bitcoin - the new Second Life

          Beenz and every other digital currency pre-bitcoin used a central infrastructure to manage it. Bitcoin-like currencies do not need a 3rd party, do not need central servers, employees, HR, customer service reps or anything else that inflates the cost of the transaction. It is pure peer to peer and you absolutely can maintain an entire global transaction payment system on very low end hardware. Innovative solutions to a 51% attack are being worked on.

          Bitcoin and all crypto has an acquisition problem in that you currently need to use exchanges or invest in mining hardware in order to acquire coins. My hope is that as this technology progresses you will be able to acquire coins as you would acquire traditional money - by exchanging goods and services for them. The crypto Ebays and Craigslists are all a little primitive at the moment, but it seems like these would be a good entrance route for many.

          1. I ain't Spartacus Gold badge

            Re: Bitcoin - the new Second Life

            Jonathan 29,

            Bitcoin-like currencies do not need a 3rd party, do not need central servers, employees, HR, customer service reps or anything else that inflates the cost of the transaction. It is pure peer to peer and you absolutely can maintain an entire global transaction payment system on very low end hardware.

            Your post makes no sense. Bitcoin transactions do need a third party. In fact several third parties. The miners who create the blockchain. Without the blockchain Bitcoin transactions don't happen. You can't do mining on low-end hardware. Even graphics processors aren't enough now, and they're onto custom designed chips with no other use.

            This works until all the Bitcoins have been mined. At which point the miners will stop. And then there will be no further Bitcoin transactions. Well I assume that isn't true. I've read that there's a plan to carry on - I just don't know what it is. I assuming it's that every Bitcoin transaction will have to be paid for. The miners will get a small percentage of each transaction as their reward for maintaining the blockchain. At which point it will be just like using a credit card, or PayPal.

            1. Jonathan 29

              Re: Bitcoin - the new Second Life

              I ain't Spartacus

              I am interested in all crypto not just bitcoin. New coins are experimenting with ways to limit expensive mining operations. Hull City council for example are experimenting with a new Crypto that will be centrally mined and distributed for community work. They will be doing all the mining on a couple of gaming machines. Other coins are experimenting with different algorithms or community funded mining operations which may run at a loss. Even in bitcoin the miners are essentially a utility rather than a 3rd party. I don't think any coin has found the right balance yet, but give it time.

            2. d3rrial

              Re: Bitcoin - the new Second Life

              @I ain't Spartacus

              The plan is simple and it's already being carried out...

              With every Bitcoin transaction you make you have to attach a fee if your transaction is larger than a specific size (I don't know it from the top of my head, but I think it was 1 KiloByte). The minimum fee you have to attach to your transaction for the network to relay your transaction is 0.00001 Bitcoin which is currently around 0.005USD. This number is expected to be lowered further in the future. The current system lets the miners prioritize transactions by their fees. Miners compete for high priority transactions (those with the highest fees) because that means they get to keep these fees themselves, which means that miners will consider transactions with higher fees more important than transactions with lower fees. That's why a small part of a block is reserved for high priority transactions and a bigger part is reserved for lower priority transactions. Some miners (like Eligius for example) allow you to create fee-less transactions and invalid transactions and will still include them in the blockchain if you are directly connected to their node.

              When no new coins are created anymore, the idea is that the transaction fees will cover the miners expenses, currently this is not the case, as the daily transaction volume is still very low, so for this to work Bitcoin has to be accepted more widely.

              1. I ain't Spartacus Gold badge
                Thumb Up

                Re: Bitcoin - the new Second Life

                d3rrial,

                Thanks for that explanation. I knew there was a way to prioritise, so you could get high-value trades confirmed more quickly - so people couldn't run off with your stuff before the transaction was confirmed. I just hadn't got round to reading about how.

    2. Mark .

      Re: Bitcoin - the new Second Life

      Try explaining public key encryption to your grandmother (or grandfather). I guess that means no one will ever buy anything on the Internet?

  5. Vizique

    Sadly I couldn't make that gig as it sounds like a lot of fun and good people to meet. On the subject of Terminals though,I will be bringing the Coinkite Terminals to Cambridge this year ...keep watching El Reg....

  6. Scott Broukell

    Excellent article, as ever, but those 'shops' and 'retail outlets' you speak of are actually 'Fulfillment Centers', don'tcha know.

  7. Anonymous Coward
    Anonymous Coward

    I'm impressed that this article recognises a legitimate use of Bitcoins - for purchasing - rather than just as a get rich quick scheme.

  8. Paul Smith

    Pissed again?

    So you were not only technically, intellectually and sartorially outclassed at this networking event, you got pissed as well. I have to assume that you hadn't sobered up when you wrote this excuse for an article.

    Let me try to explain it as I would to a five year old.

    The old fashioned pound sterling used to be a pound of sterling but people who were rich enough to own one were too posh to carry them, 'cause they were bloody heavy at almost half a kilo each. After a while, they came up with the idea of a paper version which was simply an IOU to say that you would be given the actual pound if you asked for it, but in the meantime, they would keep it in a safe place for you. It was just as good for paying for things and was easier to carry around so it became popular. Of course there were a few problems when people asked for their actual pound back, but nothing a standing army couldn't handle.

    Crypto is just a little word for big mathamatics so a crypto currency is one based on a pound of crypto. Instead of carrying around big computers to do the maths on the spot, you just carry the token that shows you (or someone else) did the math.

    Your confusion regarding refunds seems to be, how can I put this politely, fucked up?

    If you order a £5 cup of fresh sewage and get raw sewage instead, you ask for a refund and get your £5 back. You don't get exactly the same £5 back, the one your granny wrote 'happy 1st communion' on. You get 'a' £5 note, or perhaps 5 pound coins, or any other combination of monetary tokens that add up to a fiver. What doesn't happen is that people to not pretend the transaction never happend. The transation of them giving you a cup of sewage in return for your fiver was recorded on a journal and written to a ledger and sealed when the cash drawer closed. If another transaction is needed, to cancel the sewage and refund the fiver, it also has to be recorded in the journal and written to the ledger. It doesn't matter if the fiver was a promise for a pound of silver or a token for 600 Flops.

    1. Richard Jukes

      Re: Pissed again?

      True and I fully agree with you.

      However what I think the point that the OP is trying to make is that the refund will need to go through and that the customer will have to pick up the cost of any fluctuation in the conversion rate.

      Then there is the further problem of monetary controls, inflation is a very handy tool in a governments tool box. Bitcoins do not do inflation, once the last bitcoin is mined then there will never be any more.

      In my eyes it is all a very well thought out and well hyped scam, and having no infrastructure in place to process the bitcoin chain once the coins are mined somewhat proves this.

    2. I ain't Spartacus Gold badge
      Facepalm

      Re: Pissed again?

      Paul Smith,

      Whooooosh!

      Congratulations, for doubly missing the point. Firstly, Dabbs articles are not meant to be taken too seriously. They're usually humorous rants. Although he does tend to pick deserving targets.

      Secondly, the bit on refunds is entirely justified. In the real world, people don't deal entirely with bitcoins. Neither retailers, nor consumers. Therefore one party in the transaction has to bear the currency risk - I.e. Changing into and out of bitcoins. Why would the retailer wish to accept this risk? This presents a further problem when it comes to refunds, because of the massive volatility of bitcoin prices.

      Finally, the worst part, is that the speaker's answer to this difficult problem was to ignore it! Rather than deal with a difficult area, his answer was simply to ignore the law.

      1. Paul Smith

        Re: Pissed again?

        "The speakers answer"? Surely you mean the drunkards recollection of what he thinks someone else might have answered to a witty and clever question which the author cant quite recall in full detail at this time?

        Whoosh right back at you.

        There is absolutly nothing different about a refund in bitcoins from a refund in Pounds, Euro, Dollars, gold, pork bellies or any other unit of exchange. The one and only thing you can not do with bitcoins, which you can sometimes do with other currencies, is pretend that it never happened.

        Buy a gold ring or any other volitile commodity from your local pawn shop tomorrow, and take it back the next day for a 'refund'. Maybe you will get one, and maybe they will offer to but it back from you at its new price.

        1. I ain't Spartacus Gold badge

          Re: Pissed again?

          Now you're just being silly. The article isn't supposed to be a serious piece - and yet you're choosing to make childish points about, "the drunkards recollection of what he thinks someone else might have answered" - even though this has been pointed out to you. Perhaps you made a mistake originally, and came to a piece thinking it was serious? Or perhaps you're just desperate to defend Bitcoin?

          As for the argument about refunds, it's perfectly valid. BItcoin has many problems. And one of the biggest is transaction costs and exchange rate risk. Bitcoin transactions may be 'free', in the sense that nobody pays as money is printed to pay the transaction processors, but getting money into and out of BTC definitely does cost. And while almost nobody is paid in Bitcoins, the only realistic way to get them is to buy them, thus introducing currency risk into the equation. Risk in a currency that fluctuates wildly. Therefore in any transaction there's a serious risk that someone will lose 10% of their stake just for holding the Bitcoin for an hour too long.

          The Bitcoin price collapsed by 20% in a day last week - so transactions over long than a few minutes can become particularly tricky. This is much less of a problem when buying something volatile like gold, because gold is the thing you're buying. Whereas Bitcoin is supposed to be the medium of exchange. One of the main characteristics of a good medium of exchange is stability. Bitcoin doesn't manage this, and therefore isn't a good medium of exchange. Which is one of the reasons it's still a niche hobby, played with on the internet. And therefore a good reason that it's not suitable for deployment in consumer-facing retail, which is bound by quite onerous consumer protection legislation.

          1. d3rrial

            Re: Pissed again?

            I'm not a big fan of consumer protection myself. I live by this: Caveat Emptor. If I buy shit, it's my own fault, not the merchants. If I want something to be of quality, I will have to research the matter, this is not only educating but also helps making better decisions.

            The trick is not to see Bitcoin as an intermediary between fiat (€/$/£), but as its own currency. Currently the forex rate changes drastically because it's currently driven by speculation, not adoption. This will continue for another few months to years at least, but at some point the speculation will die down and adoption-driven valuation will take over.

    3. Alistair Dabbs

      Re: Pissed again?

      Thanks, Paul. I enjoyed that. It was great.

  9. IHateWearingATie

    still no reason for 99% of people in the UK to bother with bitcoin

    Why the chuff would I pay for anything except, ahem, questionable items with bitcoin. My credit cards and debit cards work perfectly well, with the benefit if someone tries to swindle me I can avail myself of the current legislation and get my bank or credit card company to pay me back. Like the vast majority of the population of the UK I hardly ever make international transactions, and the convienence of doing so using my existing cards far outweighs the transaction fee.

    The only current benefit of bitcoin I can see is not having my bank or credit card company having a record of my transactions - which I don't care about. At all. And if the public reaction to the Snowden revelations is anything to go by, nor does hardly anyone else.

    The currency fluctuation is HUGE, the hassle of setting up a wallet and exchanging some cash is not small and I can only see a benefit for a vanishingly small number of people. Tell me again why any retailer would pay for a machine to take bitcoins except for publicity purposes?

  10. PeterM42

    Mmmm - Bitcoins reminds me of SAP

    You know the SAP system which will "revolutionise your business". (by making it unworkable). Just ask nPower - they can't now issue bills!! For a company who don't do much more than issue bills and take your money, that is a bit of an embarrasment!

  11. John Lodge

    That was a cracking good article. I cannot for the life of me see the point of crypto currency - this is caveat emptor writ large.

    I don't think you're stupid by the way, just sort of normal.

  12. Count Zero

    Well, I don't know about you guys, but everything I've seen so far suggests that bit-coin is more like a commodity than a currency. That's certainly the impression I got watching all the shenanigans last year.

    An unregulated market, that produces nothing but more dosh until its all runs out... wait I minute. Would this market be shaped like a triangle?

  13. Anonymous Coward
    Anonymous Coward

    "It’s one thing to show oneself up among one’s peers but another to demonstrate publicly how thick I am front of people"

    Did you mean " in front of people" ????

  14. Black Road Dude

    10% Volatility a problem?

    I agree that a 10% change in the value of Bitcoin seems pretty large. This is mostly due to the fact its a reasonably new currency compared to any fiat version. I think we need to think about exactly what the benefits for the merchant might be in the refund scenario. Obviously this is relative to the cost of the transaction but for the coffee refund scenario a £2 cup of coffee paid for in bitcoin would cost less than a penny in fees where as if it was paid for via a credit/debit card it would cost the merchant (again this depends on the size of the retailer as the larger retailers can get better deals) anywhere in the region of 8p - 17p plus the monthly charges for renting the chip and pin machine and accessing the service. An additional charge would be a business bank account which has a monthly charge. Which is why lots of small retailers who sell relatively low value merchandise cant afford to offer digital payments at all and instead use cash. (which has its own costs such as collection by a security vehicle and again a business bank account.) So it is quite possible that 10-20% of the initial (non-bitcoin) transaction cost would be for the sole purpose of paying the banks for their service.

    So if I bought a £2 coffee with bitcoin the merchant would have potentially already gained 10% profits (by avoiding the bank transaction "TAX") so would/should be willing to take the refund risk.

    Also the (non-bitcoin) refund its self would have its own transaction fee doubling the already very high cost to the merchant.

    Ive seen paypal mentioned but their fees are just as bad if not even worse at 20p + 3.4% per transaction.

    This obviously does not cover every scenario as higher value purchases would have significantly lower transaction fees and therefore overall transaction fee percentages.

  15. Henry Wertz 1 Gold badge

    Refunds?

    I'm just not seeing the problem here -- I am a tad dubious that bitcoin transcations in brick and mortar stores will become popular, but in terms of refunds, wouldn't one just get the refund in (since you are in Britain) British pounds? Or perhaps a store credit?

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