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Simplifying Bitcoin

Sending Bitcoins should be as easy as sending an e-mail. And making a online payment should not take more effort than clicking a link.

Re-thinking Bitcoin

Although the Bitcoin network has been running successfully for over a decade, it is still not being used by the big masses for their daily usage. There are several reasons for this hold back; lack of appropriate apps and tools, the complexity of usage, no incentives to use it, and technical limitation in block-chain technology.

There is also a lack of debate in the public space about how the usage of Bitcoin should be like. Well, are some ideas:

  • Sending Bitcoins to another person should be as simple as sending an e-mail. The receiver should be addressable using a universal human-readable address.
  • There should be no requirement for a receiver to already have a Bitcoin wallet address, or for the receiver to have an existing account at the same service as the sender has.
  • It should be possible to send Bitcoins to completely new users, and the system and the infrastructure will give them an opportunity to use it or store it for later usage.
  • When making an online Bitcoin payment at a web page, this should be like clicking a payment link, and a Payment App running in the background will take care of the details.
  • When making a Bitcoin paying in the real-world, this should be doable by near-field wireless communication, by holding your cell phone close to the payment device. An App in the cell phone asks you to confirm the price and then takes care of the details.
  • Bitcoin payments must support instant micro-payments with very low fees.
  • It should also be easy for merchants and webshops to start accepting Bitcoin as payments. This should be like downloading some tools or web page libraries, followed by a smooth setup. No specialized knowledge should be needed.

In other words, Bitcoin needs to be far more user-friendly then what it is today.

A second-layer payment system

Bitcoin has some hard limitations, which makes it unsuitable for daily payment usage in itself. The maximum size of a block in the blockchain sets a limit on around 500.000 transactions per day. The time it takes to confirm a transaction, which could be everything from a few minutes to an hour, makes another barrier for making instant payments. Compared to MasterCard and VISA, which process millions of daily transactions, Bitcoin is facing tough competition. These inherent limitations can not be overcome in the system itself.

What is needed is a second-layer payment system, which can record payment transactions outside of the blockchain. This is the only way of increasing the transaction capacity and provide instant payment, without altering the Bitcoin protocols, which has turned impossible due to incentives in maintaining the current system scheme.

The Bitcoin Cheque payment system is based on trusted third-parties providing custodian accounts and payment services. It supports standardized and user-friendly money transfer for those not familiar with Bitcoin, and features like instant payments, clickable payment links, and micropayments, which can easily be embedded into any webpages.

There is an ongoing work for developing other second-layers systems like the Lightning Network. There is also a lot of talk about using alternative crypto-currencies for daily usage. Supporting the Bitcoin Cheque concept is not to say that there is no other way of doing payments. Probably all these payment solutions will coexist and have their own strengths, weaknesses, and purposes.

How to succeed

For a Bitcoin second-layer payment system to succeed, it not only must overcome the technical limitation of Bitcoin, but must offer attractive solutions for the users, incentives to start using it, be easy to implement, and adaptable for the future needs.

The system should have some features that enable new ways of doing business or enable new types of services, that are not possible or practical today. This can include new business concepts, reducing the cost of existing types of services, or creating useless megatrends like the Tamagotchi of the past. By being the enabler of the future invention, this creates a need to using the payment system in itself.

Also, it needs to be easy for merchants and web sites to start accepting Bitcoin Cheques as payments. Receiving payments should be possible and easy for any commonly used webshops and other sites running CMS like WordPress and Drupal. This should be like installing a plugin/module, and a simple and intuitive setup. There should be no need for specialized knowledge.

Lastly, the payment system should be based on open standards and protocols, so everybody can participate and make a business out of it. When more people are using the same system, it tends to create a network effect that increases the value and the benefit of the system. To keep it robust, the payment system should not have a single point of failure, so no failing entity can crash it.