The developers of Bitcoin reportedly plan togive the virtual currency an upgrade to make payments more merchant friendly.Through the Payment Request initiative, Bitcoin would provide a mechanism forsending verified payments between individuals and merchants that includes anextra layer of security. The developers aren’t saying specifically when thechanges might occur.
With Payment Request , instead sending paymentsto a bitcoin address, someone paying in bitcoins waits for an emailed requestfrom the merchant, or one supplied from a website. The customer’s bitcoinclient uses the information contained in the request to make a payment, thusimproving the security of the payment process.
In the traditional bitcoinpayment system, bitcoins are sent by manually pasting a long, gibberishalphanumeric address into a bitcoin client. Some clients allow for QR codes ofaddresses to be scanned.
“It’s great technically but itlooks like a monkey banging on a keyboard to the average person,” says coredeveloper Jeff Garzik. Aside from being difficult for the average non-techie tounderstand or use, the gobbledygook address format makes a number of attackspossible. “For example you don’t know whether the bitcoin address I gave you isreally mine,” he points out.
There is a danger that theaddress is either inaccurate, or simply fraudulent. I could pretend to be aknown legitimate merchant online, or perhaps send a phishing attack asking youfor money. If you fell for the scam and paid me, your money would be gone.After all, bitcoin payments are irreversible.
The other problem with existingbitcoin payments is while they are permanently registered in the blockchain,they’re not easy to document when they’re happening. There is no metadataencoded in the payment information itself that says what it’s for. Neither isthere any information about a return address for refund purposes. Any refundshave to be arranged separately. And if you want to confirm immediately thatyour bitcoin payment reached its recipient, then you have to get separateconfirmation from them.
Mercator Advisory Group (Jeff Green) take:
Payment Request uses digitalcertificates to improve security just as websites do to prove they are ownedand operated by the actual owners of a business, and that should help improvethe security of bitcoin payments between individuals and businesses. But as useof bitcoins increasingly shares many of the same mechanisms used withtraditional electronic-payment methods, the virtual currency loses some of itsluster as a true alternative currency. Moreover, there’s still no reason tobelieve bitcoins will become a mainstream currency, especially as the paymentprocedure moves to increasingly mirror what already is an effective process.And Payment Request still appears to make bitcoin use a more cumbersome processthan just using traditional payment cards to settle purchases.
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