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Bitcoin online payment system


Updated on April 9, 2014 by erdemg
Views: 10573 | Clicks: 198

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General Information

Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out  collectively by the network . Bitcoin is also the name of the open source software which enables the use of this currency.   What are the benefits for Merchants? Bitcoins have great properties for consumer transactions. Low fees mean you can pass the savings on and get a price advantage over other merchants. There are no chargebacks in Bitcoin , any confirmed transaction is protected by the full hashing power of the network. So businesses can accept bitcoins from any country in the world, with no risk of fraud or chargebacks . Point-of-Sale (POS) Transactions In retail stores, Bitcoins can be used side-by-side with local currency and credit cards. The merchant will need some type of point-of-sale software, which can calculate the exchange rate. They can generate an address to the shopper and monitor their account to see the payment has been received. Features to look for Here are some common questions that merchants should ask: Can I get a unique Bitcoin address for each transaction? How is the exchange rate calculated? How fast are payments approved? What is my exchange rate risk? How do I receive the funds? Are there any fees involved? How can I see a listing of my sales? Payment providers Merchant tools with USD exchange:  Bit-Pay ,  Paysius  and  BitSpend.EU Bitcoin-only merchant tools:  WalletBit  and  BitWillet . A full list of available shopping cart interfaces can be found at the  Wiki page .



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Different bitcoin clients and different versions have different rules for determining which transactions to accept and how large a fee to send.

Current default rules for the original Bitcoin client (Bitcoin 0.3.23):

  • minimum TX fee for new transactions reduced to 0.0005 BTC.

Original Bitcoin client version 0.3.20:

  • 0.01 BTC fee if sending any transaction less than 0.01 BTC. This is to help prevent DoS attacks against the network. Remember: fees are not network-enforced, so it's stillpossible to send these small transactions without the fee -- you just have to generate the blocks that contain them yourself (after modifying Bitcoin).
  • 0.01 BTC fee per kilobyte of transaction, but:
    • If the blocksize (size of all transactions currently waiting to be included in a block) is less than 27 kB, transactions are free.
    • If the blocksize is more than 250 kB, transactions get increasingly more expensive as the blocksize approaches the limit of 500 kB. Sending a transaction when the blocksize is 400 kB will cost 5 times the normal amount; sending when it's 499 kB will cost 500x, etc.
  • Transactions within each fee tier are prioritized based on several factors. Most importantly, a transaction has more priority if the coins it is using have a lot of confirmations. Someone spamming the network will almost certainly be re-using the same coins, which will lower the priority of their transactions. Priority is also increased for transactions with more BTC, and reduced for transactions with more data.
  • If the blocksize is over 4kB, free transactions in the above rules are only allowed if the transaction's priority is above a certain level.

Note that if you want to send a transaction with less than the default rules, or if you are a miner and want to include them in your blocks, you may need to peer with the Free transaction relay network.

An advantage for bitcoin users to include a transaction fee is that the likelihood of getting a transaction included into the next block is going to be higher than if a transaction fee is not included. This is a trade off of time vs. money put forward on the transaction fees, as you can be patient with a low or non-existent fee included in a transaction, or you can make sure that the transaction is processed immediately by including a higher fee than is typical.

Integration approaches

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