Topic: Get ready for a sharp rise in Bitcoin use (Read 3928 times)

I had a buyer in Brazil who reported an "item not received" (I know this is Paypal/Ebay not CC payment but this is an example), they reported it 2 days after the item shipped without contacting me beforehand.  There is no possible way it could have arrived in that amount of time, but still Paypal froze the funds in my account.  Now I had tracking so Paypal said as soon as the item shows in tracking as arrived they would release the funds...one problem Brazil never shows item as arrived...ever.  I tried communicating with the customer and he was unwilling and said if the item arrived he would remove his dispute.  Luckily for me he actually did...but then he bought another of the same item from my store...I talked with ebay/paypal about my options and ended up contacting the customer and explaining that due to our previous transaction and the inability to protect myself (even with a customs tracking form and tracking) I had to refuse to sell the item to him.


That problem would never have existed if I had been using Bitcoin.

People are scammers, in a perfect world you could communicate and solve disputes but this is not a perfect world.  There are people who do these thing specifically to cause problems. 

Also, exactly how much of a loss is "any good business" supposed to be able to cover.  If your business sells high value items you could very easily lose a large portion of your total revenue in one chargeback...and if you are  a small business trying to gain a foothold it could destroy your entire business over one scammer. 

In internet sales there has to be a mutual trust...chargebacks have their place but it has become increasingly more common for scammers to use them as a tool.  I would love to believe the customer is always right but after having dealt with people telling me items that are new in package "were used" and items in the hands of USPS "never arrived" I have become fearful of the risk. 

I preferred ebay when it was "buyer beware"...now its "seller beware".

I have a new method of dealing with Craigslist scammers too...when they message you with the standard scam message tell them "fine as long as they pay in BTC".

Nice imagining man! That's a good idea.   

Chargebacks are 90% "friendly fraud".  Buyers get stuff delivered to their home in their name and claim to the banks they didn't make the purchase.  Despite all the seller proof, the bank still sides with the criminal cardholder (my experience as a merchant).  Or other types of "friendly fraud" like the post office not doing their job scanning zip codes, or buyers forcing a refund for "not as described" and returning and empty box with tracking numbers.

The other 10% is when a merchant is stupid enough to think scamming people with credit card payments is a good idea.

Or it could be 99% and 1%.  I'm not sure, but it's mostly "friendly fraud".

I offer 10% discount for using Bitcoin, partly to get people interested in it and partly because of the benefits of Bitcoin over credit cards.

The shop has offered 5% off for cash since we opened. Accepting credit cards adds quite a bit to the overhead. The less they are used the better.

Chargebacks is the way banks and credit cards are babysitting stupid customers who cannot choose good reputation sellers, or screwing sellers with fraudulent transactions.

Crazy fees and higher prices are the costs for such babysitting.



   

chargebacks are too much in favour of buyers these days and a lot of people cash in on them, it means for example, that prices on ebay are much higher then they need to be to cover them, and its also a simple way for people to get free access for a few days to porn sites

Chargebacks are a contract between the buyer and seller - If I don;t want to sell to you becasue you have no reputation I shouldn;t have to. But if you have a proven track record and belong to the 99.9% of people who have better things to do with their lives than scam,  and just want to buy something, then I would be willing to let you claim a chargeback if I didn't deliver on my promise. That's what any decent merchant should do - and you would be much more confident to buy from me if I did that. I just want to make the sale, and 99% of the time it will go through smoothly. And if it doean't I will solve your problem without you even having to think about chargebacks.

Yes, but a good merchant doesn't let it get to the chargeback stage - they communicate with their customers and solve their problems. Any good  business has already calculated the cost of problems happening and is ready to deal with it.

Chargebacks are never voluntary between both parties.  The merchant gets a huge chargeback fee and then are at risk of losing their merchant account for it.

I have never had a charge back like that.  I have only issued 3 in recent history: one through my CC company and two through PayPal.  People bitch and moan about PayPal, but when push came to shove PayPal delivered me my money back from a fraudulent seller.


In my charge backs one party issued all sorts of excuses as to why they couldn't return my money.  Visa cut through the BS.  The two charge backs through PayPal were for fraudulent eBay sellers who suddenly went silent.  Not a peep from them.  Communication problem?  Probably not.  They took the money and ran.


If you have the option for rejecting charge backs then why have charge backs in the first place?  The merchant is always going to reject them.  Why would they approve the customer getting their money back through forced action from the credit card company?  The only thing a merchant should do is present evidence that the goods or services were delivered and then leave it up to the CC company's judgment.  A far from perfect system to be sure, but it usually works.  Merchants are never happy when a charge back arrives for whatever reason, but that's the cost of business.  Bitcoins are asking the customer to carry the risk of fraud.


PayPal managed to return my money after a hacker took over someone's eBay account and sold items they never delivered.  No central authority means the buyer is out of luck with bitcoins.  It's the price one pays for freedom from banks.

Paying with bitcoins like this is like paying with cash except if someone steals your cell phone, it should have enough password protection both in the phone's app and in the service the app connects to so you can basically carry tons of cash but can't be robbed.

Oh and chargebacks are mainly used for "friendly fraud".

Excellent points dancupid. I am perfectly fine with taking a risk and buying online with Bitcoins if there is a way to verify that the merchant has good reputation. This is why I suggested that we should have community sites where people review Bitcoin merchants. Are there any? I think this is very important.

There is no problem with chargebacks if they are a voluntary agreement between both sides of the transaction.
I sell on eBay and have to accept chargebacks even if someone buys with zero positive feedback and has no history. Any good seller of anything will always put the customer first. If you are selling something cheap and it gets lost in the post you take the buyers word for it. If it's expensive, you take out insurance and adjust your prices appropriately.
Charge-backs only occur when one party doesn't know how to communicate properly, or is scamming the system.
I'd be happy to accept chargebacks to give a normal buyer (not a cheat) the confidence to buy in the first place. But I'd like the option of rejecting their purchase if they are suspicious. Both parties need to have good reputation. If you have no reputation and want to buy from someone with good reputation, then it should be the buyer who takes the risk, not the seller.

Edit - hacked accounts are another issue - but with bitcoin, there is no such problem as their is no central authority who can prove it. It's the responsibility of the bitcoin owner to protect their money.

Soon you will be able to export transactions offline. Imagine a computer 100% isolated from the network with a massive store of bitcoins. It can generate a transaction but instead of broadcasting to the network, it displays a QR code that a user can scan in and broadcast as proxy.

This is similar to the physical coins being sold right now. Except that we have a potentially physical transaction rather than a physical private key.


Now that bitcoin client 0.4 has encrypted wallets, a rudimentary system that anyone could do today would be to generate a wallet with one key encrypted with a simple password. This encrypted wallet, printed as a QR code then becomes the bitcoin equivilent of a traveller's check. Signing the check is the act of writing or uttering the password to the recipient who can then immediately transfer funds to another wallet.

It was a fair question! Vuce, whenever a node receives a broadcast transaction, it will always check if the transaction makes any sense. No client will accept newly generated coins until after many many confirmations. A malicious node can not pretend to send coins that the block chain knows the node never had (all transactions are public knowledge, so you can only send a fraction of coins from an address that is know to have previously received coins).

The only 'counterfeit' attack vector is a double spend. Typically this is discussed as a powerful node overtaking the block chain. But in the case of 0/unconfirmed, a malicious node need only send two transactions to different recipients with the same coins from the same address. Until the network verifies one of them, it is reasonable (I believe) that the double spender might get away with it. The worst that can happen is that the recipient client rejects the transaction. The user would not even be informed (in the current client). The sucker would just continue waiting for the 0/unconfirmed transaction on the network.

If a couple walk into a bar, simultaneously order and pay for two separate drinks, they might get away with a 0/unconfirmed double spends half of the time. So, this Bonnie and Clyde might save 25% on their evil evening pub crawl. I can't imagine it getting worse than that.

Green addresses (if we trust the third party) make this scenario impossible.

+1

This is a very good point. The chargeback issue is complex and there are many ways one can look at it. Is the added benefit for merchants worth the problems it might potentially cause for customers? I used to think the no chargebacks is good but I've started to see this as a potentially big issue, especially when Bitcoin is not even protected by consumer law.

I guess there are ways to bypass this issue, but it would require a 3rd party to handle the payments in some way, right? For now the best way to protect against this is to build good community sites where merchants are reviewed and scored. And make sure everyone knows about these sites. That way people can use the community to know what's reliable and what isn't.

If we build a community that really works, it's a disaster for any merchant to fuck people up, because no one will actually buy anything from them anymore. Bitcoin being a compact, niche community, at least for now, I can see this actually working pretty well.

I was thinking about bitcoin and the issue of charge backs today.  Merchants would love a system where customers cannot issue a charge back after receiving the goods.  But from my point of view, as the customer, I like having the ability to get my money back.  Recently I dealt with a solar panel installer that refused to play ball after a deposit was placed via CC.  I and other customers of this company have successfully retrieved our money even after the company refused.  That would not be possible with bitcoins. 

Now one could argue that ordinary consumer law still protects me.  But this consumer law is slow and difficult.  Requires working through the courts and is costly.  It's much easier to fire off a letter to Visa and let them do the work for free on my behalf.

This is a good point. Again, it's not something that will make Bitcoin the next Internet but it's one of the reasons these type of systems will at least solidify Bitcoins position as a niche currency.

I don't quite agree with this. The thing is, Bitcoin commerce is not under any consumer protection laws in Finland. We have pretty good consumer protection if you buy with any VISA card, basically you don't have to worry about merchant scams if you order online. Buying with Bitcoins is a bit of a gamble from this perspective and requires significant trust.

As for physical locations such as bars, restaurants, barbershops etc, one doesn't really have to worry about consumer protection. You get what you pay for, right away. With online orders you might not get anything at all, and with Bitcoins you don't get protection of any sort.

But this is the nature of a free market type system that Bitcoin is, which is why it's especially important to have more sites where people review and score Bitcoin merchants. We definitely need those sites. I wouldn't order anything from an online Bitcoin store unless it's guaranteed by many people to be reliable.

People rarely use cash anymore in Finland, most people use Visa Electron cards. I pay with Electron most of the time as well, and I see some benefits from using this type of system. One has to remember that implementing this doesn't actually require for the merchant to have a phone, QR codes can be printed on receipts and it could also be an LCD screen at the register.

There are many reasons why I would use this payment method instead of the Electron card, 1) It's more reliable, I've suffered multiple malfunctions of Electron systems 2) I wouldn't need a wallet with me, which is convenient 3) It's more anonymous 4) I'd like to use Bitcoins because I support them as a currency, over any fiat-currency.

Now, to say this will be enough for a widespread usage of Bitcoins at physical locations is a bit far-fetched, I know, but thing is, people are in general expecting Bitcoin to become the next Internet or something like that. If that were to really happen, we would see one Bitcoin valued at 3 digits, and very high up on that scale. Maybe even at 4 digits.

These type of systems, even if they do not become really widespread, could increase the size of the real economy of Bitcoins significantly, and the price could very well be stable at high double digits. I see this all the time that people somehow assume Bitcoin needs to take over the world, and if it doesn't, it fails. That is silly thinking. Bitcoin can succeed very well as a niche currency and have a strong base, even if it isn't the most widespread currency ever.

Of course I'd hope for Bitcoin to succeed in a massive way, and it certainly could, but one step at a time. One step at a time.