Topic: p2p way to discourage fraud (Read 3188 times)

Not each time we can assume that the protocol works great. Even it can have some major drawbacks which would lead to incorrect transactions. I think that instead of automated protocols, manual protocols can help a lot in helping the transaction to happen.

Scammers can scam anyhow and anyway they want so it is really much hard to hide from them. Instead we can always look forward for our safety by using various means like escrow, etc. If we are aware and much intelligent, we can never allow anyone to scam us.

This is a great concept but it would actually take years to be implemented. The concept you tried to clear is much complex and difficult to act upon. Even some fraudsters can find some or the other way in scamming peoples by this way. We can actually not stop the scammers from scamming because there are already a plenty of them outside but just we can make ourselves secure by using proper trading means with good escrows. Bitcoins were originally not originated for the means you are talking about so these changes can perhaps never take place. Other P2P deals like dealing with direct person to person with a safe middleman etc can save our money.

Yes you can. In Halo the third party is an automated protocol - controlled equally by the peers involved. It can't be cheated because the peers involved know who's telling the truth. An it can't cheat because it's a program, not a corruptible living entity.

maybe people should review your code. seems you lack the attention to detail. so there might b issus you dont spot at first glance.
for instance your dredging up a 2011 topic.
secondly you mean its a smart contract. 
bcause escrow = 'An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties,'
you cant say something is an escrow and not an escrow at the same time.
anyway this topic if necro. so have a nice day. no need to revive it

BitHalo does this and has been running since 2014. It's two party escrow. Both parties put a deposit, if either one cheats the deal they lose their funds. No escrow agent and completely impossible to break the contracts and gain from it. BitBay implements this system I'm the dev of both. It was even used to sell real estate without escrow. Of course it spans beyond that to sales, employment, shipping, barter, etc, etc.

We need specific options for specific situations.

-no rep guy sells to no rep girl (contract trade)
A percentage up front by both parties (50/50)(Similar as Posted by: Meni Rosenfeld ).
Now both parties have incentive to gain and fear of losing something(eliminating the numbers game fraudster).
Potential Problems of buyer not being happy with goods may arise and the seller may be forced to take returns, "even with a no returns policy".
Every time we fix one problem it seems that another problem gets created.

-reputable merchant sells to no rep guy/girl (no contract)
We could use the current system in this case.

Right.

Yes, but only if Alice can be trusted not to give in to scams.

Alice can't get the Z back anyway, so compared to following through with the payment, it only costs her X.

iamzill, what do you think about Meni Rosenfeld's solution?

If the victim is isn't naive enough to send out bitcoins for free, there's still an alternative:

Fraudster: I have $100, I want to buy 6.66 bitcoins.

Victim: Okay, deal. I put the 6.66 bitcoins in escrow.

Fraudster: Damn, I can't buy them. So sorry. I don't need the coins because the guy I was going to trade them with sold the thing I was going to trade him for to his nephew for cash to buy drugs instead, plus my wife spent the money I was going to buy the bitcoins with on a new pair of shoes. And, not that this matters, but my cat has swine flu.

Victim: Umm, I already put the bitcoins in escrow. If I burn them, I'm out the coins!

Fraudster: Ok, new deal. I send you $50, you send me the coin. Take it or leave it. If you don't take this new deal then you earn $0. If you take it you earn $50. Your choice.

Am I getting this right?

1. Alice wants to buy a Widget from Bob.
2. Alice clicks "Create Deposit Box", enters Bob's receiving address and her initial deposit X BTC.
3. At any time, either party can click "Cancel" all deposits are returned.
4. Bob sees the deposit box in the block chain and adds his deposit of Y BTC.
5. Alice sees Bob's deposit in the box and adds the payment for the Widget (Z BTC).
6. At this point the button changes to "Send Payment" for Alice, and "Send Refund" for Bob.
7. Bob ships the Widget to Alice.

Fraudster Bob can cause Alice to lose X + Z BTC but it costs him Y BTC.
Fraudster Alice can cause Bob to lose Y BTC (plus value of the item shipped) but it costs her X + Z BTC.

How about this. There is a box in which there are two types of coins, "deposit" and "payment". Both parties have permission to open the box. When the box is opened, the deposits go to whoever put them, and the payment goes to the party other than the one who opened it.

So first the buyer and seller both put a small deposit in the box. This is safe since they can get it back. Then the buyer puts the entire sum of the payment in the box. Now:

1. If the seller sends the goods, the buyer will open the box and the seller will receive the funds. He is incentivized not to be lazy or spiteful because he wants his deposit back.
2. If the seller for any reason wants to back out of the deal, he can open the box and have the payment return to the buyer, and is incentivized to do so because he wants his deposit back.
3. If the seller goes with the "reimbursement" plot, the buyer knows he is scamming (since the seller should have just opened the box) and ignore the request. (There is a potential weakness in that the buyer can "defect" and open the box anyway, to get the deposit. This may be alleviated by having the buyer's deposit smaller than the seller's, giving him more bargaining power).
4. A fraudulent seller is not incentivized to try this on N people until it succeeds, since every failure costs him his deposit. Hence, scenario 3 in which the money is burned should very rarely happen.

In any case this isn't supposed to be bullet-proof, just a significant extra protection for sellers who already pass the sniff-test.

Additionally, the box can specify a charity address, agreed upon by both parties, to which the buyer has permission to send all funds, deposits and payment. So in the worst case the money will go to charity.

I'm not sure about the technical implementation details but all this should be very doable.

Escrow would be held in the block chain and can be easily verified by anyone.  This is different from all centralized escrow services as it is built on the trust that you have in the block chain and not in any particular service provider.

And what about scammers buying goods?

I mean, money putted on escrow is visible for the seller and buyer?

1. When you send bitcoin to Joe, you are taking the risk that he will take your money and run.
2. When you send bitcoin to an Escrow Service, you are taking the risk that they will take your money and run.
3. If you use public escrow, you take the risk that you will not benefit from your spending, but the lost funds do not benefit the fraudster.

If you are going to succumb to lottery / sob story scams, then nothing can help you and you deserve what you get.

Take for example, eBay.  They tell you to use PayPal or Credit Cards and not to send cash, cheque, or money order.  Unfortunately, not everyone knows how to protect themselves.  At least there is a method to help you.

Giving the merchant a "refund" option is an excellent addition.

I think JoelKatz has a good point. The problem is that a scammer can do this lots of times (it's free for him!) even if he only succeeds with a few suckers.

You offer no security for the buyer because the seller doesn't lose anything and the buyer always loses his money.

Maybe put a "Can not pay" button in, that would be used if the receiving party could not pay.
Fraudster: I have $100, I want to buy 6 bitcoins.
Victim: Okay. I put the 6 bitcoins in escrow.
Fraudster: Damn, I can't buy them, send them to me and I'll reimburse you. I'm an honest guy, I just don't need the coins anymore or don't have the money. Just send me the bitcoins and I'll send them right back to you.
Victim: How about you just hit the "Can not pay" button?
Fraudster: How about I don't and keep the coins in limbo?
Victim: How about I load a few bitcents into another escrow and give you those if you hit the button?

This at least provides a possible avenue for getting your coins back. Having a 'Can not pay' button would make it obvious that there trying to scam you if that happens.

If the person with the least reputation sends first, like in usual transactions, this would still be useful. Two people who lack any reputation would have the issues described above though.

Do you ever get emails telling you that your email won a lottery? The fraudster doesn't have to succeed every time. It just has to be possible for him to succeed.

Sure, but in exchange for that, you have to be willing to get nothing in exchange for your coins.

What percentage of the time does the fraudster have to succeed for it to be worth his while?

Here's how I see it:

Fraudster: I have $100, I want to buy 6 bitcoins.
Victim: Okay. I put the 6 bitcoins in escrow.
Fraudster: Damn, I can't buy them, send them to me and I'll reimburse you. I'm an honest guy, I just don't need the coins anymore or don't have the money. Just send me the bitcoins and I'll send them right back to you.
Victim: Since I've already promised you the coins, go get a job, then reimburse me first then I will release the coins from escrow.
Fraudster: Well shucks.

All I'm saying is that if you are willing to put the coins into public escrow, then you have a way to make sure that the fraudster doesn't get the benefit of the coins without you getting the benefit of his work / product.

Fraudster: I have $100, I want to buy 6.66 bitcoins.

Victim: Okay, deal. I put the 6.66 bitcoins in escrow.

Fraudster: Damn, I can't buy them. So sorry. I don't need the coins because the guy I was going to trade them with sold the thing I was going to trade him for to his nephew for cash to buy drugs instead, plus my wife spent the money I was going to buy the bitcoins with on a new pair of shoes. And, not that this matters, but my cat has swine flu.

Victim: Umm, I already put the bitcoins in escrow. If I burn them, I'm out the coins!

Fraudster: No, don't burn them. Just send them to me and I'll send them right back to you. I'm an honest guy, the deal just fell through, and I'm very, very sorry about that. Let me make it right -- just send me the bitcoins and I'll send them right back to you.

Victim: Well, if I burn them, I have zero chance. So I'll release them to you and hope you pay me back.

Fraudster: Sucker.

Note: This will not be obvious because the fraudster's name will not actually be "Fraudster". But if your name actually is "Victim", watch out.