Imagine:
1,000 buyers
1,000 sellers
5-10% of each are scammers
Some of the software, hardware, IP, services, etc, that you're trading coins for are mission critical. The loss to you if you cannot get the product/service that you need on time is sometimes far greater than the loss of the coins themselves.
Topic: Would coloring or "locking" of coins reduce scamming? (Read 968 times)
What would prevent a user from locking the coins after they have received the merchandise? Someone could easily use this as a way to scam legitimate sellers of their goods.
I was discussing a mechanism for altcoins where the wallet would have the built in escrow features, similar to Ethereum's built in contracts. The idea was that you trade one altcoin for another, with the transaction information included in the label. Once you ...
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
First, you never get your coins back. Although you have locked them, they are in the hands of someone else, who simply cannot spend them. At this point, it takes the owners of both wallets to recover part or all of their value, so both have an incentive to reach some mutual agreement. If the other guys turns out to be a complete scammer, I'm not letting keep even 5%. If a seller is late sending merchandise, it must contact the buyer and perform due diligence to convince the buyer to unlock some or all of the coins.
If both agree to an arbiter, then the buyer must send the transaction unlock pass phrase, while the seller (who's holding the locked coins) sends the actual locked coins to the arbiter wallet. If the proof can be a bit of text found at some url (tracking number, shipment confirmation, blockchain.info, etc), then one could even have an automated escrow/arbiter.
What would prevent a user from locking the coins after they have received the merchandise? Someone could easily use this as a way to scam legitimate sellers of their goods.
I was discussing a mechanism for altcoins where the wallet would have the built in escrow features, similar to Ethereum's built in contracts. The idea was that you trade one altcoin for another, with the transaction information included in the label. Once you send the coins for a purchase or trade for another altcoin, they are "locked" or unspendable. By default, they will unlock automatically after 24 hours (or whatever Timer you set when you spend them).
If, before the Timer runs out, the other party hasn't sent you the altcoins, funds, merchandise, mining rig, etc, you could simply go to the ledger of transactions in your wallet program and click "Lock," preventing the coins from being spent. If someone has used theft or fraud, they can't spend those coins until they make things right by you, the buyer. This is just like a credit card hold that merchants place on your card to ensure that you return something on time and in good condition.
If you pay #5,000 for a mining rig that is supposed to arrive in 72 hours, you set the Timer for 72 hours. If it still isn't at your front door within three days, you keep the 5,000 #coins locked until it arrives. That way, if the mining rig appears five months later covered in dust and fingerprints, you can just unock the 250 #coins that the things is worth, since you didn't have it for mining when it could have been put to use.
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
If, before the Timer runs out, the other party hasn't sent you the altcoins, funds, merchandise, mining rig, etc, you could simply go to the ledger of transactions in your wallet program and click "Lock," preventing the coins from being spent. If someone has used theft or fraud, they can't spend those coins until they make things right by you, the buyer. This is just like a credit card hold that merchants place on your card to ensure that you return something on time and in good condition.
If you pay #5,000 for a mining rig that is supposed to arrive in 72 hours, you set the Timer for 72 hours. If it still isn't at your front door within three days, you keep the 5,000 #coins locked until it arrives. That way, if the mining rig appears five months later covered in dust and fingerprints, you can just unock the 250 #coins that the things is worth, since you didn't have it for mining when it could have been put to use.
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
You're making a number of assumptions, though.
First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
I dont have to assume...I can just read all the posts here. I see far fewer "sellers" getting ripped off.First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
A bad person can more easily scam one product to several suckers than one person trying scamming several different sellers.
Why? It's been beaten into our brains that sellers are the trusted party. Buy anything from Amazon, NewEgg, or any online store; your sending money first. Now, untrusted, dirtbags assume the same role, ask (and recieve) money first, with no protection to the buyer. If your trying to scam many sellers, your going to be sending money. If you only have 10btc, you 'buy' 10btc worth of product and rip off every seller, there still only out 10btc. If you have 10BTC and sell 200 230GH Avalons on a group buy pre-order for 1BTC...well, the 'seller' makes a killing.
There's no other payment system that makes it this easy to hide. Even when your dumb enough to send money via Western Union Moneygram for a shady deal, someone still has to come into a physical location and sign for the money.
Therein lies the bias - you're assuming this forum is representative of the greater world. I don't think that's correct. This forum is an odd microcosm, a niche world representing the intersection of extreme geekery, extreme greed, and extreme philosophical or political views on both of those.
I've never assumed that the seller is the trusted party. The reason I'm willing to buy from Amazon, Newegg, and others is twofold. First, I have seen others use and recommend them (or I have used them myself in the past). Second, I have assurance as a buyer that if there's any problem, I can dispute the charges with my credit card company. Even on the days when eBay required mailing a check, I had recourse through my bank to stop payment on the check if I suspected something fishy -- and I did exactly that once, when I caught wind of a scam and saved myself several hundred dollars.
As a small online seller, though, the world is flipped. Credit card rules generally say that in any dispute or charge-back, the merchant is automatically responsible not just for the amount of the charge-back, but also for the associated fees and penalties. Buyer fraud through charge-backs is a huge expense for merchants, particularly small ones who don't have negotiating leverage to carve out a good deal with their bank or merchant processor. In fact, one of the primary selling points of Bitcoins and virtual currencies to merchants is that unlike Paypal and credit cards, it's not possible to do a reversal.
I'd also point out that even though we don't hear about buyer fraud on this forum, it's not correct to assume there isn't any. I'm sure we can get many of the bigger sellers here to chime in about how often they've had a dodgy buyer play games, or demand refunds claiming something is broken. More to the point, while a single seller can easily be identified as a fraud, it's much harder to identify a single buyer -- sellers don't have a single point where they can commonly post feedback, other than trust ratings, and I don't see them used that often. It can be enlightening to read the negative trust ratings of people you'd otherwise expect to be positively rated.
You're making a number of assumptions, though.
First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
I dont have to assume...I can just read all the posts here. I see far fewer "sellers" getting ripped off.First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
A bad person can more easily scam one product to several suckers than one person trying scamming several different sellers.
Why? It's been beaten into our brains that sellers are the trusted party. Buy anything from Amazon, NewEgg, or any online store; your sending money first. Now, untrusted, dirtbags assume the same role, ask (and recieve) money first, with no protection to the buyer. If your trying to scam many sellers, your going to be sending money. If you only have 10btc, you 'buy' 10btc worth of product and rip off every seller, there still only out 10btc. If you have 10BTC and sell 200 230GH Avalons on a group buy pre-order for 1BTC...well, the 'seller' makes a killing.
There's no other payment system that makes it this easy to hide. Even when your dumb enough to send money via Western Union Moneygram for a shady deal, someone still has to come into a physical location and sign for the money.
You're making a number of assumptions, though.
First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
First, it's not "A seller getting scammed by one out of a hundred buyers", it's one buyer scamming hundreds of sellers. Remember, by definition, a scammer is someone intent on nefarious and probably illegal actions, and it's unlikely such a person would be satisfied with just one victim. In my book, a bad actor is a bad actor, whether he's in the role of buyer or seller, and in either case, he could victimize hundreds of counterparts.
Second, you're also assuming there's some physical product as part of the transaction that requires physical delivery info. It's pretty common to sell something intangible - a coupon for a discount at an online store, a share of mining machine's output, or even just something delivered electronically, like an ebook. In cases like these, all the buyer and seller need to know about each other is their electronic address, whether it's a coin payment address or an email address. Both are easily created for single use, and easily abandoned or changed.
Given that, I'm not sure it's fair to assume the seller is more likely to be the bad guy.
My thought is, there are two sides to any transaction, and thus, two possible approaches to a scam.
If the protections built into the coin favor the buyer (e.g., chargeback or locking coins), then the buyer has incentive to scam as he has the protections to fall back on. He pays, gets the goods, then claims the seller is a fraud and invokes the protections. Net result, buyer has goods, seller has nothing.
If the protections instead favor the seller (e.g., non-reversible transactions), then the seller has incentive to scam, as all he has to do is convince the buyer to send the coins and then vanish somehow. Net result, seller has coins, buyer has nothing.
Which is worse? A seller getting scammed by one out of a hundred buyers? Or a hundred buyers getting scammed out by one seller?If the protections built into the coin favor the buyer (e.g., chargeback or locking coins), then the buyer has incentive to scam as he has the protections to fall back on. He pays, gets the goods, then claims the seller is a fraud and invokes the protections. Net result, buyer has goods, seller has nothing.
If the protections instead favor the seller (e.g., non-reversible transactions), then the seller has incentive to scam, as all he has to do is convince the buyer to send the coins and then vanish somehow. Net result, seller has coins, buyer has nothing.
Consider the buyer, who had to provide some real address,(delivery conformation). So it's much easier to find a bad buyer, than a seller who hides behind TOR or freenet in god knows even what country.
I would go so far as to modify this a little more, flag transmitted coins with 5 day tag(or what ever time) after that, coins come back to you if you dont release, or extend the flag, and are available again after 150% of total escrow time has elapsed , or what ever prevents the buyer from double spending. So, send with 10 day limit, seller doesnt honor, you get funds back after 5 more days pass.(like time for a credit card transaction to be refunded)
It could also be 'fail safe' or 'fail secure' meaning if the buyer doesn't release the flag, it could automaticly pay, or automaticly fail. Auto pay may be a smoother method because no further interaction is needed in honest transactions, but still allows flag extentions or revokes.
Since it's the sellers who are the wolves in the current market(TerraHash, AvalonShenzen, etc...) I think this would be more than fair.
A seller has a much better chance of finding a buyer than the other way around. This is like a built in dispute model without intervention.
And still allows immediate, non-refundable transactions if you wish by confirming the flag as soon as you send, like for web based services like casinos.
My thought is, there are two sides to any transaction, and thus, two possible approaches to a scam.
If the protections built into the coin favor the buyer (e.g., chargeback or locking coins), then the buyer has incentive to scam as he has the protections to fall back on. He pays, gets the goods, then claims the seller is a fraud and invokes the protections. Net result, buyer has goods, seller has nothing.
If the protections instead favor the seller (e.g., non-reversible transactions), then the seller has incentive to scam, as all he has to do is convince the buyer to send the coins and then vanish somehow. Net result, seller has coins, buyer has nothing.
If the protections built into the coin favor the buyer (e.g., chargeback or locking coins), then the buyer has incentive to scam as he has the protections to fall back on. He pays, gets the goods, then claims the seller is a fraud and invokes the protections. Net result, buyer has goods, seller has nothing.
If the protections instead favor the seller (e.g., non-reversible transactions), then the seller has incentive to scam, as all he has to do is convince the buyer to send the coins and then vanish somehow. Net result, seller has coins, buyer has nothing.
Move this to the development discussion, imo. This is not an accusation, but rather a core protocol suggestion.
Hmmmm... Taking that to heart. That's a good point, actually.
If the company or seller doesn't make good on what you bought with American Express or PayPal, the buyer can just say to Apuh from customer service, "Hey, bitch didn't make my bacon cheeseburger right. Gimme my money back." Many people do that, and some restaurants and retail won't take AmEx or PayPal for this reason.
When people can spend money AND get it back, you get scams. When they can't pull that anymore, the incentive to scam is removed. Automating escrow somehow would be the ideal, of course, and they're trying to do that with Ethereum.
When people can spend money AND get it back, you get scams. When they can't pull that anymore, the incentive to scam is removed. Automating escrow somehow would be the ideal, of course, and they're trying to do that with Ethereum.
I think multisig transactions with a human as a escrow would still work better than this. In your example, the guy is still out of the coins that he spent on the mining rig, the other guy just didn't get them. If the rig caught on fire between the time that you sent the coins and he would have sent the rig, then you don't get your coins back, and the other guy gets nothing. With escrow if that happened, the escrow would send the coins back to the sender, and the only person at a loss would be the guy that doesn't know how to cool his rig 
This doesn't help anybody.
It doesn't help sellers because they now have to hold the funds until they can no longer be locked, effectively raising confirmation transaction time to many days. Worse, the buyer can now scam the seller and demand an additional payment to unlock the coins.
It doesn't help buyers because they will have to pay the full cost of all these additional costs to sellers. If this coin costs me 30% more to accept than Bitcoin because I have to wait for reliable payment and I risk having to bribe you to unlock the coins, I'll have no choice but to pass those costs on to you.
It doesn't help sellers because they now have to hold the funds until they can no longer be locked, effectively raising confirmation transaction time to many days. Worse, the buyer can now scam the seller and demand an additional payment to unlock the coins.
It doesn't help buyers because they will have to pay the full cost of all these additional costs to sellers. If this coin costs me 30% more to accept than Bitcoin because I have to wait for reliable payment and I risk having to bribe you to unlock the coins, I'll have no choice but to pass those costs on to you.
Move this to the development discussion, imo. This is not an accusation, but rather a core protocol suggestion.
It is not built into the wallet client, though it could be, and there's research being done into the topic right now for both Bitcoin (colored coins) and Ethereum.
One of the major hurdles keeping fiat currencies from being turned into crypto-currency is that the holder of crypto must transact in person or through escrow to be sure. Even then, you have to place your trust and your investment into the hands of some human being or exchange, and both can have problems.
You can't sell Bitcoin for PayPal, credit, or debit card because they have chargeback periods. However, a lockable coin could be sold locked by the seller after, then remotely unlocked through the wallet client once that period had passed. The incentive to scam the person or exchange selling altcoins nearly evaporates. Instead of running an exchange that can succumb to attack, server failure/overload, software problems, virus, government raid, cryptocoiners could use a Public Ledger that joined buyers and sellers, notifying both of the destination address for their locked coins. Once both sets of coins reach their destination wallet, the network automatically unlocks them both, so escrow becomes automatic.
There's still the possibility of loss, but not of much gain through scamming. If the mining rig doesn't arrive when it was supposed to, the buyer leaves the coins locked until the rig actually arrives.
One of the major hurdles keeping fiat currencies from being turned into crypto-currency is that the holder of crypto must transact in person or through escrow to be sure. Even then, you have to place your trust and your investment into the hands of some human being or exchange, and both can have problems.
You can't sell Bitcoin for PayPal, credit, or debit card because they have chargeback periods. However, a lockable coin could be sold locked by the seller after, then remotely unlocked through the wallet client once that period had passed. The incentive to scam the person or exchange selling altcoins nearly evaporates. Instead of running an exchange that can succumb to attack, server failure/overload, software problems, virus, government raid, cryptocoiners could use a Public Ledger that joined buyers and sellers, notifying both of the destination address for their locked coins. Once both sets of coins reach their destination wallet, the network automatically unlocks them both, so escrow becomes automatic.
There's still the possibility of loss, but not of much gain through scamming. If the mining rig doesn't arrive when it was supposed to, the buyer leaves the coins locked until the rig actually arrives.
The seller/scammer/snoozer will not be able to make use of them until they have satisfied their end of the deal.
That already exists, and is called escrow.http://en.wikipedia.org/wiki/Fungibility is an absolute need. Making some coins being worth "less" than others is just suicide.
No, once you send the coins, they're gone. However, if the buyer realizes that they've been swindled, they can lock the coins wherever they may be. The seller/scammer/snoozer will not be able to make use of them until they have satisfied their end of the deal. Like career criminals living near well armed populations, it is much less lucrative to try to scam holders of these lockable #coins in the first place.
For example, exchanging two different lockable coins, both must send their coins before the other will unlock them for use. There's no question that both senders have permanently lost access to their coins. Both are served only by turning over the altcoin, product, or service to convince the other to unlock those spent coins.
For the users of these coins, scammers will still try to abscond with some. If 1% of these #coins are scammed, stolen, lost, or disappear each month, then everyone holding these #coins in their wallet or Time Deposit accounts will get a 1% reward added to their stash.
You have 1,000 #coins sitting in your Time Deposit wallet, and you are sent 10 more #coins due to the gradual loss through fraud, scams, lost passwords, etc.
For example, exchanging two different lockable coins, both must send their coins before the other will unlock them for use. There's no question that both senders have permanently lost access to their coins. Both are served only by turning over the altcoin, product, or service to convince the other to unlock those spent coins.
For the users of these coins, scammers will still try to abscond with some. If 1% of these #coins are scammed, stolen, lost, or disappear each month, then everyone holding these #coins in their wallet or Time Deposit accounts will get a 1% reward added to their stash.
You have 1,000 #coins sitting in your Time Deposit wallet, and you are sent 10 more #coins due to the gradual loss through fraud, scams, lost passwords, etc.
So let's say all of that happens - how does one recover those coins? For the person sending the coins, they would still LOSE those coins. The only thing this feature would be used for is spite so that scammers don't get the coins.
Besides, this would turn "You send first" into "Unlock plz". It wouldn't stop scamming or shady deals, it would just mutate them.
If BTC were refundable in any way due to a system, that system would be abused in order to rip people off. It's just a sad fact.
Besides, this would turn "You send first" into "Unlock plz". It wouldn't stop scamming or shady deals, it would just mutate them.
If BTC were refundable in any way due to a system, that system would be abused in order to rip people off. It's just a sad fact.
I was discussing a mechanism for altcoins where the wallet would have the built in escrow features, similar to Ethereum's built in contracts. The idea was that you trade one altcoin for another, with the transaction information included in the label. Once you send the coins for a purchase or trade for another altcoin, they are "locked" or unspendable. By default, they will unlock automatically after 24 hours (or whatever Timer you set when you spend them).
If, before the Timer runs out, the other party hasn't sent you the altcoins, funds, merchandise, mining rig, etc, you could simply go to the ledger of transactions in your wallet program and click "Lock," preventing the coins from being spent. If someone has used theft or fraud, they can't spend those coins until they make things right by you, the buyer. This is just like a credit card hold that merchants place on your card to ensure that you return something on time and in good condition.
If you pay #5,000 for a mining rig that is supposed to arrive in 72 hours, you set the Timer for 72 hours. If it still isn't at your front door within three days, you keep the 5,000 #coins locked until it arrives. That way, if the mining rig appears five months later covered in dust and fingerprints, you can just unock the 250 #coins that the things is worth, since you didn't have it for mining when it could have been put to use.
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
If, before the Timer runs out, the other party hasn't sent you the altcoins, funds, merchandise, mining rig, etc, you could simply go to the ledger of transactions in your wallet program and click "Lock," preventing the coins from being spent. If someone has used theft or fraud, they can't spend those coins until they make things right by you, the buyer. This is just like a credit card hold that merchants place on your card to ensure that you return something on time and in good condition.
If you pay #5,000 for a mining rig that is supposed to arrive in 72 hours, you set the Timer for 72 hours. If it still isn't at your front door within three days, you keep the 5,000 #coins locked until it arrives. That way, if the mining rig appears five months later covered in dust and fingerprints, you can just unock the 250 #coins that the things is worth, since you didn't have it for mining when it could have been put to use.
Of course, if you wanted to send #coins or even lend them unsecured, you could just hit the Send button or Lend button, but details are still included in the label for the transaction, leaving a paper trail that you can access if someone is merely pretending to be someone you know.
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