Bitcoin Forum

I have noticed a number of threads in the hardware forum where people are advising others to not buy any equipment with bitcoins. Only use paypal, credit card, etc.. so that you have recourse if the supplier does not deliver a product on time.

If miners are unwilling to purchase equipment using bitcoins, it seems to be a bad sign for the entire bitcoin ecosystem.
So I started to wonder, what did people do before debit and credit cards were widespread?
Mail order goods have been around since before credit cards. Did people simply put money in an envelope and hope for the best? Was there any sort of protection or recourse for consumers who did not get their product?

What can we learn from the old timey cash economy and apply it to a bitcoin economy?

Perhaps the real problem is just the arms race to get better equipment before everyone else and ensure you get a return.
This could result in people simply making the unwise choice of sending off bitcoins before it might be appropriate to do so.

I'm not sure what to answer for the whole what people did back then in regards to fraud, but I guess there was less fraud back then due to there not being e-commerce shopping so you easily knew where your funds were being sent to because you sent them there.

I could be wrong and fraud was a big issue back then in regards to paying for items but that's just my $0.02.

Escrow services for large purposes will be needed for these kinds of transactions.  For small transactions or places with very trustworthy businesses, you don't escrow.  Very simple system, just the Bitcoin economy is not mature enough to really have anyone fill this need.

We used checks. For high value transactions, cashier's checks. I don't know how this transfers to a bitcoin environment. Oh, there wasn't as much mail order back then. Most shopping was local.

The good days, when going out shopping and being able to get everything you need. Shops were full, now where I am most shops are pretty much gone only the big chains remain. All the local small businesses have sadly gone.

i'm not that old but I remember the old mail order commercials offered COD as a payment option.

http://en.wikipedia.org/wiki/Collect_on_delivery

I am speaking about 2000ish,  ;D

Ah yes.. I remember COD, unfortunately the money is picked up by the courier and then passed on to the shipper minus a fee.
This would be hard to do with bitcoin unless a package delivery startup started taking bitcoin, which I guess I could see happening in densely populated cities.

Back in my day, we relied on a now mostly obsolete concept we used to call reputation.  It might seem rather archaic, but the way it worked was that you would tend to only do business with companies that you, or someone you personally knew, had experience dealing with.  When dealing with a completely new company that you knew nothing about, you'd consider the risk and limit your exposure until they had earned your trust.  There was even a Latin expression we used to describe this concept: "caveat emptor".

As odd as it may seem, this system actually worked quite well.  Fraud was minimal, and companies had incentives to build trust and reputation by offering good products, good service, and prompt resolutions to problems.

Before credit cards, people were not so gullible as to send money to a stranger in another country who may or may not be able keep his promise to deliver something months into the future.

Credit cards have made this possible, but it isn't free. You pay 3% - 6% for this privilege.

You are absolutely right.

Growing up in a single parent household money was tight but my mother rarely, if ever, charged anything.  She was the queen of layaway purchases though.

:D Oh, yeah, I remember seeing a documentary on that. You old farts had those big corkboards up in the village square with a bunch of crude drawings (lithographs in population-dense areas) of peoples' faces who bounced checks so the village could shun the person. During a waning moon, the local leech-doctor would do a song and dance to curse the malefactor with infertility.

+1 for collect on delivery

I agree, the only sure way to know you won't get ripped off. That is if you actually check the item and all that good stuff.

back in the day it was about reputation and common sense.. something the teenage armchair activists of bitcoin spenders don't have.

the number 1 general rule was:
dont post to a P.O. Box, always find their actual business address.

the same goes for bitcoin, if your a legitimate company selling legitimate goods then there is no need to hide behind PO Boxes

What is this "common sense" old people keep talking about? And if it is so common, why do I never hear people like Kanye West or Snookie talking about it?

i know ur trying to trol now but anyways.. common sense is something you learn by living and thinking or something your parents teach you.. its not something that can only be learned watching youtube videos of celebrities..

but that brings me back to my statement about the teenage armchair activists. as you can usually spot them due to all the'facts' they spout out seem to have come from you tube videos

The problem is there is no way to build common sense into a product, service, or system.

This is why passwords are hacked so frequently. Despite all the education, people want something easy to remember. So, they choose something easy to crack.
The only way to solve the problem is to force people to choose stronger passwords, which inevitably fails.. or to completely re-think the way authentication is handled.. something a lot of people are working on.

I think it is a similar issue with bitcoin.
Despite all the info out there, people are still getting bitcoins stolen and people are still getting scammed.. sometimes even by companies or people who seemed to have an ok reputation.

Unless a technical solution is found that does not rely on trying to educate people, it will hinder widespread adoption of bitcoin.

common sense arrives when the majority know about something and know enough to make educated decisions.. computers in many of the 'silver surfer' (gran and grandpa generation) are still new.

many people will develop their own ways of making lengthy passwords.

even if it is using a parents maiden name, a date of birth and a selected word all in one. then to make it different by adding in a part of the website address or something about the website.

EG
obama8461Potusbitcointalk - used here
obama8461Potusbitcoininfosource - used here
obama8461Potusmtgox - used at mtgox
obama8461Potusmakemerich - used at mtgox

those are obviously 'unique' lengthy passwords. which even if you knew all 4 parts of the information (well the website is easy to guess :D) the order they are in makes it harder to guess on websites that only allow 3 attempts. this should be the basics of password creation for everyone, even those with memory issues

The problem is those are not as secure as you might think.
Sure, the website may block a user after 3 attempts to login, but if the site is hacked and the database is downloaded the same GPU power that is used for bitcoing mining can be used on the password hashes.
Something that I think happened here at bitcointalk once long ago. But certainly happened to numerous other bitcoin related sites.
A really good article on the topic was posted at ARS Technica earlier this year. http://arstechnica.com/security/2013/05/how-crackers-make-minced-meat-out-of-your-passwords/

Some common methods of payment before the widespread use of credit cards. I am talking about the 1960's and early 1970's here

In person:
Cash
Personal or company cheque.
Certified cheques
Cash on delivery (COD)
Traveller’s cheques (Hotels, and some larger stores)

For mail order
Personal or company cheque
Cash on delivery (COD)
Postal money orders
Wire transfer

The characteristics of all or these payments methods is that they are not reversible and with the exception of cash the payer could prove that the payment was made. This means that if the payer has recourse against the receiver of the funds, which is the case in many cases, the payer is protected. The receiver or merchant is protected in all the cases except for cheques because the payments are not reversible. With cheques the receiver or merchant was at risk only until the cheque cleared.

To understand how this is related to credit cards and later Bitcoin, one should take a look at the history of credit cards. When they were first introduced they behaved in a manner very similar to traveller’s cheques. They were intended for in person transactions. The transaction was valid and binding provided the signatures matched. Only unlike a traveller's cheque one signature was on the card and the other was on the slip.  The advent of “card not present” transactions first with telephone and mail order and later over the Internet means that there is no proof that holder of the credit card has agreed to the payment. This is and not “protecting the consumer” is the fundamental basis for chargebacks. The credit card industry has failed merchants and consumers here in a big way since merchants are presented the option of either not making the sale or accepting the chargeback risk, while consumers have to provide all sorts of personal information in an attempt to mitigate a risk not of their own creation. The latter leads to the risk of "identity theft" which is also a result of the way the banking and credit industry does business. There is no valid reason for the credit card industry to not be able to securely make online transactions binding on the payer after two decades of e-commerce and avoid the whole chargeback issue other than their own inertia and incompetence.  

Bitcoin is in effect turning back the clock to a much saner time when it comes to at distance payments. The key for the payer here is to obtain proof of payment. How? The receiver or merchant must in some form or another communicate to the payer the Bitcoin address for payment. As long as the payer can link this Bitcoin address to the receiver or merchant the blockchain record can be used as a receipt for payment just like the cheque or money order 50 years ago.

If there is a need to provide protection to the payer over and above the recourse of having a receipt this can still be provided by a trusted third party without the added unnecessary complexity of the payer denying that the payment was valid. Bitcoin can actually facilitate this further with multi-signature transactions.

I agree. A lot of the fraud today is possible because of the internet. Credit cards had been around for years (really decades in some form) before the internet so the need for the kinds of protections that credit cards provide were really not there. A customer would be able to look at an item prior to paying for it and if they later had a problem with it they could go back to the store and see if it could be replaced (with most major, reputable retailers this was not, and is still not a problem because they do not want to be known to sell defective merchandise and could just return it to the manufacturer). 

We miss you Hal

Not that old myself, but I guess that people weren't buying stuff via mail, phone, etc. that often. Also, they just didn't buy stuff from someone they barely knew. Retail shops, where you get your goods immediately are much less likely to scam you, after all.

Montgomery Ward and Sears & Roebuck built huge empires at the turn of the 20th Century via mail order.  Most of the payment methods have been discussed - Collect on Delivery, US Postal Service money orders (why robbing mail trains was so lucrative), checks and even cash in the mail for the truly brave.  In addition, Sears was famous for its unconditional money back guarantee.  This goes towards the whole overcoming opportunism problem.

However, this is not to say that fraud was not a problem.  Look at the financial markets of the time, there were scams a plenty, Mr. Ponzi himself, and even in legitimate companies insider trading was endemic.

I'm not sure that here is a lot of senior citizens.