Bitcoin Forum

I've never understood why the bitcoin community doesn't speak up about the benefits of not having to worry about fraud when you spend your bitcoins let me be more specific "Transactional fraud" or "point of sale fraud" . Seems to me this is a HUGE advantage for consumers to spend bitcoins instead of credit cards. I mean 8 million people are a victim to credit fraud a year?   Visa/Mastercard spend millions on it check this piece by ABC news it's like wtf!

http://news.yahoo.com/video/business-15749628/inside-visa-preventing-card-fraud-27668735.html

thoughts?

There are many types of fraud, and fraud is a social problem just as much as a technical one.

I agree but there is no incentive to commit fraud if you use bitcoins which solves a lot of things in my opinion.

I guess my point is this would be one reason someone would put money into bitcoins  now they need places to spend but yeah that will come.

What are you speaking about?

Bitcoin is perfect for fraud. There are many types of frauds. The mybitcoin / bitcoin superstore kind of fraud where the seller just disappears with bitcoins is  a perfect example why bitcoin is much, much _worse_ payment option than credit card.

Bitcoin is great payment method, but only with a reputable escrow service or something similar. From consumer perspective, credit cards are still the king.

Weird.  I just made this post: http://www.thebitcointrader.com/2011/12/bitcoin-users-bank-account-hacked.html

Yikes! hides head-in-the-sand lol   bad timing   I'm just saying ya of course you can rob a bank  but when it comes to "purchasing" items with bitcoins I feel safer using it then credit cards.


btw: this holiday season I've had to close two credit cards due to fraud I should have included that aspect.

I guess I'm wording it wrong. I mean "transactional fraud"   meaning at the point of purchase. Of course anyone can rob a bank i.e essentially the same thing to what happened with mybitcoin.

Man look at that massive data centre. If that's all 'necessary' to keep your 'transactions secure', and fraud and identity theft is still a huge problem, why do people like Ben Laurie consider Bitcoin proof-of-work to be a hugely inefficient waste?

I'm with you bbit, fraud at merchants with credit/debit cards is too easy because you have to give them your account information.  Bitcoin solves this type of fraud because the transaction is reversed.  I think this is a huge selling point that is often overlooked.  Problem is there are not many places to spend spend bitcoins.  And if Visa/Mastercard are absorbing the costs of the fraud, what incentive is there for merchants to accept bitcoins?

Isn't that amazing? It's like a fortress lol    you know how much money went into protecting Visa's "brand" . I mean that is what they are doing.

But the banks and credit card companies do not take responsibility for the fraud.  They push this back on the merchant as a chargeback.  So Bitcoins are much more merchant friendly for combatting fraud at the point of sale.

And the room full of data servers are primarily set to analyze your buying patterns, which is a heavy handed way to combat fraud.

Very good points. I should have said for the merchant it makes sense to accept bitcoins but the "consumer" point is never mentioned as a "selling" point for people to drop money into bitcoin. I would think this should be added to your I love bitcoins website also or no? Sorry, I can't think of the domain off the top of my head!  :-\

Merchant friendly yes, consumer friendly no.  People aren't gonna like having little recourse beyond the courts (hope you can find the conman!) when someone rips them off.  

bbit check out

http://lovebitcoins.org/introduction.html (http://lovebitcoins.org/introduction.html)

The consumer advantages for remittance, wire transfers, and international travel are the most compelling becauses of the drastic drop in fees.  Eventually we will get to a point where bitcoin can replace PayPal and online banking. 

Bitcoin gives the full power and full responsibility to the actual users. No place is safer than safety of my own computer. Mybitcoin and allinvain are examples of centralization or computer insecurity.

Fraud is social problem, not technical one. You can build perfectly secure system, but you cannot eradicate the idiots who get scammed because of their stupidity. Of course, the credit cards are not secure at all. They can be skimmed, numbers written down, etc. Bitcoin also is not secure, you can be frauded to make payment and receiver disappears without making his part of a deal, your computer can be rooted, but all these risks can be completely prevented, if You are smart.

Visa & Mastercard absorb the cost of fraud.  LOLZ.  That is unintentionally hilarious.

No VISA and Mastercard put 99.999999999999% of the fraud cost right on the backs of the merchant, and charges them a $30 fee for having the audacity of being a victim of fraud (and no they don't even refund the 3% fee on fraudulent transactions). 

VISA/MC get paid for every transaction fraudulent or not.

The merchant just absorbs that cost and puts it on the back of the consumer in the form of higher prices.

Or the merchant can disappear and not deliver the stuff like happened with bitcoin superstore (and has happened probably with other merchants too).

Really, paying with _pure_ bitcoins without a reputable escrow service is really stupid.

For merchants bitcoins are of course wonderful, but from consumer perspective the upside isn't that great.

I realize they are going to get the money, from interest on consumers and fees on merchants, but if I steal a card and use it at a merchant, the merchant is not going to pay the cost back most of the time.  Maybe this changed since my brief merchant experience several years ago, but when I got disputes and proved I followed the proper procedures, I didn't pay the fraud charges.  I only remember 1 chargeback in 3 years.  I guess 'absorb' the cost isn't the right word, more like 'distribute' the cost.  Either way, if I have to pay visa 3% or bit-pay 3% and learn a whole new technology, what's my cost incentive?  Yes I'll be hit for fraud cost with visa a few times, but I can also be hit with double spends with bit coins.

This isn't intended to start an argument, it's a question I get from merchants.  And I don't really have a good answer.

You misunderstand me.  I don't mean indirectly I mean directly.  For signature not present (internet, MOTO) you will lose even if you follow procedure.  You can se geo-location, CCV, address verification, etc and if it is fradulent the merchant loses all funds, pays $30 chargeback, and still pays the discount rate.

There are some rare exceptions (like theif using social engineering to get data on credit file changed) but 99% of the time the merchant eats the cost.  

I have yet to heard of a merchant getting hit with a double spend.   Credit card fraud costs US merchants tens of millions every single year.

Not arguing.  THAT is the answer.  For a face to face merchant in low risk industry that has a low discount rate and low % of fraud it likely isn't much incentive.  For a higher risk industry (digital downloads, porn, gambling, gift cards, etc) the costs DIRECTLY paid by merchants go way beyond the 3%.

The key is some type of escrow service on the consumer side. If I send X coins and never receive anything, the courts are all I have. If I use a credit card, I can call and have the charges reversed.

Obtaining a transaction record at the time of bitcoin payment is key and of course the reality is such that you simply don't start off with a new merchant sending thousand of bitcoins.

On the other hand, if people realized that even though they are receiving their money back when they make a credit card purchase and then get their money back if it goes wrong, the reality is that they are paying for that transaction anyway with fees, increased prices overall, etc.

Actually we pay for EVERYONE's bad transactions.

Well yeah, there are ways to protect the consumer. One of those tools is escrow.

However, I find it very irresponsible to market bitcoins without any extra layer as a more consumer friendly option to payments. They simply aren't.

OT's latest version (with smart contracts) comes with a sample script that does a two-way trade between Alice and Bob. Arbitrated escrow isn't much more -- I'll work up a script tonight and check it into github. (This was on my list for today already, in fact.)  Here's what I'm thinking:

The existing sample script takes X units of currency A from Alice and Y units of currency B from Bob. If both are successful, then it gives Alice's money to Bob, and gives Bob's money to Alice. (They are atomic, success or failure.)

The new contract will introduce a third party: the arbitrator. This will be a real escrow contract, which assumes there is some offline sale happening (ex. You are sending a guitar to someone in another state...) The contract must include the precondition and the postcondition. After the parties have signed the contract and activated it, X funds from Alice will be stashed inside the contract for 30 days, and then automatically transferred to Bob. If, during that 30 day period, Alice decides that Bob has not shipped her the guitar, she can trigger the dispute clause, which sends notices to Bob and the Arbitrator. She must send her evidence when she does this. After this, the funds will remain stashed in the contract for another 7 days, awaiting a Decision from the Arbitrator. If the arbitrator does not respond in X days, then the money goes back to Alice automatically. Otherwise the arbitrator may trigger a clause deciding the matter one way or the other. Some arbitration fee will be listed in the contract, along with any additional fee should Dispute() be triggered. There will also be clauses allowing the arbitrator to query Bob and Alice for additional information. Calling these will add a day or two to the 7 day timeout period.

You will be able to test the contract on your own machine, or use the OT test server to play around with it. If you have any thoughts on the above, please let me know so I can work them into the script.

-FT

The new A+B(or C) transactions will prevent scammers from running away with bitcoins in many cases.

This (and the multi-part-keys-so-a-wallet-doesn't-get-hacked stuff) is huge. It's the kind of technology that someone can wrap a business around. The assurances they can provide will calm a large percentage of candidate adopters. AT some point someone's going to come along and package this all up to feel like a credit card - only with built-in discounts.