Bitcoin Forum

I am just spitballing here, throwing out an idea I was tossing around in my head.

Maybe someone could set up a bitcoin registration site, where people could link their bitcoin address and their  credit card, and confirm them somehow.  Im not sure exactly how it would work, but basically you would have an account on the site.  The site would come up with some kind of registration process where they would confirm your credit card and your bitcoin address.

Then, when people wanted to trade with each other , they could trade with other people on the site.  This way they would know they were safely trading bitcoins & credit card numbers with people who were verified by the registration process.

Now, since all transactions are public, they would be able to verify that person A sent bitcoins to person B, in the case of a dispute or chargeback.

The person buying the bitcoins wouldn't  be able to claim it was fraud, because there would be a record of the transfer between the seller to the buyer's bitcoin account.  No one could say their credit card was stolen and the thief sent bitcoins to the victim's bitcoin account!

Now, perhaps this site could also let merchants set up accounts, and the site could then process a customer's credit card payments into bitcoins, or bitcoin payments into cash in the merchant's bank account.

As for paypal, I think that they are probably a lost cause.  According to their TOS, they do not allow these types of transactions, right now they probably consider bitcoin as a potential competitor.  Perhaps if someone higher up in the paypal corporate structure was able to work directly with the bitcoin community, this would change, but otherwise it seems like btc/paypal transactions are going to be much too risky, from a fraud perspective.

Any thoughts on this?  Obviously this would take quite a bit of programming, and there are definitely some legal issues, as far as licensing as a money transferring business, etc. 

The fact that these types of transactions are NOT anonymous will certainly help prevent "conspiracy to engage in money laundering" type charges.

There are two ways to handle transaction risk.  Both involve third parties.  Both types of third parties exist in the real world when transactions deal with dollars.  Eventually, both types will exist in the bitcoin world for bitcoin transactions.

Type 1 is an escrow service.  These do exist for bitcoins, as well as for dollars.

Type 2 is a transaction processor, like the Visa or MasterCard networks.  You pay them a fee to accept the risk of a rollback.  These currently don't exist for bitcoins, but at some point, they sure will.  In fact, I suspect that one or more of the current major credit card systems will embrace bitcoin when it gets big enough.

I agree with you, there has to be a third party if people want to be able to use bitcoins over the internet and have significant protection against fraud. 

I am just throwing out some ideas on how it could be implemented. 

Escrow services would not work for this type of application, unless merchants want to manually confirm every time they receive a bitcoin.  This is especially true considering that bitcoins cannot be considered 'spent' until they are treated so by the network, which takes a few minutes.

Having a separate registration system where bitcoin wallets are connected to bank accounts or some other form of money which is verifiable online allows instant verification, as 'bad' bitcoins are backed up by the online account, whether that is a credit card, bank account, etc.

Hi,

I'm getting pretty interested in this topic/problem. Have noticed a bunch of people talking about it, and have come across it myself.

I have some ideas how BitPiggy or someone else can solve some of these problems. I'll post them here when I've thought them through a bit better.

Otherwise, great post.
~Mat