Why doesn't Paypal shut down Virwox?

[velacreations]

Virwox is currently the most reliable way to transfer from paypal to btc.  There are a lot of fees involved, and time, too.  I think the fees come out to be like 11%, and they only sell whole btc (not .05 btc, for example).

Needless to say, it's complicated, expensive, and not really satisfying.  Yet, they do a lot of business in BTC, mostly to newbies trying to get some btc by using a credit card or paypal.

So, how have they avoided the issues with Paypal and CC charge backs and freezing accounts?  Is it the fact that they make you go to SL linden dollars first?

In my mind, making people go to SLL just gives them another opportunity to charge another fee.  First, from paypal, it is like 3.9%, then USD to SLL is 3.5%, then SLL to BTC is another 3.5%, and then finally .02 btc when you want to cash out.  And I think there are some minimum fees in there, too.

We need a competitor here, but everyone is scared off by the obstacles from Paypal and CCs (with good reason).  So, how is Virwox getting around those obstacles, and how could a competitor get going to provide a better service?

[lassdas]

VirWox is not the classic Bitcoin-, or E-Currency-Exchange, that's why PayPal doesn't shut them down.
You can not buy BTC for funds added thru PayPal, you can only buy virtual world currencies (SLL/ACD/OMC), which are actually virtual goods and not a currency at all.

I've no idea how they avoid chargebacks, but I guess they do it like any other merchant, by charging high fees to cover the risk.

Competition? Good luck. 

 

[velacreations]

well, if that's the case, then it should be easy enough to sell a virtual currency, like rabbitscoins or whatever you want to call it.  If you took out the fees from USD to rabbitcoins and from rabbitscoins to BTC, and just have fees for input and output, you could still have a decent profit (5%+), but undercut Virwox enough to get their business.

The charge back issue is the big one.  I know there was someone developing a similar thing with an iOS app, and basically Apple didn't allow charge backs.

So, how do they get away with it?

[payb.tc]

you can only buy virtual world currencies

well, if that's the case, then it should be easy enough to sell a virtual currency

not necessarily equivalent

[velacreations]

you can only buy virtual world currencies

well, if that's the case, then it should be easy enough to sell a virtual currency

not necessarily equivalent

yeah, you are right, I was meaning the virtual world currencies. So, just make up your own to sell, then exchange for btc.

Still, the big issue here is the chargeback thing.  I am wondering how Apple and Virwox get around that.

[velacreations]

I guess the charge back issue could overcome as easy as a simple contract.  Lay it all out they have to agree to purchase, including their BTC address, no refunds, etc.  You provide proof that the transaction was made.  So, if they try a chargeback, you just show that to Paypal or the Credit Card company, and have a standard file of proof of transaction, agreement, etc.

What am I missing?

[payb.tc]

What am I missing?

real-world experience

honestly, people have tried (and failed) using your above strategy.

PayPal doesn't care about your 'evidence'. They do as they please.

[hamdi]

They have a good standing with paypal through their proven reliability

[01BTC10]

I guess the charge back issue could overcome as easy as a simple contract.  Lay it all out they have to agree to purchase, including their BTC address, no refunds, etc.  You provide proof that the transaction was made.  So, if they try a chargeback, you just show that to Paypal or the Credit Card company, and have a standard file of proof of transaction, agreement, etc.

What am I missing?

Most chargeback are probably due to credit card fraud. The credit card company will do chargeback without even reading your contract.

The reason to use SLL is probably to take advantage of the risk API: http://wiki.secondlife.com/wiki/Linden_Lab_Official:Exchange_Risk_API

[DeathAndTaxes]

Why doesn't Paypal shut down Virwox?

Simple answer.  $, $, and $$$$$$.

As long as they bring in the big money, keep the chagebacks low, and don't end up costing PayPal any big support dollars PayPal will just look the other way.   You as a small startup the first time you get two chargebacks in a short period of time, some low level offshore researcher will auto-freeze your account checking the "unauthorized currency exchange" box and call it a day.  You will never win an appeal, and if lucky will get your money back in 180 days.

Is it fair? No but the real world rarely is.  If Virwox ever becomes a "pain" (revenue goes down and chargebacks go up) PayPal will terminate that "friendly" relationship so far it will cause whiplash.  Until they do though they have a defacto exception, fair or not.

[lassdas]

The reason to use SLL is probably to take advantage of the risk API: http://wiki.secondlife.com/wiki/Linden_Lab_Official:Exchange_Risk_API

The reason for VirWox to use SLL is because THAT is what they do, it's a SLL-Exchange, a place to buy and sell LindenDollars.
They have been around long before Bitcoin even existed.

And the RiskAPI is not a real advantage, SLL chargebacks (triggered by LindenLabs) happen even when people pass that API, it's just as insecure and risky as PayPal.

That's why I guess that they just cover the risk by huge fees.

[velacreations]

Why doesn't Paypal shut down Virwox?

Simple answer.  $, $, and $$$$$$.

As long as they bring in the big money, keep the chagebacks low, and don't end up costing PayPal any big support dollars PayPal will just look the other way.   You as a small startup the first time you get two chargebacks in a short period of time, some low level offshore researcher will auto-freeze your account checking the "unauthorized currency exchange" box and call it a day.  You will never win an appeal, and if lucky will get your money back in 180 days.

Is it fair? No but the real world rarely is.  If Virwox ever becomes a "pain" (revenue goes down and chargebacks go up) PayPal will terminate that "friendly" relationship so far it will cause whiplash.  Until they do though they have a defacto exception, fair or not.

so, how do they keep the chargebacks low?

[TheKoziTwo]

so, how do they keep the chargebacks low?

By limiting the amount one can deposit, not having instant withdraw. Honest/longterm customers can enjoy higher limits building a steady amount of "no-risk" transactions.

[zvs]

IGE accepts paypal, it is essentially the same thing

[velacreations]

what is IGE?

[payb.tc]

what is IGE?

IGE.com is the leading provider of WoW Gold, World of Warcraft Gold, SWTOR Credits, TERA Gold, FFXI Gil, and EQ2 Plat. Buy WoW Gold cheap, Warcraft Gold, ...

[farlack]

Have you used them before? I've used gold exchanges for games that require them to call you, verify you etc.

If you get a verification text message, you cant really do fraud unless you have the cc and persons phone also unless you enjoy prison.

[zvs]

Have you used them before? I've used gold exchanges for games that require them to call you, verify you etc.

If you get a verification text message, you cant really do fraud unless you have the cc and persons phone also unless you enjoy prison.

I've never used IGE to buy gold... I used to have a commission account at mysupersales where I got 60% (selling platinum from Everquest)....  when I tried to sell stuff on my own I got banned... but couple years with mysupersales, not one character ever got banned..  *scratch*

[Rampion]

so, how do they keep the chargebacks low?

By limiting the amount one can deposit, not having instant withdraw. Honest/longterm customers can enjoy higher limits building a steady amount of "no-risk" transactions.

This is it.

[farlack]

I bet they have some sort of backdoor transactions so the money doesn't deposit to a gold selling site.
Runescape and WoW have sued over bots, and gold sellers.