Proposed Altcoin Chargeback System for Businesses

[Rogue5pawn]

Just floating an Idea.

One of the main concerns put forth from the mainstream economists concerning the viability of any altcoin becoming a full fledged, "legitimate" currency is the inability to cause  chargebacks, debit reversals, or refunds. Let's say that you buy something online and pay with an Altcoin but fail to receive what you payed for (ex: pre-ordered BFL ASIC Miners). Well, you want your product/service or your money back. As it stands now, unless the "legitimate business" voluntarily returns your altcoin to you, you're basically screwed.

(and how can you prove you were the one who sent the altcoin to them in the first place seeing as how all transactions are "anonymous," but that's another topic for a different thread, me thinks)

In learning how to set up miners via config for both pooled mining and solo mining, I noticed something interesting: anyone can remotely connect to their wallet on their home computer via the rpcallow port from anywhere in the world. There's a bit of technical stuff concerning just exactly how anyone can do this having to do with how to write the config and accessing it via json-RPC (http://www.autoitscript.com/forum/topic/152472-bitcoin-json-rpc-example/). And most Wallets have a Debug Console that will list all the commands it will recognize, including the ones I found particularly interesting:
   sendfrom <fromaccount> <tobitcoinaddress> <amount> [minconf=1] [comment] [comment-to]
   sendmany <fromaccount> {address:amount,...} [minconf=1] [comment]
   sendrawtransaction <hex string>
   sendtoaddress <bitcoinaddress> <amount> [comment] [comment-to]
   walletlock
   walletpassphrase <passphrase> <timeout>
   walletpassphrasechange <oldpassphrase> <newpassphrase>
   

Here's a Chart I made that explains how it could possibly maybe work. Again, I'm no expert programmer, but I do understand the concept of Open Source.
And here's the text from the diagram, incase it's not easily readable:

Private Wallet
How it Works:
     Exactly as it does now.

Business Wallet
    How it Works:

• 1) Certain parts of the wallet.conf are compiled into the wallet-qt.exe and walletd.exe, specifically the parts that allow for Remote Access/Authorization.
• 2) Addresses can be created but not deleted.
  
• 3) Whenever the wallet.dat file comes online, it automatically announces it’s presence to the Authorized Chargeback Agency (ACA) and all Public Keys, Private Keys, Addresses, and Pass Phrases are forwarded to the ACA.
• 4) A % of all Incoming Transactions are placed in ReserveBalance for a certain period of time, after which they “mature” into accessable funds.
• 5) BUSINESSES that want to legitimately/lawfully accept Altcoins as payment are REQUIRED to obtain an “Altcoin Acceptance” License AND use a Business Wallet issued by the ACA.

(Don't know how to actually upload/embed an image, so I just did what I could. Right click on image icon and open in a new tab to see it, apparently)

https://plus.google.com/photos/118387477645076019105/albums/5937152897864088273/5937152924890438034?pid=5937152924890438034&oid=118387477645076019105

[leannemckim46]

Best coin. This would stop hacker and scammer.

[super3]

Just floating an Idea.

One of the main concerns put forth from the mainstream economists concerning the viability of any altcoin becoming a full fledged, "legitimate" currency is the inability to cause  chargebacks, debit reversals, or refunds. Let's say that you buy something online and pay with an Altcoin but fail to receive what you payed for (ex: pre-ordered BFL ASIC Miners). Well, you want your product/service or your money back. As it stands now, unless the "legitimate business" voluntarily returns your altcoin to you, you're basically screwed.

(and how can you prove you were the one who sent the altcoin to them in the first place seeing as how all transactions are "anonymous," but that's another topic for a different thread, me thinks)

In learning how to set up miners via config for both pooled mining and solo mining, I noticed something interesting: anyone can remotely connect to their wallet on their home computer via the rpcallow port from anywhere in the world. There's a bit of technical stuff concerning just exactly how anyone can do this having to do with how to write the config and accessing it via json-RPC (http://www.autoitscript.com/forum/topic/152472-bitcoin-json-rpc-example/). And most Wallets have a Debug Console that will list all the commands it will recognize, including the ones I found particularly interesting:
   sendfrom <fromaccount> <tobitcoinaddress> <amount> [minconf=1] [comment] [comment-to]
   sendmany <fromaccount> {address:amount,...} [minconf=1] [comment]
   sendrawtransaction <hex string>
   sendtoaddress <bitcoinaddress> <amount> [comment] [comment-to]
   walletlock
   walletpassphrase <passphrase> <timeout>
   walletpassphrasechange <oldpassphrase> <newpassphrase>
   

Here's a Chart I made that explains how it could possibly maybe work. Again, I'm no expert programmer, but I do understand the concept of Open Source.
And here's the text from the diagram, incase it's not easily readable:

Private Wallet
How it Works:
     Exactly as it does now.

Business Wallet
    How it Works:

• 1) Certain parts of the wallet.conf are compiled into the wallet-qt.exe and walletd.exe, specifically the parts that allow for Remote Access/Authorization.
• 2) Addresses can be created but not deleted.
  
• 3) Whenever the wallet.dat file comes online, it automatically announces it’s presence to the Authorized Chargeback Agency (ACA) and all Public Keys, Private Keys, Addresses, and Pass Phrases are forwarded to the ACA.
• 4) A % of all Incoming Transactions are placed in ReserveBalance for a certain period of time, after which they “mature” into accessable funds.
• 5) BUSINESSES that want to legitimately/lawfully accept Altcoins as payment are REQUIRED to obtain an “Altcoin Acceptance” License AND use a Business Wallet issued by the ACA.

(Don't know how to actually upload/embed an image, so I just did what I could. Right click on image icon and open in a new tab to see it, apparently)

I like the idea of having some sort of Bitcoin FDIC kinda thing for businesses. I think this could be best implemented with Bitcoin contracts.

[Rogue5pawn]

Contracts? Please expand on the concept?

I'm vaguely aware that there are many features of BTC that are currently locked to the live blockchain and only available on the testnet.... I think I heard mention of "contracts" once, but it was never really explained.

[super3]

Contracts? Please expand on the concept?

I'm vaguely aware that there are many features of BTC that are currently locked to the live blockchain and only available on the testnet.... I think I heard mention of "contracts" once, but it was never really explained.

Basically you could automate the entire process, no need for a mediator. So lets say you want to order a miner from BFL(don't do this). What's to say that BFL couldn't run away with your money, or same thing for a 3rd party mediator. Basically you would agree that your order costs 10 BTC, and must be delivered in 6 months or you want your money back. So you build a contact to follow those guidelines. BFL only receives the full amount once it has provided a valid USPS tracking number for your miner, if not the money will be returned by the automated ACA.

[knight22]

How about simply using an escrow?

[super3]

How about simply using an escrow?

Decentralization, scalability, and also no fee. 

[Rogue5pawn]

How about simply using an escrow?

Decentralization, scalability, and also no fee. 

I do so love the Escrow answer.... another BUSINESS that answers to no one when it comes to Altcoins...

Escrow: Money held by a "Trusted" Third Party.... Like a BANK... Hmmm... Yup, that's not centralized or anonymous in anyway at all, right? And what if this "Trusted Third Party" decides to KEEP your Altcoin? How would you get it back? I mean, as it stands, no court or agency could force them to do so without the Personal Wallet's Passphrase (One good thing DPR did for the Altcoin community was prove this to be true). And there are no laws actually regulating BUSINESSES that have either chosen to accept these "novelty" digital fake coins as payment OR hold them in Escrow.

So, let me get this right..... The grand Idea is to have a decentralized, anonymous currency that you either want to non-anonymously hand over to an unregulated Third Party and simply "Trust" that any and all businesses (including the Escrow Company) will simply return your coins to you if a contract goes awry because you stomped your feet, held your breath, and wrote angry emails saying, "Give it back?" How's that working for you? In that case, I'll be your Escrow ;-D
--------------------------------

As for contracts that are payment upon delivery, I can see that working for some things, but not most things, day-to-day kind of things. However, suppose the contract is fulfilled and upon receipt of the purchased item for which POD was agreed upon that it's broken or not what you ordered? After several lengthy phone calls and days of emails where they either insist that the right product got shipped or some other absurdly disturbing sequence of interactions, you decide that you want your money back.... given that businesses are using the exact same altcoin wallet/bank that private, real live people are using (the same wallet that DPR has that the FBI can't get into without his PW).... how would you go about getting your money back let alone having the issue enforced?
--------------------------------

Oh, and I just thought of something else: How could recurring automated payments be set up with Altcoins, or will every and all transactions have to be manually sent like in the good old days before computers and internet? (Something I can see as being a good thing maybe, in that is would slow the World down in some respects ) Say someone figures out how to set this up via automated api call/sends and ssh tunneling and somehow there's a an over charge/spend on someones part? Just floating ides.

[fattypig]

Chargeback is good when there is company like BFL...

[NorbyTheGeek]

I disagree that this is a feature that should be included in a cryptocurrency.  As I understand it (and like to think of it) Bitcoin, as a currency, is equivalent to giving someone cash.  I don't like the idea of someone giving me a $20 bill and then being able to yank it back whenever they want.

This is something that needs to be implemented by third parties, similar to the credit card / banking systems that the fiat currencies use. 

I don't have a good answer, but I disagree with the idea you're proposing.

[Mike Christ]

I disagree that this is a feature that should be included in a cryptocurrency.  As I understand it (and like to think of it) Bitcoin, as a currency, is equivalent to giving someone cash.  I don't like the idea of someone giving me a $20 bill and then being able to yank it back whenever they want.

This is something that needs to be implemented by third parties, similar to the credit card / banking systems that the fiat currencies use. 

I don't have a good answer, but I disagree with the idea you're proposing.

These are my sentiments exactly; this is one of Bitcoin's better qualities, I don't believe we should work to remove it.  I don't want my Bitcoin with strings attached to them.

[Rogue5pawn]

I disagree that this is a feature that should be included in a cryptocurrency.  As I understand it (and like to think of it) Bitcoin, as a currency, is equivalent to giving someone cash.  I don't like the idea of someone giving me a $20 bill and then being able to yank it back whenever they want.

This is something that needs to be implemented by third parties, similar to the credit card / banking systems that the fiat currencies use. 

I don't have a good answer, but I disagree with the idea you're proposing.

These are my sentiments exactly; this is one of Bitcoin's better qualities, I don't believe we should work to remove it.  I don't want my Bitcoin with strings attached to them.

First, thank you for engaging in the conversation at hand instead of just trolling :-)

Next, although I, too, would like to think of cryptocurrencies as "cash," the unfortunate reality is that "cash" will always be a physical medium of exchange, and cryptocurrencies are digital, therefore fall under the guise of an electronic medium of exchange.

1. That said, I completely agree when it comes to Personal Wallets.
2. I strongly think that Business Wallets should be different, and subject to regulatory measures.
3. I am in no way suggesting any change to, let alone removing, any feature of any cryptocoin's features...... only in making a change to the "business as an end user's" wallet. This feature could be implemented today, and no private individual would notice any difference.... except when it came to having the ability of getting their coins back from a business that did them wrong (like the in the case of BFL).

[Mike Christ]

First, thank you for engaging in the conversation at hand instead of just trolling :-)

Next, although I, too, would like to think of cryptocurrencies as "cash," the unfortunate reality is that "cash" will always be a physical medium of exchange, and cryptocurrencies are digital, therefore fall under the guise of an electronic medium of exchange.

1. That said, I completely agree when it comes to Personal Wallets.
2. I strongly think that Business Wallets should be different, and subject to regulatory measures.
3. I am in no way suggesting any change to, let alone removing, any feature of any cryptocoin's features...... only in making a change to the "business as an end user's" wallet. This feature could be implemented today, and no private individual would notice any difference.... except when it came to having the ability of getting their coins back from a business that did them wrong (like the in the case of BFL).

The simplest way, as I can see it, is in refusing to purchase from businesses which do not refund their customers when they have done wrong.  I believe it is better for all of us that we ensure once money is transmitted from one party to another, it is done so with the confidence that the receiving member is trustworthy.  This causes people to be conscious about the decisions they make, and to not be impulsive with their purchases.  This roots out businesses which do not play nicely (since their reputation is at complete state), with the effect of causing startups to find it more difficult to begin.

So what we're really seeking is a system to ensure new business has a chance to grow in the trust of its clients, while providing protection to its clients in the event of it not being able to provide quality service.  This can be setup through the use of escrow, in which a trusted third party holds the money devoted to the company in question until said company can ship their product to the individual, whereupon the individual receiving the item can give the OK to the escrow party to release funds to the company.  If, as in the case of BFL, the company fails to deliver on its promises, the individual can then request their money back from the escrow party.  This process can be repeated for as long as necessary until the company is established and trusted to issue their own refunds when need be.  Although we may never know if a business will suddenly fail to perform or refund, it becomes much less likely the more the entity trades successfully.

The core quality we must consider is in people being careless with their money; the illusion of security dictates that we can ship our money wherever we please with a guarantee that nothing will ever go wrong.  People are trained to be careless; I believe it's best that we be far more prudent with who we trust.  In this transition between now and then, people would be wise to ask that business work with escrow services if it is security they seek; this helps to ensure fairness and protection between both the business and the individual.  As unfortunate as it is that BFL has made the decisions it has, this is an important lesson to us all as to who we give our money to.

Now, an automated escrow service, such as in the case of a modified business wallet, could be feasible, but I don't see it working without the trusted third party to oversee the process, nor would I trust a lone, appointed entity to act as the authority of this process; as we have learned, centralization is a doorway to abuse, and if people are given any room for abuse, they tend to take the opportunity, as we're always working in our own favor.  Likewise, the agency would be unable to enforce who can operate and cannot without political power; without political power, the agency is pointless, and with political power, the agency is bound to abuse its power.  Instead of resorting to these abstractions, I would encourage people to simply be careful with who handles their money, and to stay connected as to which businesses are trustworthy and which are not.  Even when considering BFL, it was, albeit without many knowing, a risk, and with all risks, you sometimes lose out.  There is no such thing as safety or security without knowledge and cautiousness.

So in this case, had BFL agreed to use an escrow service at its customer's demand (in an alternate universe anyhow), people would have their money in hand and the grief would be long over.  The moral of the story is to weigh trust with convenience, and give benefit to trust for it often outweighs the convenience.

[Rogue5pawn]

Point of fact, I do actually like the Escrow idea as they are one of the most heavily regulated financial services in the world (having bought a house, I can attest as to just how painfully regulated they are). I can see this working for large value transactions as being of interest to established Escrow companies. You, the private customer, make a purchase and send the funds to the business's Escrow company. Upon satisfactory receipt, you inform the Escrow Service to release your funds to the company; or if the Escrow service doesn't hear a complaint from you within a certain number of days, the funds are released to the business. If there is a complaint from the customer, the Escrow company initiates an investigation, and releases the held funds to whomever it has determined to be the correct party. Yes, this can work for large value purchases, but not for things under a certain value (say $500? because the Escrow company wouldn't see any significant profit in this range of numbers?) or for day-to-day kinds of things like buying a DVD from Walmart or getting a cup of coffee.

Other than the Business Wallet suggestion I have made (which, by the way would unfortunately have to be a government agency or a government funded private business), how would/could disputes over those lesser value transactions be resolved?

I sincerely agree, in general, with the world view you have presented and wish things weren't the way they are. Unfortunately, the World is the way it is (and getting better imho).

Oh, yeah, I hope I didn't imply that the chargeback system were to be automated. Hells, no! Quite the opposite, in fact. Private people would (hopefully) have to talk to real live people (once all the right buttons were pushed in the automated answering machine system), who would in turn be required to perform a rigorous investigation, and then have to manually initiate a remote transaction of the business's wallet in order to get the customer their refund, assuming an intransigent business and the customer is in the right. This is all intended, of course, as a last resort, no-other-options-available method of reimbursement. And a process that should be just daunting enough to enter into in the first place so as to lessen the likelihood of false claims.
--------------------

On a side note, I must say I am happy to see you engaging in the conversation, instead of just nay-saying, as many others are wont to do. I really appreciated your reply. Thank you.

[AndrewWilliams]

Sounds good.


I think it will basically be companies acting as different escrows.

Kind of like SquareTrade for eBay.


Users will lean towards a particular escrow company based on reputation and fairness. If an escrow makes too many unpopular decisions regarding chargebacks, word will spread.

[Rogue5pawn]

Sounds good.


I think it will basically be companies acting as different escrows.

Kind of like SquareTrade for eBay.


Users will lean towards a particular escrow company based on reputation and fairness. If an escrow makes too many unpopular decisions regarding chargebacks, word will spread.

So are you for the Escrow as the Third Party.... or the Business Wallet?

Something to note:
The Escrow Service will take a % of every transaction, thus $$ that the Business will never see, and so The Business will raise their prices to offset this loss of income, effectively passing the fee to the customer.

The Business Wallet version lets the Business see every single cryptocoin, and only loses out if they are found at fault in a valid claim. If the Chargeback Agency is government funded, then this Agency would be (should be) a neutral Third Party with no vested interest to make a profit.

[qwk]

Escrow: Money held by a "Trusted" Third Party.... Like a BANK... Hmmm... Yup, that's not centralized or anonymous in anyway at all, right?

There are a lot of possible solutions that give you access to "untrusted" escrow, where no third party holds your coins or may just "decide to keep them".

There are more concepts, but for the moment, multisig is best suited for this.
https://bitcointalk.org/index.php?topic=195168
https://blockchain.info/wallet/escrow

[waltermot321]

Sounds good, are you going to develop it?

[Johnny Bitcoinseed]

As a business owner I can tell you that customer fraud is Rampant and they often use chargebacks and threats of chargebacks to get free stuff.  Some customers game the system so badly that it is likely they pay for almost nothing they order online.

The cost, of course, is passed on to the honest customers.  That is the only way a business can stay in business.

By putting the onus on the customer to do due diligence and only trade with reputable businesses, the way is much more clear.  Reputable businesses work with you to solve problems that may arise.  With bitcoin they do not have heavy handed credit card companies who profit from chargebacks and give customers free reign to commit fraud.

Consider this: is a 10 Million dollar company going to try and cheat you on a $20 item?  No.  If they do they won't be in business very long as word of mouth is #1.  In addition, that is alot of work in order just to make a couple bucks.  They just don't do it and its simply not worth their time and effort.

Would a customer try to cheat a 10 Million dollar company out of a $20 item?  Yes.  Many hundreds do as a matter of course.

My humble opinion based on real world experience.  Your results / beliefs may vary but I believe that if we eliminate the chargeback customer fraud problem then prices will fall for all of us honest people in the long run.

[Mike Christ]

Other than the Business Wallet suggestion I have made (which, by the way would unfortunately have to be a government agency or a government funded private business), how would/could disputes over those lesser value transactions be resolved?

Ultimately, though I find a business failing to meet consumer demand a pity, it all depends on the individual.  If a business is known to repeatedly screw consumers, they eventually tank; who wants to buy from a business that is unreliable?  Even wrongdoing one individual is cause to lose several customers; it is the duty of the person wronged to bring their wronging to light, to warn others that the business in question is shady.  Due to our connectivity, it is paramount that businesses of today perform to near perfection, and to always maintain a healthy relationship with people who are reasonably dissatisfied; it is when a business is protected, for whatever reason, from tanking (usually involving "we have to protect ourselves from the monopolies with another monopoly" or "we can't let them die or who would supply service X?"), that they tend to abuse.

There are two forms of crime in this world: crime born in necessity, and crime born in want.  The first is the cause of a person committing a crime to remain alive; this is typically not the case for business.  The second occurs when a person or entity finds themselves in a position where they can do wrong and get away with it.  It is enabled through trusting the entity; if the business or corporation etc knows they can shaft a person without the negative repercussion, or at least a delayed consequence, then they will do so, every time.  Thus, the consumer's ultimate protection against this type of crime is to disallow it from occurring, either by refusing business or taking preemptive action, such as escrow.

Now, to resolve such a matter once it inevitably arises, it is always in the light of the business to do well, for it is the business who will make the larger wave by abusing a customer, than if a customer abuses a business.  The business must weigh the pros and cons; in the case of a customer attempting to rob the business by taking advantage of return policies and whatnot, the business must draw an agreeable line; for example, if a man has eaten 3/4ths of his hamburger and only then did he realize that it was not to his liking, of course he's trying to skip out on the bill; a common understanding tells us that one should realize they do not like something within the first few bites.  However, if the man has taken but a single bite and realized it was not to his liking, it is in the responsibility of the business to solve the problem, or even give a refund if need be, for the negative imagine of serving bad food and refusing to give refunds, whether true or not, would have a far greater impact than the few dollars it took to make the burger.

In other words, these disputes, when not interfered with, will naturally resolve themselves; there is a consequence for every action, and every bad business is in the responsibility of their customers to end.  What's important is to ensure that no bad deed goes unnoticed; consumers, as they typically do today, will research a business before shopping, will have an opinion about the business after shopping, and will then recommend or condemn the business based on their experience.  So long as we remain connected and aware of our web of trust among business, we can limit the crime businesses are capable of and stomp out the ones who repeatedly fail to perform.  The point is not to seek action once the deed is done, for nothing in the world, no law or technology, can stop a person from being careless; the point is to allow those who are consistently careless to become harmed so they may learn not to be.