Bitcoin Chargeback system

[the founder]

We're taking feedback to know if this is something people want,  don't want, or opt in or out.   It's NOT implemented now,  because honestly we want your feedback (it's #7 on the list, and the only one not implemented yet waiting for your feedback).

http://www.flexcoin.com/?page_id=103

Instead of taking feedback directly,  I honestly want it discussed in open so we can hear all sides.    Flexcoin is designed to fix all the bitcoin problems or perceived problems.   Everything from easy ID's rather than long bitcoin addresses to instant (no next block wait) FREE transfers to a whole host of other issues.

[Yuusha]

One of the reasons Bitcoin exists is because people want to avoid chargebacks.

[LeonGeeste]

One of the reasons Bitcoin exists is because people want to avoid chargebacks.

That's an oversimplifcation.

Bitcoin exists so that there's a decentralized digital currency that, at the base level, does not allow chargebacks, just as physical cash does not.

However, Bitcoin is certainly not intended to prevent people who want such a feature from layering a chargeback-allowing protocol on top of the basic Bitcoin protocol, for users who really want such a feature.  This is the role played by Bitcoin escrow services, and whatever other services people are coming up with.

Similarly, physical cash does not itself allow chargebacks, but it allows people to layer systems on top of this that allow chargebacks.

Bitcoin is supposed to take the role of cash, not prevent analogous mechanisms from interfacing with it to reduce the reliance on trust between the transacting parties.

Still, to the extent that you want to modify the Bitcoin protocol *itself* to allow chargebacks, you can GTFO and take your phail with you.

[hugolp]

One of the reasons Bitcoin exists is because people want to avoid chargebacks.

That's an oversimplifcation.

Bitcoin exists so that there's a decentralized digital currency that, at the base level, does not allow chargebacks, just as physical cash does not.

However, Bitcoin is certainly not intended to prevent people who want such a feature from layering a chargeback-allowing protocol on top of the basic Bitcoin protocol, for users who really want such a feature.  This is the role played by Bitcoin escrow services, and whatever other services people are coming up with.

Similarly, physical cash does not itself allow chargebacks, but it allows people to layer systems on top of this that allow chargebacks.

Bitcoin is supposed to take the role of cash, not prevent analogous mechanisms from interfacing with it to reduce the reliance on trust between the transacting parties.

Still, to the extent that you want to modify the Bitcoin protocol *itself* to allow chargebacks, you can GTFO and take your phail with you.

I think the Bitcoin protocol already allows for a chargeback system. But its optional and selected by the payer. If you want more info youll have to ask one of the developers.

[Yuusha]

One of the reasons Bitcoin exists is because people want to avoid chargebacks.

That's an oversimplifcation.

Bitcoin exists so that there's a decentralized digital currency that, at the base level, does not allow chargebacks, just as physical cash does not.

However, Bitcoin is certainly not intended to prevent people who want such a feature from layering a chargeback-allowing protocol on top of the basic Bitcoin protocol, for users who really want such a feature.  This is the role played by Bitcoin escrow services, and whatever other services people are coming up with.

Similarly, physical cash does not itself allow chargebacks, but it allows people to layer systems on top of this that allow chargebacks.

Bitcoin is supposed to take the role of cash, not prevent analogous mechanisms from interfacing with it to reduce the reliance on trust between the transacting parties.

Still, to the extent that you want to modify the Bitcoin protocol *itself* to allow chargebacks, you can GTFO and take your phail with you.

Of course.

However, what I was trying to say is that there probably won't be much interest in a service like this because the lack of chargebacks is one of the very reasons people are drawn to bitcoin. A service that removes that aspect won't be very desireable to the bitcoin community.

I do not object to the existence of such a service, I'm merely claiming there probably won't be much interest.

[quipu]

From http://www.flexcoin.com/?page_id=103

Once the vendor accepts the transaction, the transfer would become final.

If it requires vendor approval, it's not a chargeback. It's a refund.

Chargebacks imply 3rd party arbiter with the power to reverse the transaction if vendor does not comply. That arbiter would be you.

If you are prepared to do this, lay down arbitration rules and make chargeback protection optional, I'm sure few people will object.

[the founder]

If it requires vendor approval, it's not a chargeback. It's a refund.

good point.

[TonyHoyle]

It's an interesting idea.. but it seems like it's centralised on a single website, which is a single point of failure (and vulnerable to things like DMCA takedown notice).

It may be that you can't solve the problems without centralising, but I'd hope someone smart would come along and come up with something better.

As far as chargebacks go.. you'll end up with a messy dispute mechanism if you're not careful.  In the case of fraud they're invaluable (and you'll never be able to safely take credit card/paypal without such a mechanism, and the dwolla mess wouldn't have been an issue with it in place) but user A saying user B didn't send an item through the post?  That's how paypal came unstuck...

[the founder]

remember though flexcoin only does bitcoins,  no usd, no euros, etc.

[quipu]

It's an interesting idea.. but it seems like it's centralised on a single website, which is a single point of failure (and vulnerable to things like DMCA takedown notice).

It does not have to be this way. Payment processing and dispute arbitration can be done by different entities. Payer and payee agree on terms of payment, choose an arbiter and instruct payment processor that in case of a dispute arbiter will have a final word on whether payment needs to be reversed or not.

This is basically the same as a chargeback, except in case of a chargebacks payment processor and arbiter are always the same and you cannot opt-out.

[the founder]

Just remember when replying that we can only have influence on Flexcoin ... not the download client or the bitcoin system itself.. just try to keep it in that reference .. 

[quipu]

Just remember when replying that we can only have influence on Flexcoin ... not the download client or the bitcoin system itself.. just try to keep it in that reference .. 

Sorry, if it sounded too generic. When I referred to Payment Processor I meant FlexCoin. Since you hold both payer and payee accounts and you process the transaction you have full control over its reversal. Just don't monopolize arbitration.

It could work something like this:
1. Some of your customers designate themselves as an 'arbiter'.
2. When making or requesting payment one can add a stipulation - this payment is bound by the terms this agreement (text and hash of agreement) and the arbiter is <flexcoin account id>
3. If there is a dispute later, arbiter is notified, makes his decision and instructs flexcoin to (not to ) reverse this transaction.

If I'm understanding it correctly this does not require any influence on bitcoin system itself.

[BitcoinRigs.com]

We're taking feedback to know if this is something people want,  don't want, or opt in or out.   It's NOT implemented now,  because honestly we want your feedback (it's #7 on the list, and the only one not implemented yet waiting for your feedback).

http://www.flexcoin.com/?page_id=103

Instead of taking feedback directly,  I honestly want it discussed in open so we can hear all sides.    Flexcoin is designed to fix all the bitcoin problems or perceived problems.   Everything from easy ID's rather than long bitcoin addresses to instant (no next block wait) FREE transfers to a whole host of other issues.

As an online merchant, two things happen. A. We get paid, and B. We ship the product. Once we ship a product, we have virtually no way of getting it back. Chargebacks kill us because they are one-sided. Don't add them unless you can guarantee that we'll get back the product we already shipped.

[the founder]

Remember how the system we envision works though...  the second you accept that transfer it's final.   Until you accept he could change it.  after you accept it's done and finalised.

[BitcoinRigs.com]

Remember how the system we envision works though...  the second you accept that transfer it's final.   Until you accept he could change it.  after you accept it's done and finalised.

Ok, so what you're saying is you are considering implementing what they call Authorize and Capture? If we can Auth when the order is placed, and then Capture when we ship and there's then no chargebacks after that, then we're golden! That's a very good layer to add to Bitcoins.

Beyond that, we'd like to be able to refund the customer (at our discretion of course), so add a way we can send the Bitcoins back to whomever sent it.

[dancupid]

I use paypal to sell on eBay and we get a few chargebacks, either becasue there is suspicion of fraud (a stolen account etc) or because the buyer claims they never received the item.
The fraud side I can understand, although it's open to abuse as someone just needs to claim their account was stolen .
Chargebacks from buyers who claim non-receipt are rare because most sensible people know how to use email and will simply contact us. Most people know that a percentage of items will get lost in the post and expect that a reputable seller will simply solve their problem (by resending or refunding).
For most buyers I would be happy to accept chargebacks as it gives them a little confidence that they will not get ripped off and that there is a final solution should I fail to deal with their potential problems in the correct manner. ie it increases their likelihood of buying.
The weakness of paypal's system is that it is not voluntary - I, as a seller, am forced to accept any buyer irrespective of their past history or lack of reputation. If someone with zero positive feedback in eBay buys 50 items off me, I have to just trust that they are reputable.
I think a voluntary chargeback system could work well as an extra layer to bitcoin, but it should also include a trust rating for both parties, so that both buyer and seller can make a decision on how the specific transaction should work. Also the mechanism of arbitration should include a period in which both parties need to show they have made every effort to communicate and resolve the problem themselves without the involvement of a 3rd party.
(I realise that's not what you are implementing, but these are my opinions on charge-backs in general)

[jimbo77]

If a FlexCoin user sends to another FlexCoin user can they tell who it's from? They could just refund, send back amounts if they can. I'd rather have that than some type of chargeback. Leave it for the receiver to decide if they send some back.

[the founder]

If a FlexCoin user sends to another FlexCoin user can they tell who it's from? They could just refund, send back amounts if they can. I'd rather have that than some type of chargeback. Leave it for the receiver to decide if they send some back.

damm good idea.

[JoelKatz]

As an online merchant, two things happen. A. We get paid, and B. We ship the product. Once we ship a product, we have virtually no way of getting it back. Chargebacks kill us because they are one-sided. Don't add them unless you can guarantee that we'll get back the product we already shipped.

Right, so you wouldn't ship a product until the chargeback window had closed. But the advantage would be if some guy calls you up and says "I sent you 50 bitcoins, where's my XYZZY?" you say "I have no record. Charge it back or send us proof we accepted your payment."

Or, "I accidentally sent you 100 bitcoins instead of 1.00, here's the record, send them back to this address". What do you do? You don't want to steal from someone who sent you money by mistake, but you don't want to risk the next call asking you to send them back to some other address.

This type of chargeback is a great idea. I recently posted a suggestion to add support for them to bitcoin and to make transactions truly anonymous at the same time. (Admittedly, it also had some downsides.)