2013-11-26 Wired Bitcoin...Its Fatal Flaw

[nanobrain]

http://www.wired.com/opinion/2013/11/once-you-use-bitcoin-you-cant-go-back-and-that-irreversibility-is-its-fatal-flaw/

Pretty negative piece, thoughts..

[markjamrobin]

I think the article is flawed, because that was one of the original points of Bitcoin. Also a centralized system like PP could be used to allow chargebacks in some capacity. Also given that cash is also
"non-chargeback-able", but is still used, I feel that it can be overcome.

[Nemesis]

http://www.wired.com/opinion/2013/11/once-you-use-bitcoin-you-cant-go-back-and-that-irreversibility-is-its-fatal-flaw/

Pretty negative piece, thoughts..

For someone claimed to be Security expert, hes certainly lacks intelligence.

Can cash be reversible?

lol Does reversibility of CC PREVENT CC fraud? No it might protect some CC users (no all CC has the same policy) but certainly the thieves already got their reward.

[markjamrobin]

http://www.wired.com/opinion/2013/11/once-you-use-bitcoin-you-cant-go-back-and-that-irreversibility-is-its-fatal-flaw/

Pretty negative piece, thoughts..

For someone claimed to be Security expert, hes certainly lacks intelligence.

Can cash be reversible?

lol Does reversibility of CC PREVENT CC fraud? No it might protect some CC users (no all CC has the same policy) but certainly the thieves already got their reward.

Yes, chargebacks from credit cards still screw someone, either merchants or issuers.

[TraderTimm]

Wired was relevant back in the 1990's - 2000.

It sure as hell isn't now.

[pinger]

Wired was relevant back in the 1990's - 2000.

It sure as hell isn't now.

Wired?? which wired? this one?

http://www.wired.com/magazine/2011/11/mf_bitcoin/

[Bitcopia]

I didn't read the article, but from what I gather it looks like he's saying the fatal flaw is the irreversibility of transactions.

Ok, first of all, these are primitive times for Bitcoin. We are in beta. If transactions need to be reversible (which I absolutely disagree with) then the protocol can be amended. But even without amending the protocol, services can and will probably be required to take the responsibility for transaction reversals. It is unlikely that in the future masses of people will be hosting their own wallets and sending to a company's self hosted wallet. In fact, most company's even today use services such as BitPay and Coinbase. Now companies such as these will eventually be required to enforce regulation E (at least I would imagine so, as every other payment processor to date has.) So in doing so, the businesses that use their service to accept bitcoins will be subject to the same chargeback rules that any other payment processor is required to enforce. And the die hard bitcoin believers don't like that. But it's just the way it's probably going to go in the US for any businesses that isn't operating a libertarian mom and pop shop . The huge advantage of bitcoin as a payment vehicle is the fact that a comprehensive service can be built on top of its protocol that allows for all of the same benefits of traditional merchant processing at costs that are more than 66% cheaper. ACH is no longer necessary. And that's huge.

Bitcoin is beautiful in beta. But rest assured, the way we have used it for the past few years will not be adopted by the masses. They are waiting for us to make it easier and safer, and we are doing just that.

I hope this is relevant. I should have read the article, but didn't have time.

[Bitcopia]

I don't understand how others don't understand that there will be a magnitude of services built on top of virtual currency protocols.

It's not about the masses using Bitcoin. It's about the infrastructure that can be built around it, and that is as broad as the imagination of a capable mind.

[nanobrain]

I didn't read the article, but from what I gather it looks like he's saying the fatal flaw is the irreversibility of transactions.

Ok, first of all, these are primitive times for Bitcoin. We are in beta. If transactions need to be reversible (which I absolutely disagree with) then the protocol can be amended. But even without amending the protocol, services can and will probably be required to take the responsibility for transaction reversals. It is unlikely that in the future masses of people will be hosting their own wallets and sending to a company's self hosted wallet. In fact, most company's even today use services such as BitPay and Coinbase. Now companies such as these will eventually be required to enforce regulation E (at least I would imagine so, as every other payment processor to date has.) So in doing so, the businesses that use their service to accept bitcoins will be subject to the same chargeback rules that any other payment processor is required to enforce. And the die hard bitcoin believers don't like that. But it's just the way it's probably going to go in the US for any businesses that isn't operating a libertarian mom and pop shop . The huge advantage of bitcoin as a payment vehicle is the fact that a comprehensive service can be built on top of its protocol that allows for all of the same benefits of traditional merchant processing at costs that are more than 66% cheaper. ACH is no longer necessary. And that's huge.

Bitcoin is beautiful in beta. But rest assured, the way we have used it for the past few years will not be adopted by the masses. They are waiting for us to make it easier and safer, and we are doing just that.

I hope this is relevant. I should have read the article, but didn't have time.

You got it
Nice riposte

[Carlton Banks]

I didn't read the article, but from what I gather it looks like he's saying the fatal flaw is the irreversibility of transactions.

Ok, first of all, these are primitive times for Bitcoin. We are in beta. If transactions need to be reversible (which I absolutely disagree with) then the protocol can be amended. But even without amending the protocol, services can and will probably be required to take the responsibility for transaction reversals. It is unlikely that in the future masses of people will be hosting their own wallets and sending to a company's self hosted wallet. In fact, most company's even today use services such as BitPay and Coinbase. Now companies such as these will eventually be required to enforce regulation E (at least I would imagine so, as every other payment processor to date has.) So in doing so, the businesses that use their service to accept bitcoins will be subject to the same chargeback rules that any other payment processor is required to enforce. And the die hard bitcoin believers don't like that. But it's just the way it's probably going to go in the US for any businesses that isn't operating a libertarian mom and pop shop . The huge advantage of bitcoin as a payment vehicle is the fact that a comprehensive service can be built on top of its protocol that allows for all of the same benefits of traditional merchant processing at costs that are more than 66% cheaper. ACH is no longer necessary. And that's huge.

Bitcoin is beautiful in beta. But rest assured, the way we have used it for the past few years will not be adopted by the masses. They are waiting for us to make it easier and safer, and we are doing just that.

You obviously haven't factored the strength of the decentralised network model into your thinking there. You've provided a indirect argument for taking all the control out of the hands of the people who may typically use the network in the future, and putting it back into the hands of trusted institutions, which is no different to the way the financial system works today. Hence, you're doing it wrong.

[SgtSpike]

Cash didn't have chargebacks either.  People built systems on top of cash that allowed chargebacks.  The same thing can (and very probably will) happen.

[ArticMine]

To anyone over the age of 50 this "fatal flaw" is a very valuable feature of Bitcoin. The trouble is that over the last 20 years the banking industry has moved to inherently insecure methods of payment (starting with credit cards over the Internet, and then cheques that are cleared electronically, ACH payments etc., ) and has then become totally reliant on fixing the problem after the fact by reversing payments. The result is that an entire generation has been brainwashed into the concept that reversing payments after the fact is necessary to prevent fraud.

Now turn back the clock 40 years or earlier and one finds out that commerce and banking worked perfectly well for centuries without this need to reverse transactions. When I explain Bitcoin to seniors I simply tell them it works like cash that one can use on the Internet, and they get it. This is because Bitcoin is way closer to the way payments were done during their youth, cash and bearer instruments that were not reversible. Something to keep in mind for a 20 year old wishing to introduce Bitcoin to his or her grandparents.

[Richy_T]

This thread's a day old and nobody's mentioned escrow?

[callem]

New paradigms require new thinking. Bitcoin's irreversibility is a feature, not a bug.

Cash and gold are also "irreversible". If you need reversibility, use a credit card - or escrow (there, mentioned it!).

Bitcoin is the new paradigm, eventually they will 'get it' it just seems to be taking Wired a while.

[beetcoin]

http://www.wired.com/opinion/2013/11/once-you-use-bitcoin-you-cant-go-back-and-that-irreversibility-is-its-fatal-flaw/

Pretty negative piece, thoughts..

For someone claimed to be Security expert, hes certainly lacks intelligence.

Can cash be reversible?

lol Does reversibility of CC PREVENT CC fraud? No it might protect some CC users (no all CC has the same policy) but certainly the thieves already got their reward.

well, to play the devil's advocate, cash is usually traded in-person, where meeting someone face-to-face reduces the risk. and if it's traded electronically, it'd be reversible.

in order to use bitcoin successfully, you need to not be an idiot.. because if you are, you're risking quite a bit of your money.

[histman]

I am not saying that I agree with the article, but I think his point is that consumers inherently trust all types of electronic transactions because there is a belief that these are reverseable.  I, the consumer, am protected from fraud.  

Examples:

If my credit card number is stolen I am only responsible for $50.

If I order something online and get ripped off I can initiate a chargeback.

We bitcoiners love to brag about the irreversibility of BTC, but it is this very attribute that scares the buyer.  Now I fully understand that consumers are not protected nearly as much as they think, but they believe that they are. "buyer protection" protocols must be implemented before Average Joe will start using them.

[oakpacific]

How thoroughly some Americans are spoiled and brainwashed by the credit card industry is beyond belief, they seem to be completely ignorant that there is a much superior method for customer protection, which Bitcoin fully supports and improves to a new level, and has been employed to process trillions of dollars of transaction in China by payment processors like Alipay, called escrowing.(shocking revelation!)

Escrowing provides equal protection for the seller and buyer, unlike chargeback, the favored system in the U.S, which unfairly protects the buyers only and allows a buyer to conveniently scam a merchant on the pretext that no good is received, because the fund is placed in the wallet of a third-party, and once there belows to neither the buyer nor the seller.

You may ask, how does the third party verify if the buyer is lying when he requests a refund? Dead and simple, all delivery companies have a auto-tracking system, which will update the escrower about the status of the package, once the buyer signs the package(which is required if he wants to accept it), the escrower will be immediately informed, there will be no way for you to lie.

I was shocked to find even Paypal doesn't support escrowing, cause the business model is beyond maturity.  It may sound crazy but I am convinced that had the U.S has proper escrowing payment and delivery industries, their unemployment problem would have been solved by now by a C2C platform like Taobao, which alone supports millions of online shops and creates 20 million jobs for China,(no kidding)

Chargeback is a dinosaur and should have long gone into the history, yet there is this journalist defending it like it's jewel in the crown.

[histman]

You may ask, how does the third party verify if the buyer is lying when he requests a refund? Dead and simple, all delivery companies have a auto-tracking system, which will update the escrower about the status of the package, once the buyer signs the package(which is required if he wants to accept it), the escrower will be immediately informed, there will be no way for you to lie.

This is already how the chargeback system works.  When the buyer initiates a chargeback, the credit card company asks the merchant to produce a "proof of delivery" signature.  If the buyer signed for the product then the merchant doesn't have to eat the loss.  If the buyer did not sign for it, then the merchant does.  That's the idea, anyway.

Of course most products purchased online are delivered without requiring a signature and I don't see this changing, bitcoin or not.  Smaller ticket items are generally considered not wiorth the hassle. 

Also, however, customers can seek a chargeback for other reasons, such as the product not being as described, or being damaged. 

[reedy10]

The fact that you cannot take back a transaction is old news.

[oakpacific]

You may ask, how does the third party verify if the buyer is lying when he requests a refund? Dead and simple, all delivery companies have a auto-tracking system, which will update the escrower about the status of the package, once the buyer signs the package(which is required if he wants to accept it), the escrower will be immediately informed, there will be no way for you to lie.

This is already how the chargeback system works.  When the buyer initiates a chargeback, the credit card company asks the merchant to produce a "proof of delivery" signature.  If the buyer signed for the product then the merchant doesn't have to eat the loss.  If the buyer did not sign for it, then the merchant does.  That's the idea, anyway.

Of course most products purchased online are delivered without requiring a signature and I don't see this changing, bitcoin or not.  Smaller ticket items are generally considered not wiorth the hassle. 

Also, however, customers can seek a chargeback for other reasons, such as the product not being as described, or being damaged. 

Well, here you will have to sign every package, or you don't get it.

As for unsatisification with the product, it will be handled differently according to the returning policy, the refund will be processed independently, rather than just reversing the original transaction.