How would online Bitcoin commerce work?

[Giraffe.BTC]

I've been following Bitcoin for a while now, and one hurdle to its use as a currency I'm not seeing how to overcome is the lack of accountability in online commerce. 

Online shopping works in large part because you know that if BudgetComputer.com doesn't send you the memory they promised, you can always sic Visa on them.  With Bitcoin, one party has to hand over their goods or money without any way of knowing that the other party will hold up their end of the bargain.  And if they don't, there's nothing you can do about it.

What is to stop people from putting up websites, collecting money, and then simply disappearing with it?  Wouldn't adoption of Bitcoin essentially drive out small businesses as people flock to the larger sites like Newegg and Amazon, in the hopes that a big company is less likely to rob you than a small one?

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[bulanula]

I've been following Bitcoin for a while now, and one hurdle to its use as a currency I'm not seeing how to overcome is the lack of accountability in online commerce. 

Online shopping works in large part because you know that if BudgetComputer.com doesn't send you the memory they promised, you can always sic Visa on them.  With Bitcoin, one party has to hand over their goods or money without any way of knowing that the other party will hold up their end of the bargain.  And if they don't, there's nothing you can do about it.

What is to stop people from putting up websites, collecting money, and then simply disappearing with it?  Wouldn't adoption of Bitcoin essentially drive out small businesses as people flock to the larger sites like Newegg and Amazon, in the hopes that a big company is less likely to rob you than a small one?

Nothing. This is already happening with the various sites just closing shop and running with the BTC.

[helloworld]

How about an online bitcoin wallet with generally much higher fees (in line with Visa/Mastercard) but which has customer protection in the form of insurance for the online wallet provider.

1 -- Customer purchases something via SuperDuperWallet(tm)
2 -- merchant doesn't ship the product
3 -- Customer puts in a dispute at SuperWallet and they return his coins.
4 -- SuperWallet covers the loss by pre-arranging some kind of insurance against the certain % of cases where this is going to happen.

[deslok]

Just integrety and honesty, i've always said buisness that do honest buisness make more in the long run.

[Littleshop]

You can go by history and the value of the transaction.  To be fair, there have been many places that STORE your bitcoins that have had problems, and many private sellers as well.  There have been far fewer (but not zero) bitcoin ecommerce sites that have defrauded customers.  BTCdeals.com is the only one I can think of off hand.  

I would not buy expensive items from an unknown bitcoin ecommerce site until they have a track record.

[ElectricMucus]

If recent online wallets are any indication chances are they are more likely to run off with everyones coins in the end.

The more money is involved and the less risk of exposure the more likely people rip each other off.
Reputation is key and works just fine.

For real protection we need something much more sophisticated like a decentralized web of thrust. Right now there is missing the infrastructure for this, but bitcoin could provide part of it ...

[Giraffe.BTC]

The key is to have a rating of some sort, so people have a reputation to protect. Why do big companies give good service? So people will keep coming back, they need to protect their image.

It would be useful for somebody to set up a place where bitcoin businesses can be rated, where people can give feedback and reviews. Of course, with places such as these, you have to watch out for people shilling for themselves, building up fake reputation to scam unwary customers. It is quite a dilemma.

This is the tricky part, though.  If you go with a centralized site, like Amazon's Marketplace, you kill off one of the best features of online commerce:  the ability for small sites to put competitive pressure on the big sites by offering lower prices due to their low overhead.  

Otherwise, just relying on reputation and ratings requires much savvier consumers (and can still be manipulated by shills) and seems like it will heavily favor the bigger players.  New sites will have a hard time getting off the ground since they'll be competing head to head with the scammers for customers who are willing to take a chance to get a good deal.  Meanwhile, the bigger sites can jack up their prices and charge people for the "privilege" of not getting ripped off.

[c0ffer]

Just integrety and honesty, i've always said buisness that do honest buisness make more in the long run.

+1

[Steve]

Some of the consumer protections that credit card issuers provide are desirable for certain types of transactions.  Just because such consumer protections aren't commonplace with bitcoin transactions today doesn't mean that they won't be in the future.  And the great thing about providing consumer protection in a bitcoin context is that you can do it without having any of the issues associated with stolen credit cards (which I would guess is responsible for the vast majority of credit card charge reversals).

Bitcoin is a solid and simple transaction construct on which many different types of transactions can be crafted.  It's much more difficult to take a reversible transaction and build an irreversible construct on top of it.

[bc]

How about an online bitcoin wallet with generally much higher fees (in line with Visa/Mastercard) but which has customer protection in the form of insurance for the online wallet provider.

1 -- Customer purchases something via SuperDuperWallet(tm)
2 -- merchant doesn't ship the product
3 -- Customer puts in a dispute at SuperWallet and they return his coins.
4 -- SuperWallet covers the loss by pre-arranging some kind of insurance against the certain % of cases where this is going to happen.

This, and Peter Lambert's #5, might not be far off. If trust is needed, why can't the marketplace provide it? Isn't this a business opportunity?

Imagine a "BitTrust" working to help bitcoin businesses establish themselves - like a credit rating agency geared toward bitcoin.
1) new businesses "register" with them to whatever degree they're willing:
  - participate in recorded video conference interview
  - provide valid photo ID, proof of address
  - submit to a credit check
  - submit to site security audits
  - post a bond, pay a periodic fee
  - attend face-to-face recorded interview with BitTrust employees
  - provide passports, fingerprints, social security numbers
2) BitTrust rates them and discloses their level of trust
3) BitTrust insures transactions with them for a price commensurate with their rating

Now, clearly one would have to trust BitTrust itself, but if they were a registered bricks and mortar operation themselves, maybe it could work (people could trust them enough to use their services). There'd always be the chance of collusion with an evil business, but if business were profitable, honesty might be their best policy - if BitTrust CEOs were on the line.


Sounds expensive, right? Maybe that's why credit cards charge such a high fee


It makes me think that the MOST important function of bitcoin has nothing to do with avoiding credit card fees - but more to do with it's Fed-proof nature.

EDIT:

... And the great thing about providing consumer protection in a bitcoin context is that you can do it without having any of the issues associated with stolen credit cards (which I would guess is responsible for the vast majority of credit card charge reversals).

Nice

[ElectricMucus]

@bc
http://en.wikipedia.org/wiki/Web_of_trust

[BitterTea]

Some of the consumer protections that credit card issuers provide are desirable for certain types of transactions.  Just because such consumer protections aren't commonplace with bitcoin transactions today doesn't mean that they won't be in the future.  And the great thing about providing consumer protection in a bitcoin context is that you can do it without having any of the issues associated with stolen credit cards (which I would guess is responsible for the vast majority of credit card charge reversals).

Bitcoin is a solid and simple transaction construct on which many different types of transactions can be crafted.  It's much more difficult to take a reversible transaction and build an irreversible construct on top of it.

With more advanced scripting accepted by the network, escrow can occur directly in the block chain, though some new partial transaction shipping protocols may be necessary.

[Xenland]

I've been following Bitcoin for a while now, and one hurdle to its use as a currency I'm not seeing how to overcome is the lack of accountability in online commerce. 

Online shopping works in large part because you know that if BudgetComputer.com doesn't send you the memory they promised, you can always sic Visa on them.  With Bitcoin, one party has to hand over their goods or money without any way of knowing that the other party will hold up their end of the bargain.  And if they don't, there's nothing you can do about it.

What is to stop people from putting up websites, collecting money, and then simply disappearing with it?  Wouldn't adoption of Bitcoin essentially drive out small businesses as people flock to the larger sites like Newegg and Amazon, in the hopes that a big company is less likely to rob you than a small one?

Its all about trust. period.

I highly doubt half the people from purchasing major website that you mentioned are going their because they know they can get their money back... I think they "trust" that the company will give the products up because they see the ad's on tv,internet, radio and then they hear they're friends talk about how great the service was so then they think "Well if everyone else uses and trust them, why don't i go ahead and give it a try?"
-----------

If your looking for a trust worthy bitcoin website try mine out. I've shipped over 8 packages already(if you need references PM and I'll supply them to you I don't like publicly stating peoples activity)
www.CheaperInCoins.com

[DeathAndTaxes]

Some of the consumer protections that credit card issuers provide are desirable for certain types of transactions.  Just because such consumer protections aren't commonplace with bitcoin transactions today doesn't mean that they won't be in the future.  And the great thing about providing consumer protection in a bitcoin context is that you can do it without having any of the issues associated with stolen credit cards (which I would guess is responsible for the vast majority of credit card charge reversals).

Bitcoin is a solid and simple transaction construct on which many different types of transactions can be crafted.  It's much more difficult to take a reversible transaction and build an irreversible construct on top of it.

+1 This.

The issue of disputes isn't a bitcoin issue.  Bitcoin = digital cash.  What happens if you use cash to buy xyz from abc company and they rip you off.  Can you call the Federal Reserve and request a chargeback of the cash transaction?  Yet cash (and other coinage) has been used for thousands of years.

Keep bitcoin simple.  Higher level protocols can be built on top of bitcoin. 
Escrows, forced arbitration, better business bureaus, even legal action are remedies.

The reality is that brand, and reputation are valuable and become more valuable with irreversable transactions.  It is what makes customers go back.  I go to newegg.com first because they have always treated me right.  Even if scammersRus.com has a cheaper price I likely am going to buy w/ NewEgg (although for some products Amazon is giving them a run for their money).

Bitcoin is and always should remain digital cash with all the advantages and disadvantages that come with it.  That doesn't mean higher level services can't be built on top of it. 

[netrin]

@bc
http://en.wikipedia.org/wiki/Web_of_trust

Exactly, bitcoin allows for the natural interpersonal web of trust to thrive on the internet. Perhaps bitcoiners should look at, integrate with, and expand upon existing WOT solutions such as

http://www.mywot.com/ (Actually is this a WEB of trust or just a LIST of ratings?)
http://en.wikipedia.org/wiki/WOT:_Web_of_Trust
https://addons.mozilla.org/en-US/firefox/addon/wot-safe-browsing-tool/

and of course our own

http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System
http://bitcoin-otc.com/viewratings.php

[Giraffe.BTC]

With more advanced scripting accepted by the network, escrow can occur directly in the block chain, though some new partial transaction shipping protocols may be necessary.

Sounds interesting, can you give more details about how this would work?

[Giraffe.BTC]

The issue of disputes isn't a bitcoin issue.  Bitcoin = digital cash.  What happens if you use cash to buy xyz from abc company and they rip you off.  Can you call the Federal Reserve and request a chargeback of the cash transaction?  Yet cash (and other coinage) has been used for thousands of years.

Cash requires a face to face exchange that you don't have online.  Cash has existed for thousands of years, but how many transactions are conducted by sending cash through the mail?  Not many, and almost none where you don't have prior face to face experience. 

To achieve widespread adoption, we have to explain to people how they're not just mailing cash to anonymous craigslist sellers and hoping the computer / couch / buttplug shows up a few days later.

[BitterTea]

With more advanced scripting accepted by the network, escrow can occur directly in the block chain, though some new partial transaction shipping protocols may be necessary.

Sounds interesting, can you give more details about how this would work?

https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_dispute_mediation

tl;dr Bitcoin could support a transaction that can be spent to either of 2 addresses, and must be signed by 2 of 3 parties in order to be spent. Either buyer + seller, buyer + mediator, seller + mediator can agree that the transaction should go back to the buyer, or to the seller.

[Giraffe.BTC]

https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_dispute_mediation

tl;dr Bitcoin could support a transaction that can be spent to either of 2 addresses, and must be signed by 2 of 3 parties in order to be spent. Either buyer + seller, buyer + mediator, seller + mediator can agree that the transaction should go back to the buyer, or to the seller.

Wow, that's really interesting.  Thanks for the info.

[BitterTea]

https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_dispute_mediation

tl;dr Bitcoin could support a transaction that can be spent to either of 2 addresses, and must be signed by 2 of 3 parties in order to be spent. Either buyer + seller, buyer + mediator, seller + mediator can agree that the transaction should go back to the buyer, or to the seller.

Wow, that's really interesting.  Thanks for the info.

No problem. I find the other examples on that page interesting too, especially assurance contracts.