[2014-05-07] Silk Road 2.0 Now Larger Than Silk Road Ever Was

[snarlpill]

Escrow is not safe either.

Plenty of site operators have stolen escrow funds.

Multisig escrow is the only way you can even claim your money is safe

I've heard Multisig escrow in conversation and threads on here many times. What is it (besides a form of escrow obv.) and how does it work?

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[bryant.coleman]

I've heard Multisig escrow in conversation and threads on here many times. What is it (besides a form of escrow obv.) and how does it work?

As far as I know, this is how multi-sig works:

Option 1:

1. Create a multisig address which requires signatures from both the buyer and seller.
2. The buyer sends funds to this address.
3. Seller ships the product.
4. When the product arrives, the buyer and the seller sign a transaction sending the funds from the multisig address to the seller.
5. If the order is cancelled amicably, the buyer and seller sign a transaction sending the funds from the multisig address to the buyer.

This doesn't require any 3rd party, but it does have several failure modes, e.g. extortion, negligence and so on.

Option 2:

1. Find a relatively trustworthy escrow/mediator.
2. Create a multisig address requiring 2 signatures out of the buyer, seller and mediator.
3. Buyer sends funds to this address.
4. Seller ships the product.
5. When the product arrives, buyer and seller sign a tx sending funds to seller.
6. If the product doesn't arrive, mediator verifies this fact, and buyer and mediator sign a tx sending funds to buyer.
7. If the product arrives but buyer refuses to pay, mediator verifies this fact, and seller and mediator sign a tx sending funds to seller.

This requires a 3rd party, but the trust requirement is limited. As long as buyer and seller cooperate the mediator doesn't do anything. A problem requires 2 out of 3 parties to defect, unlike traditional escrow where the escrow can ruin it himself.

(Thanks to Meni Rosenfeld of Bitcoin QT).

[Kluge]

The collusion issue with Opt2 multi-sig escrow you mention is very serious on a site which has a fair chance at being a honeypot, and it's especially dodgy given the number of accounts being "hacked." If the government is both escrow and either the seller or buyer, you're still completely screwed when they decide to harvest the project.

This would usually be in the realm of "outfield conspiracy theory," but I think it's definitely worth seriously considering for potential transactors on these kinds of sites, especially as a seller since you aren't particularly protected using either multi-sig method (I'd imagine most people use option 2, but Idunno how it works on those sites).

[notthematrix]

The collusion issue with Opt2 multi-sig escrow you mention is very serious on a site which has a fair chance at being a honeypot, and it's especially dodgy given the number of accounts being "hacked." If the government is both escrow and either the seller or buyer, you're still completely screwed when they decide to harvest the project.

This would usually be in the realm of "outfield conspiracy theory," but I think it's definitely worth seriously considering for potential transactors on these kinds of sites, especially as a seller since you aren't particularly protected using either multi-sig method (I'd imagine most people use option 2, but Idunno how it works on those sites).

address space is in a magintude of earth * granes of sand * earth * granes of sand * earth *earth times granes of sand!

so no collision is not very likely.

[bryant.coleman]

The collusion issue with Opt2 multi-sig escrow you mention is very serious on a site which has a fair chance at being a honeypot, and it's especially dodgy given the number of accounts being "hacked." If the government is both escrow and either the seller or buyer, you're still completely screwed when they decide to harvest the project.

Well... as far as I know, so far the FBI has not prosecuted any buyers. I believe that they are only after the sellers and the site admins. So... the buyers might be safe after all.

[Kluge]

It's pretty unusual for government to ever go after end-users. Johns aren't often prosecuted, nor druggos unless they're being assholes. Buyer won't be getting what he paid for at collection time, though, and probably not a refund either. (whatever happened to SR funds? Still just sitting around?)

collision is not very likely.

Collusion is a word, not a typo.

[notthematrix]

It's pretty unusual for government to ever go after end-users. Johns aren't often prosecuted, nor druggos unless they're being assholes. Buyer won't be getting what he paid for at collection time, though, and probably not a refund either. (whatever happened to SR funds? Still just sitting around?)

They are ALL PAYED back!!!!!
http://www.nbcnews.com/tech/security/silk-road-pledges-pay-back-users-after-2-6-million-n32341
so this make them more trustwordy then the everage bank!

[bryant.coleman]

It's pretty unusual for government to ever go after end-users. Johns aren't often prosecuted, nor druggos unless they're being assholes.

Sometimes they punish a few end-users, to send the message across. I remember last year, when the authorities imposed fines of hundreds of thousands of dollars to a few internet users, who had downloaded pirated movies using torrent. The aim was to spread fear, so that the majority will refrain from downloading such files.