Separating Bitcoin's Legitimate Business's

[cunicula]

I think it would make sense to try to make it similar to a trade guild. Trade guilds can be self-regulating institutions. They have played an important role in regulating commerce, particularly in contexts lacking effective third-party enforcement mechanisms. Bitcoin is such a context.

Trade guilds often work as follows:

There is a single account belonging to a collective regulatory organization. Each participating businesses holds a key to this account. Authorization of any txn requires a yes vote from the majority of keys. There are three types of txns.

1) Authorization of a new member and the issue of a key to this member on receipt of his deposit
2) Confiscation of a member's deposit and cancellation of the associated key
3) Refund of a member's deposit and cancellation of the associated key

All of these txn types should be a matter of public record (e.g. in the block chain with signed messages).

For the system to work, one needs to have the majority of businesses remain honest. The incentive to remain honest is that association with the guild provides some sort of commercial benefit (e.g. enhanced reputation).

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[bitprotection]

Update: I've come up with a way to incorporate an "escrow" around this where it takes 2-3 trust people to release any fraud claim funds against a bitcoin business.

Essentially, the idea is x amount of (btc) is put up as a "deposit" by abc company  - 2-3 bitcoin trusted members can apply to be "trusted key holders" against the business ( not associated w/ the business)  all this in a transparent website I'm coming up with where it shows how much BTC bond the business has put up and who are the "trusted key holders". Those members get a small dividend for being  "trusted key holder"   .

This is my initial idea I'm working on.

[cablepair]

as someone said earlier in the thread "Trust No One" is the best policy

but when trust is something that must be extended - really the best metric we have for trust in the Bitcoin world right now (other than the otc system which is cumbersome for many users) is the way our forum has evolved into a reputation system.

to me if a bitcoin business has absolutely no real ties to a real person on this forum its a major red flag
(case in point - Bitscalper)

[bitprotection]

as someone said earlier in the thread "Trust No One" is the best policy

but when trust is something that must be extended - really the best metric we have for trust in the Bitcoin world right now (other than the otc system which is cumbersome for many users) is the way our forum has evolved into a reputation system.

to me if a bitcoin business has absolutely no real ties to a real person on this forum its a major red flag
(case in point - Bitscalper)

I hear you on that point BUT at some point you have to trust someone in this case 3 people - I'm assuming the chances that 2-3 OTC trusted people or Hero/donator forum members  doing sort of collusion would be remote I would believe.

For your scenario above the person regardless is fronting some sort of deposit to let everyone know he/she are serious. Good feedback!

[stochastic]

I'm sure this idea has been played about before here but to lazy to search around on here but what if there was some sort of Bitcoin Business Insurance?  In other words, the bitcoin business front's a certain amount of bitcoins to insure he/she is serious about doing bitcoin business in this community. In other words, some new bitcoin company comes along and doesn't know how to "gain any trust"  ( looks overwhelming) can at least rest assure anyone he does business with that he has enough coins to compensate them for whatever happens. So it would be transparent - a certain amount of coins for the public to see against their business - if they decide the run and there are people effected by this people can issue claims and have funds released. I don't know just trying to see how we can introduce more trustworthy business to our ecosystem! 

obviously, by my handle here I'm interested in this stuff! haha

I have been thinking about this a lot too.  How to insure people's money when no one trusts each other.  Bitcoin is a system that allows people to exchange money that don't need to trust each other.

Maybe a better way is to set up an exchange that allows bets by the community on the likelihood of some type of business failure (ie, wallet theft, business incompetence, or outright scams).

For example, lets say I put some money into Bitscalper, but I am hesitant because I don't trust them.  I buy a bet on the website that says that Bitscalper will fail.  There needs to be clear contractual agreement of what constitutes a win when the business fails.

Anyway, say I have 100 bitcoins in Bitscalper and I insure 0 to 100% of those bitcoins.  A speculator bets that Bitscalper wills stay solvent so they take the bet.

The market needs to stay liquid enough so that if I close my Bitscalper account I can also sell back my bet to the market since I don't need it anymore.

People may not trust anyone else, but they sure like to speculate.

[FreeMoney]

Don't worry, the bar is set pretty low as to what constitues a legit bitcoin business!  One metric is that  scammers have made hands over fist more then what legitimate services have offered.

This is to be expected really. Scammers (usually) have short time preference and we're just getting started. People who are building good brand equity and reputation will make a buttload eventually.

[bitprotection]

I'm sure this idea has been played about before here but to lazy to search around on here but what if there was some sort of Bitcoin Business Insurance?  In other words, the bitcoin business front's a certain amount of bitcoins to insure he/she is serious about doing bitcoin business in this community. In other words, some new bitcoin company comes along and doesn't know how to "gain any trust"  ( looks overwhelming) can at least rest assure anyone he does business with that he has enough coins to compensate them for whatever happens. So it would be transparent - a certain amount of coins for the public to see against their business - if they decide the run and there are people effected by this people can issue claims and have funds released. I don't know just trying to see how we can introduce more trustworthy business to our ecosystem! 

obviously, by my handle here I'm interested in this stuff! haha

I have been thinking about this a lot too.  How to insure people's money when no one trusts each other.  Bitcoin is a system that allows people to exchange money that don't need to trust each other.

Maybe a better way is to set up an exchange that allows bets by the community on the likelihood of some type of business failure (ie, wallet theft, business incompetence, or outright scams).

For example, lets say I put some money into Bitscalper, but I am hesitant because I don't trust them.  I buy a bet on the website that says that Bitscalper will fail.  There needs to be clear contractual agreement of what constitutes a win when the business fails.

Anyway, say I have 100 bitcoins in Bitscalper and I insure 0 to 100% of those bitcoins.  A speculator bets that Bitscalper wills stay solvent so they take the bet.

The market needs to stay liquid enough so that if I close my Bitscalper account I can also sell back my bet to the market since I don't need it anymore.

People may not trust anyone else, but they sure like to speculate.

I do like the idea as you are right people love to speculate. Probably could bring that over to that bitcoin betting site that lets you bet on everything forget the name of it. You could still speculate if you wanted to "add" to the bitcoin business's deposit amount because you have confidence they will remain. Maybe in return , if they are there 6 months later you get the excat amount you put in 1 to 1 - so you add 10 btc to the 100 btc the business put up.  In 6 months, you get 10 of that 100 btc for being right and the company has to front another 10 btc thus you start seeing a community rallying around the success of a company. Good thinking!

[stochastic]

I do like the idea as you are right people love to speculate. Probably could bring that over to that bitcoin betting site that lets you bet on everything forget the name of it. You could still speculate if you wanted to "add" to the bitcoin business's deposit amount because you have confidence they will remain. Maybe in return , if they are there 6 months later you get the excat amount you put in 1 to 1 - so you add 10 btc to the 100 btc the business put up.  In 6 months, you get 10 of that 100 btc for being right and the company has to front another 10 btc thus you start seeing a community rallying around the success of a company. Good thinking!

I don't think the business would even need to put up money.  A person that opened an account with a bitcoin financial service company wants to insure their money.  That person just wants to lower their risk.  A speculator is willing to take that risk in return for a potential profit.  The "insurance company" makes standard contracts that expire every quarter.  They can also help out their customers by rating each company to give their customers a better idea of the solvency of the company.  Some people may not get insurance, but if they get burned by a scam company everyone can say, "you should have gotten insurance!"

[the founder]

Mybitcoin would have had ZERO problem forking over 100 BTC ... 

Hence this just makes it more expensive to start up,  not stop fraud.

[bitprotection]

Mybitcoin would have had ZERO problem forking over 100 BTC ... 

Hence this just makes it more expensive to start up,  not stop fraud.

It's at least something and that is 100 more bitcoins we all would have gotten back!  actually the only bitcoins we would have gotten back since they never paid 50 percent like they said they would.

[cunicula]

Mybitcoin would have had ZERO problem forking over 100 BTC ... 

Hence this just makes it more expensive to start up,  not stop fraud.

Of course, the amount of money on the line needs to be proportional to the profit opportunity from fraud. Is that your point?

[stochastic]

I'm sure this idea has been played about before here but to lazy to search around on here but what if there was some sort of Bitcoin Business Insurance?  In other words, the bitcoin business front's a certain amount of bitcoins to insure he/she is serious about doing bitcoin business in this community. In other words, some new bitcoin company comes along and doesn't know how to "gain any trust"  ( looks overwhelming) can at least rest assure anyone he does business with that he has enough coins to compensate them for whatever happens. So it would be transparent - a certain amount of coins for the public to see against their business - if they decide the run and there are people effected by this people can issue claims and have funds released. I don't know just trying to see how we can introduce more trustworthy business to our ecosystem! 

obviously, by my handle here I'm interested in this stuff! haha

I have been thinking about this a lot too.  How to insure people's money when no one trusts each other.  Bitcoin is a system that allows people to exchange money that don't need to trust each other.

Maybe a better way is to set up an exchange that allows bets by the community on the likelihood of some type of business failure (ie, wallet theft, business incompetence, or outright scams).

For example, lets say I put some money into Bitscalper, but I am hesitant because I don't trust them.  I buy a bet on the website that says that Bitscalper will fail.  There needs to be clear contractual agreement of what constitutes a win when the business fails.

Anyway, say I have 100 bitcoins in Bitscalper and I insure 0 to 100% of those bitcoins.  A speculator bets that Bitscalper wills stay solvent so they take the bet.

The market needs to stay liquid enough so that if I close my Bitscalper account I can also sell back my bet to the market since I don't need it anymore.

People may not trust anyone else, but they sure like to speculate.

I do like the idea as you are right people love to speculate. Probably could bring that over to that bitcoin betting site that lets you bet on everything forget the name of it. You could still speculate if you wanted to "add" to the bitcoin business's deposit amount because you have confidence they will remain. Maybe in return , if they are there 6 months later you get the excat amount you put in 1 to 1 - so you add 10 btc to the 100 btc the business put up.  In 6 months, you get 10 of that 100 btc for being right and the company has to front another 10 btc thus you start seeing a community rallying around the success of a company. Good thinking!

Another good thing about doing it this way is that this is not considered gambling.  Since risk already exists by someone putting their money in a bitcoin financial company, that risk is just being transferred to someone else in exchange for a cost.  Something is considered gambling if risk is created like when someone goes in a casino and bets on a craps table.  The act of betting is creating risk.

The below quote better explains the process of insurance betting, but in my case I am suggesting to allow institutions and individuals to use them.

insurance derivatives base their value on a predetermined insurance-related statistic. For example, an insurance derivative could offer a cash payout to its owner if a specific index of hurricane losses reached a target level. This would protect an insurance company from catastrophic losses if an exceptional hurricane caused unforeseen amounts of damage.

[lakeluke]

I like some components of this idea. I have a simple way of actualising this in a fast manner.

At present in the community there are several Escrow businesses; like btcrow.com . So my idea is that these Escrow businesses "expand" their role and do the following: For persons wanting to start a new BTC business and who are lacking enough Trustwothyness due to the reason that they are very new, they would deposit an amount of their choosing into the Escrow business, and have this as a Public record. The more they deposit, the more Trustworthy they can be perceived by the community.

The new BTC business would launch, and advertise the fact that they are "registered depositors" at XYZ Escrow service. XYZ can get a percentage for playing this role from the deposit; they can also charge a fee for future arbitration.

If any client in the future has a serious issue with the business, they can claim against the deposit at the Escrow service; these issues will also be public record.

[bitprotection]

I like some components of this idea. I have a simple way of actualising this in a fast manner.

At present in the community there are several Escrow businesses; like btcrow.com . So my idea is that these Escrow businesses "expand" their role and do the following: For persons wanting to start a new BTC business and who are lacking enough Trustwothyness due to the reason that they are very new, they would deposit an amount of their choosing into the Escrow business, and have this as a Public record. The more they deposit, the more Trustworthy they can be perceived by the community.

The new BTC business would launch, and advertise the fact that they are "registered depositors" at XYZ Escrow service. XYZ can get a percentage for playing this role from the deposit; they can also charge a fee for future arbitration.

If any client in the future has a serious issue with the business, they can claim against the deposit at the Escrow service; these issues will also be public record.

Basically, what you said is exactly what I have in the works. You are spot on with your thinking.