Bitcointalk Escrows - Trade Safely!

[Serge V.]

So if the buyer refuses to release the funds, then will the funds be stuck for ever?

In a normal escrow scenario then will the escrow arbitrate between the buyer and the seller, if a settlement is not possible then will the funds be released to the part with the most convincing prof.

Yes, but as you can see, the buyer is not interested do not release the funds, but the opposite, he is financially motivated to unlock them.

In a normal escrow scenario the escrow agent can: 1) make a mistake (a human factor), 2) be hacked, 3) be physically compromised, 4) scam the buyer and the seller (as it usually happens here) or 5) just simply disappear (for any reason)... So, what will you choose?

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[DannyHamilton]

Yes, but as you can see, the buyer is not interested do not release the funds, but the opposite, he is financially motivated to unlock them.

Serge V.


Lets imagine a scenario here...

Lets say you have a product that I want to buy.  You are willing to sell it for 1 BTC.

I send 2 BTC to the 2-of-2 bitcoin address, and you send 1 BTC to the 2-of-2 bitcoin address.

Then you send me the product.

When the product arrives, I claim that the box is empty (I'm lying, but nobody other than you knows that) and I demand that you release my 2 BTC back to me.  I accuse you as a scammer in the forum.

Do you:

• Release the full 2 BTC back to me, so that your reputation isn't damaged and you can continue to sell other things in the forum?
• Negotiate with me and attempt to release less than 2 BTC (but more than 1 BTC) back to me
• Refuse to release anything to me and lose both your product AND your 1 BTC?

No matter which you choose, I get to keep the product and you lose both your product and your money.

Now, lets look at a similar situation from the other side...

Lets say I have a product that you want to buy.  You are willing to pay 1 BTC for it.

I send 1 BTC to the 2-of-2 bitcoin address, and you send 2 BTC to the 2-of-2 bitcoin address.

Then I send an empty box to you.

When the box arrives, you claim that the box is empty.  I state that I carefully sealed the product in the box before shipping it and that you must be lying (I'm lying, but nobody other than you knows that).  I accuse you of attempting to scam me and I demand that you release 2 BTC to me (my 1 BTC collateral and 1 BTC for the product that I claim I shipped).

Do you:

• Release the full 2 BTC to me, so that your reputation isn't damaged and you can continue to buy other things in the forum?
• Negotiate with me and attempt to release less than 2 BTC (but more than 1 BTC) back to me
• Refuse to release anything to me and lose 2 BTC?

No matter which you choose, you lose some of your money.  I *might* lose 1 BTC, but if I can get more than 50% of my victims to just release to me then I come out ahead.

[Serge V.]

DannyHamilton

Thank you for your post, it actually shows how much freedom gives this scheme to the escrow parties.

Lets imagine a scenario here...

I:

When the product arrives, I claim that...

Before to claim something we need to have irrefutable proof or to have a good reputation, otherwise our words will be empty.

No matter which you choose, I get to keep the product and you lose both your product and your money.

You get to keep the product but lose twice as much as it costs.

II:

No matter which you choose, you lose some of your money.  I *might* lose 1 BTC...

You will lose not only 1 BTC, but also your reputation (that was claimed above) which is usually worth more than a single purchase.


What is important:

1) no matter what I choose, it will be my decision (based on the truth), and only I will responsible for it;
2) in any possible scenario I will have a chance to punish the scammer.

[DannyHamilton]

2) in any possible scenario I will have a chance to punish the scammer.

But only by punishing yourself.

This is how extortion works.

In this case your punishment is twice as bad as the scammers.  If you want to reduce the punishment that you feel, you can only do it by giving in to the scammer and allowing him to win.  If the scammer gets punished for doing wrong, then the honest person gets punished twice as much.

[Serge V.]

In this case your punishment is twice as bad as the scammers.  If you want to reduce the punishment that you feel, you can only do it by giving in to the scammer and allowing him to win.

Not necessary. All you need is just to proclaim in advance, that you will always punish the scammer, and be tough. I do not think that after that, you will find someone who will check you out... The scammers will always try to find a less risky options.

This is how psychology works.

[Dabs]

In a normal escrow scenario the escrow agent can: 1) make a mistake (a human factor), 2) be hacked, 3) be physically compromised, 4) scam the buyer and the seller (as it usually happens here) or 5) just simply disappear (for any reason)... So, what will you choose?

Just my comments:
1. Unlikely to happen. Yes, possible, but unlikely, at least for the more reputable escrows here.
2. Unlikely to happen. Most decent escrows, while not immune to being hacked, have taken precautions to prevent being hacked.
3. Same as 2.
4. I've only known of a small handful, but they were not trusted to begin with, so I don't know why other people went with them.
5. One very reputable escrow did disappear, but he did come back and fix things. Some of us have lives outside this forum.


All the other topics I've read so far up to this point, in this thread, have been interesting reading. Go on, continue your discussions.

[Serge V.]

In a normal escrow scenario the escrow agent can: 1) make a mistake (a human factor), 2) be hacked, 3) be physically compromised, 4) scam the buyer and the seller (as it usually happens here) or 5) just simply disappear (for any reason)... So, what will you choose?

Just my comments:
1. Unlikely to happen. Yes, possible, but unlikely, at least for the more reputable escrows here.
2. Unlikely to happen. Most decent escrows, while not immune to being hacked, have taken precautions to prevent being hacked.
3. Same as 2.
4. I've only known of a small handful, but they were not trusted to begin with, so I don't know why other people went with them.
5. One very reputable escrow did disappear, but he did come back and fix things. Some of us have lives outside this forum.


All the other topics I've read so far up to this point, in this thread, have been interesting reading. Go on, continue your discussions.

All escrow agents were from this list and they were more reputable (according to the trust rating) than You:

  1. redsn0w https://bitcointalk.org/index.php?topic=768454.msg10010518#msg10010518.
  2. (or 4, and finally 5) master-P https://bitcointalk.org/index.php?topic=1306301.0.
~3. escrow.ms, possible as a consequence https://bitcointalk.org/index.php?topic=1359877.0.
  4. Maidak https://bitcointalk.org/index.php?topic=1077982.0.
  5. Same as 2.

P.S. Maybe I forgot somebody.
P.P.S. So, this "escrows list" is a bullshit, like as the forum "trust rating system".

[SebastianJu]

And why can he lose twice more coins than the seller? He received his goods already from the seller but he decided to get half of his coins in escrow back. Nothing the seller can do except giving in when the buyer created the deal with a newbie account. He would not care about red trust on that account.

I mean the coins on the MultiSig address, where the buyer locks up twice as much as the seller. In case when the buyer refuses to release the funds, he gets the goods (1x) but loses twice more coins than this goods worth (2x), his profit is x-2x=-x - not the best situation to lay down the conditions... Yes, for the seller the situation is not better, but at least he will have the chance to punish the scammer and leave him without his money, and I am sure, after that, the buyer will never try to repeat this scenario.

Ok, but why should the buyer take the risk to lose twice the amount of coins, not receiving goods AND being extorted by the seller afterwards? As buyer I would not take that risk since we would not at the same risk levels then.

I now read DannyHamilton mentioned the seller has to deposit the price of the item to the escrow address too? So seller sends amount x and buyer amount 2x?

You say your reputation is tarnished... well that doesn't matter for new accounts. And many trades happen with fresh accounts to stay anonymous.

In this case your punishment is twice as bad as the scammers.  If you want to reduce the punishment that you feel, you can only do it by giving in to the scammer and allowing him to win.

Not necessary. All you need is just to proclaim in advance, that you will always punish the scammer, and be tough. I do not think that after that, you will find someone who will check you out... The scammers will always try to find a less risky options.

This is how psychology works.

Well, the normal traders would always find a less risky option than trading with that plan. Which I think is the general problem with your plan. It's risky for both sides. No one observing and no one to fear by the scammer. Even reputated members would be at risk. Scams in that might happen a couple of times and if the scammer is a good actor, or prepared himself, then there are chances the forum believes the scammer and the reputation is gone.

[DannyHamilton]

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I now read DannyHamilton mentioned the seller has to deposit the price of the item to the escrow address too? So seller sends amount x and buyer amount 2x?
- snip -

Yes.  That's how Serge V. described the process. See here:

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1. The escrow agent creates a transaction, according to which the buyer collateral & the buyer payment for goods (2x) + the seller collateral (1x) will be sent to the created from their public keys MultiSig address.
- snip -

So the buyer sends payment plus "collateral" of bitcoins equal to payment, and seller sends "collateral" of bitcoins equal to the seller's price.

That way if the participants can't come to an agreement on a resolution for the payment/product dispute, they both lose the collateral (permanently stuck in the 2-of-2 transaction.  The only way either of them can get any of their collateral back is to find a resolution that they can both agree to.

The concept is that the collateral is enough motivation to force the scammer to behave, but the problem is that the collateral might be enough motivation for the scammer to force the victim to concede.

[Serge V.]

Ok, but why should the buyer take the risk to lose twice the amount of coins, not receiving goods AND being extorted by the seller afterwards? As buyer I would not take that risk since we would not at the same risk levels then.

...the problem is that the collateral might be enough motivation for the scammer to force the victim to concede.

It is like in trading of cryptos, you will never lose until you sell cheaper than bought, even if the current asset price is lower than when you bought it.

The beauty of this scheme is that without your wish nobody can scam you, but the scammer will lose his own money. And only you, by your own hands, can return to the scammer his money plus give him your own. If you are considering such a possibility, just do it before the deal, you will win a lot of free time.

Which I think is the general problem with your plan. It's risky for both sides.

Exactly! But it is not a problem, it is the foundation of the scheme, a good motivator for the both parties to be honest each with other.

[SebastianJu]

Serge V.


Hm. So the seller risk 1x and buyer 2x while the seller has the goods. Though the seller only sends the goods after the escrow address was funded. Additionally, who has to send first to the escrow address?

When the buyer has to send first 2x then the seller is in favor risking nothing. If the seller sends 1x first then he would be in risk of losing 1x. So a scam can happen by both sides. And using a new account will ensure that a scam accusation thread is useless.

Even when both sent. Then the seller risked only 1x and the buyer 2x. At this point the buyer is more at risk. The seller can extort for more than his 1x.

Well, when I feel into the situation then this surely is nothing you can use for every trade. One always had to keep the value of the other account in mind. Even when it is higher than the possible loss, he might have done it to multiple persons at the same time and thus his account was paid maybe multiple times with the scam already.

So far you would be astonished about the amount of escrow requests that are stopped because an escrow is involved or even the mentioning stops many deals. Obvious scams. So when I see all the traders that request me then there is a high amount of very likely scammers. Imagining having to put my trust in them is something I would not do honestly. I would either risk 2x as the buyer or 1x as the seller. Honestly, when I see the percentage of scam attempts then I would not feel safe to use this scheme. I would rather trust a third party. Well, if I would want more safety then I might chose a 2 of 3 multisig escrow. So the escrow could release the coins. I see the chance to get an established escrow who only now started to scam way lower than the percentage of scam attempts Iam confronted with as escrow.

[Serge V.]

Hm. So the seller risk 1x and buyer 2x while the seller has the goods. Though the seller only sends the goods after the escrow address was funded. Additionally, who has to send first to the escrow address?

When the buyer has to send first 2x then the seller is in favor risking nothing. If the seller sends 1x first then he would be in risk of losing 1x. So a scam can happen by both sides. And using a new account will ensure that a scam accusation thread is useless.

Even when both sent. Then the seller risked only 1x and the buyer 2x. At this point the buyer is more at risk. The seller can extort for more than his 1x.

The buyer and the seller send funds to the MultiSig address at the same time and in the same transaction.
In most cases the seller is more reputable than the buyer and his reputation worth more than a single purchase... but it is doesn't matter, because the scheme is assumes that you will never put a desert eagle near your balls and will never shoot yourself in the foot.

Well, when I feel into the situation then this surely is nothing you can use for every trade...

There is nothing complicated for you as the MultiSig escrow agent, just to prepare the transaction, help verify and sign it, broadcast it to the network. All responsibility for any decisions lies on the buyer and the seller.

[DannyHamilton]

Additionally, who has to send first to the escrow address?

When the buyer has to send first 2x then the seller is in favor risking nothing. If the seller sends 1x first then he would be in risk of losing 1x.

If you read the thread where Serge V. described the concept, you'd have seen that neither sends first:

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Here is an example of the escrow scheme that motivates scammer to be honest to his trading partner:
1. The agent creates a transaction, according to which the buyer collateral & the buyer payment for goods (2x) + the seller collateral (1x) will be sent to the created from their public keys MultiSig address.
2. The buyer and the seller checks and sign the transaction, the transaction is broadcasted to the network.
- snip -

So, the idea here is that a facilitator (they can be the buyer, seller, an escrow or agent, or whatever you like), is given a list of inputs that each party is planning on using to fund the transaction.  The facilitator then crafts a single unsigned transaction that uses the necessary inputs from BOTH parties and funds the 2-of-2 address with a single output (and adding additional outputs to send any required change back to the parties).  This transaction is unsigned and therefore not useful to the facilitator to steal anything from anyone.  The facilitator then provides the unsigned transaction to each of the parties so they can review it to make sure it does what it is supposed to do.  Once the two parties are happy with the transaction, they can both sign it.  Since the transaction simultaneously uses inputs from BOTH parties, it isn't useful when only one party has signed it. Therefore, it doesn't matter which of the two parties signs first.  After BOTH parties have signed the transaction, any of the three parties (buyer, seller, facilitator) can broadcast the transaction.  When the transaction has confirmed, the funds of BOTH parties will simultaneously be trapped in the 2-of-2 transaction until BOTH parties agree to release it.

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Even when both sent. Then the seller risked only 1x and the buyer 2x. At this point the buyer is more at risk. The seller can extort for more than his 1x.
- snip -

He can, or the buyer can extort from the seller.  It's a bit like the "mutually assured destruction" that was supposed to prevent nuclear war.  As long as the "collateral" is large enough that neither party is willing to lose the money, and both parties are willing to walk away and lose their money in order to prevent the other party from gaining anything inappropriately, the scammer can't extort anything.  The scammer can force the victim to lose money, but they can't gain anything for themselves without the victims cooperation.

If the victim is more desperate than the scammer to at least get some potion of their money back, then the scammer can convince the victim to give up a portion of their money in order to get a little bit of it back.

If the scammer is more desperate than the victim to at least get some potion of their money back, then the victim can convince the scammer to give up a portion of their money in order to get a little bit of it back.

So, if the seller risks 1 BTC, and the buyer risks 2 BTC.

• The buyer can extort the seller, by demanding that the seller sign a transaction to release 2.1 BTC from the 2-of-2 so that the Seller only gets 0.9 BTC back.  The buyer will win this extortion if the seller is desperate enough.
• The seller can extort the buyer, by demanding that the buyer sign a transaction to release 1.1 BTC from the 2-of-2 so that the Buyer only gets 1.9 BTC back.  The seller will win this extortion if the buyer is desperate enough.

As Serge V. pointed out, if the victim is always willing to walk away with a complete loss of everything that they put into the transaction, then the scammer can't gain anything, all the scammer can do in that situation is lose their own money and force the victim to lose money at the same time.  Once the transaction is funded and confirmed, the entire thing turns into a negotiating contest where each party has the opportunity to try to negotiate the best possible result for themselves while trying to find a result that the counter-party will be willing to accept.

[SebastianJu]

I did not know that it is possible at all to send bitcoins from different wallets in one transaction. That possibility would make it impossible to surely judge from a transaction with 2 input addresses to the outcome that both addresses were in the same wallet and belong to the same person. Or one could connect his own wallet with another wallet to make it harder to find him.

Or is this only possible with multisig addresses and/or can it be done  with normal addresses too and does the transaction look differently than signed from the same wallet? If so then services like walletexplorer.com has a serious flaw.

Guess one should not get a stubborn one in your way with that scheme...

[DannyHamilton]

I did not know that it is possible at all to send bitcoins from different wallets in one transaction. That possibility would make it impossible to surely judge from a transaction with 2 input addresses to the outcome that both addresses were in the same wallet and belong to the same person. Or one could connect his own wallet with another wallet to make it harder to find him.

At the technical level, bitcoin doesn't know anything about wallets.  There are only inputs and outputs.  The only requirement on the inputs are that they refer to unspent outputs.  They don't need to belong to any wallets. They don't even need to belong to any bitcoin addresses. Or they can come from as many addresses or wallets as you like.  This is the concept behind things like "SharedCoin", "SharedSend", etc.

Or is this only possible with multisig addresses and/or can it be done  with normal addresses too and does the transaction look differently than signed from the same wallet?

It can be done with any transaction.  They don't look any different.

If so then services like walletexplorer.com has a serious flaw.

All blockchain explorers have a lot of serious flaws.

[thesame12]

Should this page be pinned?

[Ralobot.com]

LOL 

So seb what your new escrow rules ?

Please reply as soon as possible 

[SebastianJu]

I did not know that it is possible at all to send bitcoins from different wallets in one transaction. That possibility would make it impossible to surely judge from a transaction with 2 input addresses to the outcome that both addresses were in the same wallet and belong to the same person. Or one could connect his own wallet with another wallet to make it harder to find him.

At the technical level, bitcoin doesn't know anything about wallets.  There are only inputs and outputs.  The only requirement on the inputs are that they refer to unspent outputs.  They don't need to belong to any wallets. They don't even need to belong to any bitcoin addresses. Or they can come from as many addresses or wallets as you like.  This is the concept behind things like "SharedCoin", "SharedSend", etc.

When you say it this way then it has to be that way. I think it might be interesting to check out the fundamentals of the protocal a bit mire. I did not bother yet about that besides multisig though that something I believed in now is not true anymore is interesting.

If so then services like walletexplorer.com has a serious flaw.

All blockchain explorers have a lot of serious flaws.

I meant walletexplorer.com is for finding connected bitcoin addresses so that you know that they have to be owned by the same wallet. Though now that doesn't sound like something trustworthy anymore. Even when inputs come from 2 address into a transaction, it is maximum a strong hint that they have the same owner. So even that can't be proof of anything.

[Dabs]

I meant walletexplorer.com is for finding connected bitcoin addresses so that you know that they have to be owned by the same wallet. Though now that doesn't sound like something trustworthy anymore. Even when inputs come from 2 address into a transaction, it is maximum a strong hint that they have the same owner. So even that can't be proof of anything.

I've never believed those either. A strong hint is still a hint, however it is not proof.

[SebastianJu]

I meant walletexplorer.com is for finding connected bitcoin addresses so that you know that they have to be owned by the same wallet. Though now that doesn't sound like something trustworthy anymore. Even when inputs come from 2 address into a transaction, it is maximum a strong hint that they have the same owner. So even that can't be proof of anything.

I've never believed those either. A strong hint is still a hint, however it is not proof.

I think for 99,99% of the cases this will be the truth. Though I wonder what will that mean for scammer proofs coming from walletexplorer. Guess it does not serve as a total proof now.

At least it can't be exploited by scammers to frame someone. The privkey of another person or shared wallet would be needed. On the other hand, some people sell their private keys. It might mean a risk though I think a small one in the cases I know.