[quack]

I used to believe that the reversibility of transactions was a major benefit of using cards, but it turns out that is really just a reversibility of liability.

Credit cards are an outdated tool. They pass plain text data about a user to authorize a transaction allowing hackers to pull something off like the Target hack. One of the advantages of bitcoin is the ability to digitally authorize a transaction that cannot be reused. In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail.

I expect a lot of online retail stores to start accepting bitcoin payments at large discounts to cash just for this reason.

[steveklabnik]

Hi, I work for Balanced Payments, a payments company for marketplaces, YC W11. You can track our plans for cryptocurrency support here: https://github.com/balanced/balanced-api/issues/204

> In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail.

I'm not sure how you are getting this. Bitcoin is absolutely susceptible to various forms of fraud. Let's make this a bit more concrete: assume eBay accepts BTC. I could sign up for a seller account, make some auction listings, once some people buy them, never ship the goods, and disappear. I could set up a fake seller account, list some fake items, and then also make a fake buyer account, purchase the fake goods with my fake buyer account from my fake seller account, report that everything went well, and now I've laundered some money. That kind of activity can cripple a business.

As a consumer, the irreversability of BTC transactions is a bug, not a feature. You only need to look at the incredible amount of fraud that's happened in the Dogecoin community to see how fraudulent activity can be rampant, and can harm consumer confidence. Consumers expect the ability to be able to initiate a chargeback when fraudulent activity happens. You can't do that with just plain old BTC. When I was home over the holidays, the local TV station ran a story about how you should be using credit cards rather than debit cards to purchase things online, specifically because the credit cards' chargeback policies are often better. "With a credit card, you'll have the money taken off your statement, but with a debit card, it could take over two weeks to get your money back." etc.

Bitcoin is digital cash. Online stores don't allow you to mail them an envelope with $20 inside, because that would be kind of ridiculous for all parties involved. It's only when certain financial instruments are built on top of Bitcoin that have the same kinds of consumer protection and regulatory compliance built in.

[quack]

> Let's make this a bit more concrete: assume eBay accepts BTC. I could sign up for a seller account, make some auction listings, once some people buy them, never ship the goods, and disappear.

This already is a problem on ebay. People post dishonest listings all the time and run with the cash. You have the additional problems of people buying goods with stolen cards or running up the price of an item with no intention of purchasing. With BTC you can verify that a bidder is able to pay for an item, and you can immediately hold the funds in escrow. There is no "overcharging" a Bitcoin account.

> As a consumer, the irreversability of BTC transactions is a bug, not a feature.

Bullshit. Credit card companies are paying people with their own fat. The 3% cashback that you get on purchases for gas and food comes from the profit theyre making on top of that. Many local stores give cash discounts when buying goods, and some refuse to accept cards because they are so expensive.

> It's only when certain financial instruments are built on top of Bitcoin that have the same kinds of consumer protection and regulatory compliance built in.

We dont need your middlemen. I dont need an account to hold my funds when I sell an item online. I dont want to give eBay, paypal, et al, a unilateral authority to withdraw from my bank accounts.

[steveklabnik]

> This already is a problem on ebay.

Exactly. It's a problem that doesn't go away with Bitcoin.

> Credit card companies are paying people with their own fat.

I am certainly not arguing that they don't charge a premium. I'm saying that they do add value.

> We dont need your middlemen.

You may not, but I am quite certain most people do.

[minimax]

Agree with everything you said. Credit cards have useful consumer protections baked in. What happens when you look at it from the merchant's perspective? Lets say someone buys something from me with a card, I ship it out, but then it turns out the card was stolen. Who takes the loss? The merchant or the credit card company? I guess what I'm trying to figure out is whether or not the irreversibility of a transaction might be a good thing for merchants dealing with fraudulent buyers.

[steveklabnik]

Generally speaking, the merchant takes the loss. It would be a good thing for the merchant, except then, they wouldn't have any buyers. I know I wouldn't use a financial instrument structured like that, especially when there's a plethora of ones where I don't hold that liability.

[pault]

M-of-N transactions solve most of the trust problems with online marketplaces without having to cede total authority to the escrow service. If you want to favor the buyer in disputes a la paypal, that's easy, but the worst thing that can happen in the case of a false positive (from the seller's perspective) is the loss of a single transaction, rather than having an entire account frozen.

[steveklabnik]

M of N is useful, yes. All I'm saying is that reversibility is an important part of online transactions, and you need _some_ kind of mechanism here to facilitate trust.

[mcfunley]

> In an online marketplace it's far far easier to accept bitcoins than credit cards because you have no fraud risk, which is a HUGE problem in online retail.

I currently work for a large online marketplace. A very typical fraud scenario (maybe the most common) is someone collecting payment for an item that they don't actually possess. This would only be harder to deal with and correct if the payment were disbursed to an anonymous seller in bitcoins.

[Sambdala]

Such an online marketplace should have an escrow included then if they wish to use Bitcoin as a payment method.

I believe the Silk Road(s) have used such systems.

[glesica]

So now the online marketplace has to run an escrow service as well. If they're going to do that, why not run an escrow service for credit card transactions? You pay the marketplace, the seller ships the goods, you confirm that you got them (or the seller proves that the shipment took place), and then the marketplace pays the seller. I don't see how Bitcoin really provides any innovation that isn't already available in this particular situation.

[Sambdala]

If it's not a core competency (although for certain marketplaces, it may be), you can use a 3rd party escrow.

You're already effectively using an escrow service when you provide a Credit Card payment option; you just don't get to choose who provides the service, you can't unbundle it from a larger product offering, you have very little control over it, it doesn't work well for certain types of goods & services, and it's built on top of a pull payment network instead of a push payment network.

[glesica]

I agree that un-bundling the escrow from the rest of the stack would be a good thing. However, I think it is important to keep in mind that replacing credit cards with something less effective (for whatever definition of "effective" matters) than credit cards isn't a true replacement.

The way I am thinking about it is sort of like those threads on HN where someone says "You can create a Dropbox clone in N lines of X and an external hard drive". That's NOT a Dropbox "clone", but rather something that could be used to replace Dropbox for some people some of the time. It would take much, much more to replace Dropbox, and maybe someone will get it right someday. Same goes for Bitcoin, it's fine to think of alternative financial networks (awesome, in fact, I hate banks!) but it's important not to get ahead of ourselves.

[Sambdala]

I would argue in this case that Bitcoin is likely to be more effective in a huge number of cases, not less effective.

I agree with the first part of your second paragraph, but I don't necessarily think it's going to apply here for any places where we see Bitcoin in wide deployment.

[diminoten]

As an online retailer, what do you do if someone reports fraud? Shrug your shoulders and tell them they should have been more careful with their wallet?

If Bitcoin == cash, what does a storefront do if someone comes to them and says "my stolen cash was used to buy items here"? Usually nothing, yes? Is that what we're saying is the burden of responsibility for an online store with Bitcoin?

[logicallee]

what do you do if you're a real retailer and someone says : "Hey one of your customers last week paid you with cash that was stolen from me!"

The answer is: "Well go report the stolen cash, we have no idea how to help you."

It's just the nature of cash that it works that way. People need to / will learn the nature of bitcoin, whatever that is exactly.

[dublinben]

That's a significant reason why many people do not use cash for all their purchases. The consumer protection of credit cards is one of their primary benefits. Bitcoin takes away all of those protections.

[thisosound]

But the fees are a lot lower and it doesn't mean that those protections can't be added back on on a different layer. You can also do a lot more with Bitcoin than with CCs.

[sliverstorm]

Magnetic stripes are outdated, but smartcards fix that problem.

Reversable transactions moves the onus of security to the people who can really do something about it. A consumer can only chose "purchase or do not purchase", whereas a merchant can elect to use (for example) more secure payment methods and stronger identity verification.

[gizmo686]

There is no reason we cannot have credit card like things that do not pass plain text authorization. I believe some places have already switched to useing smart cards which leverage cryptography to proved identification without revealing the secret. I'm not sure exactly what crypto is used in practice, but as a proof of concept you can imagine this being done with normal public key chryptography.

[Sambdala]

The only reason is that credit card companies haven't implemented such a system.

I'm actually shocked that we've been able to use our current pull payments system for so long without more problems than we've currently seen.

One innovation I did like (which I only saw when I was using Bank of America) was a feature that allowed you to create new, internet-only, credit card numbers on the fly with a self-chosen credit limit that was tied to your checking account. I would have loved to see this implemented in a physical card so that you could just use a different cc# for each separate transaction and only authorize it (in perpetuity) for the exact amount of the transaction.