[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.

[glesica]

I disagree, because I don't think Bitcoin is a very good currency, and even if it had the potential to be a good currency at some point in the past, that potential has been destroyed by speculative hoarding and a mining arms race. The linked-to article makes clear that it isn't necessarily "Bitcoin" that is promising, but the end-run around the financial services industry that it is trail-blazing for everyone else. I agree with this sentiment, and really I had never considered it the way he stated it. However, if you see Bitcoin itself, as a currency, differently, then it makes sense we would disagree on its worth as a replacement for credit cards.