Overstock.com uses Coinbase and Coinbase handles the entire checkout process. It's really no different than checkout with PayPal. Except that it's never in bitcoin at all. Overstock never shows a bitcoin amount due, it's handled entirely at Coinbase's end. And no bitcoins are ever given to Overstock.com, they just get USD from Coinbase directly and the customer is charged the amount in bitcoins that convert to the amount of USD that their order is.
It's a win win for Overstock.com, really, since they don't need to worry about the volatility and instability of bitcoin and only deal in USD but get to look forward-thinking by accepting bitcoin. Yes, they are accepting more risk because Coinbase.com could disappear overnight (FAR more likely than PayPal or Visa disappearing overnight), but they get some advantage for their risk.
In what way is this different from any other retailer allowing me to pay in EUR, GBP, HKD or whatever while the only currency they manage is USD?
The vast majority of companies only manage a single currency and have the payment processor or the bank make the conversion (and take the risk).
So in what way is it different than if they were accepting EUR?
For a business to accept and truly manage multiple currencies, it needs to have a complex infrastructure, with an accounting system that allows for mutlicurrency management. On top of that, it has to manage the risk of fluctuating exchange rates between currencies.
I guess that unless their own suppliers start accepting bitcoins (or EUR or CNY, etc), it doesn't make sense for most companies to manage that risk.
The important point here, is that if I have bitcoins, I can use them to pay for tangibles from a well-known retailer.
Whether they go with Coinbase, VISA or Mastercard or Paypal to process their payment and get USD instead of BTC, EUR, JPY isn't really a disavowal of bitcoin.
Except for the whole "you have no recourse as a consumer since there are no chargebacks" thing. And no, the better business bureau, ratings websites, etc don't count.
What does that have to do with the fact that Overstock.com accepting Bitcoin is literally increasing Bitcoin adoption and making more items available for purchase via Bitcoin, prompting other companies to follow suit?
Presumably Overstock.com is a reputable company, and they would honor their guarantees, so I would feel safe sending them Bitcoin.
I wouldn't give my credit card information out to some untrusted third party that I was unsure of their sending me the products.
Just because the credit card industry has created a massive protection racket in North America doesn't mean it must continue to exist.
There are plenty of business' who cannot take credit card purchases because of possible chargebacks.
We make all sorts of purchases from smaller merchants because we know they can't just take the money and run when we pay via credit card. I do it all the time. That way I don't have to just buy from Overstock.com or Amazon.com, but all kinds of merchants. I don't have to implicitly trust that a merchant will deliver the goods to me on time and in the fashion they say they will. I know they will or I can initiate a chargeback. And as far as "Presumably Overstock.com is a reputable company, and they would honor their guarantees"... I don't have to presume anything. I know I can get my money back if they fail to deliver.
I had to do this recently with a site that I expected would be reliable. One that I'd enjoyed the free services of for the past 5 years and had no problem placing a $40 order to download some premium content from. They never bothered to deliver it and wouldn't respond to email, voicemail or twitter. So, I initiated a dispute via PayPal and got my money back. If I'd paid with bitcoin, I couldn't get my money back.
I run my own small business, have worked with many other small businesses, and have friends running all kinds of other small businesses. I don't know of ANY legitimate business that "cannot take credit card purchases because of possible chargebacks".
I think you're overstating how often chargebacks are necessary (or you have terrible luck / judgement), I've never had to dispute a charge. Ever. I suspect the vast majority of chargebacks are related to cc fraud/theft.
Chargeback fraud is also a problem, especially for businesses selling digital goods who cannot present a tracking # or proof of delivery to Paypal.
That is missing the point. Arrests are not that common either, but the mere possibility of them does change behaviour. The chargeback is an important part of credit card transactions - it makes the card-holder more likely to spend, and it makes it more likely that the payment recipient is going to deliver.
I have both issued chargebacks for non delivered goods, and had chargebacks raised against me as a merchant. Generally fraudulent chargebacks are easy to defeat if you run your business well. Generally chargebacks are easy to win if you are a sensible consumer. The costs of chargebacks on consumers and vendors alike are vastly outweighed by their benefits.
Going to a commerce system where that layer of trust is removed is going to be more difficult to do.
Certainly not me, perhaps they will - I'm merely observing that the presence of the chargeback system can be felt even if no chargebacks have been issued.
The OP was posting that chargebacks can't be that important because they had never done one. That's not the right way to look at it.
True. My point is that chargebacks are kind of a moot point, once someone implements a bitcoin payment processor that includes the option of n-of-m escrow transactions :)
You'd be surprised how often chargebacks are necessary when you're dealing with smaller businesses as a consumer. If you only ever deal with Amazon, Overstock.com, etc... then you, as a consumer, won't have much need for chargebacks. These are well-established public companies that care about their reputations. But when dealing with smaller businesses... the exact segment that bitcoin advocates keep saying that bitcoin is best for... you wind up with a much more frequent situation of people being unable or unwilling to deliver the goods you paid for. True, this was the only time I've ever had to do a PayPal dispute, but it was damned nice that it was there since I could get my $40 back. And, as I said, this is a company I'd been enjoying the freemium content of for for 5 years (actually, 7 I just looked it up) and I trusted to place an order from.
Bitcoin has solutions to these issues, which will continue to grow and develop as the ecosystem matures. There is a built-in system for escrow that works will for this kind of transaction with a merchant of unknown repute.
For that, you pay a small surcharge to the escrow provider, and you are then protected against fraud:
One note about fees - because of the way this works with Bitcoin's multi-signature transactions, arbitrators don't have to intervene at all when there's no dispute so a lot of them choose to charge fees only for disputed transactions, meaning that most transactions should be free of charge.
That being said, I do see the rational behind charging for every transaction and think that its going to be a popular choice too. I wrote some of the reasons for that here: http://www.reddit.com/r/BitcoinSerious/comments/1sqibz/bitra... (near the end, in the "Edit:")
I absolutely think the only feasible business model for arbitrators is to charge a fee for each transaction. Otherwise, how can they afford to spend the time and money to investigate a dispute properly?
People are not going to want to pay for more than the cost of an item when there is a dispute, yet it could cost many more times the value of the disputed item to conduct a proper investigation and produce a fair arbitration.
Great project, by the way. Thanks for releasing it open source!
They have the option to accept it. Technically, if you figure out the merchant's public key, you could "force" them into being a part of the "escrow" [1], but unless they agreed to it (and agreed to the arbitrator being used) they won't consider the product paid until the payment is under their control.
[1] I'm using quotes because the way it works with multi-signature isn't an escrow, but escrow is commonly used when talking about something like this. There's some explanation about how multi-signature transactions works and why its not an escrow in Bitrated's FAQ, under "How does Bitcoin arbitration work?" and "Is this an escrow?" (https://www.bitrated.com/faq.html)
> I don't know of ANY legitimate business that "cannot take credit card purchases because of possible chargebacks".
But a random person trying to sell something on their own cannot take paypal because of possible chargebacks. And we're all paying a premium on the prices because businesses have to cover chargebacks in their pricing.
It's a huge problem for example in trading online game items; the current solution is to have reputation threads, where you have your previous trading partners vouch that you did not chargeback your paypal transaction / did provide the item as promised. Taking paypal from an unknown party is a huge risk.
So, instead of having the possible risk to the seller that a buyer could do a chargeback (which the seller can fight on PayPal with proof of delivery, though I'm not claiming how well this works), bitcoin shifts all that risk to the buyer (with no recourse at all). It's as risky as sending a money order through the mail. How does this make bitcoin better than PayPal for the overall transaction (for BOTH buyer and seller)?
It gives them flexibility. (Additionally, multisig transactions cancel all the risk as long as they can find a 3rd party trusted to make the decision)
The seller can still go first, if he's prepared to shoulder the risk. Then the buyer can send the money once they receive the item. This is the same as using paypal.
If neither party is willing to go first, they have to either use a trusted middleman (seller gives item to middleman, buyer sends money, seller confirms to middleman, middleman releases item), or multisig transactions (the same, except the middleman can't run away with the money/item)
Right, a middleman service that could operate much like Coinbase, PayPal, credit cards, etc. Which you don't have access to if you are DIRECTLY making bitcoin payments from customer to merchant. Which is what the comment I was responding to was advocating. Hence my reply that you would lose the ability to to do chargebacks in that specific scenario.
Sure, but it is a lot easier for companies to proliferate and compete in the space we are talking about, than in the credit card/PayPal type arena. It's a simpler business to run with less regulatory capture and old-boys-club effects.
Plus, bitcoin gives customers the OPTION to not be able to do charge-backs (99% of the time you know you don't need it); that saves money for the merchants, which can be passed on to consumers.
> Which you don't have access to if you are DIRECTLY making bitcoin payments from customer to merchant.
Sounds like how I can't chargeback dollar bills I use for a money order.
I don't imagine it will ever get to the point where people perform financial transactions with bitcoin using raw addresses. They will probably always use third party services like coinbase, which has a fractional commission, for the security, both in having a remote wallet (ie, bank) and providing chargebacks.
> you've only had this kind of recourse for the past 50 years. before that, for 5-10,000 years, money in all its forms worked just like bitcoin.
To the extent its true (and, actually, money in most of its other historical forms doesn't work much like bitcoin, but yes there wasn't a widely used convenient equivalent to modern payment dispute resolution systems before credit cards), like computers and modern dentistry and all kinds of other modern developments, its not one of those things I'd like to give up having to go back to the way things used to work.
Can we safely assume you never use physical cash because it doesn't support "charge backs"?
Also, what do you say to the populations of the ~40 countries that credit cards don't work in because charge back requests are too common there? Do you tell them to simply never make online purchases?
Whether it's good news or not depends on what your hopes for Bitcoin are.
If you'd like to have an open and decentralized protocol for direct cash transactions in online commerce, then this is indeed fantastic news.
But if what you want from Bitcoin is a standalone currency that's immune to political manipulation, it's not such great news: in this and other similar recent stories, Bitcoin is being used merely as a proxy for dollar transactions. If this type of transaction ended up becoming dominant, Bitcoin would effectively be pegged to the dollar, nullifying its advantages as a non-fiat currency.
For Bitcoin to work as a standalone currency, there has to be a real economy with prices denominated in Bitcoin, not just a dollar-denominated economy with an instant spot exchange built into transactions.
GigabyteCoin - That scenario wouldn't bottom out the dollar any more than previous attacks did. Bitcoin could bottom out all on its own with no real reason.
As a math nerd, I have lots of faith in numbers. Believing bitcoin to have value isn't about faith in numbers vs faith in governments. They're both about faith in people and what THEY choose to have faith in. If it's just about the numbers and the math, why do you and others have more "faith" and attach more value to bitcoin vs litecoin, etc? Did the others get the math wrong? Or is it about more than numbers?
Of course it's about more than just faith in numbers but I'm not pandering to your straw man arguments any longer.
Edit/offtopic: I just realized I was debating with the creator of a website that i ABSOLUTELY LOVE! Thank you for making portableapps.com - if it wasn't for that website, I wouldn't be doing what I do now. Long story, but thanks!
You're welcome. And you'll note that PortableApps.com accepts Bitcoin and Litecoin for donations: http://portableapps.com/donate
A handful of users asked for it, so I implemented it. It's only netted us $4 and I don't really expect it to go anywhere. But I do fire up the Bitcoin and Litecoin beta clients every few days and see where they're at. They're pretty resource hungry while syncing a few days backlog, so I only bring up em when I'm heading away from the PC.
And, for what it's worth, these are not strawman arguments. These are legitimate concerns I have as a businessman and as a consumer. Scan through my comment threads. My issues can be summed up as:
1. Chargebacks. Chargebacks are a biggy, I've had to use them in the last 2 months, and are a big reason why bitcoin (raw, sans a 3rd party allowing you to get your money back) are bad idea for consumers with respect to small businesses. Bitcoin advocates keep claiming that it can be the salvation of small businesses, but, as a consumer, it's these small businesses that are the MOST likely to not fulfill on the product I paid for. Not having any recourse would make me less likely to purchase.
2. Volatility/Risk. Risk of volatility is a big one, and why Overstock.com isn't taking it on themselves (they've pushed that risk to Coinbase). I'd never agree to sell a physical good at a given bitcoin price as it could be 50% of the value within hours on any day. And, yes, it is a risk that Coinbase could go out of business suddenly. The regularity with which bitcoin players get hacked and go under as a percentage of the players in the space has been a bit frightening the last year. True, it is due to poor security on their own systems, but this is a new space and folks haven't had to worry about money being stolen directly from an internet-connected server before. I'd wager a couple players will get it sorted.
3. Perceived Value. I understand the math behind bitcoin, but the value appears to be based on pure speculation and a dash of wishful thinking. Lots of bitcoin players say they have faith in the numbers, but then why does bitcoin have more value than litecoin, dogecoin, or the 100 other cryptocurrencies that have popped up, since those are based on the same or similar numbers. So, it's obviously not just faith in the numbers, it's something else. For some, it seems to be a bit of libertarian gung ho we can do it. For others, it seems to be a bit of technology can solve everything. For others, it seems to be about not having faith in governments. But none of those are really something to base a system of currency around. It needs to be numbers plus something else for me, and it's just not there. At least right now.
Use Electrum as your Bitcoin client. Doesn't need to sync entire blockchains, it's super-fast and also can generate a wallet based on a passphrase so you can recover a wallet if your hard drive crashes.
Ah, nice. Open source and lighter weight. This could be a good candidate for the PortableApps.com app store as you wouldn't need the 15.4GB and climbing full bitcoin blockchain on your portable device.
Contrarily, the bottom could fall out of the U.S. dollar at any given time. A dirty-bomb could detonate above The Whitehouse tomorrow.
We all have to place our faith somewhere. Some of us choose to place faith in numbers, some of us choose to place faith in governement. I prefer numbers.
If people had to carry around a wheelbarrow full of U.S. dollars to pay for something, I would consider that to be "the bottom falling out".
I realize I am throwing myself in the fire by offering up the whitehouse/nuke scenario. However, nobody has proposed a reason as to why the value could fall out from under Bitcoin completely tomorrow which I assume would be an equally unplausible scenario as a nuke hitting the whitehouse.
I think you misinterpreted the image. It's currency traders with a pile of currency on a table.
Somali currency is not worth much, but it was never worth much. What is interesting is that the government basically going away did not lead to worthless currency.
The bottom would fall out of bitcoin if X% of the users decided they didn't want to use bitcoin anymore. If that's the same X% as the dollar, that's far fewer people, and thus correspondingly more likely.
It's a win win for Overstock.com, really, since they don't need to worry about the volatility and instability of bitcoin and only deal in USD but get to look forward-thinking by accepting bitcoin. Yes, they are accepting more risk because Coinbase.com could disappear overnight (FAR more likely than PayPal or Visa disappearing overnight), but they get some advantage for their risk.