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Buying With Bitcoin: How to Get Your Money Back When a Purchase Goes Wrong

By Kyle Torpey Feb 19, 2015 5:29 PM EDT

NEW YORK (InsideBitcoins) — Bitrated publicly released the latest version of its reputation and arbitration platform on Wednesday, and the service could be useful for consumers who wish to purchase goods or services online from untrusted sellers via bitcoin. Cryptocurrencies do not allow payments to be reversed because there is no third party between the sender and receiver of a payment. The Bitrated platform allows anyone to position themselves as the third party participant through the use of multisignature addresses.

Chargebacks come to bitcoin

Bitrated

Photo: Bitrated on Vimeo

If you’ve ever purchased a laptop, book, clothes, or anything else online, then you know that sometimes the purchased good is not everything it was made out to be by the seller. In some situations, you may have never received anything at all after making your purchase online. For this reason, it’s important to have arbiters, such as PayPal or Visa, between the buyer and an untrusted seller.

[Read More: Can Bitcoin Handle 8% of $4.5 Trillion in US Retail Sales This Year?]

The issue with these sorts of arbitration services is that there aren’t many to choose from and they’re usually attached to a specific payment system. For example, when you make payments via PayPal, you’re stuck with PayPal’s arbitration services. Bitcoin is able to democratize the online arbitration industry to the point where anyone can be the arbiter between a buyer and a seller.

Bitrated uses multisig addresses to activate a third party arbiter in situations where a buyer is not satisfied with the end result of a transaction. Instead of being stuck with PayPal, Amazon, or one of the handful of other online arbiters, you can now find a dispute resolution provider like you would find an Uber driver or an Airbnb rental. If you’re making an online purchase from an untrusted buyer via bitcoin, you now have the ability to essentially conduct a chargeback if things don’t go your way. It should also be noted that the money is not held in escrow, so there is no chance for a malicious arbiter to run away with the funds (unless they’re colluding with the seller).

A user-friendly web of trust

In addition to the arbitration services, Bitrated also provides a reputation system that can be useful when choosing an arbiter for a transaction. Some early bitcoin adopters may be familiar with the original #bitcoin-otc web of trust, and Bitrated’s reputation system works in a similar manner. It wouldn’t be a stretch to say that Bitrated’s reputation system is simply a user-friendly version of the #bitcoin-otc web of trust. Bitrated users can link accounts from places like LocalBitcoins, the #bitcoin-otc web of trust, bitcointalk.org, Twitter, Reddit, and more. Those external accounts can be used to create a preliminary rating, but Bitrated also has its own reputation system where uses can proclaim their trust for each other.

Integration with wallets, marketplaces, and more

Bitrated is also willing to share their data via open APIs. This means wallet providers and payment processors are able to integrate their multisig payment solution, and marketplaces, such as OpenBazaar, could allow their users to carry over their Bitrated reputation score. It will be interesting to see if Bitrated is able to take hold as the de facto reputation system and arbitration service for the bitcoin ecosystem.

You can follow @kyletorpey on Twitter.

Facebook Comments


  • Victoria

    I’ll advice you to contact katiecor44@gmail.com She referred me to a group of charge back Pros.

  • Victoria

    Thanks so much for pointing me the right way. I have just recovered my money, my whole life changed since that first email I sent to you.

  • Bones Sp

    I need help getting my money back from the Bitcoin machine things I made a purchase and up I don’t think it’s going right I want to receive my money back how to get it back please let me know thank you

  • meryl garner

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  • katiecor44@gmail.com

    Did you make mistake making paying through bitcoins or did you transfer more than amount intended to transfer and you need to recover your funds back? Are you a scam victim trying to recover your funds or bitcoins back? Do not hesitate to write me via katiecor44@gmail.com for help. I lost a lot of money and via bitcoins payment and I got this dude to recover all that was lost.

  • Ehibor Stella

    Hello, My name is Ehibor Stella. My dad was a bit coin merchant seller before he died, I currently have over 1500 bit coins. Honestly, he bought those btc in 2013 for

    47$ each, Right now, a single btc is over 2,800$ in the market. I am putting 500btc in the market at a low price. I don’t want to sell to big companies. I want to

    sell to individuals. I am selling each btc for 1500$. This is my little way of changing the world *I only sell 1 btc and above.if you are interested in purchasing some

    kindly contact me through my email address:ehiborstella96@gmail.com,,,,only someone who is serious should contact me thanks.

  • christie

    Hello. Scammers take advantage of people who seem low risk and fragile. It sucks when all you wanted was to invest your money into something that secures a better future for yourself and your family only to get ripped off. I am available if anyone wants to talk and trade experiences and recovery solutions. christiehartwich56 at gmail dot com (my email is written like that to avoid spam)

  • Tracy Hebert

    HELP

  • Tracy Hebert

    IM A VICTIM OF BITCOIN FRAUD HOW DO I GET MY MONEY BACK?

  • Mark Basler

    Haha yes a mistake with Bitcoins or a comma can cost alot of money. But anyway that isn’t really a problem. Monero and Ethereum got more features than bitcoin if you compare it. Like Smart Contracts. But i’d spend money on Altcoins as said like Monero and Dash or Steem, Pascal Coin, cause its faster and can size better. Look, every Blockchain will be huge and can have problems (Blo https://uploads.disquscdn.com/images/92261de4e8ede3081300d246ed6c2e6d7b7b439d7bc3d624e5d8497fbec597de.png cksize Limit 1024 kb/ Megabyte) of scaling, cause It is A BLOCKCHAIN. So in Ethereum i love the probability of experiencing a software which can operate on it. Also these smart agreements are genius. But easier to compare the Altcoins and then take an investment using one of these Market segments like 😍 CEX (my favourite, it has alots of coins), Kraken etc. Compare it at your own on http://www.bestcryptoexchange.com and also have a look what exactly are the fees for Wiretransfer etc. I did so buy some Ethereum and came up also to a niche site where in may use a Trading Bot onto it coupled with Poloniex API. Its really funny to observe how your money develops while youre sleeping as well as your ??very small bot http://bit.ly/tradingbot is working. But put it to use in your own risk or have a great time growing your own bot which is trading ethereum.

  • ambra h

    I am a victim and made a transaction through bit coin…how can i get my money back?

  • Harry Styles

    Do you need to recover your stolen money back? I was a victim with sending bitcoin and I couldn’t get it back till I contacted a pro to help. email me at harryme293@gmail.com and I will point you the right way.

  • Aladebo Adebayo

    I made a silly mistake of transfering $50 worth of bitcoins instead of $10. Is there a way of getting my money back from this person?

  • Gloria Cruceru

    I have another question.. Can we see if the bitcoin address it’s one that is ok and that the seller will not scam us?

  • Gloria Cruceru

    Hello, i have an issue similar to your topic. I want to buy a program with bitcoins, but i am not sure if it will work or not and the seller told me “money back guarantee”. I don’t know how can we choose the option of arbitration and how can i be sure that i will not get scamed by the seller? I am new in the bitcoin industry, in fact i didn’t even bought yet.. so it is a little complicated for me to understand all the subtilities that come with the bitcoin.
    Thanks for your help

  • BTC Time

    Yes, this is true. However at least it puts the power of choice in the users’ hands. If they want to risk buying from a new merchant with low or non-existant ratings, then they do so at their own risk, knowingly.

    And yes, it may make it slightly more difficult for a new, honest, up-and-coming merchant to start up in that environment, but if the merchant is honest, they will persevere to obtain the trust scores to have a reputation for their lasting business. They will be around longer than the passing scammer so it’s worth more of their time to build a good reputation.

  • What does “escrow system with no chargeback” means exactly? What’s the point of the escrow then?

  • The problem with that model is that it makes it very hard for newer and smaller merchants to build up their initial reputation and compete with the more established merchants, to the point where they would find it very hard to enter the market. And if consumers were willing to buy from new sellers somehow, then scammers could simply open up a new account, scam one buyer, “burn” their seller account and open up a new one, ad infinitum.

    The Bitrated payment system helps merchants jump over that initial entry barrier, and contributes to an overall more healthy and competitive market.

    We do anticipate that once a merchant is trustworthy enough, arbitration might not be needed anymore and consumers would feel safe simply paying to them directly, knowing that they have their reputation on the line. We’re planning to support non-arbitrated transactions down the line, where the Bitrated system would simply provide a way to record and authenticate the transaction contract (using digital signatures) and add ratings.

  • BTC Time

    Interesting idea. That’s pretty good. And the feedback system would go both ways, right? The buyer could also leave feedback for the seller.

    I think that’s the best escrow system I’ve heard of yet. Beats what PayPal and credit cards offer.

    So while the seller would be safe from chargebacks, he would not be safe from negative feedbacks. And then nobody would do business with him anyway. Kind of like mixing the eBay feedback system (except going both ways) with Bitcoin payments.

  • cohagen

    Yes it is. put in a little simple effort and ebay and scammers easy to handle lazy bones. Now if your a stealther say ala the aspkin forum stealth guide then yes it’s a different matter and you for the most part are at the mercy of scammers.

  • Anon Wibble

    Well i think the solution is an escrow system with no chargeback and feedback system where the seller is allowed to give negative feedback when a customer tries to shaft him. It also requires paypal to actually investigate these cases rather than just refund.

  • Anon Wibble

    That’s just not true at all.

  • cohagen

    Wrong. I sell quite a bit on ebay and have dealt with scam buyers often. Take’s very little effort to prove your in the right as a seller. A couple pics, tracking numbers and scanned postal receipts and presto! Scam deflated, your money safe and scam buyer suspended.

  • BitcoinGuy

    There will probably never be a PERFECT solution. EIther the seller or the buyer will have the disadvantage.

    Without arbitration the seller has the full advantage and can never be taken advantage of. In this case the buyer is at the disadvantage, if he truly does get screwed over by the seller. On the other hand it also opens the door to fraud as you mention. But another plus point for offering arbitration is that the seller may get more buyers just by the fact of offering a 3rd party arbitration service, as it instills confidence in the buyers.
    This alone may offset the cost of fraudulent abuse of the arbitration when it occurs.

    There are lot of factors to think about. At least with bitcoin the seller and buyers can CHOOSE what they are comfortable with.

  • The situation with chargeback fraud today is largely caused due to the high barries of entry for providing escrow services, the coupling with the payment system and the lack of competition. The companies providing these services today have a very mechanical and bureaucratic dispute resolution process that heavily leans towards protecting consumers, even on the expense of merchants.

    We believe that by lowering the entry barriers and the associated costs (mainly due to avoiding the strict escrow regulations and leveraging multi-signature), we can increase competition and create a truly open marketplace for arbitration services that is more accountable, more fluid and reacts to market demand.

    Under Bitrated’s open marketplace model, the dispute resolution process should be much more innovative, comprehensive, and fair, and help resolve the chargeback fraud issues you mentioned.

  • Anon Wibble

    No the problem with middlemen who issue chargebacks, is they facilitate chargeback fraud, as all sellers that have sold on ebay know. Customer swears to god they never received the item, or that the item was broken and posts back a brick, paypal will never ever ever side with the seller in a SNAD case… In fact they wont even investigate, they’ll take the money out of your bank, allow the customer to keep the product and they will refund them. It’s on the customers word that they sent the item back and not a brick as they only even check that something’s been posted – they wont even check if its the same weight.

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