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Comment by downandout | Hacker News Reader

I don't know why, in 2013, people are surprised when they use PayPal and wind up without access to the money for months or years. Paypal apologists will say that this is relatively rare. Even if that is true, since the criteria they use to take these actions are often beyond the control of merchants, using PayPal is an unacceptable risk for any business that doesn't have at least 6 months of working capital.

Always avoid PayPal if you need access to the money. Even if you feel that your business falls squarely within PayPal's AUP, always have a backup implementation with an alternative payment provider coded and ready to go (I recommend using Stripe and skipping PayPal altogether). You don't want to lose new sales on top of the money PayPal decides to hold indefinitely.

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I've seen PayPal nearly put several small businesses out of business.

There are some things that cause PayPal to just freeze an account, and it's next to impossible to speak to a human or to otherwise get the situation resolved.

Pretty much the only threat to Stripe's eventual world domination would be PayPal getting its act together.

Most of Paypal's competitors weren't wiped out by Paypal being good, they were wiped out because they weren't as good as handling risk and fraud as Paypal. They got wiped out by criminals.

Paypal is risk averse, which means you shouldn't use them for cases where you're taking a large amount of money up front and not delivering in the near future (i.e events, crowd-funding), or alternatively get pre-approval from Paypal.

I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases.

> I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases.

I'm one of Stripe's cofounders. For what it's worth -- we already process billions of dollars a year. (More than PayPal when it was acquired.) There'll always be more we can do on the fraud/risk side, but we're already operating at a scale that requires a decent amount of sophistication.

Stripe rocks :)

You're right, but then there was no PayPal when PayPal reached their size, so the situation now seems different to me.

Thank you for Stripe ... it freed us from PayPal's chains.

(in a previous life I worked in front office investment banking so had to undergo anti-fraud and anti-money laundering training as well as worked on general exposure risk issues)

The problem is that fraud/risk (like tech security) is it often involves black swan events. Everything seems fine right until the point where it's not and you're on the hook for millions of dollars (Stripe is probably in the position where you can afford to take a few black swan type events and survive; a lot of Paypal competitors weren't).

Given that Stripe don't do the "wallet" approach of Paypal and is primarily focused on API customers I'm guessing your risks in general are lower, but I'd recommend you be careful about becoming over-complacent.

> I'd recommend you be careful about becoming over-complacent.

Absolutely. Indeed, I'd characterize us as actively paranoid. My point was merely that we're already operating at a scale that needs pretty good fraud systems.

(I think we're mostly in strong agreement.)

Does fraud follow the power law?

And then there's Bitcoin- no fraud, no charge backs.

Payments are final and instant and, best of all, don't require a middle man.

> no fraud

Only for extremely specific and useless definitions of "no fraud."

If I send my bitcoins to someone to buy something, I have no protection if they decide not to deliver.

At which point the Bitcoin enthusiasts will say "but you can use a third party escrow service," which is true, and puts us right back into the same situation we are with PayPal.

The difference is you have the option to offer buyer protection or not offer it with Bitcoin.

With Credit Card companies and their proxies, Stripe, PayPal, etc. there is no option of choosing a buyer protection service provider which meets your needs (unless you consider strict to extremely strict a choice).

Buyer protection isn't always a good thing. Often it is a hindrance to progress. Merchants should be able to chose the level of buyer protection they want to offer.

But with Bitcoin, if you trust the merchant/recipient you can opt out of using escrow and transfer the money directly to him. With Paypal it's impossible.

This merchant offered Bitcoin. The vast majority of payors chose to use PayPal with its built-in buyer protection instead.

The fact that the vast majority of payors used PayPal rather than Bitcoin certainly has nothing to do with PayPal's buyer protection and everything to do with Bitcoin being obscure and more complex to use.

I rarely use cash when I buy anything in person mainly because of the buyer protection a credit card offers me.

Online it's the same thing. I'd pick credit card or Paypal over bitcoin just like I pick credit cards IRL over cash. It has nothing to do with obscurity.

I can mail money directly to someone if I don't want to deal with a bank or payment processor. FedEx/UPS/USPS are the Internet in this analogy.

I can still send someone cash in the post.

Just send a money order or cash through the mail. After all, you trust the recipient, so you don't need all that customer protection stuff that Paypal offers.

I do that all the time. I live in Poland and bought hundreds of things from the Internet. Buyer always pays first, and there are no such things as chargebacks. And yet most people are okay with that. Only US people take chargebacks for granted.

I live in the Czech Republic and by far the most used payment method here is 'cash on delivery' - you send something and the postal service collects the money for you and than just sends you the cheque. It can hardly get simpler and it's safe. I wonder why this solution is apparently so rarely used in western countries.

> If I send my bitcoins to someone to buy something, I have no protection if they decide not to deliver.

To be more precise, you have no protection from the money transmission service. This is no different from cash.

> At which point the Bitcoin enthusiasts will say "but you can use a third party escrow service," which is true, and puts us right back into the same situation we are with PayPal.

Bitcoin escrow doesn't work that way. Escrow cannot decide by itself to freeze your money. There are three parties in the transaction and you'd need the consensus of at least two of them to move the money. It's either the buyer and seller (in ideal transaction), or the escrow and seller or the escrow and buyer in a situation where transaction is disputed. The bitcoin escrow cannot behave like paypal do in this case.

While fraud was a big deal for PayPal, based on reading The Paypal Wars (http://en.wikipedia.org/wiki/The_PayPal_Wars) network effects, good early customer engagement and the fact that the dotcom bust killed everyone else's funding were also pretty important.

Everyone keeps saying that fraud will be a serious problem for Stripe, but they move a huge amount of money now which is probably comparable to the period when PayPal nearly got destroyed by fraud - which was around the year 2000 when the web was a lot smaller.

Surely Stripe will eventually face the same issues that made Paypal behave the way it does? I imagine there is a certain logic behind Paypal's "evil".

What should they use - Google Checkout? https://support.google.com/checkout/sell/answer/3080449?hl=e...

For better or worse, Paypal has survived and looks like it's going to go on surviving, that's why people if they only support one method, choose it.

Bitcoin

Because everyone wants to limit their crowd-funding project to a micro-niche of internet users competent enough to use this internet currency.

Bitcoin has a long way to go before it's as easy to use as Paypal.

>Bitcoin has a long way to go before it's as easy to use as Paypal.

Coinbase (out of Y combinator) is getting there.

People can get tired of other people telling this, but really, they should use Bitcoin. There are several advantages of this: accountability (you can verify with the block chain that they really received your payment), ease of use (utilizing 3rd parties like Coinbase, BitPay and others you don't really have to know how Bitcoin works to pay with them) and most importantly - irreversibility - once you receive Bitcoin there are no chargebacks.

PS. They accept Bitcoin donations (not in the indiegogo campaign, just independently) and already raised 52.44 BTC which roughly translates to 5244 EUR. Not bad if you ask me for a payment channel that's not actively advertised by them.

Of course you also have about zero privacy with bitcoin (by design), but who cares about that, right?

Just like everything else.

Not really - can USA spy on credit cards issued by Chinese banks? And vice-versa? There is at least some level of privacy. But with BTC every time you make a purchase you can be linked to all your previous and future purchases.

If it's a Visa or MasterCard, yes the US Gov can spy on it.

If it isn't, you can't use it to pay Mailpile- so it's irreverent.

That's only true if one has access to data at every point in the block chain. If at some point coins go to a private person or company that didn't advertise their address anywhere you're lost. There's no way to know who own a Bitcoin address if it's not part of any online service/exchange and was funded by someone else.

The US surely can spy on Chinese CC transactions that occur in, or where the tx data passes through a friendly locale. There is a decent chance for them to be able to get CC tx data from within China as well.

>But with BTC every time you make a purchase you can be linked to all your previous and future purchases.

This is simply not true. If i make my first purchuase using address A and my second purchuase using address B, how can they be linked together?

Bitcoin is a protocol that gives you as much privacy as you want. You can use one-time addresses both for sending and receiving, which gives you more privacy than using Paypal or credit cards directly.

> irreversibility - once you receive Bitcoin there are no chargebacks.

Unless I receive the goods before paying, I would never buy anything with Bitcoin online. There’s no buyer or fraud protection whatsoever. I don’t understand how any legitimate merchant would be alright with that. If a merchant would only accept Bitcoin, that would come across just as sketchy as a merchant who wants me to mail him a cashier’s check – never gonna happen.

Merchants have a reputation to keep. Most people will trust a merchant who has proved themselves trustworthy. Merchants who haven't built trust will be forced to use a trusted escrow service, of which there are many.

There are more than enough options for buyer protection with Bitcoin. The good thing is that they're all optional. Buyer protection is a trade off. Sometimes it is unnecessary. But with card companies and businesses like PayPal, merchants don't get a choice. They're liable for charge-backs for 90days and for having their accounts frozen indefinitely.

MailPile has already received over $6000 in Bitcoins, by the way. It is their only donation received which is currently liquid.

See https://blockchain.info/address/13z55AGS14pSPiPpMqAAFHb576tS...

Out of the half dozen times I've purchased with bitcoins, I was ripped off every single time. I stopped using it.

I'm a supporter of bitcoins and want it to succeed, I just don't trust a lot of the vendors that use it.

What were you buying?

Out of the dozens of times I've purchased with Bitcoins I have never been ripped off.

Buy from reputable companies or use an escrow service.

A homeless guy asked me for my car keys the other day. He said he'd clean the inside of my car and bring me the keys. I didn't give him my keys. Something tells me you would have.

Well that escalated quickly.

use an escrow service.

Something like PayPal for Bitcoins? Sounds like we're back to square one. What's the point of bitcoin again?

Not exactly. Bitcoin enables multi signature transactions, so power rests not only with the escrow service, but also with the parties involved. There can also be more than one dispute mediator involved, as to maintain a balance.

For the delivery of real world goods you can write small scripts in the tx that monitor tracking numbers, have time locks, and the like as to maintain more control over the flow of money. Bitcoin is trustless, but only to an extent. Just like anything there will be point of failures, but Bitcoin minimizes them to a large extent and brings with it the opportunity to distribute power among many third parties, not just one.

I won't even bother answering you last question though, because I'm sure you realize how ridiculous that sounds in the context of this thread. Namely, if MailPile only accepted Bitcoin this would have never happened.

A script in the transaction cannot check if the the item sent was as described. No matter what, you will need people/courts/judges involved.

So fraud is perfectly OK, in your view, as long as the person defrauded meets a certain minimum standard of deserving stupidity?

Remember that "chargebacks for everyone, no questions asked" is a US and Australia-only thing. In most other places it's not very common (you need to go premium for that), and Bitcoin would be more than welcome to reduce fees, delays, frozen accounts, and other bull.

Fraud is still fraud, so if you get defrauded by someone, all you need is that a judge decides that Bitcoin is money, like it has already happened with that guy in the US who ran a ponzi scheme based on Bitcoin and got caught. So don't worry about that.

> all you need is that a judge decides that Bitcoin is money

And then what, do I need to sue every time someone stiffs me? That would be a colossal waste of time and money, which means in practice that the fraud gets away with it – knowing they might not even have the funds to pay me.

The way it works now is, if I’m not satisfied and the merchant isn’t being reasonable, I can call my credit card company and request a chargeback. No lawyers and courts needed.

I was talking about fraud, which is a lot broader than "I bought something on Amazon and something went wrong". If you fall into a ponzi scheme, a credit card won't save you.

About chargebacks, again, it's a US and Australia-only thing, so yeah, maybe in those places Bitcoin won't look so good, won't be adopted, and they will be left behind.

At least in the US, it's not quite "no questions asked". The last time I requested a chargeback my credit union sent me a form with a list of questions, including asking me to detail how I had attempted to resolve the issue with the merchant, with the dates of when I had phoned them.

On the other hand, "chargebacks for everyone if no evidence of goods delivered" is a global thing.

Fraud is very different from chargebacks - if you lose money in fraud, good luck getting it back from the fraudster; proper chargebacks mean you get the money back in any case, even in extreme cases if your bank goes bankrupt during that time.

> Unless I receive the goods before paying, I would never buy anything with Bitcoin online.

Good, then you should be fine donating to Mailpile using Bitcoin. Because it's not a purchase transaction, it's a donation. There is no promise of a product.

By clicking 'Continue', you acknowledge that you understand that you are contributing to a work-in-progress and not making a direct purchase. Perks are managed by the campaigners and cannot be guaranteed by Indiegogo. Your click also acknowledges that you agree to the Indiegogo Terms of Use.

I know that's what all the crowdfunding sites says, but practically speaking, people expect their stuff, and get angry if they don't get it.

I think crowdfunding would be a lot less popular if people actually understand it wasn't just a pre-sale. Because most people are not just donating.

> I think crowdfunding would be a lot less popular if people actually understand it wasn't just a pre-sale. Because most people are not just donating.

Exactly. In a world where caveat emptor doesn't apply for consumer purchases, this is a mild case of fraud. Naturally, PayPal is extremely wary.

There is something I don't understand about Bitcoin: right now there is a lot of instability in the exchange rate of Bitcoin and everyday currency like dollars, euros, or pounds, from the graph I checked from here[1].

How can it be a viable alternative, when its value can change by 40% in a month? Gaining or losing value is not important (if it's increasing value, I have to delay exchanging to dollars as much as possible thus withholding funds), but as long as a vast majority of the population is not using it to pay or get paid, it poses a serious problem to its adoption.

The only solutions I can think of are: either it becomes stable, and so everyday people can exchange other currencies in Bitcoin, or people get paid in Bitcoin by employers, so they can spend it whenever they want, but neither of them look like they're going to happen soon.

Am I wrong in my analysis? I'm not an expert in finance so maybe I might have missed something.

[1] http://bitcoincharts.com/charts/mtgoxEUR

Just don't keep BTC. I'm surprised the default method of using bitcoins isn't "I give send USD to my transfer agent, they make a BTC transfer to your transfer agent, and your transfer agent immediately deposits USD in your account", with the entire process occuring with a defined instantaneous exchange rate.

That's interesting! But isn't there any delay between currency exchange and an exchange fee as well?

Yes, I imagine that, like with Paypal, the sender would be responsible for eating both exchange fees. The delay, on the other hand, would impose price volatility that would likely be equal in both directions--so as long as the transfer-agents formed a network with an agreement that the receiving agent smoothed over both all losses and all gains during transfer, there should be net zero liability (they'd just need some float.)

You've lost me. Why would a consumer ever bother with BTC? Especially if both ends of the transaction are paying fees, spreads and paying for an escrow service.

Also, does the merchant set your prices in BTC, and change prices a few times per week as the exchange rate fluctuates? Or are the prices in USD?

Who said anything about an escrow service? One of the whole reasons to use BTC is irreversibility. You can build a crowdfunding site on atomic USD->BTC->USD transfers, precisely because there's no possibility of chargebacks. Crowdfunding is fundamentally a "pay cash in advance for some probability of a return" model, and BTC is the "cash" part that would make that work. Credit cards are very bad at being cash.

Before my transfer agent will send the irreversible transfer of bitcoins, they'll want to receive their USD by some irreversible means.

Why bother with the bitcoin sandwich? Why not transfer between the agents using Western Union or Hawala or whatever?

It's a new currency that is not artificially stabilized by any government, so it's only natural that it has some wild fluctuations. If you don't like big gains just avoid holding BTC and you'll be fine.

It's not just that Bitcoin is not stabilized by any Government. Bitcoin has no stabilization mechanisms at all, and they cannot be added.

As derefr said, there are many third party processors who will handle the Bitcoin for you and wire you the cash directly as soon as you receive Bitcoin payment. Or you can do it yourself and sell your BTC as soon as you get them.

I will accept goats and chickens before I accept Bitcoin. 99% of people have never even heard of it. I am pretty certain that 100% of my customers have never heard of it. Not worth my time.

Yeah, you can probably multiply your savings x10 every year by yourself anyway, no need to use a revolutionary currency for that.

http://blockchain.info/charts/market-price?timespan=all&show...

He is talking about using that currency as a way of being paid (= running his business), not for investing neither for speculating.

N.B. maybe I'm wrong but according to this graph: http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g... http://blockchain.info/charts/market-price Now bitcoin has half the value than in April (and, I known, 10x Jan value). Too volatile to use if your business IMHO.

Like it has been said a gazillion times already, you can get paid in USD if you want to (using Bitcoin behind the scenes). You get the same benefits as a merchant (no chargebacks, easy implementation, ridiculously small fees, countries: All), and without the annoying x10 yearly gains.

That's probably what you should have said in the first post (benefits as a merchant) and not implying he was dumb because it was missing those fabulous gains

Nice, logarithmic scale. Really smooths out those bubbles :)

Bubbles? We are at $120 currently. So the only "bubble" is always the last one. I used logarithmic scale to make the x10 increments more obvious.

Past performance is no guarantee of future results.

What is this, another reddit meme that will be repeated until the end of the internet?

Bitcoin can only go to zero or +inf. Past performance is a way to show what haters are losing every year for denying Bitcoin.

> Past performance is a way to show what haters are losing every year...

... said real estate agents in the early 2000s.

Folks who bought in April at $260 are out more than a hundred bucks per Bitcoin. It's just as easy to lose your shirt as it is to get rich.

Folks who bought in April will be early adopters and will see incredible profits too if they don't panic sell. It's a matter of logic. Like I said, it can go to 0 or +inf.

If it can go to zero, why do you say "will see"? "Might see" is accurate, as is "might see incredible losses".

Quite hard to accept goats and chickens from people living on another continent. With Bitcoin it's possible, fast and costs pennies. Plus, many Bitcoin supporters are buying from merchants that accept Bitcoin just because of that, so with little cost you get more business. I don't see how this could be a bad thing or not worth your time.

irreversibility - once you receive Bitcoin there are no chargebacks.

irreversibility is good for the merchant, and bad for the customer.

Everyone always recommends Stripe as an alternative to PayPal. Sure, it's an alternative to PayPal for accepting credit cards. But it doesn't accept payments from PayPal accounts, which is the only reason most people use PayPal in the first place. I have a business in the SEO sector, and many of my clients are foreign without credit cards. Over 50% of my transactions are from PayPal (the that option is direct credit card through a traditional gateway).

I use PayPal when it's an option simply to avoid giving out my credit card number to every site I purchase from

Yeah.... even my mother knows better than to use PayPal.

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