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Comment by colinbartlett | Hacker News Reader

What does a reversible payment method mean? And how does that differ from Mt. Gox? I know Coinbase is not an exchange like they are but are their payment methods different? Genuinely curious.

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Coinbase uses a method called "ACH" to electronically request the money from your bank account. The problem with this method is that it is relatively easy for a fraudster to get the information needed to do this (routing and account number) and submit that as their account on coinbase. Consumer protection banking laws in the US are very consumer favorable and thus if someone goes to their bank and claims they did not authorize the transaction (of coinbase taking the money from your account) the funds will be returned to you and coinbase will take the hit. Now, typically this is less of an issue, but with bitcoin, coinbase is not able to take back any bitcoins they have let you withdraw. Thus you can see where this leaves them in a very delicate situation about having to monitor how and who they withdraw money from as well as the amounts.

Good details. US laws suck. But they have all this account/identity verifications which is trackable. As a new user, I followed all steps to become a good user, but all my transactions are being cancelled. I even tried new accounts, and no luck. So, if they were to follow this trust pattern, no new user would be able to become a good user. I have seen posts where people who are veterans on coinbase have their transactions cancelled. I am to the point that I want to drop by their office with a physical check in hand and tell them to buy me BTC.

Ironically enough, due to check fraud that check might not help you as much as you think ;)

I don't know what algos they use to detect fraud but being a veteran does not always mean there won't be fraud on your bank account. Remember, this is not about those five 10 dollar transactions you authorized, this is about that one 5 thousand dollar one that was the result of fraud. From their point of view, a false positive is much better than a false negative.

OK. Then with the current bitcoin price, their risk level goes significantly higher. They should really open the option to people walking into their office and drop off physical checks. I am willing to do that and that does not have the problem is ACH because it is in physical form and has your signature on it.

Sure it does, especially since many times checks aren't actually sent to a clearinghouse, but scanned and turned into ACH transactions. They're just as easy to counterfeit (you can order checks with any account and routing number you want from Vistaprint online, or print your own at home) and sometimes just as easy to reverse. A cleared paper check that was never converted requires a bank's intervention to reverse, but it's still possible.

You want to show up with cash, not a check.

OK. Cash in the suitcase. ;) I feel like a gangster.

Here in Australia all the exchanges I know about require you to physically deposit cash at a bank branch to fund your account. This type of deposit can't be reversed.

Coinbase uses ACH (which is reversible) while many other exchanges use wire transfers (which AFAIK are merely more difficult to reverse, not impossible).

Yes, wires are much more difficult to reverse but they can be reversed. In my experience, your financial institution must get your prior approval before reversing a wire (which is not true for ACH reversals). Wires also you a completely different system of clearing funds which is part of the reason reversal requirements are different.

I think what he means is this:

If you buy something online for example and you don't get it, you can call them up bitch about it and they refund you, and in worse case if they are jerks and you used your credit card you can dispute.

With bitcoin, once transfer is done from one account to another account, the transaction is not reversible. Since bitcoin addresses are anonymous, you don't know who it went to so there is no way to track and reverse the transaction like we do with refunds and voids.

However, his explanation doesn't make sense anyway. The concerns he raises are about fake accounts and having them to pay exchange to purchase the coins before they actually withdraw money from your account, which is taking a risk on their part to be able to secure the coins at the price you purchased. However, this is not true either. I had my orders cancelled back to back even if the money was withdrawn from my bank account. What risk? I don't know. Perhaps they made money from not granting me the coins that were doubled in price since last week.

The risk is not that your account will be debited, it is that you will go to your bank and claim the charge was not authorized by you after having moved the coins off their site. Now, maybe your bank account was compromised, and the attacker used your info to get coins. The bank will still refund you at the expense of coinbase. Remember, it isn't the "good" actors these actions are meant to protect against. A business like coinbase is a target 24/7 for many malicious individuals with access to lots and lots of compromised accounts.

So this is good tip. I actually did transfer out my first bitcoing from Coinbase to Blockchain, so it makes sense if their algorithm doesn't like that. I just transferred that coin back in to see if it makes any difference. But frankly, it is impossible for new users to buy bitcoin on coinbase. I had used my daily limits just to find out about this problem.

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