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Comment by pavel_lishin | Hacker News Reader

I don't understand why vendors would keep a lot of bitcoins on the site, instead of withdrawing them as quickly as possible.

This guy apparently had 300BTC/$85k on there! http://np.reddit.com/r/DarkNetMarkets/comments/2zeuxo/compla...

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Apparently Evo admins stopped processing withdrawals a week ago. Vendors wouldn't be able to transfer money to a local wallet even if they wanted to. Disabling autowithdrawals should have been a sign of impending doom.

That said, some people probably just leave money in their accounts anyway due to convenience/laziness.

> * Vendors wouldn't be able to transfer money to a local wallet even if they wanted to.*

So this guy made $85k in a week? Or do we suspect that he was one of the lazy ones?

maybe not 85k a week, but it wouldn't be unreasonable to amass close to that amount of money in the span of 2-3 weeks

Escrow, funds are only released once the buyer confirms that he received the shipment. If you have a ton of outstanding orders, you are going to have a lot of funds frozen in escrow.

I thought the whole point of bitcoin was that it was peer-to-peer with no chargebacks or centralized middlemen?

A side benefit, but I wouldn't say the whole point. There are some cases where middlemen are necessary - the difference being that they're a lot more avoidable with BTC than they are in meatspace. (Credit cards, authorities who rob people carrying large amounts of cash, and so on.)

I'm not positive that bitcoins offer much more protection from robbery than cash, given the situation here.

They offered protection, though didn't they? Evolution had multiescrow, they wouldn't have gotten those funds would they have?

I'd much rather have someone charge up fraudulent charges on my credit card than Bitcoin, I would much more likely be getting that money back and letting the CC fraud department deal with it. That guarantee is a major selling point of why so many people use credit cards in the first place.

The bitcoin model alone doesn't fit buying drugs online. The purpose of escrow is a mutually agreeable middleman to facilitate a transaction, especially when parties that do not trust each-other can not exchange goods and payment in person.

I still don't understand how this helps though - couldn't the person still get their shipment and claim they never received it in order to trick the middleman to return their funds?

How does the middleman have any ability to investigate or know who to believe?

In one model of escrow, the middleman receives both the goods and cash before distributing them to the other parties. Potentially doing some inspection of goods at the time too.

In another model, more common on the internet, the middleman holds the money from the buyer while the seller ships the goods to the seller. They can't guarantee the buyer does not lie to the middleman, but it changes the incentive structure around fraud. Especially so when the middleman runs or has connections to the marketplace.

Bitcoin allows transactions that only become valid once 2 of 3 people sign them. If the three people are buyer, seller, and arbitrator, you can have escrow without trusting a third party. There have already been commercial services along those lines.

Seems to me that any dark service that doesn't do it that way probably shouldn't be trusted.

>arbitrator

Is the arbitrator not a third party?

Not one that you need to trust.

You need to trust either the buyer or the arbitrator actually. In this case some money might have been lost due to malicious buyers (and the absent arbitrator).

You have to trust the arbitrator to make fair decisions, but the arbitrator has no ability to steal the money.

The transaction simply moves funds between buyer and seller. If buyer and seller both sign the transaction, it completes without the arbitrator's involvement. If buyer and seller dispute, then the one who hopes to complete the transaction signs it and contacts the arbitrator, who will either sign, or not sign, but either way never gets possession of the funds.

If both the buyer and the arbitrator are anonymous, how do you know that they aren't the same person?

They're actually pseudonymous, so they can have reputations. If the other party insists on an arbitrator you've never heard of, you probably shouldn't agree to those terms.

The arbitrator will usually be known by reputation, i.e. always the same key id.

The article mentions that Evolution provides such a service, but it didn't get heavily used. Quoting from the article

>That system, would require at least two out of three parties in a transaction—the buyer, the seller, and Evolution’s administrators—to sign off on a deal. But due to its complexity, buyers rarely used the feature.

Edit: apparently this does not use bitcoins version of it, but their own that requires them to hold the funds in escrow. Which seems pretty stupid.

Once again user experience trumps security

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