Big Crypto accepting companies giving false sense of security... Use Multisig Escrow Everywhere
It was great to see large companies like Overstock, Expedia and others to start accepting bitcoin. Now its time for the next step. Multi sig has been around for a while, and can be used with a 3rd party arbitrator. Traditionally credit cards will act as an arbitrator, think of credit cards as having 180 day escrow, the time limit for chargebacks.
most big companies use bitpay, and bitpay does some vetting to make sure the company provides good service. but bitpay still expects you to send direct.
while the companies are trust worthy, and will correct issues with product quality, they are getting people comfortable with sending direct, with no form of protection. new users who are just getting started have no awareness of the issue.
Many people like to support smaller businesses. and there are lots of great small businesses out there that will do everything they can to provide good products/services. But there are many fake small business scammers out there. Escrow can protect against this.
Sites big and small could get hacked, users could end up on the wrong site, and blindly send btc to the wrong address. an arbitrator might catch this.
arbitration is not perfect and can also have issues, or an arbitrator could be a scammer. Its important that arbitration be decentralized, not just one big company like bitpay, but lots of individuals.
When the consumer losses out due to scams the consumer is a direct victim. but it also hurts the crypto community, giving a bad image, and good businesses end up with a customer base that has less money to put towards the good businesses that deserve it.
There are a few ways to go about using escrow with multisig. The first is direct wallets, with manual setup. Electrum and Copay/bitpay wallets are wallets that support multisig. the most popular way would be a 2 of 3 wallet. where 2 signers out of 3 people are needed to finalize a transaction. if everything goes well only the buyer and seller are active. if there is an issue the arbitrator will review evidence, and side with one or the other. Manual also allows for upto 10 signers)
The other ways are a more automated way of doing the same thing. Bitrated is one of them. the buyer will select someone they will be buying off, and an arbitrator. it also allows you to link social media, and has a rating system based on your social media following/reputation, and your trades on platform. The other popular place is OpenBazaar. In OpenBazaar anyone can be an arbitrator, Openbazar2 adds verified moderators, the OpenBazaar team has verified them as a good crypto community member. also altcoins can be used in OpenBazaar2. Bithalo is similar to openbazaar but with double escrow, this gives both buyer and seller more incentive to be serious and honest. I meant to play with it more, but i was inspired to start writing and get this out.
Bisq is an exchange, one of the only ones where you have the keys. currently the developer serves as the arbitrator, but hopefully in future releases it will be opened up to members of the community. Bisq is software that runs on mac/win/linux for exchanging fiat to/from btc or btc to/from altscoins. With bisq Bitcoin goes into escrow, and the traded funds go from user to user. All other exchanges you don't have the keys, and should not be trusted as much as people do. Binance is looking to become more like bisq, but currently binance is centralized and has the key to both Bitcoin and the traded currency. As far as I know, no other exchange is working towards this for bitcoin. there are some other decentralized exchanges- forkdelta for eth tokens only. bitshares, and maybe a few others I haven't spend much time on, like nem, waves, neo, maybe eos- the smart contract coins.
Manual Multisig is good for private, and one time use, or long term agreements where the wallets can be left active. Bitrated is good for checking reputation, and setting one time offers. OpenBazaar is good for the seller to list items for sale. The seller will choose various acceptable arbitrators, and from that list the buyer can choose an arbitrator. Have a significant number of arbitrators to choose from (manual may be difficult to find).
An additional advantage to utilizing multisig, for crypto enthusiasts is more people will be hodling potentially for a few hours, days or even weeks. This can drive the btc price up.
an additional issue, especially for projects that may take weeks or months is price volatility. you'll have to agree on if you are strictly priced in btc, or if you are using a fiat exchange rate at the start of the transaction, or at the end of the transaction. or you might give the option to be whatever is more advantagious to the business or customer.
This opens up some spaces for new companies to become arbitrators, and certain people may like a well established arbitrator, while others might like the small individual arbitrator. Any participant could even set themselves up to hedge the exchange rate to make more interesting offers.
I would hope that those who are true believers will start using escrow soon, and get people in the habit of transacting safely. Overstock seems to be a crypto ally so I hope to see them and other believers start sooner. Expedia seems like they just care about customer demand and the profit, so I don't expect as much or as soon from them (untill it starts hurting their profit). There are many other examples, I just didn't want to spend the time to go through every crypto accepting site. There's lots of people already on bitrated, and openbazaar, that maybe need a little reminder of how important their part is in escrow, and keeping the crypto community strong
https://www.bitrated.com/opticbit
OpenBazaar Verified Moderator
ob2: QmcscQDiCuTSGxBeMD9qyXwRMcbLU5m9P1kupojYJdFdoh
(Me)
Every time I hear of a story of someone getting hacked or scammed in crypto, it's because they were lazy and didn't use the strong protection that was available. It's a shame.
Thanks for the rundown of the importance of MultiSig. I agree it is a very important innovation and needs to be more widely used, just like running updated full core nodes needs to be more widely adopted.
Thanks also for the resources here. It's very helpful to have this info in one place. Very Helpful!
Had so many thoughts to get out, and was running out of time.
Forgot to mention LocalBitcoins, Paxful, Wall of coins and similar.
With those sites, you are basically choosing them as the arbitrator. Except they have they keys, and you get to pretend you have the keys. You are mainly either trading Fiat or a gift cards priced in Fiat and altcoins (with BTC escrowed). On those sites. You could trade products on those platforms, but it's not their intended purpose. Use the right tool for the job.
They offer some protection, and are better than exchanges like Gemini and gdax in that they only hold your BTC, not your Fiat. But you do need to watch who you trade with, especially selling.
Thank you for this important and excellent article :)