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Bitcoins: Cash trading with 0 chargeback risk

Discussion in 'SteamRep Guides' started by Dando Real [ITA], May 12, 2012.

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  1. Dando Real [ITA]

    Dando Real [ITA] New User

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    In this guide I'll explain:
    • What are bitcoins
      • How can bitcoins make chargeback scams impossible
    • How to start using bitcoins
    • How to do a bitcoin transfer
    • How to buy/sell bitcoins for cash
    • How i can know Bitcoin current value?
    Introduction:

    Paypal trades are fast and easy to do, but they have a huge risk: a chargeback scam.
    There are 2 reasons which allow this scam to go through:
    1. Paypal has power to touch your balance
    2. The transfer has no intrinsic irreversibility. This means, the transfer itself is not able to make a chargeback impossible
    Thus, cash selling is pretty difficult:
    • Very few sell to newbies, and only in small amounts
    • For every trade a lot of time-wasting checks are done
    • Still, every transfer is based upon belief that the buyer won't chargeback. Unfortunately, rep can't be enough.
    What are bitcoins:

    "Bitcoin" is a decentralized electronic cryptocurrency, born to solve the 2 problems declared in the Introduction:
    1. Only the user has power to touch/move his own balance
    2. Transfers are irreversible by construction
    3. (Bonus 1) Anonymity
    4. (Bonus 2) 0 fees
    5. (Bonus 3) Worldwide, but still fast.
    With a bitcoin transfer, you can:
    • Sell to newbies, any amount
    • Avoid any boring buyer checks
    • Once the buyer sends the payment, the seller is iron-safe.
    A bitcoin transfer is best suited when there isn't any kind of protection for the seller, which is the case for tf2 cash trades.
    I'll focus on practical aspects, leaving conceptual and technical aspects to the reader in the Resources section.
    Only the user has power to touch/move his own balance:
    Once the user downloads the client, a file, wallet.dat, is created in the user's app folder.
    Only the user, who holds this file, can use the bitcoins sent to him.

    There is no third party, like paypal, which can touch his bitcoins, because everyone else in the world, miss the user-specific wallet.dat file.
    Transfers are irreversible by construction, or How can bitcoins make chargeback scams impossible:

    To clarify this, I have to be a little more technical.
    Bitcoin transactions use public key encryption to transfer bitcoins between users.
    Example: A ( buyer ) wants to send a bitcoin payment to B ( seller )
    B tells A his payment address, for example 17pDwScCK53nU4kaAuiaBTjhm2C3FoeRDJ
    you can think it as a paypal email.
    However, this address is, in fact, a public key.
    When A sends X bitcoins to 17pDwScCK53nU4kaAuiaBTjhm2C3FoeRDJ, A is encrypting his bitcoins with B's public key.
    Only B owns the private key to decrypt, and thus, spend, the X bitcoins received from A. This key is stored in the wallet.dat file.
    So, A can never chargeback his payment: he, and no one else in the world except B, has the private key to unlock the bitcoins.
    This is the core of bitcoin payments, and the solution to make chargebacks problems disappear, once for all.

    (Bonus 1) Anonymity:
    Buyers and sellers do not share any sensitive data. Only the address is needed to make a transfer.

    (Bonus 2) 0 fees:
    Transfers are almost always at 0 fee. Sometimes a 0.0005 bitcoins fee can be asked, but that's all.

    (Bonus 3) Worldwide, but still fast:
    Bitcoins are the same in the whole world. There isn't any kind of boundary/limit with bitcoins.
    Transfers are fast: broadcast takes 1 second or so, while confirmations ( which set the transfer "in stone" ) are done each 10 minutes.

    How to start using bitcoins:
    There are at least 2 ways to start using bitcoins:
    1. With an account on an online exchange
    2. With a local client
    With an account on an online exchange:
    This is best suited for:
    • Newbies
    • People who want to easily access their balance online, from multiple devices, multiple locations
    • People who want to sell bitcoins for cash ASAP
    The steps needed are:
    1. Choose the best suited exchange for your needs. Common used are:
    2. Register an account on the chosen exchange
    3. You can now receive bitcoins with the "add funds" option and send bitcoins with the "withdraw" option of the exchange.
    With a local client:
    This is best suited for:
    • People who want to keep total control on their wallet.dat file, i.e. to backup it
    • People who mainly use one computer and want to have a localized program to keep track of all the transfers
    The steps needed are:
    1. Download and install the client from http://bitcoin.org
    2. Do not start the program
    3. Download the last blockchain by date from: http://sourceforge.net/projects/bitcoin/files/Bitcoin/blockchain/
    4. Uncompress the blockchain in: %APPDATA%\Bitcoin ( explorer converts this to the actual path )
    5. Let the client sync the last blocks
    6. Encrypt the wallet:
      1. Go to Settings menu
      2. Crypt the wallet
      3. Choose and save a complex password ( I suggest using keepass to generate and store passwords )
      4. Restart the client
    7. You can now send and receive bitcoins from the client tabs
    How to do a bitcoin transfer:
    The seller should ask the buyer always to go first.
    Only 2 informations are needed: the address and the number of bitcoins to send.
    A transfer can be considered 100% complete after 6 confirmations, which need around 1 hour. However, I have these advices, adjust them to your personal taste:
    • For transfers < 20$ value, the initial broadcast, which takes 1 second, is enough. This allows refined/keys/little promos sells to be very fast
    • For 20$ - 500$ value, you can wait for 1 confirmation. This allows low-middle tier unusual to be sold with peace-of-mind
    • For > 500$ value, you can wait for 2,3,4,5 confirmations, and for 1000$+, wait the full 6 confirmations. Best suited for god-tier unusuals sold to a total newbie.
    With an account on an online exchange:

    Seller:
    1. Log in the online exchange account
    2. Go in the "Add Funds" section
    3. Give the bitcoin address shown to the buyer
    4. You can verify a payment on: http://blockchain.info/address/<your address here>
      • Check the transaction of interest. They are ordered by date/time, most recent on top
      • It will show the payment to that address as soon as it is broadcasted, and you can verify the number of confirmations of that payment
    5. After 6 confirmations, the funds will show on your exchange balance, and you can use them to send a payment or trade for cash
    Buyer:
    1. Log in the online exchange account
    2. Go to the "Withdraw Funds" section
    3. Paste the address of the seller, and write the amount
    4. Click send/withdraw
    With a local client:
    Seller:
    1. Open the client. It's best to keep it active and online when possible to keep it synced
    2. Go in the "Receive Coins" tab
    3. You can:
      • Use the same address for every buyer/transaction
      • Generate each time a new address with the "new address" button and write a custom label. I for example, make a new address for each transaction, and label it "<SteamName> <NumberOfTrade>" with <NumberOfTrade> meaning a counter that I increment each time I trade with the same user
    4. Click the "copy to clipboard" button to copy the address
    5. Give the bitcoin address shown to the buyer
    6. You get instant notify of the payment in the transaction tab. You can check and wait the number of confirmations you want before giving the item to the buyer
    7. You should be able to transfer the received bitcoins already after 1-2 confirmations
    Buyer:
    1. Open the client.
    2. Go in the "Send Coins" tab
    3. Paste the seller address, write a custom label, insert the amount
    4. Press "Send"
    5. You can verify the transaction in the "Transactions" tab
    How to buy/sell bitcoins for cash:

    When you need to buy bitcoins to do a trade, or you want to convert your earned bitcoins in your local currency, the best, most used, and simpler way is an online exchange.
    No exchange allows you to buy or sell bitcoins for credit card or paypal.
    The most used methods for in/out are:
    • Dwolla in the US
    • Bank transfer, very easy & cheap in the SEPA zona ( Europe )
    • Webmoney ( East Europe )
    • Cash deposit ( only to deposit funds to the exchange )
    However, every exchange is different and can offer many more ways, tailored to the local currency of their nation. Here: https://en.bitcoin.it/wiki/Buying_bitcoinsthere is a list of mayor exchanges and methods to choose from. Every exchange has deep and visual guides on how to deposit and withdraw funds.
    I can make an example of what I use, intersango.com, for European SEPA bank transfers.
    Deposit:
    1. Login to your intersango.com account
    2. Click on "Add Funds" for Euro row
    3. Copy the bank details for the transfer. Very important is the "reference", called "causale" here in Italy, used from intersango to identify to who belongs the deposit. All 3 words must be present.
    4. Go to your online/offline bank and make a transfer with point 3) details
    5. After 1-2 work days the fund will show in your intersango.com as "euro balance"
    6. You can use them to buy bitcoins, which will appear in your "bitcoins balance" ( detailed below )
    Withdraw:
    1. Login to your intersango.com account
    2. Click on "Withdraw Funds" for Euro row
    3. Write in all your bank details to make the transfer, plus the amount of euro you want to withdraw
    4. Click withdraw
    5. Funds will show in your bank after 1-2 work days.
    How to place buy/sell orders:

    Most exchanges show the same interface, I'll talk about intersango.com example.
    Buy order ( BID ):
    1. Go in the buy/sell section
    2. Choose the currency you want to buy, i.e. euro
    3. Verify the book. it shows the highest offer to buy bitcoins on top of BID tab, and the lowest offer to sell bitcoins on top of ASK tab
    4. Choose:
      1. Order Type: Buy BTC
      2. Quantity: The number of BTC you want to buy. It allows up to 5 decimal.
      3. Rate: how much you want to pay 1 BTC . It allows up to 5 decimal.
      4. Total: Shows the total of the order
      5. Good till cancelled: leave this as default.
    5. Press submit to place the order. Once completed, you'll get bitcoins in your balance
    Sell order ( ASK ):
    1. Go in the buy/sell section
    2. Choose the currency you want to buy, i.e. euro
    3. Verify the book. it shows the highest offer to buy bitcoins on top of BID tab, and the lowest offer to sell bitcoins on top of ASK tab
    4. Choose:
      1. Order Type: Sell BTC
      2. Quantity: The number of BTC you want to sell. It allows up to 5 decimal.
      3. Rate: How much you ask for each 1 BTC sold. It allows up to 5 decimal.
      4. Total: Shows the total of the order
      5. Good till cancelled: leave this as default.
    5. Press submit to place the order. Once completed, you'll get euros in your balance
    How can I know Bitcoin current value?
    A fast way to convert between BTC and any other currency, like USD, EUR and so on, is this site:
    http://www.preev.com/
    1. Choose currency of interest
    2. Write the value of interest in BTC or CURRENCY, and it will convert the other value.
    Example: if you write 10 in BTC, you'll get their USD value. If you write 10 USD, you'll get how many bitcoins are needed.

    A typical use is when a seller lists prices in usd.
    Then, before trading, the seller converts USD value to BTC value and tells the buyer how many BTC to send.

    Conclusion:

    This guide covers the basic steps for an alternative payment method which allows to avoid any chargeback scam and headaches they give.
    I personally sell exclusively for bitcoins, but you can start to offer them alongside paypal.
    My suggestion is that the bigger is the transfer, the best is to use bitcoins to be safe.
    For every question, you can find me in my extended friend list group chat when I am online:
    http://steamcommunity.com/groups/dando-real-ita-efl

    Resources:

    http://bitcoin.org/
    http://bitcoin.org/about.html
    http://en.wikipedia.org/wiki/Bitcoin
    https://en.bitcoin.it/wiki/Buying_bitcoins
    https://intersango.com/
    https://mtgox.com/
    http://steamcommunity.com/groups/dando-real-ita-efl
  2. Middlemann Codykinz

    Middlemann Codykinz New User

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    If you typed this up yourself, then I applaud you, sir. This was very informative and helpful, as I've been wondering what Bitcoins are for a while now.
  3. Dando Real [ITA]

    Dando Real [ITA] New User

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    Thank you.
    I gathered posts (actually, wall-texts) I wrote for a few months all around on tf2outpost, tf2-trader and sourceop, and tried to take the juice out of them.

    I am happy to say that buyers and sellers using bitcoins are increasing on sourceop.
    Melkor and Mattie! like this.
  4. SilentReaper(SR)

    SilentReaper(SR) Retired Staff

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    I used to have bitcoin, but cashed out and left it for not enough people used it.
    The theorem is that the money is only retractable the first half an hour or so, the longer it lasts, the harder it becomes to "undo" it. Bitcoin support should grow widely within the trade community in my opinion, for its:
    - Fully free transactions
    - once the money is made over, it cannot be retracted. (and if, only in the first x minutes, and if that person has a lot of resources to do so)
    - its fully anonymous too.
    - nobody decides on transactions, for there is no authority reviewing the transactions that can reverse them.

    The only way to "control" any money flow is to own more then half of all computing power that is at that moment busy with processing payment data. As bitcoin increases, it becomes more and more impossible.
  5. Dando Real [ITA]

    Dando Real [ITA] New User

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    I want to specify the:
    to avoid any unnecessary fear.

    Current hashrate power is 150+ Petaflops, source: http://www.bitcoinwatch.com/
    Current #1 supercomputer of the world, achieves 10,5 Petaflops ( 1 Peta = 1000 Tera ) consuming
    12500+ KW
    , source: http://i.top500.org/system/177232

    This means that, to reach 51% of network power, one needs to own around 7-8 top #1 supercomputers dedicated to bitcoins hash calcs, and a personal 90-100 MW power plant to supply them, to reverse their payment.

    So, it's already impossible.
    gritztastic likes this.
  6. SilentReaper(SR)

    SilentReaper(SR) Retired Staff

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    ehm I meant 2 separate weaknesses.

    1. Directly after sending a amount, its then not yet hash calculated yet. The resources I meant there are knowledge and means to do so (programming, knowing how bitcoin exactly works etc.)
    2. Once hashed, it needs those big super computers indeed to change stuff.

    That both are pretty hard to do doesn't mean that they are impossible. The NSA owns the biggest computing power plant known. Governments own a lot of computing power that they could employ for it. And they can buy/hire more. The scale does mean that its pretty unlikely that case #2 will happen tho. Case 1... will happen sometimes I think (like maybe once a year).
    Dando Real [ITA] likes this.
  7. Mattie!

    Mattie! SteamRep Admin

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    Actually, Dando, it's not impossible-- you're neglecting the fact that major mining pools have a major major influence on that hashrate power at any given time. Someone with control of 1-2 major pools could cause major problems with fraudulent transactions.

    If one of the major pools goes down, the other major pool could take that opportunity to exploit the system.

    Major pools: http://blockorigin.pfoe.be/chart.php

    There is a great bit of answers here explaining this risk: http://bitcoin.stackexchange.com/questions/3274/are-big-miners-a-threat-for-bitcoin

    That being said, this is an inherent weakness in the system that is unlikely to come into play for anyone's TF2 item sale. If that exploit is ever used the damage to the system would be fundamental and pervasive, affecting an incredible amount of transactions after the "exploit" point in the blockchain. So to rollback your transaction, they'd fundamentally have to rollback millions of global transactions through a monumental exploit.

    I love Bitcoin and fully support its use. I've been investing and tracking it since early last year. I love selling or buying TF2 items for bitcoin. But, I just wanted to comment that "impossible" is not the right word to use for the "50%" situation.
    Melkor and Dando Real [ITA] like this.
  8. ste113rjay

    ste113rjay New User

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    I'm still very confused on how to use bitcoins. Do you need a vertified paypal account to transfer money into your bitcoin account?
  9. DataStorm

    DataStorm Retired Staff

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    no. see bitcoin as a independent worldwide money currency. you can buy bitcoins from ppl who have them, at your local country, using any money transaction system you like. You are in west USA, so you can buy from a fellow american bitcoins, there are some big forums used for this, altho I don't know them.

    /edit: https://bitcointalk.org
  10. BL | BobSevenSevens

    BL | BobSevenSevens New User

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    You can also mine for bitcoins yourself using a pooled mining site. Personally I use http://deepbit.net , i found their instructions easy to follow.

    The only major requirement for mining is to have a decent GPU- i have an ATI Radeon 6750 HD card and i make around .03 BTC a day of mining, which equates out to about a key every 4 or 5 days.
  11. DJ_Machine

    DJ_Machine New User

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    WAT
    Also when transfering back to real money you are going to find liquidity problems for large amounts and guess what happens a whole hell of a lot with bitcoins -> real money .....
    Chargebacks.
    Ipsum Lorem don't use this method its more hassle then its worth also Having a wallet.dat file makes you a target to a large wedge of people who are more nasty (trojans/exploits/chargebacks/fraud/theft)
    then your everyday ✿✿✿✿✿✿s on tf2...


    @the person who was mining coins on his gaming hardware
    Think of the damage you are doing to your gpu's in terms of usage cycles and the wasted power you are doing to gain something a power trader can pull an hour....... your clockcycles are best put to use elsewhere.
  12. DataStorm

    DataStorm Retired Staff

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    Really:
    - When transferring back to real world currency, you can find more reputable traders who have better rep to exchange the money.
    - On the "hassle", I have no trouble to keep my computer clean... maybe if you put in 5 minutes to do the same, you will understand that its pretty easy to do so.
    - For whatever its worth, if someone wants to "mine" BTC, thats their decision.

    In short you're quite negative, do you have any CONSTRUCTIVE to offer?
  13. Accell

    Accell tf2bazaar founder Partner Community

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    You know, this neat guide has inspired me to seriously try Bitcoin; it may even be accepted as a donation currency for TF2Bazaar in the future. Thank you for taking the time to write this guide!
  14. gritztastic

    gritztastic New User

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    FWIW, the easiest way to buy bitcoins with cash (that I have found), is https://www.bitinstant.com/ The downside is you have to pay a 3%-4.5% (I think) commission for cash -> bitcoin. The upside is you can get bitcoins within ~1 hour of depositing cash. I believe they are rolling out some sort of bitcoin debit card in the near future for easy conversion of bitcoins back to cash, not sure of the details though.

    The lowest cost alternative (that I have found) for the US is a Dwolla bank transfer to Mt. Gox, though that takes about 5 business days start to finish, and I believe you have to fill out extra ID forms to transfer to Mt. Gox (or other bitcoin services).
  15. Dr. McKay

    Dr. McKay FirePowered Owner Partner Community

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    I think your numbers are wrong there. At current exchange rate, 50 bitcoins is $500. That's definitely not a low-middle tier unusual.

    Nice guide though! For a wallet, I highly recommend https://blockchain.info/wallet. It's unlike most online wallets in that they don't actually know your keys. Everything is done in your browser via Javascript. They just store your wallet file encrypted with your password.
  16. HostFat

    HostFat New User

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    Tf2wh.com is already accepting Bitcoin, they have made a dedicated exchanger to their "credits": tf2whx.com

    I really hope to see other trading services accepting Bitcoin, every market needs competition!
  17. Melkor

    Melkor New User

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    Just started using bitcoins.
    Thank you very much for this guide!
    Much appreciated :)
  18. TemioMAN

    TemioMAN New User

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    If people started to use BitCoin's instead of paypal, alot of problems will be gone
  19. paulstirling

    paulstirling New User

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    Well but people won't take keen interest to
    Hidden Content:
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    as they prefer to do all through paypal.
    Last edited by a moderator: Jul 14, 2018
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