CoinDesk reported on Sunday that despite merchants accepting bitcoin, it has not had more media coverage in the first quarter of 2015 and bitcoin has not increased in the purchase of goods and services. Bitrated has a solution to advance bitcoin transactions for consumers and merchants.
Bitrated, the Israeli-based company, founded in 2013 by software developer and bitcoin enthusiast Nadav Ivgi, provides fraud prevention and consumer protection mechanisms for bitcoin. Bitrated provides a very simple process that uses multisign transactions where a trusted third party (trust agent) is nominated to resolve disputes and reverse payments in case of fraud.
Its process establishes that two out of three signatures are required to unlock a payment: the seller’s, the buyer’s and the trust agent’s. An unhappy buyer can seek a trust agent who will arbitrate the dispute for a fee, and eventually take either the side of the seller, in which case the payment will proceed, or the buyer, in which case the escrowed bitcoin will go back to the buyer.
I had an opportunity to find out more about Bitrated and Nadav Ivgi’s vision through a Q & A session.
Q. Does agreement to an arbitrator bind the consumer and the merchant to the arbitrator’s decision? If either the merchant or consumer is dissatisfied, how is this recorded in the merchant scoring system on your website?
Igvi- Yes. They’re bound to the arbitrator’s decision on the technical/cryptographic level by the Bitcoin protocol itself (the arbitrator is declared on the Bitcoin network ahead of time to be given the authority to adjudicate disputes), as well as bound legally by our terms of service (section two).
During the transaction process, users can add ratings for all the parties involved. The weight for each rating is determined by the history of the rater – his own past ratings, trust relationships on the platform, and linked accounts (we extract various metrics from the user’s social media accounts, third party rating systems, etc) – meaning that ratings from established users carry considerably more weight than that of new accounts.
Q. What is the fee rate for arbitration? Will this be too cost inefficient for many of the transactions which are too small to afford action?
Igvi- Arbitrators set their own fees under a free-market model, with no rate that’s determined by Bitrated itself. There are two types of fees – base fees to be paid for all transactions, and an additional fee to be paid in case a dispute arises and arbitration is needed. Both of them can be set as a percentage (with an optional minimum/maximum amount) or as a fixed fee.
The fees today are quite low, as many arbitrators are trying to build up their initial reputation on the platform. Many of them only charge a fee in case of dispute, making the majority of transactions free of charge, and some even don’t charge a fee at all. For these that do charge fees, it usually varies between 0.05%-1% base fee and 0.5%-2.5% dispute fee.
I would say that the fees today are economical even for very small transactions. We anticipate fees to raise over time, but there will probably always be newer arbitrators that are offering low fees (even operating at a loss) to build their reputation, as well as altruistic arbitrators that are offering their services for free to help the Bitcoin community.
In addition, some forms of transactions can be adjudicated automatically (by a computer program rather than by a human), making the operational costs close to zero. There are also some more sophisticated fee structuring models that we plan on supporting in the future, some of which would be more suitable for small/micro transactions.
Q. How many merchants are members of Bitrated scoring system?
Igvi- As of now, there are 318 accounts marked as sellers on the platform (out of a total of 1,850 users).
Q. How many arbitration disputes have taken place to date?
In the two months since Bitrated was released, there was a total of 8 disputes opened and 6 disputes resolved. This number is too small to draw any meaningful statistics from, but I would assume that for every dispute there’s always going to be one dissatisfied party (the one who lost the dispute) and one satisfied party (the one who won the dispute). Because arbitration only begins once the parties are already in an unresolvable disagreement, that 50/50 satisfaction rate is probably inherent to this kind of systems.
Q. What is the turn-around time for the arbitration and release of bitcoin in the transaction?
Igvi- As I mentioned, there’s not enough data yet for arbitration statistics. The average time between holding the funds and releasing them (for all transactions, not only disputed ones) is 3.3 days.
Q. You are addressing one of the basic criticisms of using bitcoin in the transaction process. What is your vision for the future of Bitrated and its merchant scoring system?
Igvi- Bitrated is a platform that’s meant to be integrated across the ecosystem and make identity, reputation and consumer protection a standard part of Bitcoin payments. We want to instill consumer confidence for dealing with Bitcoin, and provide them with the protections they’re used to from the traditional financial system.
To achieve that, we’re developing an API that’ll allow third-party services to integrate with Bitrated, leverage our reputation information and use our payment system to provide their users with buyer protection and a peace of mind.
Our API is not fully developed yet, but we’re currently in discussions with various marketplaces, communities, wallets, exchanges and other services in the cryptocurrency ecosystem that wish to integrate with our platform. We’re gathering use-cases and requirements in preparation for releasing a stable version of the API, which is currently scheduled for August.
Igvi states: “We believe that Bitrated holds the key to the next wave of Bitcoin consumer adoption. The new reputation management system is a huge leap forward in consumer protection when combined with the secure payment system, and it can help bring Bitcoin one step closer to the massive numbers of users in e-commerce.” Information about Bitrated for merchants and consumers can be found on their website.