Bitrated has spent the last year in stealth mode, quietly developing version two of their consumer protection platform. They launched it on February 18, adding a new reputation layer on top of multisignature (multi-sig) technology, essentially creating the possibility for Bitcoin chargebacks.
According to founder Nadav Ivgi, the original version of Bitrated, which came out in 2013, was the first multisignature application ever released. Soon after, they went to work completely rebuilding their platform to create a brand new interface, add the reputation layer, and even further strengthen the Bitcoin trust system. Ivgi said:
“We believe ... we can increase competition and create a truly open marketplace for arbitration services that is more accountable, more fluid and reacts to market demand.”
The service calculates a “Bitrating” for individuals within the Bitcoin community who wish to list themselves—either using their real name or a pseudonymous one—as a buyer, seller or arbiter. They can link their profile to chosen social networks where they already have built a reputation, including LinkedIn, Facebook, Twitter, the original OTC web of trust, and many others.
The system analyzes each user’s social standing, including the weight of positive or negative reviews written by community members who “vouch” for them on their profile. Using this data, it compiles a unique “numeric measurement of trustworthiness” for each individual buyer, seller and arbiter. (See Ivgi's Bitrated profile and rating for an example)
A buyer and seller agree to the arbitration process ahead of time, along with their choice of arbiter or “agent.” The three enter into a multsignature smart contract before the buyer sends any funds. The agent never holds or controls the funds, and only acts as one party to the 2-of-3 multisig transaction that eventually completes the trade. In the case of a dispute, the buyer and seller trust their mutually chosen agent to decide which one of them will receive the funds.
Bitrated creates a new level of buyer protection, essentially allowing the ability to make chargebacks, which are not usually possible with Bitcoin because there is no third party in P2P transactions to guarantee a refund to a dissatisfied buyer. The website explains, “Our chargeback-like process allows a trusted agent to reverse payments and protect you against fraud.”
Credit card protection can be valuable against fraudulent sellers, but Bitrated may be even better because the parties to the transaction can jointly and voluntarily choose—unlike with PayPal or Amazon, for example—who will arbitrate. This provides a new level of security, especially for large bitcoin purchases, where losses can be high if there is a dishonest party to an unprotected transaction. With Bitrated, where each party has a publicly recorded reputation to protect, dishonesty could be costly.
Mike Lorrey, president of Galactic Systems, Inc., says a reputation service for Bitcoin is “both necessary and progress.” He concludes:
“Creating private arbitrators through the transaction smart contract is part of the promise of cryptocurrency, especially to decentralize governance.”
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