Thanks to near-universal WiFi access and the affordability of access devices, much of the way we buy and sell the products has shifted online. The problem is that, in many cases, the technology still hasn’t caught up with the high volume of sales traffic.
Case in point: Craigslist is an online classified ad website that makes it easy to connect buyers with sellers for specific products. But while Craigslist is highly efficient, it’s not actually all that safe.While the use of Craigslist grows larger every day, so do the number of stories about people who were scammed, robbed or even killed by people they met on while using the website. You probably know or at least heard about someone who bought something like an iPad or a treadmill from somebody on Craigslist only to find out later that the product they purchased was stolen or didn’t work.
Right now, Craigslist is based on trust. But because you don’t usually know the other person before it’s time to make the actual transaction — and there’s usually little time or opportunity to test out the product you are buying — it’s practically impossible to tell who you can trust and who you can’t. Craigslist doesn’t make it any easier, either. They simply point you to a page that explains about how to avoid scams or tell you to contact the police if you fall victim to a scammer. Not acceptable.
Until the technology catches up with the growth of the virtual marketplace, sites like Craigslist are too risky to use. Yet given the efficiencies they create, sites like Craigslist are going to continue to become a bigger and more important marketplace for people to find the products and services they want — despite the risks. So how can you protect yourself when using these kinds of marketplace websites? There’s a new program called BitBay that may offer a solution.
BitBay is a software program that automatically generates a contract that can be used to protect virtually any web-based transaction, such as buying something from somebody you find on Craigslist. What it does is require both the buyer and the seller to sign a binding contract that protects both parties from getting ripped off or burned later. BitBay works the same way as a store’s return policy or a money-back guarantee. Both parties are required to put funds into “multi-signature addresses”, which essentially are Escrow accounts that hold the money until both sides say they are David satisfied with the transaction. The buyer deposits twice the amount agreed upon for the purchase. The seller deposits just the amount agreed upon for the sale. So, for example, if you agree to buy a pocket watch from somebody on Craigslist for $10, you would put $20 into an Escrow account (the purchase price plus $10 collateral) and the seller would put in $10 (their own collateral). The length of the contract — a week, 10 days, a month or whatever — is determined jointly by the buyer and seller.
If there is a problem later — such as the pocket watch you bought turned out to be stolen, doesn’t work or doesn’t match the description or photo of the watch you thought you were buying — as the buyer you can simply cancel the contract and the seller can’t gain access to your money. BitBay also protects sellers because if you receive the pocket watch but decide not to release the funds to pay for it, you can’t get your $20 back and the seller doesn’t get their $10 back. Each party’s collateral actually serves as an incentive to broker a legit deal.
Let’s consider another example. Assume you find a $1,000 car you want to buy on Craigslist. Because you don’t know the person you are buying the car from, they probably won’t want to let you test drive it for a couple of days to see how it runs. Instead, both parties could use BitBay to generate a seven-day virtual contract in which the seller agrees to sell the car to the buyer for $1,000.The buyer deposits $2,000 and the seller deposits $1,000 into a multi-sig Escrow account. If after seven days the buyer is satisfied with the car, both parties agree to release the funds and the seller gets their $1,000 back plus their $1,000 collateral. You get a car worth $1,000 and your $1,000 collateral back. If, however, you aren’t satisfied because the car is a lemon, you can refuse to release the funds. If the seller agrees to take the car back and try to sell it to somebody else, both you and seller can agree to release the funds back to each other and the contract is cancelled. But assume you decide to try to rip off the seller by keeping the car and not paying for it (obviously not something you would actually do). Under the terms of the contract, neither you nor the seller can access your money until both parties agree, so there is a financial disincentive to not paying.
Now, the first thing most people think when they learn about BitBay is, “Wait a minute, does this mean I have to tie up twice the amount of money I planned on spending for something I found on Craigslist?” Yes and no. Yes, until both parties are satisfied with the transaction and agree to release the funds, the money will be held in double-sig Escrow accounts. But there will be disputes in only a small percentage of Craigslist transactions, so in all other cases where both parties are happy, all the money — both the purchase price and both parties’ collateral — can be released right away. BitBay secures your funds should either part try to rip off the other, so it’s actually worth it to put up more money because it guarantees you can protect your initial investment if there is a dispute. Plus, the other thing to remember is that although Craigslist and sites like it are very large, they are also relatively new. Given the inherent risks involved with entering into transactions with people you don’t know and can’t trust, software like BitBay that protect people are quickly going to become the norm in the next couple of years.
Craigslist is a great way to connect with the people who are buying and selling the products you want because it harnesses the lightning-fast speed and efficiency of the Internet to get you directly to exactly what you want to buy and sell. BitBay and other programs are the best way to protect yourself in this 21st Century marketplace. Doing business online without software like BitBay is not only risky … it’s also foolish.