Quote from: Romoku on July 26, 2011, 08:20:22 AM

Quote from: Jered Kenna (TradeHill) on July 26, 2011, 08:13:22 AM

Quote from: JoelKatz on July 26, 2011, 07:48:03 AM

Quote from: grod on July 26, 2011, 07:01:12 AM

Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.

Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them.

They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.

Jered

Well there goes Dwolla and Paypal. Too bad traditional banking institutions are the ones causing the currency fraud.

For the time being Dwolla is still here, thankfully. IMO, they helped boost the bitcoin economy as much as bitcoin did theirs. They are still the cheapest and most convenient way for US customers to fund exchanges.

However, since it is clear that Dwolla transactions are in fact reversible (contrary to their claims), exchanges like TradeHill might need to change how they process Dwolla deposits. To protect themselves, they may have to start withholding bitcoins purchased with dwolla deposits for a couple of weeks, until it is clear the deposit won't be reversed.

Reversing transactions is really the only way to protect themselves against (ACH) fraud, so this shouldn't be much of a surprise despite their claims about "no chargebacks".

Dwolla is still friendly to bitcoin, just not to fraud. We are lucky that bitcoin makes up the bulk of their business. Otherwise, they would probably choose to freeze MtGox and TradeHill's entire accounts (like PayPal would) rather than just reversing a few of their transactions.