2023 Feb 14
I do believe if you can’t explain something well, you don’t really understand it. That being said, being able to explain on the spot in conversation is a further level. You can really understand something, but fail to explain something on the spot, although if you can explain it on the spot you likely really understand it.
In transactions over the internet, there is always some sort of trust involved. Often uncertainties between the buyer and merchant can be resolved by in-person transactions, but over the internet you don’t have these assurances. So in some way or another you will need to trust your counterparty. However, the important thing is with Bitcoin you remove the trust in the intermediaries processing your payments, who in the current system control the payment and your funds.
Very insightful tweet
The primary importance of non-reversible payments is that you no longer need custodians of your money in order to make payments over the internet.
For smaller transactions, the risk as a buyer is lower, and the incentive for a merchant to rip off a buyer is lower. A merchant is incentivized to follow through on a transaction to build trust/reputation in order to continue doing business.
For larger transactions, or first time purchases from a seller, say on something like eBay, escrow mechanisms can be used. Note that this does reintroduce a trusted third party, but importantly the third party is not in control of the funds, but assists in mediating disputes.
Also note: for many payments, an escrow is likely not necessary, either from merchants being trusted, or transaction sizes being very low. Bitcoin enables these non-reversible transactions. This is notable, because this reduces transaction costs, allows for micropayments, and no longer requires a merchant to know much about a buyer.
- Something I haven’t dug into that much: what does it mean for the merchant to need to know a lot about the buyer? Like the fact that whenever purchasing online I have to put my name address etc. or my bank/credit card provider has to know tons of data about me? Is all of that a part of it?
Some basic resources I’ve been looking at: