The Paradigm of Fraud Acceptance

A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

- Satoshi Nakamoto, Bitcoin Whitepaper

Due to the way in which payment services by trusted third parties operate, for merchants operating both on-line and in physical locations it is almost impossible for them to avoid coming into contact with bad actors who use fraudulent practices to obtain goods without paying. Commonly this is done through the acquisition of compromised credit card numbers and details, or by the true owner of the credit card reversing the charges made by the merchant through their own financial institution.

These problems can be mostly avoided by accepting physical currency however this is becoming less and less desirable to both consumers and merchants due to the overheads involved for both parties in handling banknotes and coins.

There are no methods of transacting electronically available to users of legacy money systems that do not require the use of trusted third parties in the transaction.