All of the promotional materials (videos, papers, articles, etc.) on Bitcoin bill it as a decentralized solution for e-commerce/online financial exchanges that bypasses traditional banks, federal reserve, etc.

My question: why is this a good thing? Is it better, or just different? What shortcomings in traditional e-com are now solved by Bitcoin? Thanks in advance!

1 Answer 1


Stealing directly from Satoshi's original paper:

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable.

In other words, it's cheaper and safer to not to have to trust the other party, or to have to pay someone else to trust the other party.


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