Can contracts programmed in bitcoins be used to scam merchants?

Question

I've been learning a lot about bitcoin over the past couple of weeks because I have some interesting ideas for websites and I would like to accept bitcoin as payment.

One of my concerns centers around a somewhat more advanced topic that so far I've only skimmed the surface of. And I cannot find an adequate answer to my question online.

I was reading that it is possible to program simple contracts into bitcoins to ensure that the recipient must spend the coin in a specific way, or within a specific time-frame. Here is simplified video that discusses this as a feature but does not go into the security implications of it.

Could this possibly be used to scam merchants, for instance, by returning the bit coin to the sender after a period of time, or to hold the bitcoins hostage? What tools do merchants have available to protect themselves from this type of abuse?

Answer 1

Simple answer, no. What you're most likely talking about are interesting ways to use script to pay to a m-of-n multisig, for example. Generally, when you get paid in bitcoin, you, as the merchant, get to choose where the customer sends the bitcoin. This can be 2-of-3 multisig, which would mean 2 of the 3 people you choose have to agree in order to move the bitcoins or something much more complicated. But the address that the user sends the money to is entirely up to you, the merchant.

A more complex answer is maybe. It is possible if you're using some complicated escrow system that a customer may be able to hold the bitcoins hostage, but that's not something you have to worry about unless you specifically choose that sort of payment system. The vast majority of merchants that take bitcoin don't do business this way, they simply take payment into a standard bitcoin address.

Answer 2

No.

Bitcoin scripts only have control over the spendability of funds (yes, or no) and they don't have a view of where the output is being spent to. A concept of a system where they do have this ability is called a coin covenant, and is generally thought to be a terrible idea for some of the reasons outlined in that thread. If you are paid to a Pubkey Hash script (Bitcoin address starting with 1) the funds are irrevocably controlled by you no matter what.

I was reading that it is possible to program simple contracts into bitcoins to ensure that the recipient must spend the coin in a specific way [snip]. Here is simplified video that discusses this as a feature but does not go into the security implications of it.

This is not a feature of Bitcoin, the video is incorrect.