If one does a search on eBay for bitcoin, you’ll find hundreds of listings for coins. They come in a variety of different formats — instant to your wallet, paper wallet, Casascius coins. Delivery options are either electronic, but some few are local pickup only.
Initially, buying on eBay looks like a good way to pick up bitcoin in an environment where buying bitcon for cash is not easy. It looks especially good for sellers since the markup can be anywhere up to double or more the current trading value. One could argue that this is justified given the otherwise relative difficulty in buying bitcoin for cash and the earning potential if the value of bitcoin rises.
On the other hand, the markup seems pretty steep given that a linked bank account with Coinbase or a trip to CVS or several other stores to deposit money with Bitinstant would achieve the same thing for the current exchange rate.
Well, scratching the surface reveals the essential problem. For buyers, other than the typical steep markup, the transactions seem to be relatively safe. For sellers, the potential of having a customer charge back through their credit card or through PayPal is relatively high. They can do it weeks or even months after the sale, and the seller has little or no recourse as PayPal will typically side with the buyer with non-tangibles like bitcoin.
This explains the steep markup. Scammers can afford to outbid legitimate buyers since they know they they have no intention of paying the price they are bidding. In bidding on a few bitcoin myself, I found that even when I bid what I thought was a high markup, I would in some instances have my bit instantly outmatched by the pre-set bid of another buyer.
This also accounts for the number of Casascius coins and paper wallets. Paper wallets, or pieces of paper that have the bitcoin addresses and private keys printed on them, are claimed to be one of the safest ways to safecard bitcoin. Casascius coins are similar. The creation of Mike Caldwell who began minting coins with a part of the bitcoin address on the outside and the private key buried under a tamper-proof hologram. The coin itself has no value beyond that of a collectors item, but the coins are a secure way to carry actual bitcoins. The value of the bitcoin itself can be confirmed on the internet.
In terms of eBay, both the Casascius coins and paper wallets are improvements on instant transfer, since if you can show that you shipped a product to an address by showing a tracking number, you can more easily dispute a chargeback. This makes a transaction over eBay more, but by no means, secure.
Finally, for buyers, eBay seems to be a poor options for buying bitcoin due to the high markup driven by the scammers. For the sellers, eBay seems to be a poor option due to high risk of being scammed even when precautions are taken.
Next article, I will be looking at several bitcoin lending sites to see if there is anything worthwhile there.
If you have more information about buying or selling bitcoins on eBay, have a story you would like to share, or a correction, please feel free to leave a comment.
Please also visit here to get free bitcoins and increase my haul of free bitcoins. (I will be writing a review of free bitcoin websites in the future as well).