I was also wondering if anyone had any other escrow services to recommend. I am thinking of starting to accept e-gold escrow payments for my online sales so that my customers can have a little bit more assurance that they will receive the product they ordered -- I think a reliable escrow service especially would help me increase sales to Western Europe, since there is little legal recourse for individuals when transactions go awry across international lines (I sell out of California.)
I also have some concerns with the protocol Universal Escrow uses that I would like to share. I think the protocol is sound at solving problems with the vast majority of contingencies, and probably a better way of dealing with things than the way Tradenable and others do things.... The fact that both paries need the other one to agree for either of them to withdraw money from the escrow account is a great incentive for them to come to some sort of equitable agreement with each other. (A seller will give up nearly the full value of the gold in escrow to get it out, so he has a strong incentive to give the buyer either the goods or a repund. Conversely the buyer will give up nearly the full value of the gold in escrow to get it refunded, and thus he has a strong incentive to accept either the product or an equitable refund.)
This works well most of the time, but I think the fact that both parties have to agree before either can withdraw the gold is actually a problem in certain situations and can be used in a certain form of attack either by a buyer or seller.
Suppose you have a competitor who wants to put you out of business, or a disgrunted ex-employee or ex-customer, just basically anyone who has some sort of spite against you or some reason to want to see you go out of business, without necessarily wanting to rip you off for any other reason.
For the sake of argument, let's say you are the main competitor with a business in a small market with room for only a couple firms of your size and that sales in that market are international. You reside in a different legal juristiction from your competitor, and it is difficult to to any legal action across international borders. And let's also say that demand for the goods you are selling is relatively inelastic. Your competitor accepts payments by Universal Escrow, but you don't -- you rely mostly on reputation instead. You want to put your competitor out of business so that you can monopolize the market, restrain supply, and reap the montary benefits. Here's how you can do it:
First you discretely hire buyers to serve you in a confidential capacity. You have the buyers buy from the competitor using Universal Escrow. You pay the buyers -- except you instruct them not to release the money from escrow when the transaction completes. You then take the goods and add them to your own inventory, having acquired them at a reasonable rate. You repackage them as necessary and sell them to customers yourself. You lose little money in overhead costs doing this, but your competitor has just sold goods at the full production cost, which will never be reimbursed. The money will sit in the escrow for however many years it takes for the storage fees to spend it down to zero, but you don't care. You have just created a cost for your competitor far larger than what you paid to create it.
At a certain point, they may get wise and stop accepting escrow payments, but not before the damage is done.
You can do this on the opposite end too. Instead of hiring people to secretly act as buyers, you have them secretly act as suppliers. You post advertisements for whatever supplies your competitor needs to do business at reasonable, but attractively low rates. You ignore any inquiries or orders by anyone other than your target. As soon as the business you want to damage places an order, you accept payment for it by escrow -- except you never ship the goods. In fact the goods never even existed. You let the money sit in escrow forever and never agree to release it. You don't care how long it sits there, as long is it helps put your competitor out of business. You have done this at very little cost to youself, but made your competitor lose a large amount of money, probably before he even realizes what is happening.
That was a very specific example, but a disgrunted ex-employee, or anyone else who has a grudge against you can pull the same tactics. They may have a monetary incentive to release the money from escrow, but the money may not be all they care about -- the side-effects of leaving your money stuck in escrow are themselves enough incentive for them to leave it there.
It seems that these types of problems would be most prevalent in the kind of fraud-prone online markets where the sellers are fairly anonymous, where an escrow service is most needed to complete transactions. Though the kind of service offerred by Universal Escrow is good and cheap, it seems to me that some type of arbitration-based system for dealing with disputes is really necessary in order to prevent things like these types of abuses.
Absent that, it would seem that the only other way of keeping this from happening would be to have both parties put down an additional deposit before the transaction can be completely. The deposit would then be refunded after the money was released from escrow. A seller would want that kind of protection against abusive buyers, and a buyer would want the seller to put down a deposit in order to raise the cost of attacks where the money is trapped in escrow to prohibitive levels.
(I just thought of that protocol while writing this.... It seems you could actually implement it with Universal Escrow right now, though it wouldn't be a standard transaction flow. You would have two escrow accounts, one normal, and the second a deposit that would be refunded as soon as the first one was released, never actually inteded to be paid out to the recipient. A buyer might actually want you to put down a deposit in a third account before they put down anything, one to be released back to you after the transaction is completed, and then you have the problem of who releases the deposit first -- you have just iterated the problem, because whoever is last can simply refuse to release the deposit. It seems that you need an entirely different kind of protocol to solve that problem, one where both deposits are kept together by the escrow service and both deposits are released simultaneously only when both parties agree. You need a third party to do that, and any third party who can credibly offer that service might as well start their own escrow service rather than riding on top of another one.)
I hope this message hasn't inspired anyone to do anything bad -- but perhaps pointing out this possible problem will cause people to take measures against it before it happens.
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