Contents I. Introduction
Payments, money transfers and commerce are widely preferred to be made on the Internet for a long while, especially in the last decade, as with many other things in this digital age. This preference comes from the speed, which is provided by the digitalization and needed in busy daily life, as well as increasing global connectivity with the rise of digital businesses and social networks. Commerce on the Internet is done assured that financial institutions and banks serve as trusted authorities. This model can be called trust-based; buyers and merchants may not trust each other, however, they trust well-known banks and banks act as trust entities managing transactions and keeping records. However, there are some disadvantages with this trust-based model [1]. First, financial institutions act as mediators between merchants and buyers, and there exists a cost for mediation. This limits the minimum practical transaction size. Second, there is a possibility of reversal of transactions. Transactions can be reversed by banks if there is a dispute between the trading parties, e.g., the buyer transfers the money, but the seller does not send goods or provide services to the buyer. However, this possibility of reversal compels that merchants get information about their customers. On the contrary, merchants do not have to get extra information about their customers like billing address, name, etc. when transactions are irreversible. In addition, irreversible transactions protect merchants from chargeback fraud, i.e., a dishonest buyer says that he did not make the purchase [2]. If dishonest merchants are considered, using escrow services may be a method for protecting buyers in the case of irreversible transactions. Finally, especially international transactions in the regular banking, e.g., money transfers, are slow due to procedural delays.
