> How does bitcoin handle any form of fraud, misrepresentation, or contract dispute?

It doesn't need to. That's up to the individual to be more discerning (a long-term good thing as it re-establishes reputation as an asset and focus on community). On an international scale, services could easily be created (think BBB) that act as a reputation scoring system for buyers who want extra assurance (or even insurance which could be offered as a service to skeptical buyers).

Yes - we have those already. We call them banks.

They only agree to take on those roles when they have the tools available to offset the costs of doing that business.

In particular, they want to be able to do things like: Reverse transactions, correctly identify all parties, freeze accounts that are in dispute, fine users who abuse their services or mislead them.

So again - how are you avoiding trusting other people, exactly?

Banks are not what I described. A bank takes custody of your money and controls your access to it. With Bitcoin, you hold custody (if you want) and distribute it at your own discretion without permission. Contrast that with a bank, withdrawing any large sum of money requires permission from a manager or other authority, gets reported, etc. I don't want that as it's not of anyone's business when/how/in what sum I spend my money.

What I suggested was a company that assigns ratings to companies (banks do not do this) and offers opt-in insurance in the event that a transaction is fraudulent.

> Reverse transactions, correctly identify all parties, freeze accounts that are in dispute, fine users who abuse their services or mislead them.

This is the problem. I don't want those things present for all transactions, only some. These "services" can be used to unfairly target and censor people. What I described would not make that possible.