9 ms·

That’s the great thing about Bitcoin. You can defraud people at scale and completely get away with it. Hardly seems newsworthy at this point.

almost 5y ago
It’s not a big it’s a feature :/
vmception 5y ago
Just like ACH fraud isn’t news so you only get news about bitcoin frauds
- woodruffw 5y ago
  ACH fraud isn't news because the ACH network allows clawbacks.
  - DaiPlusPlus 5y ago
    I thought ACH was negative-confirmation-only, and a "clawback" is really just a delayed "nope" message instead of revoking or undoing a previously issued "ok" message, simply because there is no "ok" message. How on earth was ACH's design approved in the first place? It violates practically every principle of good transactional system design.
    - aaomidi 5y ago
      It's decades old.
    - woodruffw 5y ago
      > a "clawback" is really just a delayed "nope" message instead of revoking or undoing a previously issued "ok" message, simply because there is no "ok" message. That's actually not a clawback in ACH parlance: that's just a transaction rejection, which causes the original transaction to "bounce" and enter a remediation process. Clawbacks are done via "return records", which can be issued separately of any transaction records. Clawbacks, in turn, can be dishonored and countermanded by the RDFI. I wrote a short summary of the different rules here[1]. > How on earth was ACH's design approved in the first place? It violates practically every principle of good transactional system design. ACH's design comes from the 1960s. It was designed for a time when the average American used their physical checkbook to pay for everyday items, and there was no reliable (non-military) nationwide computer network. Its design looks bad because it's optimized for forces that are currently mostly irrelevant, but used to be common: tens of thousands of tellers filing physical paper, smudged checks, typos by secretaries, delays in the mail network, the cost of long-distance calls, &c. They probably didn't even have a sound notion of a "transaction" in the ACID sense, given that Jim Gray didn't develop that particular paradigm until the 1970s. ACH's flexibility and complexity make it look staid and antiquated compared to modern settlement systems, but it's all there for a good (historical) reason. [1]: https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-the-American-banking-system https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-th...
      - DaiPlusPlus 5y ago
        But why didn't they improve it at all during the past 50 years?
        woodruffw 5y ago
        They've tried! ACH has been somewhat modernized over the decades, in the form of compliance and in-protocol changes (faster turnarounds, additional transaction codes for online transactions and different cardholder verification methods). The Fed has also been working on a modern replacement to ACH for at least a decade, and is planning on performing an initial release in 2023[1]. But as for why it's taken so long: banking in the US is, for various reasons, significantly more complicated than banking in most other countries. The US has thousands of FDIC-insured banks and credit unions, each of which operates under a patchwork of municipal, state, and federal regulations. Banks are (mostly) required to honor each other's checks and transactions which means that, in the worst case, there's a total graph of all ~10,000 banks and credit unions serving as both ODFIs and RDFIs[2]. Transaction failures between any two nodes in that graph are a possible compliance failure, so any common mechanism is both a lowest common denominator and resists any modernization or other changes than can cause disruption. [1]: https://www.federalreserve.gov/paymentsystems/fednow_about.htm https://www.federalreserve.gov/paymentsystems/fednow_about.h... [2]: It's actually simpler than this, since the ACH clearinghouses serve as a central resolution and dispatch service for all ODFIs and RDFIs. But each O/RDFI still has to interpret the ACH record(s) they receive, so there's still extraordinary inertia against any changes.
  - vmception 5y ago
    Basically the defrauded doesnt notice it is occurring, at some interval, and the fraudster isnt keeping the money in the account and also using mules, and third they dont get caught most of the time banks provide a user experience that makes them pretend to get the money back, a crypto bank can pretend to do the same thing, hardly a one to one comparison
    - woodruffw 5y ago
      As of 2019 (the last year before just about every financial statistic goes sideways due to COVID), the ACH payment system has the lowest fraud rate by value of any settlement system in the US[1]. I'm not aware of similar statistics for any popular cryptocurrency, but I'm not optimistic about how any of them would compare. It's difficult to find statistics for the percentage of money recovered from fraudulent ACH transactions, but this industry survey[2] says that 92% of fraudulent transactions are discovered within two months (and 79% within one month). Given that NACHA allows clawbacks within 60 days, that offers a relatively bright prospect for funds recovery compared to an irreversible transaction. [1]: https://www.nacha.org/news/ach-payments-have-lowest-fraud-rate-fed-survey-finds https://www.nacha.org/news/ach-payments-have-lowest-fraud-ra... [2]: https://www.synovus.com/-/media/files/business/webinars/2021_paymentsfraudsurveyreport-3.pdf https://www.synovus.com/-/media/files/business/webinars/2021...
      - vmception 5y ago
        Thats a nice improvement for them Bitcoin would be calculated by value deemed as being defeauded from users onchain as payments and on exchanges, that year, and compared to a portion of its.. marketcap? or by quantity of non-fraudulent transactions? Since bitcoin is all one kind of payment method (well lightning would be different), it would have to be compared to the other kinds mentioned in the nacha article too, ACH + ATM + Card fraud For bitcoin I would say the data doesnt exist, but even with the headlines trying to break down just bitcoin for that year, it would be fairly low I’m thinking, even $1bn in fraudulent irrecoverable transactions would be a single digit. Percent or maybe down to a couple basis points as well just like NACHA brags about
- cpach 5y ago
  OTOH, ACH lets you actually pay for goods or services received, right? I never hear of people paying invoices with Bitcoin.
  - codetrotter 5y ago
    I recently agreed with a client that they’d pay in Bitcoin for an invoice that I sent them :) I received half of it in Bitcoin and the other half via old fashioned bank transfer. It was a neat experiment, and I plan on accepting payment in crypto for some invoices that I send in the future as well.
    - Griffinsauce 5y ago
      How did you handle the fluctuation in value?
      - codetrotter 5y ago
        We agreed to use the average price from the most recent day in the past from the CoinMarketCap website price history page for Bitcoin, and I attached a note to the invoice stating the USD/BTC exchange rate that we would use when calculating how much they were to send me.
    - dagenix 5y ago
      Why? Couldn't you just take the whole payment via bank transfer and then go buy Bitcoin afterwards if you wanted to? This sounds like extra steps that I don't understand the point of.
      - codetrotter 5y ago
        They had Bitcoins, I wanted Bitcoins. It would have been more extra steps for me to first wait for bank transfer and then transfer money to an exchange, buy Bitcoins, and then transfer the Bitcoins to my wallet.
        5y ago
- kevingadd 5y ago
  ACH fraud is more trackable than Bitcoin fraud and in many cases you can get the money back. For example, the most recent time I ran into an ACH scam I was able to identify the bank + individual that owned the target account.
  - vmception 5y ago
    who was likely a money mule, who likely got their account overdrafted by your bank because the actual fraudster already got away with the actual money, while you just got a user experience that has nothing to do with the recoverability of money just an illusion of it a financial institution custodying bitcoin can do that too
- mbesto 5y ago
  And $61T got transferred via ACH in 2020[0] with a 0.08% fraud rate[1] Completely different scale with an incredibly low fraud rate. Not to mention consumer protections put in place by banks (i.e. recoverability). This analog is disingenuous. [0] - https://www.nacha.org/content/ach-network-volume-and-value-statistics https://www.nacha.org/content/ach-network-volume-and-value-s... [1] - https://www.nacha.org/news/ach-payments-have-lowest-fraud-rate-fed-survey-finds https://www.nacha.org/news/ach-payments-have-lowest-fraud-ra...
  - vmception 5y ago
    The disingenuous part is that the weekly news isnt dominated by the large frequent thefts at all, if it was actually about awareness and questioning then an ACH fraud noticed would be on the news and would conventially not mention that its a tiny tiny fraction of a basis point of activity on the network
    - mbesto 5y ago
      > that its a tiny tiny fraction of a basis point of activity on the network Hence why it's not in the news...I still don't understand your point?
      - vmception 5y ago
        Because thats the standard that should apply to bitcoin and crypto But instead no proportions are mentioned in a crypto fraud, just large dollar values paraded as if its unique It is intended to distort perception and its silly
        mbesto 5y ago
        How much USD$ or equivalent is moved into cryptocoins and how much of that amount is considered fraudulent? Until you have numbers there, then I simply don't believe your premise.
        5y ago
deleted 5y ago
[deleted]
mitchdoogle 5y ago
When someone is mugged and has $100 cash stolen, you don't disparage the idea of holding cash.
- lclarkmichalek 5y ago
  I mean, I do.
- jimkleiber 5y ago
  It's hard to mug someone of their cash from the other side of the planet. That physical proximity limitation seems to provide a relative amount of safety.
- dragonwriter 5y ago
  > When someone is mugged and has $100 cash stolen, you don't disparage the idea of holding cash. Yes, you do, if you are using “cash” in the same sense in both places (physical currency). If you use cash to mean “fiat denominated depository accounts and investment instruments” in the second case, sure, you don't hear that, but that's equivocation as that's not something that gets stolen in a mugging.
- Griffinsauce 5y ago
  I don't carry cash partly for this reason so yes I do?
- zitterbewegung 5y ago
  Actually I do. I only carry around less than $50 dollars of cash around with me. So I can pay someone who can't accept credit cards.
- davewritescode 5y ago
  Bitcoin isn’t the $100 bill in your wallet, it’s your bank account. If my bank account can be completely drained in a way that the money can’t ever be recovered, that’s not a feature, it’s a bug.
  - passwordreset 5y ago
anotheraccount9 5y ago
>"You can defraud people at scale and completely get away with it." That's possible with any fiat currency too.
- xxs 5y ago
  way way way harder than that.
  - KiranRao0 5y ago
    Way way harder unless you're in an authoritarian regime with control over the banking sector.
    - timeon 5y ago
      So is this that decentralization? With Bitcoin authoritarian regime has no borders.
  - AnthonyMouse 5y ago
    > way way way harder than that. Is it? https://www.forbes.com/sites/instituteforjustice/2021/10/25/new-proof-that-police-use-civil-forfeiture-to-take-from-those-who-cant-fight-back/ https://www.forbes.com/sites/instituteforjustice/2021/10/25/... https://fortune.com/2016/06/09/civil-forfeiture-erad/ https://fortune.com/2016/06/09/civil-forfeiture-erad/ At least with Bitcoin they need your passphrase.
- kspacewalk2 5y ago
  With flat currency it is possible to have a well-designed banking system with mechanisms for boring human pen-and-paper recourse in case of fraud. El Salvador probably doesn't have one, but they can create one. With Bitcoin, they cannot, by design.
- davewritescode 5y ago
  No it’s not. If my savings account gets drained by someone hacking my account, the bank gives me back my money up to 250k and they have mechanisms to claw back that money from other institutions. With crypto you can commit fraud at scale with little risk of long prison sentences due to the non violent nature of the crimes and victims are SOL.
ekianjo 5y ago
> You can defraud people at scale and completely get away with it Ever heard of fiat currency inflation?
- mrosett 5y ago
  You're not wrong, but the USD has had ~6% inflation over the last year while Bitcoin has experienced ~15% inflation since the end of last motnh.
  - AnthonyMouse 5y ago
    Kind of cherry picking when over the same year as the 6%, Bitcoin has experienced ~45% deflation, isn't it?
    - vorpalhex 5y ago
      Stability is a feature. 6% is pretty rough, ~45% is atrocious world ending stuff.
      - deleted 5y ago
        [deleted]
      - AnthonyMouse 5y ago
        The deflationary aspect of Bitcoin was a design flaw, but it's not inherent to cryptocurrencies generally. Nothing says there has to be a finite supply of coins as opposed to the supply scaling in proportion to how much the value of the currency exceeds the cost of hardware or electricity. And even with Bitcoin itself, think about what Wall Street and governments would do with securities derivatives and Bitcoin-denominated debt instruments. The supply of Bitcoin isn't actually limited by the supply of Bitcoin.
      - ekianjo 5y ago
        > Stability is a feature so the USD going to the ground at 6% per year is a feature? Aren't currencies supposed to be store of value over the long term, you know, over dozens of years since you need hard cash to retire?

almost 5y ago

It’s not a big it’s a feature :/

vmception 5y ago

Just like ACH fraud isn’t news so you only get news about bitcoin frauds

woodruffw 5y ago
ACH fraud isn't news because the ACH network allows clawbacks.
- DaiPlusPlus 5y ago
  I thought ACH was negative-confirmation-only, and a "clawback" is really just a delayed "nope" message instead of revoking or undoing a previously issued "ok" message, simply because there is no "ok" message. How on earth was ACH's design approved in the first place? It violates practically every principle of good transactional system design.
  - aaomidi 5y ago
    It's decades old.
  - woodruffw 5y ago
    > a "clawback" is really just a delayed "nope" message instead of revoking or undoing a previously issued "ok" message, simply because there is no "ok" message. That's actually not a clawback in ACH parlance: that's just a transaction rejection, which causes the original transaction to "bounce" and enter a remediation process. Clawbacks are done via "return records", which can be issued separately of any transaction records. Clawbacks, in turn, can be dishonored and countermanded by the RDFI. I wrote a short summary of the different rules here[1]. > How on earth was ACH's design approved in the first place? It violates practically every principle of good transactional system design. ACH's design comes from the 1960s. It was designed for a time when the average American used their physical checkbook to pay for everyday items, and there was no reliable (non-military) nationwide computer network. Its design looks bad because it's optimized for forces that are currently mostly irrelevant, but used to be common: tens of thousands of tellers filing physical paper, smudged checks, typos by secretaries, delays in the mail network, the cost of long-distance calls, &c. They probably didn't even have a sound notion of a "transaction" in the ACID sense, given that Jim Gray didn't develop that particular paradigm until the 1970s. ACH's flexibility and complexity make it look staid and antiquated compared to modern settlement systems, but it's all there for a good (historical) reason. [1]: https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-the-American-banking-system https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-th...
    - DaiPlusPlus 5y ago
      But why didn't they improve it at all during the past 50 years?
      - woodruffw 5y ago
        They've tried! ACH has been somewhat modernized over the decades, in the form of compliance and in-protocol changes (faster turnarounds, additional transaction codes for online transactions and different cardholder verification methods). The Fed has also been working on a modern replacement to ACH for at least a decade, and is planning on performing an initial release in 2023[1]. But as for why it's taken so long: banking in the US is, for various reasons, significantly more complicated than banking in most other countries. The US has thousands of FDIC-insured banks and credit unions, each of which operates under a patchwork of municipal, state, and federal regulations. Banks are (mostly) required to honor each other's checks and transactions which means that, in the worst case, there's a total graph of all ~10,000 banks and credit unions serving as both ODFIs and RDFIs[2]. Transaction failures between any two nodes in that graph are a possible compliance failure, so any common mechanism is both a lowest common denominator and resists any modernization or other changes than can cause disruption. [1]: https://www.federalreserve.gov/paymentsystems/fednow_about.htm https://www.federalreserve.gov/paymentsystems/fednow_about.h... [2]: It's actually simpler than this, since the ACH clearinghouses serve as a central resolution and dispatch service for all ODFIs and RDFIs. But each O/RDFI still has to interpret the ACH record(s) they receive, so there's still extraordinary inertia against any changes.
- vmception 5y ago
  Basically the defrauded doesnt notice it is occurring, at some interval, and the fraudster isnt keeping the money in the account and also using mules, and third they dont get caught most of the time banks provide a user experience that makes them pretend to get the money back, a crypto bank can pretend to do the same thing, hardly a one to one comparison
  - woodruffw 5y ago
    As of 2019 (the last year before just about every financial statistic goes sideways due to COVID), the ACH payment system has the lowest fraud rate by value of any settlement system in the US[1]. I'm not aware of similar statistics for any popular cryptocurrency, but I'm not optimistic about how any of them would compare. It's difficult to find statistics for the percentage of money recovered from fraudulent ACH transactions, but this industry survey[2] says that 92% of fraudulent transactions are discovered within two months (and 79% within one month). Given that NACHA allows clawbacks within 60 days, that offers a relatively bright prospect for funds recovery compared to an irreversible transaction. [1]: https://www.nacha.org/news/ach-payments-have-lowest-fraud-rate-fed-survey-finds https://www.nacha.org/news/ach-payments-have-lowest-fraud-ra... [2]: https://www.synovus.com/-/media/files/business/webinars/2021_paymentsfraudsurveyreport-3.pdf https://www.synovus.com/-/media/files/business/webinars/2021...
    - vmception 5y ago
      Thats a nice improvement for them Bitcoin would be calculated by value deemed as being defeauded from users onchain as payments and on exchanges, that year, and compared to a portion of its.. marketcap? or by quantity of non-fraudulent transactions? Since bitcoin is all one kind of payment method (well lightning would be different), it would have to be compared to the other kinds mentioned in the nacha article too, ACH + ATM + Card fraud For bitcoin I would say the data doesnt exist, but even with the headlines trying to break down just bitcoin for that year, it would be fairly low I’m thinking, even $1bn in fraudulent irrecoverable transactions would be a single digit. Percent or maybe down to a couple basis points as well just like NACHA brags about
cpach 5y ago
OTOH, ACH lets you actually pay for goods or services received, right? I never hear of people paying invoices with Bitcoin.
- codetrotter 5y ago
  I recently agreed with a client that they’d pay in Bitcoin for an invoice that I sent them :) I received half of it in Bitcoin and the other half via old fashioned bank transfer. It was a neat experiment, and I plan on accepting payment in crypto for some invoices that I send in the future as well.
  - Griffinsauce 5y ago
    How did you handle the fluctuation in value?
    - codetrotter 5y ago
      We agreed to use the average price from the most recent day in the past from the CoinMarketCap website price history page for Bitcoin, and I attached a note to the invoice stating the USD/BTC exchange rate that we would use when calculating how much they were to send me.
  - dagenix 5y ago
    Why? Couldn't you just take the whole payment via bank transfer and then go buy Bitcoin afterwards if you wanted to? This sounds like extra steps that I don't understand the point of.
    - codetrotter 5y ago
      They had Bitcoins, I wanted Bitcoins. It would have been more extra steps for me to first wait for bank transfer and then transfer money to an exchange, buy Bitcoins, and then transfer the Bitcoins to my wallet.
      - 5y ago
kevingadd 5y ago
ACH fraud is more trackable than Bitcoin fraud and in many cases you can get the money back. For example, the most recent time I ran into an ACH scam I was able to identify the bank + individual that owned the target account.
- vmception 5y ago
  who was likely a money mule, who likely got their account overdrafted by your bank because the actual fraudster already got away with the actual money, while you just got a user experience that has nothing to do with the recoverability of money just an illusion of it a financial institution custodying bitcoin can do that too
mbesto 5y ago
And $61T got transferred via ACH in 2020[0] with a 0.08% fraud rate[1] Completely different scale with an incredibly low fraud rate. Not to mention consumer protections put in place by banks (i.e. recoverability). This analog is disingenuous. [0] - https://www.nacha.org/content/ach-network-volume-and-value-statistics https://www.nacha.org/content/ach-network-volume-and-value-s... [1] - https://www.nacha.org/news/ach-payments-have-lowest-fraud-rate-fed-survey-finds https://www.nacha.org/news/ach-payments-have-lowest-fraud-ra...
- vmception 5y ago
  The disingenuous part is that the weekly news isnt dominated by the large frequent thefts at all, if it was actually about awareness and questioning then an ACH fraud noticed would be on the news and would conventially not mention that its a tiny tiny fraction of a basis point of activity on the network
  - mbesto 5y ago
    > that its a tiny tiny fraction of a basis point of activity on the network Hence why it's not in the news...I still don't understand your point?
    - vmception 5y ago
      Because thats the standard that should apply to bitcoin and crypto But instead no proportions are mentioned in a crypto fraud, just large dollar values paraded as if its unique It is intended to distort perception and its silly
      - mbesto 5y ago
        How much USD$ or equivalent is moved into cryptocoins and how much of that amount is considered fraudulent? Until you have numbers there, then I simply don't believe your premise.
        5y ago

deleted 5y ago

[deleted]

mitchdoogle 5y ago

When someone is mugged and has $100 cash stolen, you don't disparage the idea of holding cash.

lclarkmichalek 5y ago
I mean, I do.
jimkleiber 5y ago
It's hard to mug someone of their cash from the other side of the planet. That physical proximity limitation seems to provide a relative amount of safety.
dragonwriter 5y ago
> When someone is mugged and has $100 cash stolen, you don't disparage the idea of holding cash. Yes, you do, if you are using “cash” in the same sense in both places (physical currency). If you use cash to mean “fiat denominated depository accounts and investment instruments” in the second case, sure, you don't hear that, but that's equivocation as that's not something that gets stolen in a mugging.
Griffinsauce 5y ago
I don't carry cash partly for this reason so yes I do?
zitterbewegung 5y ago
Actually I do. I only carry around less than $50 dollars of cash around with me. So I can pay someone who can't accept credit cards.
davewritescode 5y ago
Bitcoin isn’t the $100 bill in your wallet, it’s your bank account. If my bank account can be completely drained in a way that the money can’t ever be recovered, that’s not a feature, it’s a bug.
- passwordreset 5y ago

anotheraccount9 5y ago

>"You can defraud people at scale and completely get away with it." That's possible with any fiat currency too.

xxs 5y ago
way way way harder than that.
- KiranRao0 5y ago
  Way way harder unless you're in an authoritarian regime with control over the banking sector.
  - timeon 5y ago
    So is this that decentralization? With Bitcoin authoritarian regime has no borders.
- AnthonyMouse 5y ago
  > way way way harder than that. Is it? https://www.forbes.com/sites/instituteforjustice/2021/10/25/new-proof-that-police-use-civil-forfeiture-to-take-from-those-who-cant-fight-back/ https://www.forbes.com/sites/instituteforjustice/2021/10/25/... https://fortune.com/2016/06/09/civil-forfeiture-erad/ https://fortune.com/2016/06/09/civil-forfeiture-erad/ At least with Bitcoin they need your passphrase.
kspacewalk2 5y ago
With flat currency it is possible to have a well-designed banking system with mechanisms for boring human pen-and-paper recourse in case of fraud. El Salvador probably doesn't have one, but they can create one. With Bitcoin, they cannot, by design.
davewritescode 5y ago
No it’s not. If my savings account gets drained by someone hacking my account, the bank gives me back my money up to 250k and they have mechanisms to claw back that money from other institutions. With crypto you can commit fraud at scale with little risk of long prison sentences due to the non violent nature of the crimes and victims are SOL.

ekianjo 5y ago

> You can defraud people at scale and completely get away with it Ever heard of fiat currency inflation?

mrosett 5y ago
You're not wrong, but the USD has had ~6% inflation over the last year while Bitcoin has experienced ~15% inflation since the end of last motnh.
- AnthonyMouse 5y ago
  Kind of cherry picking when over the same year as the 6%, Bitcoin has experienced ~45% deflation, isn't it?
  - vorpalhex 5y ago
    Stability is a feature. 6% is pretty rough, ~45% is atrocious world ending stuff.
    - deleted 5y ago
      [deleted]
    - AnthonyMouse 5y ago
      The deflationary aspect of Bitcoin was a design flaw, but it's not inherent to cryptocurrencies generally. Nothing says there has to be a finite supply of coins as opposed to the supply scaling in proportion to how much the value of the currency exceeds the cost of hardware or electricity. And even with Bitcoin itself, think about what Wall Street and governments would do with securities derivatives and Bitcoin-denominated debt instruments. The supply of Bitcoin isn't actually limited by the supply of Bitcoin.
    - ekianjo 5y ago
      > Stability is a feature so the USD going to the ground at 6% per year is a feature? Aren't currencies supposed to be store of value over the long term, you know, over dozens of years since you need hard cash to retire?