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'50% of transactions were fraudulent' when Steam accepted Bitcoin for payments

477 points by mrkramer 5y ago

kova12 5y ago
What exactly does it mean "fraudulent transaction" in the context of bitcoin? It's not like you can use someone else's account number to purchase stuff.
- chii 5y ago
  i suspect that steam was using a payment processor which identified that the coins were on a blacklist of sorts, and was not legitimately acquired (e.g., either stolen, or purchased with stolen money etc).
  - hashimotonomora 5y ago
    How does Walmart compare to that regarding purchases with ill-gotten cash?
    - subash_8848 5y ago
      Thankfully there is no distributed ledger keeping track of every little thing so we don’t have to worry about that.
    - anonymousab 5y ago
      If cash could tell you whether it was illegally acquired then I'm sure many businesses would refuse to accept illegal cash.
    - temp8964 5y ago
      Because cash can't be easily identified as stolen, so the problem does not exist. Just like the electricity cost of bank transaction cannot be easily quantified, so the problem does not exist. Those problems only exist in Bitcoin. /s
      - bena 5y ago
        No one says that the electricity cost of a bank transaction can't be quantified. They say it's far cheaper than bitcoin. Because it is. Bitcoin by its very nature wants to expand to consume every possible unit of energy it can.
    - ajross 5y ago
      Walmart (like all large retailers) spends a ton of effort trying to address e.g. laundering efforts with gift cards, actually. Google around for all the press releases about how they partner with the FBI, etc... They absolutely recognize that they're part of the laundering chain (and that this makes them liable to punishments under AML statutes, of course).
      - reaperducer 5y ago
        Walmart (like all large retailers) spends a ton of effort trying to address e.g. laundering efforts with gift cards, actually For example, you can't buy a gift card in an Apple Store without signing a statement promising that you're not buying the gift card because a stranger online told you to. Sounds ineffective on the surface, especially to jaded tech-types, but it's enough to give real people in the process of being scammed an opportunity to think about what they're doing.
    - georgyo 5y ago
      Cash is completely fungible because there is no clear trace of money from one person to the next. If someone steals 100k of cash, there is a very low probability that the serial number of those bills were recorded somewhere. And even if they were, you couldn't easily trace the money though complex systems. Bitcoin on the other hand is a complete and open ledger. When these large heists that constantly happen, it is trivial to identify the transactions that happen afterwards. Cash is actually anonymous and Bitcoin is only pseudo-anonymous.
      - hashimotonomora 5y ago
        The fact that it’s difficult or expensive to track does not mean it cannot be. Technically it’s possible to force every cash handling business to scan (just like you scan an UPC) each bill.
        bena 5y ago
        "This note is legal tender for all debts, public and private." If I buy you lunch today, you can pay me back next week. We're not "cash handling business[es]", so we wouldn't have to scan. Second, I don't think it's technically possible. For companies that do business across state lines, sure, but within a state's border, interstate commerce laws don't apply. Each state would have to enact a similar law. And best of luck with that.
      - iszomer 5y ago
        Which iirc was the basis for "cleanly mined" btc with little to no transaction history on-chain and tumbler/mixer services that attempted to obfuscate it.
- swid 5y ago
  The people who buy the game then resell the key on other websites for less than you find it on steam. They can buy many licenses when the game is on sale, so even if there is no chargeback, the devs can lose money through these methods. Otherwise it is still a money laundering tactic. Here’s a blog post where they talk about this eco system. https://factorio.com/blog/post/fff-303 https://factorio.com/blog/post/fff-303
  - flotzam 5y ago
    OK that kind of makes sense: "fraud" = making geographical or time-limited price discrimination less effective
  - kova12 5y ago
    I'm failing to understand why is this considered fraudulent. Buy low sell high, this is how all trade works. People buying multiple keys for resale is just an unintended consequence of underpricing the product.
    - swid 5y ago
      If the purpose is to avoid KYC laws and turn bitcoin to cash, it isn’t hard to understand why Steam wants to avoid these types of customers. Also, they aren’t buying low and selling high, they are buying low and selling even lower because they are okay with a lossy conversion.
- Duralias 5y ago
  Money laundering I'd imagine. Criminal creates shit game, buys game using crypto and gets paid out in fiat because *very* few developers would accept being paid in crypto.
  - rosndo 5y ago
    This does precisely nothing to “clean” the money as it doesn’t eliminate the direct link between you and the dirty bitcoins.
    - Duralias 5y ago
      Forgive my ignorance, but does, for example, ransomware payments in, for example, bitcoin make the bitcoin "dirty"? The only context I have heard "dirty" coins in is if they have been stolen from a crypto platform, or I think stolen by a influential crypto bro.
      - rosndo 5y ago
        > Forgive my ignorance, but does, for example, ransomware payments in, for example, bitcoin make the bitcoin "dirty"? Yep, also links to darknet markets and any other “bad actors” whose addresses are known.
janandonly 5y ago
Unfortunately no details were given about what makes 50% of all bitcoin transactions “fraudulent” ? What does that even mean? * did someone try to send something other then bitcoin to a ₿ address? * did a client claim he payed and did the payment seem to fail on his end? * did a client not realise that you as payee also pay for the network fee? Nowadays these kind of problems would be easily prevented by using bitcoin lightning payments, because they work in a fraction of a second and specify the exact amount that has to be payed. Also they are almost free of transaction costs.
- erk__ 5y ago
  Likely using stolen credit card credentials to buy bitcoin and then use them to buy things on Steam. They already have a massive problem with that without introducing bitcoin into the equation
  - flotzam 5y ago
    Wut. This is like stealing faberge eggs so that you can throw them through the window of a Shake Shack that you want to break into
    - dahfizz 5y ago
      Have you ever heard the phrase "money laundering"?
      - flotzam 5y ago
        Yes, and it's almost always used as a vague catch-all
        mr_cyborg 5y ago
        There are some resources out there if you search for the stages of money laundering. Companies that have to fight money laundering have to know what it looks like and what they can do to catch it. The stages are Placement, Layering, and Integration. Here’s one source that may help explain: https://www.stpaulschambers.com/stages-of-money-laundering-explained/ https://www.stpaulschambers.com/stages-of-money-laundering-e...
duxup 5y ago
> There's a difference between what it should be and what it really is currently in the real world. I feel like that when I speak with bitcoin enthusiasts. Lots of ideology that I don’t necessarily disagree with… but the ecosystem is something else…
- vmception 5y ago
  The enthusiasts are excited and altering the network towards what it should be, even if that’s simply use and being an addition to the collective conscious Many saw something that wasn’t done and go contribute Others saw something as static Others saw something as stagnant and went to contribute to another network that experiences the same path towards its ideals
- ta988 5y ago
  That's the thing if you talk to people from any political party or ideology, there are some really general ideas that may not be shocking. What matters is the reality of the actions of those people and those they believe in.
space_rock 5y ago
This article is incoherent. Say what you like about Bitcoin but fraudulent payments are not possible. And yes Gabe is right that people in crypto are criminals running scam projects
- AlexandrB 5y ago
  Fraudulent payments are very much possible in the "buying stuff with a stolen credit card" kind of way. This is a much more common type of fraud than the "double spend" attacks Bitcoin protects against. Bitcoin is only resilient to fraud only if you define fraud as "violating the rules of the blockchain". Any definition of fraud that involves meatspace is possible.
  - allisdust 5y ago
    Stolen credit cards are a problem for the merchant because the charges could be reversed by the bank and merchant will incur the loss. I don't see how that is even remotely possible with Crypto. How did Steam lose money ? My guess is they might be accepting it through some payment provider (so not a true crypto) who has in their T&C to be able to reverse transactions (which must be happening in Cash on the Steam facing side).
    - erk__ 5y ago
      Yes they were using the BitPay provider when they were accepting Bitcoin, I assume they were made aware of that it was possible to track the transactions back to fraudulent credit card transactions, which I guess in some way could still make them liable for it.
      - rosndo 5y ago
        This is absolutely not what happened. Why come up with such crazy theories when this just comes down to double spends of unconfirmed transactions?
        5y ago
IgorPartola 5y ago
At this point is BTC a good idea? Does it actually provide any damn value at all at a macro level?
- reaperducer 5y ago
  Does it actually provide any damn value at all at a macro level? It provides macro value to coinbros and wantrapreneurs who think that bragging on social media about fake money is the same thing as owning real money. I guess that's something.
- newaccount74 5y ago
  The only real use case that people keep mentioning is transferring large-ish amounts of money (>1000 USD) internationally.
  - thallium205 5y ago
    Which is not hard if you have a bank account that is in any tier above poor person consumer level.
    - rabuse 5y ago
      Unless you're Russian now
- ipaddr 5y ago
  It provided a great way to buy weed before it was legalized and transaction fees skyrocketed. Bitcoin at $5,000 a coin was extremely useful for transactions. Bitcoin at $50,000 make it less useful because of scaling issues.
  - doomroot 5y ago
    Have you tried lightning network its extremely fast and cheap and pretty reliable these days. Many great mobile wallets support it now, Blue wallet, Muun, Phoenix. Hell even Cash App supports outgoing lightning payments now. Scan a QR code few seconds later done, final, irreversible.
tiahura 5y ago
And of the 50% that were legit, what percentage was with stolen or fraudulently obtained bitcoins?
woah 5y ago
Completely incoherent article. What does “fraudulent” even mean? Fraudulent credit card transactions for gift cards are common, because the gift card provides a way to cash out a stolen credit card number. But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”.
- jayd16 5y ago
  It's not cash so it's not cashed out. Simple as that.
- deutschewelle 5y ago
  I feel like your comment is unjustified and incoherent. It is obvious to many of us what "fraudulent" mean here, it could be an array of: - previously flagged wallets moving through mixers - purchases and refunds to facilitate money laundering - converting to and from steam wallet to crypto etc. It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so. Bitcoin is a public ledger where all transactions are PERMANENTLY recorded. The law enforcement agencies have much better deobfuscation tools than 10 years ago and the tools will just continue to improve as they have INFINITE resources. > But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”. You are describing one type of crime that has existed far long before crypto as basis to discredit Gabe's claims and its an unconvincing argument/poorly baked logic that they tell in maximalist echo chambers. Rather I ask, what is it that you fear so much whenever criticisms are raised? Did you transfer your savings to purchase jpegs and other insane APY that seasoned hedge fund managers can't produce?
  - gruez 5y ago
    >It is obvious to many of us what "fraudulent" mean here, it could be an array of: >- previously flagged wallets moving through mixers So if someone robbed a bank, used that money to buy drugs, that money ended up in my hands somehow (eg. I bought from the same drug dealer), and I used that to buy a big mac, my big mac purchase is "fraudulent" as well? >- purchases and refunds to facilitate money laundering How does that even work? You can only refund to the same person. It's not like you can buy a game, gift it to someone, and have that person "refund" the game to cash out >- converting to and from steam wallet to crypto etc. There isn't an official way to convert steam wallet to crypto >It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so. 1. You say it's "NOT at all ambiguous" but you yourself listed 3 very different possible reasons. That sounds pretty ambiguous to me. 2. I skimmed the article and there isn't really much in the body either.
TrapLord_Rhodo 5y ago
i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up. I don't understand this sentiment. A) 50% of btc transaction were fraudulent makes zero sense. The technology behind BTC ensures it can't be fraudulent. So unless someone wants to explain to me how the hackers broke BTC's consensus to buy... videogames? it makes noe sense.
- nest0r 5y ago
- reaperducer 5y ago
  i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up. Not every organization accepts debit cards. Look it up.
  - deleted 5y ago
    [deleted]
  - TrapLord_Rhodo 5y ago
    I don't think i've ever run into one here in the US that didn't let me use my crypto card. I don't even remember the last time i carried cash?
    - reaperducer 5y ago
      I'm in the U.S., too. You must not go very many interesting places, or find yourself in very many interesting situations. I guess maybe a crypto debit card is good for people who lead plain lives. Like hanging around town and going to the movies and the candy store. But I require both cash and a real credit card for my life. Debit cards have failed me too often.
      - TrapLord_Rhodo 5y ago
        Okay - but now we are really picking at semantics here, aren't we? If i changed my answer to everywhere who accepts a debit card can accept crypto, does it really change the sentiment of what i'm trying to convey? Because at that point i can go on a tangent and say well, the USD is actually accepted at less places than BTC because i can use my debit card in mexico but you can't use USD.
hogrider 5y ago
jlkuester7 5y ago
This sounds eerily similar to various debates regarding adult content, that some companies (clearly not all becuause OnlyFans) have decided that customer segment is not worth pursuing. Not because there is no money in it, but just because it is not worth the trouble... I am specifically thinking of the drama between payment processors and porn sites. I don't really think that Visa's position is "porn = bad" or that they would deliberately sever a profitable relationship with customers unless they were experiencing or anticipating something bad for business. Valve seems to be thinking in the same vein here, where it is just not even worth trying to play the crypto game (pun intended...).
lokar 5y ago
There seems to be a basic misunderstanding on the part of the pro-btc ppl here all saying "how is that fraud?" or "how is that steams problem?" If you run a business that can be used in a money laundering scheme, even if you are not a victim, you have a legal responsibility to try to limit/prevent that actually. The crypto crowd may not like that, but it's not up to them.
- rosndo 5y ago
  The basic misunderstanding is on your part. “Money laundering” wasn’t mentioned by anyone but you. Stop inventing things. This is about valve getting fucked because they were accepting bitcoin payments with zero confirmations.
  - felipellrocha 5y ago
    Why take it personally? They brought up an important issue.
    - rosndo 5y ago
      I’m not taking anything personally, just calling him out on his strawman.
  - lokar 5y ago
    Did you even read the other threads? It comes up almost every time.
    - rosndo 5y ago
      So what? That’s completely unfounded speculation by those commenters supported neither by the article nor the actual facts.
  - httpsterio 5y ago
    I think assuming money laundering was a fair assumption as the article only describes fraudulent activity and nothing else on the matter.
ike0790 5y ago
bitcoin should be seen in the mainstream as a universal payment network. I believe its best use case for the average(non-cypherpunk libertarian) person/company is to accept it by using a service that automatic exchanges it for dollars on their end. For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account. It allows for bitcoin to be held by those who don't mind the volatile nature of its market value, AND allows for those wanting to accept without holding it in the short term. Win Win for both parties :)
- jayd16 5y ago
  You're forgetting the tax implications here. Steam is still on the hook for sales(and other) taxes. The problem was never just picking an exchange currency. It was the legal hurdles that made this complicated. Those hurdles are still there. They apply to everyone but especially in Valve's case as they are not under the radar.
- PragmaticPulp 5y ago
  > For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account. Transaction fees and exchange fees will diminish that received value and force the customer to pay a fee to pay for something. The net cost of Bitcoin transaction fees and exchange fees is higher than just using a random, common credit card processing company. It’s also slower for users. Let’s be real: Gamers don’t really want to pay extra transaction fees for the privilege of sending Bitcoin and waiting as much as an hour or more for the transaction (my latest Bitcoin payment took longer than an hour) before they can play their game. Not when they can type in a credit number and get it done right away for 0 fees (or negative fees with reward cards)
devit 5y ago
How can a Bitcoin transaction be fraudulent? They are irreversible and if the Bitcoin is stolen that's not the merchant's problem. The whole point of Bitcoin is to eliminate the possibility of chargebacks and thus the need for merchant to care about whether the buyer is in good faith and whether the money is stolen.
- jayd16 5y ago
  Just because a computer says it's ok doesn't mean you can just start dealing in stolen goods.
- mdoms 5y ago
  > if the Bitcoin is stolen that's not the merchant's problem It is if half the transactions at the merchant eventually get refunded. > The whole point of Bitcoin is to eliminate the possibility of chargeback I'm sorry I'm having trouble keeping up with the "the point" of Bitcoin is this week. So it's chargeback avoidance now?
- giaour 5y ago
  > They are irreversible and if the Bitcoin is stolen that's not the merchant's problem. This seems consistent with the bitcoin ethos but incompatible how the economy and legal system work. If someone buys a physical item from your physical store with a hot check, a stolen credit card, or marked bills that were just stolen from a bank, you don't get to keep the money, even if police aren't able to recover the item you sold. This is normally referred to as being defrauded.
  - olalonde 5y ago
    I do believe that you get to keep cash. I don't think I've ever heard of an instance of "dirty cash" getting seized back from a merchant. Do you have an example of that?
    - giaour 5y ago
      No, but I don't really have an example of a specific credit card chargeback, either. At least in the US, the police can seize the cash as evidence, and their duty is to return it to the rightful owner, not whoever happened to have it at the time of seizure.
DangitBobby 5y ago
This article I think contains the original interview with Gabe. It at least mentions the nature of the fraud [1]. He actually says "the vast majority" which sounds like more than 50% to me. > Another thing was that the vast majority of those transactions, for whatever reason, were fraudulent, where people were repudiating transactions or using illegal sources of funds and things like that. And that's just out of control, right? You want that number, realistically, in a couple of percent, not half of all transactions turning out to be fraudulent transactions. Similarly, with the actors that are currently in this NFT space, they're just not people you really are wanting to be doing business with. That doesn't say anything about the underlying technology, it's just a reflection of the people right now who are viewing it as an opportunity to rip customers off, or engage in money laundering, or other things like that. 1. https://www.rockpapershotgun.com/gabe-newell-interview-steam-deck-crypto https://www.rockpapershotgun.com/gabe-newell-interview-steam...
doomroot 5y ago
Context on what I believe they mean by "fraudulent". Steam back in the day used to accept 0 confirmation bitcoin spends. This means that the transaction has been gossiped on the bitcoin p2p network but had not yet been mined into a block and thus had minimal finality guarantees. Steam could see that they were going to receive a bitcoin payment (when the transaction was mined into a block) and would credit the users account instantly for a better purchase UX. Turns out anyone with some deeper understanding of bitcoin could construct another transaction spending the same bitcoin back to themselves before their original transaction was ever put in a block. The bitcoin community moved away from accepting '0 conf' transactions pretty much everywhere because of this reason. In fact the high fee era (2016-2018) saw many wallets incorporating this "double spend" feature into their wallets. This is known as RBF, "replace by fee" and is really useful when you need to bump your transaction up the queue. You replace your old transaction, that is waiting to be mined, with a new one that offers a higher fee to incentivize miners to add it to a new block. I think its rather unfortunate that 0 conf transactions were written off so quickly. There are many context where a 0conf tx makes sense, mostly IRL. But, if you are running a business online and you don't trust you customers you should wait 3-6 blocks after the transaction has been mined before delivering your goods.
- exitb 5y ago
  Shouldn’t it make most sense in contexts exactly like Steam, where the merchant can take the goods back in case of a fraudulent transaction?
  - gambiting 5y ago
    It did, and they did. That's probably exactly why they allowed it like that in the first place - if the transaction is fraudulent then simply remove the user's entitlement, but offer instant access for better experience.
    - agentofoblivion 5y ago
      “Fraud” and “simply” don’t belong in the same sentence. This is coming from someone who’s spent years working with many fraud departments in major companies. Wack-a-mole doesn’t work, they just scale their account creation.
Lochleg 5y ago
In my estimation, most of the activity done with people's inventory on Steam, especially skins in major games, involve one illicit scheme or another. I guess you can't or shouldn't stop people from using their skins on gambling sites. However, it doesn't seem like many of the metafeatures that the company started to build around Steam actually serve regular gamers just looking to enjoy themselves.
xyst 5y ago
I am more surprised that Gabe Newell is still the CEO of valve/steam and it's privately owned
dhosek 5y ago
The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense. I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in. Then again, people still get suckered into Ponzi schemes 100 years later so ?
- StanislavPetrov 5y ago
  >The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense. People and countries who are prevented from accessing the banking system or making money transfers would beg to differ. >I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in. The same can be said about every fiat currency. Which will collapse first? Or, more importantly, which will collapse faster?
whatever_dude 5y ago
The number of people in this site that can't accept that half of the transactions was fraudulent is astounding. If you're in the space, going "well actually" in every article critical of blockchain based finance doesn't help your mission at all. Ultimately you're just making up excuses for the toxic parts of the system.
jake_morrison 5y ago
I ran a web hosting business. We had a word for people who wanted to pay for servers with an untraceable currency: criminals.
blunte 5y ago
What a pointless fluff piece. How did they know the payments were fraudulent? Yes there are a ton of pitfalls and shams and bad things happening in the crypocurrency world, but this "article" is the media equivalent to the garbage projects in the crypto world. It is designed not to provide something useful, but rather to make money with questionable promises.
id02009 5y ago
"People didn't figure out why we need distributed ledger" Means rather Gabe didn't figure it out, the team didn't understand how it works, and for burned. The reasons for distributed ledger are actually quite obvious.
farzher 5y ago
what a dumb title. bitcoin transactions can't be fraudulent. obviously some kind of clickbait

477 points by mrkramer 5y ago

What exactly does it mean "fraudulent transaction" in the context of bitcoin? It's not like you can use someone else's account number to purchase stuff.

chii 5y ago
i suspect that steam was using a payment processor which identified that the coins were on a blacklist of sorts, and was not legitimately acquired (e.g., either stolen, or purchased with stolen money etc).
- hashimotonomora 5y ago
  How does Walmart compare to that regarding purchases with ill-gotten cash?
  - subash_8848 5y ago
    Thankfully there is no distributed ledger keeping track of every little thing so we don’t have to worry about that.
  - anonymousab 5y ago
    If cash could tell you whether it was illegally acquired then I'm sure many businesses would refuse to accept illegal cash.
  - temp8964 5y ago
    Because cash can't be easily identified as stolen, so the problem does not exist. Just like the electricity cost of bank transaction cannot be easily quantified, so the problem does not exist. Those problems only exist in Bitcoin. /s
    - bena 5y ago
      No one says that the electricity cost of a bank transaction can't be quantified. They say it's far cheaper than bitcoin. Because it is. Bitcoin by its very nature wants to expand to consume every possible unit of energy it can.
  - ajross 5y ago
    Walmart (like all large retailers) spends a ton of effort trying to address e.g. laundering efforts with gift cards, actually. Google around for all the press releases about how they partner with the FBI, etc... They absolutely recognize that they're part of the laundering chain (and that this makes them liable to punishments under AML statutes, of course).
    - reaperducer 5y ago
      Walmart (like all large retailers) spends a ton of effort trying to address e.g. laundering efforts with gift cards, actually For example, you can't buy a gift card in an Apple Store without signing a statement promising that you're not buying the gift card because a stranger online told you to. Sounds ineffective on the surface, especially to jaded tech-types, but it's enough to give real people in the process of being scammed an opportunity to think about what they're doing.
  - georgyo 5y ago
    Cash is completely fungible because there is no clear trace of money from one person to the next. If someone steals 100k of cash, there is a very low probability that the serial number of those bills were recorded somewhere. And even if they were, you couldn't easily trace the money though complex systems. Bitcoin on the other hand is a complete and open ledger. When these large heists that constantly happen, it is trivial to identify the transactions that happen afterwards. Cash is actually anonymous and Bitcoin is only pseudo-anonymous.
    - hashimotonomora 5y ago
      The fact that it’s difficult or expensive to track does not mean it cannot be. Technically it’s possible to force every cash handling business to scan (just like you scan an UPC) each bill.
      - bena 5y ago
        "This note is legal tender for all debts, public and private." If I buy you lunch today, you can pay me back next week. We're not "cash handling business[es]", so we wouldn't have to scan. Second, I don't think it's technically possible. For companies that do business across state lines, sure, but within a state's border, interstate commerce laws don't apply. Each state would have to enact a similar law. And best of luck with that.
    - iszomer 5y ago
      Which iirc was the basis for "cleanly mined" btc with little to no transaction history on-chain and tumbler/mixer services that attempted to obfuscate it.
swid 5y ago
The people who buy the game then resell the key on other websites for less than you find it on steam. They can buy many licenses when the game is on sale, so even if there is no chargeback, the devs can lose money through these methods. Otherwise it is still a money laundering tactic. Here’s a blog post where they talk about this eco system. https://factorio.com/blog/post/fff-303 https://factorio.com/blog/post/fff-303
- flotzam 5y ago
  OK that kind of makes sense: "fraud" = making geographical or time-limited price discrimination less effective
- kova12 5y ago
  I'm failing to understand why is this considered fraudulent. Buy low sell high, this is how all trade works. People buying multiple keys for resale is just an unintended consequence of underpricing the product.
  - swid 5y ago
    If the purpose is to avoid KYC laws and turn bitcoin to cash, it isn’t hard to understand why Steam wants to avoid these types of customers. Also, they aren’t buying low and selling high, they are buying low and selling even lower because they are okay with a lossy conversion.
Duralias 5y ago
Money laundering I'd imagine. Criminal creates shit game, buys game using crypto and gets paid out in fiat because *very* few developers would accept being paid in crypto.
- rosndo 5y ago
  This does precisely nothing to “clean” the money as it doesn’t eliminate the direct link between you and the dirty bitcoins.
  - Duralias 5y ago
    Forgive my ignorance, but does, for example, ransomware payments in, for example, bitcoin make the bitcoin "dirty"? The only context I have heard "dirty" coins in is if they have been stolen from a crypto platform, or I think stolen by a influential crypto bro.
    - rosndo 5y ago
      > Forgive my ignorance, but does, for example, ransomware payments in, for example, bitcoin make the bitcoin "dirty"? Yep, also links to darknet markets and any other “bad actors” whose addresses are known.

janandonly 5y ago

Unfortunately no details were given about what makes 50% of all bitcoin transactions “fraudulent” ? What does that even mean? * did someone try to send something other then bitcoin to a ₿ address? * did a client claim he payed and did the payment seem to fail on his end? * did a client not realise that you as payee also pay for the network fee? Nowadays these kind of problems would be easily prevented by using bitcoin lightning payments, because they work in a fraction of a second and specify the exact amount that has to be payed. Also they are almost free of transaction costs.

erk__ 5y ago
Likely using stolen credit card credentials to buy bitcoin and then use them to buy things on Steam. They already have a massive problem with that without introducing bitcoin into the equation
- flotzam 5y ago
  Wut. This is like stealing faberge eggs so that you can throw them through the window of a Shake Shack that you want to break into
  - dahfizz 5y ago
    Have you ever heard the phrase "money laundering"?
    - flotzam 5y ago
      Yes, and it's almost always used as a vague catch-all
      - mr_cyborg 5y ago
        There are some resources out there if you search for the stages of money laundering. Companies that have to fight money laundering have to know what it looks like and what they can do to catch it. The stages are Placement, Layering, and Integration. Here’s one source that may help explain: https://www.stpaulschambers.com/stages-of-money-laundering-explained/ https://www.stpaulschambers.com/stages-of-money-laundering-e...

duxup 5y ago

> There's a difference between what it should be and what it really is currently in the real world. I feel like that when I speak with bitcoin enthusiasts. Lots of ideology that I don’t necessarily disagree with… but the ecosystem is something else…

vmception 5y ago
The enthusiasts are excited and altering the network towards what it should be, even if that’s simply use and being an addition to the collective conscious Many saw something that wasn’t done and go contribute Others saw something as static Others saw something as stagnant and went to contribute to another network that experiences the same path towards its ideals
ta988 5y ago
That's the thing if you talk to people from any political party or ideology, there are some really general ideas that may not be shocking. What matters is the reality of the actions of those people and those they believe in.

space_rock 5y ago

This article is incoherent. Say what you like about Bitcoin but fraudulent payments are not possible. And yes Gabe is right that people in crypto are criminals running scam projects

AlexandrB 5y ago
Fraudulent payments are very much possible in the "buying stuff with a stolen credit card" kind of way. This is a much more common type of fraud than the "double spend" attacks Bitcoin protects against. Bitcoin is only resilient to fraud only if you define fraud as "violating the rules of the blockchain". Any definition of fraud that involves meatspace is possible.
- allisdust 5y ago
  Stolen credit cards are a problem for the merchant because the charges could be reversed by the bank and merchant will incur the loss. I don't see how that is even remotely possible with Crypto. How did Steam lose money ? My guess is they might be accepting it through some payment provider (so not a true crypto) who has in their T&C to be able to reverse transactions (which must be happening in Cash on the Steam facing side).
  - erk__ 5y ago
    Yes they were using the BitPay provider when they were accepting Bitcoin, I assume they were made aware of that it was possible to track the transactions back to fraudulent credit card transactions, which I guess in some way could still make them liable for it.
    - rosndo 5y ago
      This is absolutely not what happened. Why come up with such crazy theories when this just comes down to double spends of unconfirmed transactions?
      - 5y ago

IgorPartola 5y ago

At this point is BTC a good idea? Does it actually provide any damn value at all at a macro level?

reaperducer 5y ago
Does it actually provide any damn value at all at a macro level? It provides macro value to coinbros and wantrapreneurs who think that bragging on social media about fake money is the same thing as owning real money. I guess that's something.
newaccount74 5y ago
The only real use case that people keep mentioning is transferring large-ish amounts of money (>1000 USD) internationally.
- thallium205 5y ago
  Which is not hard if you have a bank account that is in any tier above poor person consumer level.
  - rabuse 5y ago
    Unless you're Russian now
ipaddr 5y ago
It provided a great way to buy weed before it was legalized and transaction fees skyrocketed. Bitcoin at $5,000 a coin was extremely useful for transactions. Bitcoin at $50,000 make it less useful because of scaling issues.
- doomroot 5y ago
  Have you tried lightning network its extremely fast and cheap and pretty reliable these days. Many great mobile wallets support it now, Blue wallet, Muun, Phoenix. Hell even Cash App supports outgoing lightning payments now. Scan a QR code few seconds later done, final, irreversible.

tiahura 5y ago

And of the 50% that were legit, what percentage was with stolen or fraudulently obtained bitcoins?

woah 5y ago

Completely incoherent article. What does “fraudulent” even mean? Fraudulent credit card transactions for gift cards are common, because the gift card provides a way to cash out a stolen credit card number. But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”.

jayd16 5y ago
It's not cash so it's not cashed out. Simple as that.
deutschewelle 5y ago
I feel like your comment is unjustified and incoherent. It is obvious to many of us what "fraudulent" mean here, it could be an array of: - previously flagged wallets moving through mixers - purchases and refunds to facilitate money laundering - converting to and from steam wallet to crypto etc. It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so. Bitcoin is a public ledger where all transactions are PERMANENTLY recorded. The law enforcement agencies have much better deobfuscation tools than 10 years ago and the tools will just continue to improve as they have INFINITE resources. > But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”. You are describing one type of crime that has existed far long before crypto as basis to discredit Gabe's claims and its an unconvincing argument/poorly baked logic that they tell in maximalist echo chambers. Rather I ask, what is it that you fear so much whenever criticisms are raised? Did you transfer your savings to purchase jpegs and other insane APY that seasoned hedge fund managers can't produce?
- gruez 5y ago
  >It is obvious to many of us what "fraudulent" mean here, it could be an array of: >- previously flagged wallets moving through mixers So if someone robbed a bank, used that money to buy drugs, that money ended up in my hands somehow (eg. I bought from the same drug dealer), and I used that to buy a big mac, my big mac purchase is "fraudulent" as well? >- purchases and refunds to facilitate money laundering How does that even work? You can only refund to the same person. It's not like you can buy a game, gift it to someone, and have that person "refund" the game to cash out >- converting to and from steam wallet to crypto etc. There isn't an official way to convert steam wallet to crypto >It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so. 1. You say it's "NOT at all ambiguous" but you yourself listed 3 very different possible reasons. That sounds pretty ambiguous to me. 2. I skimmed the article and there isn't really much in the body either.

TrapLord_Rhodo 5y ago

i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up. I don't understand this sentiment. A) 50% of btc transaction were fraudulent makes zero sense. The technology behind BTC ensures it can't be fraudulent. So unless someone wants to explain to me how the hackers broke BTC's consensus to buy... videogames? it makes noe sense.

nest0r 5y ago
reaperducer 5y ago
i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up. Not every organization accepts debit cards. Look it up.
- deleted 5y ago
  [deleted]
- TrapLord_Rhodo 5y ago
  I don't think i've ever run into one here in the US that didn't let me use my crypto card. I don't even remember the last time i carried cash?
  - reaperducer 5y ago
    I'm in the U.S., too. You must not go very many interesting places, or find yourself in very many interesting situations. I guess maybe a crypto debit card is good for people who lead plain lives. Like hanging around town and going to the movies and the candy store. But I require both cash and a real credit card for my life. Debit cards have failed me too often.
    - TrapLord_Rhodo 5y ago
      Okay - but now we are really picking at semantics here, aren't we? If i changed my answer to everywhere who accepts a debit card can accept crypto, does it really change the sentiment of what i'm trying to convey? Because at that point i can go on a tangent and say well, the USD is actually accepted at less places than BTC because i can use my debit card in mexico but you can't use USD.

hogrider 5y ago

jlkuester7 5y ago

This sounds eerily similar to various debates regarding adult content, that some companies (clearly not all becuause OnlyFans) have decided that customer segment is not worth pursuing. Not because there is no money in it, but just because it is not worth the trouble... I am specifically thinking of the drama between payment processors and porn sites. I don't really think that Visa's position is "porn = bad" or that they would deliberately sever a profitable relationship with customers unless they were experiencing or anticipating something bad for business. Valve seems to be thinking in the same vein here, where it is just not even worth trying to play the crypto game (pun intended...).

lokar 5y ago

There seems to be a basic misunderstanding on the part of the pro-btc ppl here all saying "how is that fraud?" or "how is that steams problem?" If you run a business that can be used in a money laundering scheme, even if you are not a victim, you have a legal responsibility to try to limit/prevent that actually. The crypto crowd may not like that, but it's not up to them.

rosndo 5y ago
The basic misunderstanding is on your part. “Money laundering” wasn’t mentioned by anyone but you. Stop inventing things. This is about valve getting fucked because they were accepting bitcoin payments with zero confirmations.
- felipellrocha 5y ago
  Why take it personally? They brought up an important issue.
  - rosndo 5y ago
    I’m not taking anything personally, just calling him out on his strawman.
- lokar 5y ago
  Did you even read the other threads? It comes up almost every time.
  - rosndo 5y ago
    So what? That’s completely unfounded speculation by those commenters supported neither by the article nor the actual facts.
- httpsterio 5y ago
  I think assuming money laundering was a fair assumption as the article only describes fraudulent activity and nothing else on the matter.

ike0790 5y ago

bitcoin should be seen in the mainstream as a universal payment network. I believe its best use case for the average(non-cypherpunk libertarian) person/company is to accept it by using a service that automatic exchanges it for dollars on their end. For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account. It allows for bitcoin to be held by those who don't mind the volatile nature of its market value, AND allows for those wanting to accept without holding it in the short term. Win Win for both parties :)

jayd16 5y ago
You're forgetting the tax implications here. Steam is still on the hook for sales(and other) taxes. The problem was never just picking an exchange currency. It was the legal hurdles that made this complicated. Those hurdles are still there. They apply to everyone but especially in Valve's case as they are not under the radar.
PragmaticPulp 5y ago
> For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account. Transaction fees and exchange fees will diminish that received value and force the customer to pay a fee to pay for something. The net cost of Bitcoin transaction fees and exchange fees is higher than just using a random, common credit card processing company. It’s also slower for users. Let’s be real: Gamers don’t really want to pay extra transaction fees for the privilege of sending Bitcoin and waiting as much as an hour or more for the transaction (my latest Bitcoin payment took longer than an hour) before they can play their game. Not when they can type in a credit number and get it done right away for 0 fees (or negative fees with reward cards)

devit 5y ago

How can a Bitcoin transaction be fraudulent? They are irreversible and if the Bitcoin is stolen that's not the merchant's problem. The whole point of Bitcoin is to eliminate the possibility of chargebacks and thus the need for merchant to care about whether the buyer is in good faith and whether the money is stolen.

jayd16 5y ago
Just because a computer says it's ok doesn't mean you can just start dealing in stolen goods.
mdoms 5y ago
> if the Bitcoin is stolen that's not the merchant's problem It is if half the transactions at the merchant eventually get refunded. > The whole point of Bitcoin is to eliminate the possibility of chargeback I'm sorry I'm having trouble keeping up with the "the point" of Bitcoin is this week. So it's chargeback avoidance now?
giaour 5y ago
> They are irreversible and if the Bitcoin is stolen that's not the merchant's problem. This seems consistent with the bitcoin ethos but incompatible how the economy and legal system work. If someone buys a physical item from your physical store with a hot check, a stolen credit card, or marked bills that were just stolen from a bank, you don't get to keep the money, even if police aren't able to recover the item you sold. This is normally referred to as being defrauded.
- olalonde 5y ago
  I do believe that you get to keep cash. I don't think I've ever heard of an instance of "dirty cash" getting seized back from a merchant. Do you have an example of that?
  - giaour 5y ago
    No, but I don't really have an example of a specific credit card chargeback, either. At least in the US, the police can seize the cash as evidence, and their duty is to return it to the rightful owner, not whoever happened to have it at the time of seizure.

DangitBobby 5y ago

This article I think contains the original interview with Gabe. It at least mentions the nature of the fraud [1]. He actually says "the vast majority" which sounds like more than 50% to me. > Another thing was that the vast majority of those transactions, for whatever reason, were fraudulent, where people were repudiating transactions or using illegal sources of funds and things like that. And that's just out of control, right? You want that number, realistically, in a couple of percent, not half of all transactions turning out to be fraudulent transactions. Similarly, with the actors that are currently in this NFT space, they're just not people you really are wanting to be doing business with. That doesn't say anything about the underlying technology, it's just a reflection of the people right now who are viewing it as an opportunity to rip customers off, or engage in money laundering, or other things like that. 1. https://www.rockpapershotgun.com/gabe-newell-interview-steam-deck-crypto https://www.rockpapershotgun.com/gabe-newell-interview-steam...

doomroot 5y ago

Context on what I believe they mean by "fraudulent". Steam back in the day used to accept 0 confirmation bitcoin spends. This means that the transaction has been gossiped on the bitcoin p2p network but had not yet been mined into a block and thus had minimal finality guarantees. Steam could see that they were going to receive a bitcoin payment (when the transaction was mined into a block) and would credit the users account instantly for a better purchase UX. Turns out anyone with some deeper understanding of bitcoin could construct another transaction spending the same bitcoin back to themselves before their original transaction was ever put in a block. The bitcoin community moved away from accepting '0 conf' transactions pretty much everywhere because of this reason. In fact the high fee era (2016-2018) saw many wallets incorporating this "double spend" feature into their wallets. This is known as RBF, "replace by fee" and is really useful when you need to bump your transaction up the queue. You replace your old transaction, that is waiting to be mined, with a new one that offers a higher fee to incentivize miners to add it to a new block. I think its rather unfortunate that 0 conf transactions were written off so quickly. There are many context where a 0conf tx makes sense, mostly IRL. But, if you are running a business online and you don't trust you customers you should wait 3-6 blocks after the transaction has been mined before delivering your goods.

exitb 5y ago
Shouldn’t it make most sense in contexts exactly like Steam, where the merchant can take the goods back in case of a fraudulent transaction?
- gambiting 5y ago
  It did, and they did. That's probably exactly why they allowed it like that in the first place - if the transaction is fraudulent then simply remove the user's entitlement, but offer instant access for better experience.
  - agentofoblivion 5y ago
    “Fraud” and “simply” don’t belong in the same sentence. This is coming from someone who’s spent years working with many fraud departments in major companies. Wack-a-mole doesn’t work, they just scale their account creation.

Lochleg 5y ago

In my estimation, most of the activity done with people's inventory on Steam, especially skins in major games, involve one illicit scheme or another. I guess you can't or shouldn't stop people from using their skins on gambling sites. However, it doesn't seem like many of the metafeatures that the company started to build around Steam actually serve regular gamers just looking to enjoy themselves.

xyst 5y ago

I am more surprised that Gabe Newell is still the CEO of valve/steam and it's privately owned

dhosek 5y ago

The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense. I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in. Then again, people still get suckered into Ponzi schemes 100 years later so ?

StanislavPetrov 5y ago
>The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense. People and countries who are prevented from accessing the banking system or making money transfers would beg to differ. >I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in. The same can be said about every fiat currency. Which will collapse first? Or, more importantly, which will collapse faster?

whatever_dude 5y ago

The number of people in this site that can't accept that half of the transactions was fraudulent is astounding. If you're in the space, going "well actually" in every article critical of blockchain based finance doesn't help your mission at all. Ultimately you're just making up excuses for the toxic parts of the system.

jake_morrison 5y ago

I ran a web hosting business. We had a word for people who wanted to pay for servers with an untraceable currency: criminals.

blunte 5y ago

What a pointless fluff piece. How did they know the payments were fraudulent? Yes there are a ton of pitfalls and shams and bad things happening in the crypocurrency world, but this "article" is the media equivalent to the garbage projects in the crypto world. It is designed not to provide something useful, but rather to make money with questionable promises.

id02009 5y ago

"People didn't figure out why we need distributed ledger" Means rather Gabe didn't figure it out, the team didn't understand how it works, and for burned. The reasons for distributed ledger are actually quite obvious.

farzher 5y ago

what a dumb title. bitcoin transactions can't be fraudulent. obviously some kind of clickbait