6 ms·

Doesn’t using crypto lead to more fraud, not less?

rglullis 4y ago
I am talking from the perspective of the merchant. Imagine bogus chargebacks because of buyer's remorse or purchases done with stolen credit cards. None of this happens for a merchant that accepts crypto.
- 1270018080 4y ago
  So if you just pretend there's no fraud, then there's no fraud?
  - rglullis 4y ago
    No, what I am saying is that if you reduce the methods for fraud, the cost of dealing with it are lower.
    - 1270018080 4y ago
      Crypto doesn't reduce the methods for fraud.
      - rglullis 4y ago
        How can a customer use a stolen credit card to make payments with crypto? And how does a customer initiate a bogus chargeback on the blockchain?
        karpierz 4y ago
        If credentials are stolen, crypto or otherwise, a scammer can then use those stolen credentials to make a payment. All non-reversible transactions do is put the risk of fraud on the consumer. IE, if you buy anything with crypto and it turns out to be defective, or just not arrive, you have no recourse. You're just out the money.
        cowtools 4y ago
        >If credentials are stolen, crypto or otherwise, a scammer can then use those stolen credentials to make a payment. Crypto credentials are not comparable to bank credentials. Crypto credentials are a public key; you still need the secret key in order to authorize a payment. Credentials are insufficient to make a crypto payment. Bank credentials are usually just open-source information that anyone can get a hold of, and they are usually sufficient to make a bank payment.
        cuteboy19 4y ago
        No. Cryto credentials are the public and private key both. Losing a credit card credentials is the exact same scenario as losing a private key
        karpierz 4y ago
        1) Yes, much like if someone finds your credit card number, they can't use it without your name, CVC code, and zip code. 2) It doesn't matter how secure you make it, because if your payment system is impenetrable, I'll just steal your account on some site where you've already enabled payments.
        rglullis 4y ago
        I'm trying to understand what you mean with your point (2). How do you think that a crypto wallet works? Could you walk me through a step-by-step of how it would be possible to steal "my account"? What do you mean by "account", and what do you mean by "enabling payments for a site"?
        rglullis 4y ago
        > if you buy anything with crypto and it turns out to be defective, or just not arrive, you have no recourse. If you buy something with cash and it turns out to be defective or it is never delivered, are you left with no recourse? "But online shopping could mean someone from some other part of the world!" yeah, then don't buy with crypto. > All non-reversible transactions do is put the risk of fraud on the consumer. "And for everything else, there is Mastercard..." Yes, the risk goes to the customer. But the point here is that crypto can enable a whole lot of other businesses that don't exist today because of merchant risk. Patreon "exists", but as TFA shows is stupidly expensive. I have a SaaS that I'd like to charge $0,50/per month. I can not do that because Stripe would eat 80% of it in fees. The minimum payment amount is $5, but from that Stripe still gets 9%! If crypto payments were normalized (and if scaling solutions get more adopted to reduce tx fees), customers would think "well, if fifty-cent service is a scammer, it will be on reddit already. If it is not, then it is only fifty cents and I can get a lot of karma for it"
- janosdebugs 4y ago
  Just because crypto doesn't offer chargebacks doesn't mean that the customer is not legally entitled to a refund. Depending on the jurisdiction of the merchant and the customer there are a number of scenarios where the merchant is legally obliged to providing a refund. For example, in Germany when a minor makes the purchase, the transaction may be invalid and the merchant has to refund the money.
  - rglullis 4y ago
    If a refund is legitimate, the merchant can go on to void the purchase and initiate a refund. The point is not to have a system of final purchases, but final payments.
    - vorpalhex 4y ago
      I sue you. The court demands you appear and return the payment. The Merchant says "No! This was crypto! No give backsies". The Merchant will discover that the state does in fact have finality on the movement of value.
      - rglullis 4y ago
        The payment was final. The purchase was not. The refund is another payment. "But the state can still compel you to pay back". Yes, sure it does. The point is that the cost of doing it now is much higher and it is enough to deter a lot of opportunistic, fraudulent behavior from consumers. This difference in cost can make or break a business.
        TheOtherHobbes 4y ago
        It also encourages a lot of opportunistic, fraudulent behaviour from merchants, because the cost of perpetrating fraud is lowered. So you end up with a system that most people won't touch, and only appeals to users who need to make shady transactions. In which case they may just as well leave out the middle merchant and exchange crypto directly.
- gingerlime 4y ago
  Or 3DSecure which is becoming very common in Europe. No chargebacks.
  - rglullis 4y ago
    3Dsecure helps against criminals try to use the card and makes it harder for customers flag a transaction if they have provided the authorization code. It helps, but does not prevent chargebacks. If you are selling digital goods, a malicious customer could, e.g, make the payment, access the download page of the product and then file a chargeback saying the received product does not match what was advertised.
    - TheOtherHobbes 4y ago
      Many digital merchants in the EU have a rights waiver box to eliminate this kind of opportunism.
      - rglullis 4y ago
        There is a whole other world of people who do not live in the EU.
    - gingerlime 4y ago
      That’s covered by the right of withdrawal, and is handled between the customer and merchant. But they cannot chargeback but can get a refund. The idea that crypto solves fraud is laughable, particularly when so much fraud is facilitated by it.
- luma 4y ago
  From the point of view of the merchant, crypto is riddled with fraud: https://www.pcgamer.com/50-of-transactions-were-fraudulent-when-steam-accepted-bitcoin-for-payments-says-gabe-newell/ https://www.pcgamer.com/50-of-transactions-were-fraudulent-w... If crypto truly solved all the problems you claim it solves, I think it’s reasonable for the major online marketplaces and vendors to have already switched over. I’ll note that they haven’t, and the state of the overall crypto market in the past few weeks suggests one good reason why.
  - rglullis 4y ago
    I'd really like that more information was provided in the article. What is he counting as a "fraudulent transaction"? > If crypto truly solved all the problems (...) vendors would have already switched over. Transaction fees are not solved yet. UX is not solved yet. Privacy is not solved yet. (Well, it is if you count Monero, but for commerce you need a stabletoken, and you can not easily build a stabletoken on Monero like you can do it in Ethereum. In Ethereum we can have the stabletokens and privacy solutions are being built) On-ramping is getting solved: it's relatively easy to get fiat-to-crypto today, though I'd say that the current players charging 3% are already at the limit of how they can go, and it's still too high. There are still plenty of challenges and things to work on to get crypto as a viable alternative for payment networks. > the state of the overall crypto market The troubles in the current market have little-to-no relation with the story about crypto for payments. If this crash is going to get us rid of the stupid fools gambling their money in "investment opportunities" and it wipes out the nefarious scumbags who were selling ridiculous promises, all the better.
    - luma 4y ago
      It has a lot to do with crypto for payments if the vendor has to deal with massive swings in value over very short time frames. The solution that most vendors wind up with is getting their crypto exchanged for not-crypto ASAP, which is useful solution but not much of an endorsement for having accepted crypto in the first place.
      - 4y ago

I am talking from the perspective of the merchant. Imagine bogus chargebacks because of buyer's remorse or purchases done with stolen credit cards. None of this happens for a merchant that accepts crypto.

1270018080 4y ago
So if you just pretend there's no fraud, then there's no fraud?
- rglullis 4y ago
  No, what I am saying is that if you reduce the methods for fraud, the cost of dealing with it are lower.
  - 1270018080 4y ago
    Crypto doesn't reduce the methods for fraud.
    - rglullis 4y ago
      How can a customer use a stolen credit card to make payments with crypto? And how does a customer initiate a bogus chargeback on the blockchain?
      - karpierz 4y ago
        If credentials are stolen, crypto or otherwise, a scammer can then use those stolen credentials to make a payment. All non-reversible transactions do is put the risk of fraud on the consumer. IE, if you buy anything with crypto and it turns out to be defective, or just not arrive, you have no recourse. You're just out the money.
        cowtools 4y ago
        >If credentials are stolen, crypto or otherwise, a scammer can then use those stolen credentials to make a payment. Crypto credentials are not comparable to bank credentials. Crypto credentials are a public key; you still need the secret key in order to authorize a payment. Credentials are insufficient to make a crypto payment. Bank credentials are usually just open-source information that anyone can get a hold of, and they are usually sufficient to make a bank payment.
        cuteboy19 4y ago
        No. Cryto credentials are the public and private key both. Losing a credit card credentials is the exact same scenario as losing a private key
        karpierz 4y ago
        1) Yes, much like if someone finds your credit card number, they can't use it without your name, CVC code, and zip code. 2) It doesn't matter how secure you make it, because if your payment system is impenetrable, I'll just steal your account on some site where you've already enabled payments.
        rglullis 4y ago
        I'm trying to understand what you mean with your point (2). How do you think that a crypto wallet works? Could you walk me through a step-by-step of how it would be possible to steal "my account"? What do you mean by "account", and what do you mean by "enabling payments for a site"?
        rglullis 4y ago
        > if you buy anything with crypto and it turns out to be defective, or just not arrive, you have no recourse. If you buy something with cash and it turns out to be defective or it is never delivered, are you left with no recourse? "But online shopping could mean someone from some other part of the world!" yeah, then don't buy with crypto. > All non-reversible transactions do is put the risk of fraud on the consumer. "And for everything else, there is Mastercard..." Yes, the risk goes to the customer. But the point here is that crypto can enable a whole lot of other businesses that don't exist today because of merchant risk. Patreon "exists", but as TFA shows is stupidly expensive. I have a SaaS that I'd like to charge $0,50/per month. I can not do that because Stripe would eat 80% of it in fees. The minimum payment amount is $5, but from that Stripe still gets 9%! If crypto payments were normalized (and if scaling solutions get more adopted to reduce tx fees), customers would think "well, if fifty-cent service is a scammer, it will be on reddit already. If it is not, then it is only fifty cents and I can get a lot of karma for it"
janosdebugs 4y ago
Just because crypto doesn't offer chargebacks doesn't mean that the customer is not legally entitled to a refund. Depending on the jurisdiction of the merchant and the customer there are a number of scenarios where the merchant is legally obliged to providing a refund. For example, in Germany when a minor makes the purchase, the transaction may be invalid and the merchant has to refund the money.
- rglullis 4y ago
  If a refund is legitimate, the merchant can go on to void the purchase and initiate a refund. The point is not to have a system of final purchases, but final payments.
  - vorpalhex 4y ago
    I sue you. The court demands you appear and return the payment. The Merchant says "No! This was crypto! No give backsies". The Merchant will discover that the state does in fact have finality on the movement of value.
    - rglullis 4y ago
      The payment was final. The purchase was not. The refund is another payment. "But the state can still compel you to pay back". Yes, sure it does. The point is that the cost of doing it now is much higher and it is enough to deter a lot of opportunistic, fraudulent behavior from consumers. This difference in cost can make or break a business.
      - TheOtherHobbes 4y ago
        It also encourages a lot of opportunistic, fraudulent behaviour from merchants, because the cost of perpetrating fraud is lowered. So you end up with a system that most people won't touch, and only appeals to users who need to make shady transactions. In which case they may just as well leave out the middle merchant and exchange crypto directly.
gingerlime 4y ago
Or 3DSecure which is becoming very common in Europe. No chargebacks.
- rglullis 4y ago
  3Dsecure helps against criminals try to use the card and makes it harder for customers flag a transaction if they have provided the authorization code. It helps, but does not prevent chargebacks. If you are selling digital goods, a malicious customer could, e.g, make the payment, access the download page of the product and then file a chargeback saying the received product does not match what was advertised.
  - TheOtherHobbes 4y ago
    Many digital merchants in the EU have a rights waiver box to eliminate this kind of opportunism.
    - rglullis 4y ago
      There is a whole other world of people who do not live in the EU.
  - gingerlime 4y ago
    That’s covered by the right of withdrawal, and is handled between the customer and merchant. But they cannot chargeback but can get a refund. The idea that crypto solves fraud is laughable, particularly when so much fraud is facilitated by it.
luma 4y ago
From the point of view of the merchant, crypto is riddled with fraud: https://www.pcgamer.com/50-of-transactions-were-fraudulent-when-steam-accepted-bitcoin-for-payments-says-gabe-newell/ https://www.pcgamer.com/50-of-transactions-were-fraudulent-w... If crypto truly solved all the problems you claim it solves, I think it’s reasonable for the major online marketplaces and vendors to have already switched over. I’ll note that they haven’t, and the state of the overall crypto market in the past few weeks suggests one good reason why.
- rglullis 4y ago
  I'd really like that more information was provided in the article. What is he counting as a "fraudulent transaction"? > If crypto truly solved all the problems (...) vendors would have already switched over. Transaction fees are not solved yet. UX is not solved yet. Privacy is not solved yet. (Well, it is if you count Monero, but for commerce you need a stabletoken, and you can not easily build a stabletoken on Monero like you can do it in Ethereum. In Ethereum we can have the stabletokens and privacy solutions are being built) On-ramping is getting solved: it's relatively easy to get fiat-to-crypto today, though I'd say that the current players charging 3% are already at the limit of how they can go, and it's still too high. There are still plenty of challenges and things to work on to get crypto as a viable alternative for payment networks. > the state of the overall crypto market The troubles in the current market have little-to-no relation with the story about crypto for payments. If this crash is going to get us rid of the stupid fools gambling their money in "investment opportunities" and it wipes out the nefarious scumbags who were selling ridiculous promises, all the better.
  - luma 4y ago
    It has a lot to do with crypto for payments if the vendor has to deal with massive swings in value over very short time frames. The solution that most vendors wind up with is getting their crypto exchanged for not-crypto ASAP, which is useful solution but not much of an endorsement for having accepted crypto in the first place.
    - 4y ago