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Comment by Uptrenda | Hacker News Reader

For me this is bitter-sweet as I've watched Paypal for years try kill any blockchain startup that had anything to do with using their shitty payment processor. "Absolutely NO cryptocurrencies! Unless of course it's us monopolizing it! Then it's okay!" Facebook pulled the same shit banning crypto ads and then shilling their crapcoin. Samsung did it by stalling anyone working on blockchain tech designed to run on their devices until they could offer their own solution. Google is doing the same with search ads until it can shill their centralized cloud solutions as a scalability option and whatever other evil shit they have in the pipeline. These companies are the anti-thesis to the blockchain. Paypal's crappiness is probably a leading reason 'Satoshi' invented Bitcoin.

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PayPal couldn't act as an on-ramp for anything crypto because PayPal is run on soft money (reversible credit card transactions or potentially hacked bank accounts).

Allowing conversion of soft money to hard money (a btc with 6 onchain confirmations) means every criminal will use you as an on-ramp to convert their hack cc details and bank accounts into immutable hard money.

This was my feeling, too. It wasn't a Big Conspiracy to suppress Bitcoin. It was an effort to stop transactions that had a high percentage of fraud issues.

Same thing with Facebook and crypto ads. There were just too many pyramid schemes and get-rich-schemes with a cryptocurrency angle that were being advertised.

Back in the day, it wasn't that PayPal didn't let people buy crypto, it was that you were mad to sell for PayPal credits. The system favoured the buyer so much it was just too risky. So I'm not really sure this policy matters - if nothing else has changed, selling crypto for PayPal creds is just asking to be scammed.

Indeed don't attribute to corporate malice what is in reality government regulation. The cherry on top is that the regulations are often pushed by corporate industry players to push out other possible players.

Why not? They're not a party to the transaction; it is the vendor selling cryptocurrency that is taking on the risk. Paypal can reverse the transaction and the vendor has to eat the risk, same as for any PayPal transaction.

If I buy a sweater from some company through PayPal, and the company sends me the sweater, they're out the sweater if they get a chargeback. They can fight it, but PayPal is just the middleman.

Cryptocurrency vendors would have to figure out a policy to deal with it, so it might be that nobody would be willing to sell crypto for PayPal, but there's no reason for PayPal to block it.

I'm guessing that because sweaters are not money, and furthermore are actual physical objects that have to be sent to a physical address, criminals aren't attempting to convert stolen identities into sweaters at any rate the federal government cares about. That may not be true for BTC.

Right but because this conversion is possible, it's very attractive to fraudsters, which means it will attract high chargeback rates, which is a big problem for PayPal, as it affects everything else they do

> which is a big problem for PayPal

I mean, it's a big problem in a sense, if vendors don't expect it. But by necessity the bitcoin vendors will have to deal with it as a prime scenario, which means they'll either have to offer a meaningful user identification story (i.e. KYC or similar protocols) or offer a settlement period before the bitcoin is available -- credit the customer's account, but don't let them withdraw for 30 days / 90 days / whatever.

This requires that the vendor take on some risk (because if they make the trade and the price moves but the trade is cancelled due to chargeback the price may have moved) and they have to price this in to the deal; maybe charging a premium for using PayPal, etc. This is all fairly standard and Coinbase, for example, had to deal with a ton of this when they accepted credit card purchases.

But there's no risk to PayPal.

The risk to PayPal is that Visa/MC no longer allow PayPal to transact on their network if aggregate chargebacks exceed some percentage.

I don’t know how the exact details iron out but this was a concern when I worked on a payments platform. PayPal enables transactions for merchants who don’t have a relationship directly with Visa/MC and thus are themselves responsible at some level.

> The risk to PayPal is that Visa/MC no longer allow PayPal to transact on their network if aggregate chargebacks exceed some percentage.

PayPal processed 711.92B USD of transactions during 2019. [1] It's feasible that they'll hit a trillion dollars in PV this year. While it's true that Visa/MC could lock them out if they so chose, it's incredibly unlikely.

[1] https://www.statista.com/statistics/277841/paypals-total-pay...

How many of those transactions were with buyers who if PayPal were not available would have used their credit card directly instead?

You misunderstand, it is indeed an issue of their chargeback rate as a platform - not isolated to particular merchants.

Having high rates has significant consequences - leading to fines from card schemes, lower authorisation rates from issuers, higher interchange costs as it harms negotiations for custom deals with issuers.

Even quite small numbers in the enormous pond of PayPal can have serious impacts when it's well optimised.

Also keep in mind, where it is possible to do this kind of thing, it can very rapidly grow to a huge problem when fraudulent end users learn they can do it.

I get this reasoning but I'm curious, what has changed now? That issue still exists right?

They aren't letting anyone withdraw their crypto.

The easy solution is: 1) double-verify the identity of the credit card holder using MFA or another way 2) don't allow refunds or chargebacks on cryptocurrency transactions.

Not every PayPal transaction is refundable.

I've bought Bitcoin using PayPal before.

> don't allow refunds or chargebacks on cryptocurrency transactions

In practice this just means: when a hacker gets into your elderly family member's PayPal account, they need to buy as much crypto as they can since then there's no chargebacks for fraud.

Thanks to this I've found building a product in the cryptocurrency market has been the most challenging for applying typical online marketing strategies - I've exhausted most avenues of advertisement - basically the only tools left are the more expensive sponsorship arrangements as every advertising platform will instantly reject your content.

I can appreciate why the pendulum swung hard against ads - it's incredibly hard to differentiate between real and fake ICOs, and we're seeing that again with the defi craze at the moment. It's just made it so much more expensive as an emerging company to try to sell services in this market even when you _aren't_ trying to sell a coin.

Having a coin is a marketing strategy - people get in early because they have the most to gain, and then they spread the word to all of their friends to use the service, and it grows from there. Plus early adopters are extremely crypto-focused and have different groups and contacts who would be your ideal customers. The coin is the marketing - it's as if a tiny SaaS made it super simple to sell equity to their first customers, even in tiny increments.

Do speculators make good product advocates? Seems like they have a pretty obvious conflict of interest.

They shill your product endlessly. What's the conflict of interest? They market for you, as they have a vested financial reason to do so. I mean it's no more a conflict than anyone else promoting their investment.

The US financial system does not allow or encourage people who "shill" for investments. We in fact have many protections and policies that limit your ability to solicit investment in unregistered securities, which is what virtually all ICOs are/were.

Investments aren't always in money. They can be in a form of vendor lock-in. It eventually results in massive hidden losses nobody warned about, but shilling was above sky.

I mean that the subjects of their "marketing" might come to the conclusion that advocates are primarily interested in attracting more speculators rather than selling a product they genuinely think will help you.

I think they meant a conflict with the person they're advocating to, not advocating for.

> Having a coin is a marketing strategy - people get in early because they have the most to gain, and then they spread the word to all of their friends to use the service, and it grows from there.

So do ponzi schemes. The early investors into them make money, and have a lot to gain by spreading the word to other people.

Investing into a growing ponzi scheme is a rational investment strategy. That's why people do it, and that's one of the reasons for why they are illegal.

As far as I can tell, the majority of interest in ICOs comes from people who are hoping to dump their investment onto a bigger fool. Ironically, the worse the ICO is as a business, the more fools will be interested in it, which makes those ICOs more attractive to invest in.

Almost all ICOs have no reason to exist other than to extract money from the ICO. The entire space is full of fraudulent actors by design.

> by design

Non-native English speaker here but doesn't "by design" refer to something being designed explicitly for that purpose? I agree that lots of ICOs were indeed scams and/or attempts of just taking money for low-quality work, but I don't think fund-raising was initially designed for that. It just happened to be that lots of fund-raising are scams.

But to say that it's by design it's going a bit far, and making your point weaker, not stronger.

I think their point is that the holders of the money after ICO can easily get away with doing nothing and just extract the funds. In reality, their payment is not tied to the interest of the coin holders, legally, or for the sake of their reputation. They can be anonymous.

The ICO ecosystem was expressly designed to help liquidate illiquid positions created by the super-massive eth premine without collapsing the market.

I suppose you're right that there wasn't any requirement for that design for the ICOs to be scams, there just wasn't any particular need for them to not be scams.

Virtually all (actually all?) ICOs themselves have been designed to have scam friendly terms-- e.g. no real ownership or control for the buyers, no accountability for the sellers, and little to no transparency. Even the least scammy of the ICOs have some term or another that effectively enables their issuers to just walk off with the funds with no recourse in the contract.

Cryptocurrency was designed to be resistant to law enforcement and allow money to be transferred irrevocably to opaque pseudonyms, and to prevent blacklisting by any central agency. Once fraud happens, you've irrevocably lost the money.

This is a hilariously uninformed statement. Which cryptocurrency?

I'd even argue that the juggernaut BTC was _designed_ to be trackable, and as the recent history shows, law enforcement successfully and multiple times did exactly that when needed - tracked, identified and penalized bad actors.

The leading blockchain tech out there (Algorand) supports both freezing and clawback: https://developer.algorand.org/docs/features/asa/

The phrase "by design" can be used emphatically and/or to mean in effect. Or at least that's how I also use it. Intetstingly, according to Webster's 1913 I'm using the word emphatically in an obsolete fashion.

That's like saying forests are made to harbor violence by design, because most forest animals are violent while farm animals are peaceful.

The abundance of scams in ICOs (and the cryptocurrency ecosystem in general for that matter) has more to do with the heavily regulated nature of the mainstream financial space, than the design of the cryptocurrency space itself. Because most of the world is regulated, fraudsters are now funneled to cryptocurrency. They come where they are the most free, but there is nothing in the structure of cryptocurrencies that encourages scams over legitimate enterprises. Honesty and hard work is still most rewarding. The absence of barriers to prevent scams other than regular social signals and the user's own vigilance, is the natural state of the world.

This same type of argument is repeatedly employed against free-speech platforms, that keep ending-up hosting the neo-nazis and other undesirable groups that were ousted from Facebook and co.

Shared reputation systems layered over a free platform like Matrix announced[1] a couple days ago should provide relief, but simple increase in adoption will also tilt the ratio back to the average.

[1]: https://news.ycombinator.com/item?id=24836987

Forests are more dangerous they have hiding places for predators and predators A farm is a safely human controlled ecosystem for animals where their needs are met.

They attract different animals for this reason.

The bitcoin ico scams attracts many predators.

Apologies, this is pointless, but I just think it's funny you said "attract different animals" as if building a farm and waiting would cause cows and chickens to wander in and settle there.

Yes, thankfully the metaphor fails when we take coercion into account.

Crypto scammers, overwhelmingly, simply fool people chasing easy profits. Hacks and actual offensive behaviors are uncommon, you're safe from predators in your den and you don't need to leave it.

Wait until smart contracts have been live for a certain amount of time before interacting with them. You won't fall prey to predatory behavior if you mint DAI with Maker or trade well known tokens on Uniswap for instance. The danger comes when sending money with no guarantees of getting anything back, in the hope of multiplying your money.

It's not that "forests are made to harbor violence" but rather it offers hiding places that predators can adapt to their own needs that a farm intentionally does not. For that reason we should avoid the forest and stick to the farms.

If all you want is safety and stability yes. But it should be clear by now that the current regulated financial system is skewed against small players (which includes scammers, sure, but also regular entrepreneurs) and does not allow for enough innovation.

Ah, I understand. The ICO scams are only illegal because there are laws. If you didn't have laws, they wouldn't be illegal!

Magic.

I think your comprehension of my argument is oversimplified.

This is about the dynamics between a set of entities, being mischaracterized as a fundamental property of one of these entities. (Here: migration of a pool of bad actors from traditional finance to cryptocurrency).

Like saying Iraq is an evil country by design because it harbors terrorist groups. Most people would agree by now that the emergence of these groups isn't directly caused by the nature of the country's culture or religion. For good reasons we have enough respect for these things to dig deeper in our understanding than a superficial glance. You're free to not do this with cryptocurrency, but then you probably shouldn't hold your opinions about it too strongly.

No, I get your argument. You have chosen a morally convenient abstraction that is allowing you to exclude the consequences of your actions/positions with respect to Bitcoin.

Comparing Bitcoin with a country like Iraq is pointlessly simplistic. Countries are complex social entities that aggregate behaviors through a large number of mechanisms. Bitcoin is a single mechanism whose characteristics have entirely predictable consequences.

Any sympathy for the University of California? https://www.bbc.com/news/technology-53214783

Bitcoin doesn't kill people. People kill people...right?

> Bitcoin is a single mechanism whose characteristics have entirely predictable consequences.

Cash is a single mechanism, that also predictably allows robbers to more easily offload their loot than if it was livestock, jewels or silverware. Are cash and other fungible assets automatically evil once they're on the internet?

You can cite random examples of crimes committed using Bitcoin, but that still doesn't begin to address the initial argument to which I replied: is cryptocurrency inherently evil? Will it cause more good in the world than bad once it is widely adopted?

Unlike cash, cryptocurrency provides easy access to both scale and anonymity for criminal activity...so bad, inherently. While cryptocurrencies have rewarded speculators by allowing indirect investment in crime, I do not believe this is a "good". I am not aware of any good effects for cryptocurrency. We are all aware of the substantial bad effects it enables.

And with Uniswap, you don't even need an ICO to scam people. Just mint a token, list it on Uniswap, throw in some buzzwords and exit scam

But you need some liquidity? I dont think it is that easy. Never used uniswap or invested in ICOs but to me seems that the golden days of ICO scams are gone. People have either lost their money or learned the lesson.

We've now moved on from people naively buying into interesting projects and getting scammed.

Now, people willingly buy into pump & dump schemes, hoping to not be the ones left holding the bags. Just go to r/cryptomoonshots or /biz/ where a new coin is shilled practically every hour and everyone just hopes to ride the pump and dump it on the next round of gullible buyers.

There was a massive wave of food-themed DeFi tokens recently with multiple exit scams.

For anybody morbidly interested in this kind of stuff, here's a fascinating case study. The token is ostensibly ERC20 compliant, but the transfer function is hardcoded to prevent anybody but the sender from selling on the Uniswap liquidity pool.

Muppets come in and buy the token on Uniswap. But they can't go back and sell it. Essentially all the Ethereum in the liquidity pool becomes the personal piggy bank of the scammer. There's nothing Uniswap can even do to prevent this type of scam, because the malicious code is in the token tracker contract, not Uniswap itself.

https://www.reddit.com/r/UniSwap/comments/jew0id/1000_reward...

While I agree big tech is the antithesis of the blockchain "spirit", I doubt they chose to block would-be competitors in anticipation of their own offering. The feeling I get is that everyone is/was tiptoeing around the whole matter due to compliance worries, until there was enough regulatory confidence to make a move. There's also the matter of how exactly Paypal is going to deal in crypto: the Revolut (and others?) model where you own only whatever crypto you buy on their platform, or the real deal where you can also deposit/withdraw cryptocurrencies.

Either way, it's a step that highlights regulatory progress being made. It may not be the blockchain spirit, but alas that may not be what ultimately prevails.

This is coming a bit too strong... I was there from the beginning. PayPal and Credit Cards did not ban bitcoin in the early days, but the high charge-back rate forced them to do it.

> PayPal and Credit Cards did not ban bitcoin in the early days, but the high charge-back rate forced them to do it.

Were you? Then you must have simply forgotten how Ebay UK (which deals with Paypal) allowed for Bitcoin sales only through the ads, outside of the Paypal-sphere [0]. At the time this was pretty signinficant because this was when several Uk based bitcoin exchanges were being shut down. Bittyliciious being the biggest. And Localbitcoins started to become a target by regulators and gox was on its last legs.

Also worth noting how you could bypass this with the sale of Bitcoin 'software' on their platform:

> Ebay previously allowed users to sell software for bitcoin mining and transactions.

0: https://www.ibtimes.co.uk/ebay-uk-allow-users-buy-sell-bitco...

Well said. But I don’t understand:

> until Google can shill their centralized cloud solutions as a scalability option and whatever other evil shit they have in the pipeline

How does this relate to search ads?

It's bad when your bank prevents you from doing business because of conflict of interest.

It isn't a conflict of interest, it's risk mitigation. Banks and payment processors constantly analyze which categories spawn the most fraud and at a tipping point they ban the category completely. This is why it's incredibly hard to fund an online casino account with a credit -- or even a debit -- card without using some shady 3rd party go-between.

This bit me with Coinbase 7-8 years ago when I was trying to buy $10k of bitcoin -- they'd only allow bank transfers, and only $100 at a time until you were "established". I gave up (and lost a lot of profit because of it).

The quasi-anonymous nature of crypto means that fraud is rampant. For better or worse payment processors and banks have decided they'll make more money banning crypto unless the whole transaction is within their ecosystem. It's not great but I get it.

Online casinos are banned because they are illegal (in some jurisdictions), not because of the fraud. Just no need to defraud anyone when your profits are that good. (as a former online casino owner).

The card declines started back in the Before Times, before they were outlawed, pre-black friday.

The fraud I mean is people funding their accounts, losing, then charging back.

Back when paypal didn't prohibit trades for Bitcoin there was a ton of fraud done that way.

There doesn't have to be just one reason, however.

Upvoting because of spicy sailor talk.

For Paypal, this is just inflation protection for their customers. Inflation is going to be much higher going forward so this feature is more important now.

It's for people who leave a bunch of money sitting idle in their Paypal accounts for several months and don't want it to lose buying power.

Paypal can achieve this by holding onto Bitcoin reserves to back their customers' funds. What this means is that Bitcoin is going to become the new gold standard. This will allow Paypal to take the place of traditional banks and help society to transition away from fractional reserve banking backed by fiat currency.

It is very clever and brave of Paypal to do this.

> Paypal's crappiness is probably a leading reason 'Satoshi' invented Bitcoin.

The leading candidate for Satoshi is international murdering drug- and arms-dealing, racist, real-life Bond-villain Paul "Solotshi" Calder Le Roux. He of course created E4M and Truecrypt. [1,2] And he likely did so to avoid money laundering rules.

And hey he just told a judge he was looking to get into the Bitcoin business!

“The scope and severity of Mr. Le Roux’s criminal conduct is nothing short of breathtaking. I have before me a man who has engaged in conduct in keeping with the villain in a James Bond movie,” Judge Abrahms said.

"I plan to start a business selling and hosting bitcoin miners." [3]

You love to see it.

[1] https://en.wikipedia.org/wiki/Paul_Le_Roux

[2] https://www.wired.com/story/was-bitcoin-created-by-this-inte...

[3] https://news.bitcoin.com/satoshi-nakamoto-paul-le-roux-start...

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