I like the takeaways, though I'd also add an additional one, that you should use systems that have reversible transactions. That way, when you fall victim to fraud, you can use the court system to recover your losses.
OTH I'm pretty sure that if the mark had been using such systems years ago, he wouldn't have $100m+ worth of ETH now ; )
Beware the survivorship bias: https://xkcd.com/1827/
We had multiple threads about base rate error on HN just yesterday!
Most financial activity happens in fiat, and so of course it stands to reason that most fraud is also done in fiat. The real question is whether the legitimate-to-fraudulent ratio is higher in cryptocurrencies than in fiat.
[1]:https://www.lesswrong.com/s/XsMTxdQ6fprAQMoKi/p/DSzpr8Y9299j...
In a twist of irony, you can see another example of it in the distribution of terms reinvented by internet rationalists :-)
> Most people think of stereotyping as “Here’s one example I heard of where the out-group does something bad,” and then you correct it with “But we can’t generalize about an entire group just from one example!” It’s less obvious that you may be able to provide literally one million examples of your false stereotype and still have it be a false stereotype.
Also here in Belgium, plenty of people are getting scammed by wire transfer, and no way to get their money back.
I think you have overly optimistic view on banks or the court system giving your money back.
If somehow you get through an in-person meeting with a bank branch manager to unwittingly wire millions of dollars, and the topic of how much money you're wiring and the exact purpose of wiring such a high amount isn't brought up, and you somehow still accidentally wire millions of dollars away without anyone ever bringing up the amount and purpose of the transaction, then I'm sure you'll still be able to recover that money back because banks are required to actually validate transactions of that size with KYC, AML, etc. laws. Only cryptocurrencies allow one the ability transmit this amount of money in seconds.
Isn't that only for cash transfers?
> which would likely involve a mandatory in-person meeting with the bank customer
At least at Chase and Fidelity, wires can be done over the phone with no limit.
> to verify their credentials and purpose
I've never seen a banker really help to verify wire instructions, as in contacting the intended recipient. Normally they just ask the sender if they've verified the instructions, if they understand that the wire is irreversible, etc.
Of course when it gets to the bank's wire department, they make some attempt to block suspicious wires. But they're guessing based on limited info, as they don't typically contact the sender or recipient.
> I'm sure you'll still be able to recover that money back because banks are required to actually validate transactions of that size with KYC, AML, etc. laws
From what I've heard, fraudsters will (indirectly) transfer funds to e.g. a Nigerian bank and cash out there. It doesn't always succeed, but it does sometimes, or wire fraud wouldn't exist.
But the scenario in the OP is only possible in cryptocurrencies. You can't put a button on a website "Click here to send a JPEG through email for $3.50*" with the fine print "*and also 100 million dollars" and expect that to ever work out with the legacy banking system. Only in cryptoland could someone ever accidentally yeet 100 million dollars in a few seconds by visiting a website and clicking a button.
I'm able to work with total strangers, raise money, sell products, contribute to causes, commission art work etc, etc, hold those funds in a smart contract treasury and encode rules to govern the spending of those funds.
Safe guards do exist for the aforementioned issue. Number one is not holding significant sums of money in a single wallet, unless it's a multi-sig that requires multiple parties to agree to transactions (like Gnosis Safe wallets, which store $100B+ in assets and are battle tested at this point).
The value of the PEOPLE tokens on the secondary market proceeded to increase nearly 10x in the weeks following the dissolution of the DAO. Even though market cap is declining, at $327M mcap, it is still many multiples of the amount raised.
PEOPLE tokens in circulation are still redeemable for the underlying ETH, but the monetary premium has increased as a result of the dispersed liquidity to so many holders (16K+) as well as the novelty of retaining the token for a failed, yet valiant effort.
When I purchased a house, I Googled the recipient, confirmed the certificate, Googled the number found on their website separately to confirm it was listed elsewhere as belonging to the company I expected it to belong to, called it, and got them to tell me the account details for the wire transfer, confirming it matched what I had been sent. Which, to their credit, their instructions also told me to do. And I initially sent the down payment, confirmed they received that, and only later in the process sent the remainder.
While there still are some ways to beat that (compromise the recipient's infrastructure, change the website, lock out the recipient from their email, insert into the email exchange, get a wire transfer done before the recipient can proactively call the target to warn them), it's a lot harder to pull off than "find a target that won't read the code very closely".
At least with crypto, the chain of ownership is transparent and can't be faked. So validation is cheap and easy to do.
AFAIK you don't need to be a title company to do this, any buyer could do it themselves.
And what if you don't know enough about land law to make sense of everything? That's when you need companies to do it for you.
Is checking the chain of ownership of cryptocurrencies easier than land? It depends whether you're talking to a real estate lawyer or a NFT seller.
I'm neither, and I don't see the intrinsic difference.
In theory. The devil is in the details; does everyone know how to validate the chain of ownership, even the most non-technical of users who must rely on the system? If not, you either will never be mainstream, or you're reliant on a trusted agent to validate on your behalf (sorta like a title company!).
And if you screw something up with crypto, there is no way to address it. The complaint of "dealing with lawyers and trying to get someone to pay for it" is a feature, not a bug. Worst case, it's no different than the crypto outcome; best case, you have recourse.
I worked at a financial institution, no way you could open an account, deposit some spare change, and then withdraw 900k after a few weeks especially in America. Compliance would be all over that account, which is probably why they got the money back anyhow because the crooks would have a lot of talking to do after getting that much money in their account. KYC and AML is required for both sides of the wire transfer.
I could find literally thousands of other stories like this in a minute scraping the web.
The fact is wires can also be irreversible and you cannot use the court system as a blunt instrument outside your jurisdiction. The value transmission medium isn’t the problem here.
Try getting your money back when getting scammed via venmo or PayPal - rarely any better, and if you’re selling you’re more likely to get scammed with those services than crypto.
In nearly all cases, no separate restitution was required: the processor or my bank was able to reverse or halt the ACH transaction before the money settled. In the handful of cases where settlement had already happened, they were able to countermand the transaction.
Venmo/PayPal/Fedwire transactions should be able to settle in real time, which can be more convenient at the expense of easy reversability
If you use a payment card (debit or credit) with a payment service, then they might use either the payment card's network or ACH, depending on what the card issuer supports.
It’s definitely not a guarantee. Most of the Venmo type scams where people “accidentally” send you money and ask you to send it back or pay for an item with bad funds are not reclaimable from those services based on TOS. In those cases you’d be better off with BTC.
No, it isn't. It's a reminder that we have all of this financial structure for a reason. The person you're responding to didn't make any light of the potential victim or call them a degenerate.
In traditional finance, you (Joe Shmoe) can't just wire someone ~100M USD, regardless of jurisdiction. There are controls, most of which have been written in blood or tears. Cryptocurrencies will also grow those controls, and we will all rightly question its value when it inevitably does.
But it's also not a disgrace for traditional finance: it's a disgrace with respect to the latitude our justice system gives to individual LEOs and a sign that the government is willing to extrajudicially punish people instead of pursuing justice through the courts.
Put another way: assert forfeiture is not some kind of "gotcha" against traditional finance in favor of cryptocurrencies. When law enforcement seizes your bank account, they're going to seize your cryptocurrency accounts too. And if you (unadvisedly) attempt to hide those assets, then you will be making their job in court much easier.
But don't delude yourself into thinking that any meaningful number of people, even cryptocurrency believers, share your position. It's all fun and games until the Men with Sticks show up, and most people understandably tuck tail at that point.
If I'm going to be made a coward in the eyes of a few LARPers, I might as well pay as few middlemen as possible in the process. But that's just me!
> But don't delude yourself into thinking that any meaningful number of people, even cryptocurrency believers, share your position.
You'd be surprised.
Next you're going to tell me that the blockchain isn't made of Lego blocks!
> You'd be surprised.
Given the aggressive spread of custodial services, I don't think I would be. The average cryptocurrency user (even enthusiasts, true believers, &c.) is not a dyed-in-the-wool Burkean. Less prosaically: easy money comes with loose beliefs.
If someone goes through the legal process and is found to be guilty and their assets are seized that's fine. But if someone is pulled over, found to have some drugs, gets their car and cash on them possessed and is forced to go through a lengthy process that free up that money, then that's different.
In any case: the really egregious examples of civil asset forfeiture are the petty ones: the government stops someone for the crime of DWB[1], and seizes all of the property they have on their person (including, sometimes, the car itself.) It's a disgusting crime, but one that doesn't typically extend to the victim's bank accounts or other financial resources, unless there's a larger case being pursued against them. And so, once again, it's not clear how cryptocurrency improves the state of affairs: either you're carrying a hot wallet around with you for your day-to-day expenses (in which case you're subject to the same seizure), or it's roughly equivalent to a traditional financial produce and isn't subject to a spurious seizure (but might be subject to a larger one).
Scenario 2: they take your hardware wallet, then they must prosecute you and prove to a court that the money is not legitimately yours, to get the key. IANAL, but am I wrong?
Instead, I'll point out that the answer does not matter: from the moment that they have my hot wallet instead of me, I can no longer use it. It doesn't matter to me whether they can actually liquidate it or not. And, as I pointed out earlier, I'd harm my own case by attempting to liquidate my assets with a separate copy.
I'm not saying technical solutions make the rule of law unnecessary. But they can defend against some violations of the rule of law, depending on the parts of the justice system that are still just.
People effectively defending themselves against a national disgrace help towards getting the disgrace fixed.