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Comment by tpurves | Hacker News Reader

What many people don't realize is that the operational and customer service costs of payments don't scale with payment amount. Customers will cost almost just as frequently dispute, have questions, have problems, ask for help, attempt to defraud etc with a $1 transaction as they will a $100 or $1000 transaction. This is the real killer with micro payment schemes. Customer service costs scale more with number of payments than payment volume. And these real costs are born by Patreon, by the networks and by the banks which is why min txn costs exist. The crypto bros totally miss the point in understanding this too.

Source: 25yrs experience building payment networks

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Yeah, all of the other payment processors have settled on somewhere between 2-4% fees to handle fraud. See PayPal.

So either Patreon has an order of magnitude more fraud going on or is massively wasteful in its business operations. Probably both.

Yes, but that 2-4% works when 90% of the range of charges is 10-1000. But with Patreon the nature of its transactions are that 95% are $30 or less.

Or, to look at it another way... All the other payment processors have settled on needing to earn and average $0.50 / transaction in order to make a profit. Then they calculated their average transaction and came up with a 3% (or 2 or 4) being required to make that amount.

Then Patreon came up with the same $0.50 / transaction number. However, since their average transaction amount is so much lower, they have to charge a higher number in order to make their target.

Would you say the same of app stores?

I think there's a reasonable case to view Patreon as a platform, not a pure payment processor.

Patreon is much more exposed to competition than the app stores, which are "protected" by the device duopoly.

Having never paid patronage, I don’t really know, but doesn’t patreon host a lot of content? Or where are all the paid-only content hosted?

In my limited experience the Patron only content that Patreon hosts is in the form of blog posts. The actual content is often an unlisted YouTube video or something.

You can upload any number of attachments in any format, and each one can be up to 200MB. There is no limit. I used this to great effect when I still used Patreon to host FLACs of all my music for supporters in zip archives split in 200MB volumes.

I replaced it with a simple Ko-fi shop where you can just upload anything up to your 200GB quota (if you're a Gold member): https://ko-fi.com/s/7e9f22c63b

Patreon handles EU VAT and similar digital VAT for its users. Otherwise each and every one of those donations will need to be handled and filed by the creators.

To illustrate how bad it can get - in EU VAT, if your yearly sales are over 30,000 Euros (it may even be 10k, I don't know the latest limit), you have to charge your customers/patrons the appropriate tax rate of the country that they are in. And if you don't, you may end up having to deal with the tax authority of that particular country.

People take this lightly, but as many are finding out, its serious business.

...

And - fraud is not handled by Paypal. Any chargeback, fraud, refund is your responsibility. You can even get your Paypal suspended for those reasons.

And every other payment processor modeled VAT without raising their fees. Your software developers only need to model it once and make updates. You don't have armies of humans dealing with this to necessitate 10-20% fees.

And no payment processor or retailer deals with fraud. They all suspend your accounts for chargebacks. The fee is the built in fee to cover _losses due to fraud_, not for "handling" it.

The reason to have fees as a percentage vs a flat fee isn’t because costs scale with payment amounts, it’s because it’s a more fair way to levy fees. I can either charge everyone $3/transaction, even if the transaction itself is less than or equal to $3, or I can structure it as a percentage to encourage smaller transactions. If people think Patreon is making a killing with their fee structure, they should build a competitor.

Still, why is a percentage more fair? What definition of 'fair' are you using?

"If people think Patreon is making a killing with their fee structure, they should build a competitor." >> Yes! And honestly this could be applied in so many places where people like to complain, and yet nobody builds a competitor, or they do and it ends up looking like the original. So easy to complain, so hard to do better.

If Patreon took 75% commission of small payments, people would be outraged and quit the platform. You’re right that “fair” can mean many things, but a percentage is, in my view, the least objectionable way to do it.

How are you defining "more fair"?

By having the larger transactions subsidize the smaller transactions, how is that "more fair"?

fair is the wrong word. it's certainly more practical

Fair would be to charge the lower of $X or X%.

You would need to increase the percentage in order to make this change.

If each transaction has a fixed cost but as a payment processor you're charging a percentage fee that seems like a risky business. What happens if the mix of payments on your platform tends towards lots of small transactions?

Patreon is also more than a payment processor.

OP even calls this out - they like having different membership tiers. They're a content host for exclusive images. (Videos do tend to be offsite as unlisted Youtube videos)

So they also provide a service that imgur, catbox.moe, google drive, and others do for free?

Yes. Creators should upload content to Imgur and ask supporters to pay them directly through PayPal. That’s a fantastic alternative to Patreon.

https://news.ycombinator.com/item?id=9224

I mean, he's right. all these file-sharing services like dropbox merely exist because the general public doesn't know how to use something like bittorrent.

Maybe you can grift off of that ignorance for a while, but that doesn't mean it's a sustainable business model.

I think you're missing the forest for the trees.

You can apply a variance of that philosophy onto EVERYTHING.

"Automatic transmission merely exists because the general public doesn't know how to use something like manual transmission"

"Calculators merely exist because the general public doesn't know how to use something like a slide ruler"

Note, these are analogies, I'm not saying Patreon is as innovative or world-significant as either. But it IS optimized for a very specific use case, and it does it incredibly well.

Patreon is a relationship processor that handles some elements of some relationships with content hosting and payment processing.

I don't think it's unreasonable to distinguish between what Patreon does and basic PP. Users are paying for access to the package - which includes removal of PP friction - not just for a basic PP service.

Charge backs should also be less of an issue if the purchase is $1. Same with fraud.

The stakes are lower the lower the amount. Who cares?

It's not worth disputing. Fire the customer if it crosses a threshold.

> stakes are lower the lower the amount. Who cares?

OP mentioned customer service. Pretty much any American can create 50+ hours of customer support and legal work for no reason at all in payments. Even an irate, clueless customer will waste an hour of your support staffs’ time.

Just give them their money back and shadow ban them from using your store.

And then you get the HN post about you banning some rather well known tech figure because when your system created the issue in the first place.

Stores can ban patrons that aren’t following specific rules :)

Having run a B2C business with recurring monthly payments around $15, I assure you that fraud goes UP with lower payment amounts. You preferentially attract the worst possible customers who bank with the lowest common denominator banks and they charge back like crazy.

Some choice moments: "Please keep my service on, I only charged back because I needed to make rent this month", "I know that wasn't my card, but that b---- owes me money."

And it's hard to fire these customers because they come back with a different card and fake names. They don't care that they're committing fraud; no one will prosecute them for $10 here, $20 there.

The real promise of crypto is to provide a system with 0% low level fraud like this.

Well, in crypto there's still non-zero amounts of fraud if the merchant doesn't deliver their goods or if the sender executes double spend attacks. But theoretical double-spend attacks aside, almost all transactions require some minimal level trust between the merchant and the customer regardless of payment system. In this sense, Cryptocurrency doesn't prevent fraud completely but it does severely limit the extent and direction of fraud.

> And it's hard to fire these customers because they come back with a different card and fake names.

Perhaps it is time to start asking for government IDs before accessing customer service.

How would that work if you validly didn’t make the charge or were charged incorrectly and were calling to give them a chance to fix things?

I once had someone enter my zip code as the payment amount and completely drained my bank account at a time in my life when I somewhat enjoyed eating and if they told me I would have to send them a copy of a government issued ID before they would even talk to me I don’t even know what would have happened. Nothing good I can tell you.

And these systems exist because sellers do fraud too, merchants that don't ship after taking payment, etc. With irreversible payments through crypto you are just pushing all the risk on customers. That will never fly.

If the customer does not trust the merchant, they simply don't make the payment with crypto.

Why, oh why is it so hard to understand the concept of multiple alternatives?

Every retailer with a median transaction size under $20 hates credit cards. Yet with rare exception they all take cards.

The customer chooses the mechanism, not the merchant. To best credit cards you'll have to be more customer friendly.

Come to Berlin and marvel at how many cash-only shops we have.

And if you are talking about internet retailers, can we make an exercise to think of how many new businesses would be viable if transactions of 20 cents were a thing?

Why is that? Is Berlin more prone to credit card fraud than usual for Europe?

Two explanations I've heard: (1) small-shop owners simply do not want to pay the fees to card processors and (2) people are more privacy-minded here and distrustful of both the government and the banks, so they don't use credit/debit cards for purchases as often.

10 years ago I remember either MediaMarkt or Saturn (large electronics/ home appliance stores) not taking credit cards. Now not only most businesses in Berlin take credit cards (I saw a couple of cash-only, for sure)… I found a couple of “electronic payments only” ones.

A lot of shops started to accepted cards because of Covid restrictions, leading to the point of "contactless transactions". Now that restrictions are being lifted, smaller shops are going back to cash only or putting high minimums.

If you don't trust the customer, don't take their business.

Right, shoplifting doesn't exist. Movie theaters run around profitably by getting people to pay whatever they want. They even let them bring their own food. And banks give you a mortgage just because you look like such a trustworthy dude.

How does crypto solve shoplifting?

Banks do credit worthiness checks as part of business.

Movie theaters actually do keep a banned list and enforce it.

My comment was just meant to show the absurd of "not making business if you don't trust the customer"

But that is literally what your examples are doing! Either not doing business because of lost trust or establishing trust before giving money.

No. What I am saying is that for the majority of cases, there is no "trust" involved. There is a protocol that ensures that the exchange occurs properly, regardless of any trust relationship between customer and seller.

How are you supposed to know which customers are trustworty and which aren't?

Last time I got a mortgage I had to turn over financial history and have credit checks run. I have definitely had to pass background checks as a customer before.

Your landlord asks you to post a security deposit.

We literally have an entire credit worthiness sector.

You can also invert this and take trust as a default and only ban misbehaving customers.

So people with low social capital should do what, starve?

Grocery stores are pretty low trust environments.

If you literally are getting banned from grocery stores and starving the answer is probably "the prison warden has a legal duty to feed you".

Thank you for your comment, for a moment I thought I was crazy to believe that it can make sense to have a payment system where merchants are protected.

When I say the majority of anti-crypto people are privileged, it's because of this. They never got to experience life in a world where people nickel-and-dime on a 5 dollar purchase. They can not even conceive of a world where "evil" business owners have legitimate reasons to want to protect themselves, and they can't even see that people will do the most stupid stuff over pettiness or because they think they can get away with it.

>When I say the majority of anti-crypto people are privileged, it's because of this. They never got to experience life in a world where people nickel-and-dime on a 5 dollar purchase.

Ah yes, a classic case of "non-business owner privilege". Most of us are blind to how good we have it.

There are a few million(?) businesses in the world. There are at least 8 billion people in the world. Your average individual isn't going to adopt a payment scheme that protects businesses at the expense of themselves.

> Your average individual

The "average individual" has approx one breast, one ovary and one testicle. Speaking of "average individual" is meaningless.

The important thing is to think of how many business transactions are completed or never initiated due to the existence or absence of an a payment option.

> protects businesses at the expense of themselves

If you browse around this thread, you'll find maybe 7 or 9 other times where I responded to this: of course, for most use cases people will be fine by using the current systems. This does not eliminate the other cases that are not viable with the current systems, such as cases where the risk is negligible to the user on the individual transaction, but the risk to the merchant is too high at scale.

There's also the issue of <$10 services being used explicitly to test stolen credit cards, before they're sold and used for the big spending.

> with 0% low level fraud like this.

It's got its own issues. For example i hope you've got a separate wallet per transaction. Otherwise someone will use their tumbled BTC to pay you and you'll get blacklisted from using it in exchanges.

I think bitcoiners already use a new address for every transaction. They call it "HD Wallets".

>Otherwise someone will use their tumbled BTC to pay you and you'll get blacklisted from using it in exchanges.

This is a non-issue for cryptocurrencies with mandatory obfuscation like monero. Worst case scenario, you swap your tainted BTC for monero[0] and take the monero to an exchange.

[0] https://github.com/comit-network/xmr-btc-swap

Have you explored any crypto payments for this purpose?

This is why I switched to $10+ tiers on Patreon, and later, Ko-fi. Less than that and you get a lot of impulse pledges. Most of them are fine, but it only takes one person who didn't read what was on the pledge page clearly to make trouble. At $10+, you get people who are mostly there for the journey and aren't troubled if you make big changes. The flexibility is worth not getting a few bucks from people who don't read before buying.

Organizations are incapable of properly dealing with "firing the customer" in that manner. You're talking about hundreds of office employees with generic technical knowledge. This ultimately ends up in firing the wrong customers, and when those customers end up being big, your company gets a poor reputation and lack of revenue.

Therefore eating the cost is the most profitable outcome.

This is a very naive view. Stripe have an excellent page [0] on why this doesn't work. The short summary is that each chargeback will cost you $15 (plus returning the transaction), and if you have more than 100 fraudulent transactions in a month you get put on a monitoring list and if you don't bring the number down your account will be suspended. The stakes are very high for the person accepting a merchant agreement with Visa and MasterCard.

[0] https://stripe.com/docs/disputes/monitoring-programs

You can get fined and kicked off the payment network if your business has an excessive number of chargebacks. The chargebacks measurement is the number of chargebacks, not the amount of dollars chargedback.

These fines can be greater than $100,000 USD. Being kicked off a network such as Visa or MasterCard would be even worse.

> The crypto bros totally miss the point in understanding this too.

I am not sure what you mean by this, but bitcoin transactions do have fees which are determined in an open market fashion.

> The crypto bros totally miss the point in understanding this too.

The crypto folks are pretty cognizant of it, which is why they built an entire technology that isn’t reliant on intermediaries, banks, and payment processors to manage transactions.

A crypto Patreon in stablecoin like DAI on an L2 would basically be able to remove most of the high fees creators see in Patreon.

That doesn’t address the criticism. If I pay for a good or service via crypto and it is not delivered satisfactorily, what is my remedy? Who even decides what “satisfaction” is?

Yes, the dispute/chargeback process for cards is cumbersome today, but it is a solution - albeit inefficient. What is the crypto answer?

I don’t mean to put you on the spot for this question, but I would love to understand how decentralized solutions might address this issue.

> If I pay for a good or service via crypto and it is not delivered satisfactorily

In this vague hypothetical situation, what a lot of crypto folk would tell you is that you should use a smart contract, and not a regular transaction, to pay. Hypothetically the contract/network will act as an escrow agent, and would only complete the transaction when all input parameters are true AKA all parties are "satisfied". The successful input parameters and their truth sources would be agreed upon before hand.

I could argue more specific scenarios around fraud (buyer receives a good/service and pretends it was not satisfactory), but that can go on forever and I would encourage readers to go search for answers to specific edge cases because they are out there.

Sounds like a lot of work. I'd rather pay someone to do it for me.

That only works if all "input parameters" involved in the transaction are verifyably on chain. If I'm buying a physical good with crypto there's no way you can write a smart contract that verifies I did indeed get the good I paid for. Oracles don't count because that's just kicking the can to a different level (how do I dispute the oracle saying something happened that didn't).

Many Patreon payments are simple donations, or gated access to digital media. These can be achieved with smart contract functionality to mitigate the need for costly payment processing.

Yes though I would point out that smart contracts require some knowledge of coding knowledge to implement....

Yes, a theoretical crypto-Patreon would have to be coded in Solidity and frontend interfaces built around it for the web. This might be OSS or just a private enterprise.

But the users of this platform do not need to know how to code.

Exactly. On top of that and the high transaction fees, it's more complicated to do a Patreon like service with Crypto than just work with the imperfect financial systems we have now....

It’s really not that hard to build a Patreon style service on crypto and web3. It’s also far easier to build a new payment processing platform on crypto than it is to build an alternative to PayPal or Stripe.

What if you pay via cash or debit card or don't want to cut off a company (like Apple or Google or Amazon) completely? What is your remedy..chargebacks are a last resort. How many can you do before you get cutoff?

Normally chargebacks are for scams or fraud not because something came broken from Amazon.

> If I pay for a good or service via crypto and it is not delivered satisfactorily

If you paid with cash, what is your remedy?

And if the reason you need a third-party is just to resolve disputes, then what's stopping to have other companies that do nothing but the scrow-holding and dispute resolution?

If I pay in cash then I’m physically present. Usually I’m at a store with a reputation to uphold and a set return policy that’s reliable. If I’m transacting with an unknown entity (eg craigslist) then I can at least physically inspect the item. Very different than ordering online.

> Very different than ordering online.

So for these cases you consider a high chance of the counterparty being dishonest, you use the alternative that can give you safeguards. If it makes more sense to use a credit card, you can still use it.

Since it is the customer who chooses the payment method (or just won't buy from the seller if they aren't happy with the options offered), what is the benefit for the customer?

The lack of fraud (by which you really just mean lack of charge back) is only a benefit for the seller, and not the buyer. You are just moving risk to the buyer, and it is just like the old days of the Web when some sellers would try to get you to use western union to pay.

I've not seen you describe this yet in the thread, which tells me there is no benefit or you haven't thought this through.

There you go: https://news.ycombinator.com/item?id=31795159

In a hypothetical crypto Patreon, if you send $1 to an artist, your only recourse to get that back if you are displeased with their art is to ask them politely, or ask the platform or protocol creator. Most likely you will not get your funds back, but this is assumed to be the case.

If it's a micro-payment system then fraud doesn't really matter because the risk per transaction is low. In an ideal crypto payment system there's no double spending and no charge-backs. The only cost in cryptocurrency is per-transaction fees due to limited network bandwidth (which can somewhat be mitigated with multisig setups).

> The crypto bros totally miss the point in understanding this too.

I don't know which "crypto bros" you've been talking to, but as someone who is building a self-hosted payment gateway for crypto [0], the benefits from using crypto are two-fold: it eliminates the chance of fraud and it moves the cost of customer support to the merchant.

Also, once again I will have to repeat that no one sane will try to completely replace the existing payment systems with crypto. Crypto is meant to be an alternative for the cases where the cost of existing processors make the transaction not viable.

[0]: https://hub20.io/

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

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.

So if you just pretend there's no fraud, then there's no fraud?

No, what I am saying is that if you reduce the methods for fraud, the cost of dealing with it are lower.

Crypto doesn't reduce the methods for fraud.

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?

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.

>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.

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

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.

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"?

> 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"

> But the point here is that crypto can enable a whole lot of other businesses that don't exist today because of merchant risk.

This doesn't address the primary risk that merchants take on: fraud. Either crypto or credit card, if you end up taking a payment via stolen credentials, you will refund the money.

The risk that the middleman in a two-sided takes on is fraud. The scam is pretty simple: steal credit card/crypto key, set up fake seller account, buy stuff from yourself using stolen credit card/crypto key, cash out. The middleman pays the money out to the scammer, and eventually has to pay back the person that was stolen from, credit card or no.

Micro transactions are a huge merchant risk not because angry customers can chargeback, but because one stolen account can undo 1000/X legitimate transaction (where X is your profit per transaction). If your margin is slim, you've just amplified your fraud risk.

And before you say that it's easier to steal credit cards than crypto keys: 1) wait until crypto becomes common and 2) it doesn't matter. If you secure your keys, then scammer finds some user's account credentials and cleans their account out.

> Either crypto or credit card, if you end up taking a payment via stolen credentials, you will refund the money.

This by itself shows that you are making a fundamental confusion: crypto is not to be compared with credit cards. crypto is meant to be cash.

Anyone that steals crypto will wash it before attempting to spend it. And depending on the network, you can't even know what is the origin. So, it would be the same as being robbed of cash.

But okay, let's move on.

> If your margin is slim, you've just amplified your fraud risk.

What if my margin is infinite? Say I want to sell digital goods, with an effective unit cost of zero. Why would I want to worry about the 1/1000 chance of someone "stealing" a copy, when that cost is nothing compared with credit card processor fees and the only thing I am trying to avoid is being hit with chargeback fees?

> wait until crypto becomes common

Crypto becoming common does not mean that people should be keeping large amounts in their wallets. A wallet is not a bank account.

Even those crazy enough to keep substantial amounts of funds in crypto would have (at least) two separate set of keys. One to use for their "hot wallet" and one for cold storage. This is almost basic practice. In a world where crypto "becomes common", what could happen is that your "bank" would be a service that is responsible (and properly paid) to be a trusted custodian of larger funds.

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.

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.

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.

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.

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.

> So you end up with a system that most people won't touch, and only appeals to users who need to make shady transactions.

It can also appeal to applications where payers and payees have some sort of social capital at stake. Patreon is the perfect example for that. If Patreon could offer the possibility of making payments via crypto with reduced fees, don't you think that people would do it?

It also can appeal for the use cases where the value of the transaction is too low for payers to worry about the "insurance" provided by the credit card networks, but that merchants need to be protected. E.g, selling digital goods online. Imagine you want to sell a book online and charge $2. With crypto would be easy. With a credit card, not so much.

Finally, it also would make sense for transactions where people would rather risk losing the money over their privacy. E.g, if Ashley Madison had a crypto option, how many of its users would use it just to be sure that their names would never end up on a list?

Or 3DSecure which is becoming very common in Europe. No chargebacks.

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.

Many digital merchants in the EU have a rights waiver box to eliminate this kind of opportunism.

There is a whole other world of people who do not live in the EU.

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.

From the point of view of the merchant, crypto is riddled with fraud: 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.

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.

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.

When I am talking about payments with "crypto" it also includes stabletokens, which don't have this problem.

(And no, not all stabletokens are created the same. Tether is poison and everyone should stay away from it. The "algorithmic" stabletokens are already provably not viable. But DAI has managed to survive even worst market crashes than the current one, and USDC still has some semblance of trustworthiness.)

>But DAI has managed to survive even worst market crashes

We said the same thing about Celsius

No, "you" didn't. And if you did, you'd be wrong.

DAI can only crash "for good" if Ethereum crashes for good. MakerDAO is not over-leveraging itself to mint DAI into the market. MakerDAO does not pay any type of dividends to the people putting their crypto into the system - the opposite, actually.

Honestly the biggest issue with any crypto, at least in the United States, is for taxation purposes, it's treated like buying or selling a stock vs an actual currency. We need some actual crypto regulation defined that protects people and allows for cryptocurrencies to be used as an actual payment method, not an investment...

> it eliminates the chance of fraud

Declaring a priori that all transactions are legitimate doesn't eliminate fraud, it just eliminates the system's ability to handle it. Actual humans can still get victimized. The gateway just says "Lalala can't hear you not my problem."

> and it moves the cost of customer support to the merchant.

Likewise, it moves the consequences of fraud onto the victim.

> for the cases where the cost of existing processors make the transaction not viable.

I assume you realize what kind of transactions end up being nonviable for existing processors that do have fraud prevention, money laundering safeguards.

Your site says:

> When you receive a payment, the money is yours. No hold-out periods, no chargebacks, no forced refunds.

Read that from the perspective of a bad actor. That's exactly the kind of payment gateway they would want. No way for a victim to seek redress once they've sent their money. You seem to be targeting merchants that:

1. Don't want customers to be able to seek any redress when fraud occurs.

2. Are willing to deal with the overhead of customer support in order to get 1.

Hell, your site actually advertises "No KYC" as a feature! OK, so, yes, you do seem to be deliberately building a system targeting ransomware, drugs, scams, and money-laundering.

Try zelleing a scammer, call the bank, then get back to us buddy.

That's why you don't.

You are thinking only from the side of a customer, who already has it easy with the existing payment networks.

If you are a customer that wants to make a transaction that can be reversed, you go for the credit card. If the value of the transaction is not high enough for you to care (micropayments) or if you rather lose some money but not give away your data, you go for crypto.

The problem that crypto can solve is for the merchants, like TFA. Patreon charges absurd rates because payers are problematic.

(Edit: once again, the anti-crypto crowd decides to downvote reflexively and ignore everyone that brings legitimate use cases. Why is it so hard to at the very least consider the point that others are trying to make?)

>You are thinking only from the side of a customer, who already has it easy with the existing payment networks.

And you're pretending the customer doesn't exist by saying that crypto eliminates the chance for fraud. That's clearly a lie.

Do us a favor: instead of nitpicking to attack something that I never said, please consider the best possible interpretation of an argument.

When I say about eliminating fraud, I mean fraudulent payments. What happens after the transaction is a separate problem, and not one that is meant (or possible) to be solved by crypto.

If you as a customer want more safeguards, then of course it is not recommended and you should use other alternatives.

Because you're moving risk around without fixing anything.

Why would payers use a system which allows fraudsters to screw them over without recourse?

Crypto is not a solution because this is one of many problems that can't be solved with technology.

The real issue is that some people are consistent bad actors. You can't deal with that on a per transaction basis.

You'd need some kind of social credit system which assesses behaviour for trustworthiness accurately, independently, and objectively - instead of by personal feedback or by half-finished algorithm without appeal.

Even if such a thing were possible, everyone would consider it an intrusion on their privacy.

> You are thinking only from the side of a customer, who already has it easy with the existing payment networks.

Merchants factor processing fees in when determining pricing which means the cost ultimately gets passed on to the customer. The merchant would of course like lower transaction fees.

But legitimate merchants also want to comply with consumer protection laws and have happy customers even when unpleasant things like mistaken charges, stolen credentials, etc. happen. There is a real value provided to both buyers and sellers when transactions are regulated and reversible. The payment processor's fee is the cost of that value.

Now, it may be that payment processing is a horrendously inefficient market and the processing fees are much higher than they need to be given the value they provide because of lack of market competition.

However, your product does not appear to compete with other payment processors, because it offers little of the value that they provide.

> The problem that crypto can solve is for the merchants, like TFA. Patreon charges absurd rates because payers are problematic.

Yes, and your product doesn't charge those rates... but nor does it make payers any less problematic. Fraud still happens. People still get their identity stolen, or have their kids grab the phone and buy $10,000 in Robux. It's just that with your product, merchants don't have to care.

You have to wonder what kind of merchants would consider that system a significant win. This sounds like tour company buying a passenger bus and choosing the cheapest bus with no seatbelts or a roof. Hey, it saves them money! But, you know, it's not the best deal for the passengers.

> There is a real value provided to both buyers and sellers when transactions are regulated and reversible.

How is that we can do this with cash without having someone taking 2.9% + 30c per transaction?

> However, your product does not appear to compete with other payment processors, because it offers little of the value that they provide.

Absolutely correct. If you want to use Stripe, go use Stripe. They are great (most of the times). I use it as well. When it suits me.

I am not trying to replace Stripe, or Visa, or Mastercard. I am building an alternative for when these solutions do not work.

> People still get their identity stolen

Crypto payments (like cash!) do not require your identity to make a transaction.

> have their kids grab the phone and buy $10,000 in Robux.

You won't be carrying thousands of dollars in your crypto wallet, just like you don't carry throusands of dollars in cash.

> You have to wonder what kind of merchants would consider that system a significant win.

Can you do micropayments with Stripe? You can not. Then, you might be interested in a system that can.

Do you have a perfectly legal business that is for some reason in Mastercard's blacklist? Then you might be interested in having an alternative.

Having been involved with fincrime teams at retail banks, I don’t think this can be said enough.

There are so, so many bad actors and it costs every payment platform so, so much more than I imagined before I saw it from the inside.

Someone commented disparagingly along th lines of f “try calling your bank after fraud and see if you get the money back”. My experience having been victim of financial crime 3 times is that the bank ate the cost every time. That’s part of the value proposition. Building a ledger is relatively easy- stopping people taking the piss is a nightmare.

You can still have fraud, can't you still get sued to return someone's tokens?

I doubt the kind of person who's initiating chargebacks on patreon donations is going to go to small claims court to claw back their $10 donation.

As somebody who also built a crypto startup that facilitated payments (opentoken.com), crypto does not eliminate fraud. Merchants want fraud protection, they don't know how to handle it and aren't interested in taking on that business. You will end up either handling fraud in the payment layer, or your merchants will find somebody who will.

> Crypto is meant to be an alternative for the cases where the cost of existing processors make the transaction not viable.

Allow me to quote myself: using proof of work in place of CC processor fees is just moving the problem around - and arguably, making it worse: you're essentially taking on environmental debt, which all of us will eventually have to pay down.

Ethereum is moving to PoS in less than two months. Can we please drop this BS excuse of an argument?

(Before you reply with the usual "Ethereum devs have been promising PoS for years" line, I will tell you this: I pledge to drop all work on Hub20 if Ethereum doesn't complete the transition by the end of the year.)

How is this a "BS excuse of an argument"? Is proof of work being used?? Hmmm, yes it is. Thus, the argument stands.

> Is proof of work being used?

Not for all blockchains. If that is the point of contention in regards to crypto, then just look at the many other blockchains that do not use PoW.

Environmental cost is a BS argument because nobody talks about the environmental cost of the already existing technologies that they are using. Everything we plug into power in our houses comes from the same power sources which the crypto miners also use. They dont come from elsewhere. So there is no difference in between using an electric car and crypto in that regard - you are still using carbon-producing energy. All energy needs to be green. Crypto, EV, gaming, this or that technology or application of technology cannot be targeted specifically.

> Environmental cost is a BS argument because nobody talks about the environmental cost of the already existing technologies that they are using.

Have you been living under a rock for the past several decades? Or is this only a thing in EU? Every single fridge or TV sold has an energy class rating. Apple's new processors are all the rage because of their performance per watt. We use 230v (rather than 110v) AC because it's more efficient over medium-distance power lines.

> So there is no difference in between using an electric car and crypto in that regard - you are still using carbon-producing energy.

The car uses energy to move mass, it's almost the textbook definition of work in physics. Cryptocurrency is based on proof of waste - you must provide a mathematical proof of pointlessly wasted CPU cycles to conduct transactions.

> All energy needs to be green.

"All lives matter."

Saved the date.

> I pledge to drop all work on Hub20 if Ethereum doesn't complete the transition by the end of the year.

Why not two months from now? That's when they'll be done, right?

> That's when they'll be done, right?

If everything goes well and according to plan, yes. But I am not going to make harsh decisions based on best-case scenarios.

And I really really want Ethereum to succeed so other cryptocurrencies move to non PoW systems. Good to hear we are getting close to it rolling out....

The belief that crypto eliminates fraud is pure myth. It dramatically increase the chance of fraud for customers, and for honest merchants, there is still a risk of fraud.

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