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Comment by rglullis | Hacker News Reader

> 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/

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> 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.

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.

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...

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.

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