'50% of transactions were fraudulent' when Steam accepted Bitcoin for payments

https://www.pcgamer.com/uk/50-of-transactions-were-fraudulent-when-steam-accepted-bitcoin-for-payments-says-gabe-newell/

by mrkramer • 4 years ago

477 324 4 years ago

pcgamer.com

janandonly• 4 years ago

Unfortunately no details were given about what makes 50% of all bitcoin transactions “fraudulent” ?

What does that even mean?

* did someone try to send something other then bitcoin to a ₿ address?

* did a client claim he payed and did the payment seem to fail on his end?

* did a client not realise that you as payee also pay for the network fee?

Nowadays these kind of problems would be easily prevented by using bitcoin lightning payments, because they work in a fraction of a second and specify the exact amount that has to be payed. Also they are almost free of transaction costs.

erk__2• 4 years ago

Likely using stolen credit card credentials to buy bitcoin and then use them to buy things on Steam. They already have a massive problem with that without introducing bitcoin into the equation

flotzam5• 4 years ago

Wut. This is like stealing faberge eggs so that you can throw them through the window of a Shake Shack that you want to break into

TrapLord_Rhodo9• 4 years ago

that doesn't make any sense. The 'fraud' in your scenario and where the point of contention lies is between the the credit card company and the exchange where it was onramped. There's no way the exchange is then going to go through the effort to track the btc to steam and say 'Hey, that transaction that didn't come from our exchange wallet was fraud i want the BTC back.'

Also - That's just like fraud with extra steps? Why even usee btc?

scotty79• 4 years ago

How would steam know what was used to pay for bitcoin they received?

rhino369• 4 years ago

How would Steam even learn about that? The person getting scammed in that situation is the person selling bitcoins for credit card payments, since those payments will be canceled by the card holders bank.

Does anyone actually sell bitcoin via credit card transactions?

tenuousemphasis2• 4 years ago

You can't really buy bitcoin with a credit card because the seller would likely lose a ton of money to chargebacks.

lucb1e2• 4 years ago

* did someone try to send something other then bitcoin to a ₿ address?

That would not even register right? Different coins are completely separate and it wouldn't even have registered anywhere and show up in the statistic. As far as I know the addresses are also distinct between coins (so it's not even physically possible) but there are so many now and I've been out of that world for a few years now so that might have changed.

* did a client claim he payed and did the payment seem to fail on his end?

You mean like opening a support case, claiming they have paid?

* did a client not realise that you as payee also pay for the network fee?

That sounds possible. In this case, Steam's bitcoin client would indeed detect the transaction but it would never be mined and thus never really spent.

My first thought was a double spend, though, or perhaps that the source money was illegitimately obtained (e.g. later determined to be laundered money or so).

marcosdumay• 4 years ago

If it was double spend, I imagine we would have heard the news.

It's probably illegitimate money.

ipaddr4• 4 years ago

Sending the wrong type of coins btc vs bch will result in you losing those coins. That's not fraud..

paulgb• 4 years ago

I remember a period somewhere in the 2010s where it wasn't uncommon to see a business experiment with accepting Bitcoin (as Steam did), before transaction fees made it impractical.

Given the way people talk about LN, and the (quite understandable!) desire to avoid credit card transaction fees, why don't we see more businesses accepting it?

(Asking this in good faith; I am admittedly ignorant about LN and have not tried making a transaction with it.)

londons_explore• 4 years ago

There are just too few users on the LN. Of the whole world population, there is probably fewer than 1 in a million who could just scan a qr code and make a lightning payment.

TrapLord_Rhodo9• 4 years ago

yeah, a couple of companies in the space are experimenting with the concept of an omni-pool.

Essentially, since arbitrage bots are a constant you don't need an outside oracle to ensure there's very little slippage between assets. Addititionnally, since you are swapping inside the pool it does not incur a trade fee as you aren't trading some outside entity with a confirmation time.

Obviously it gets deep in math, but what you get it the ability to pay for anything with anything with no trading fees and a % APR for keeping your assets in the omni pool.

Solona and dot already beat visa in transaction speed, latency and confirmation time. DOT at technology maturity is looking to be able to process around 10X the transaction volumes of visa.

dale_glass• 4 years ago

I'm not the best person to answer, but lacking better ones, here's what I know:

* LN is technically complex, and hard for a normal person to run.

* LN requires making an on-chain transaction to open a channel. It's still vulnerable to high BTC fees and limited by the chain's low capacity.

* LN still runs on top of BTC, and has all the economic characteristics BTC has. So if it's stupid to buy pizza for $10K BTC because it appreciates, or stupid to sell a game for 0.0012 BTC because the price might fall tomorrow, then LN changes nothing about that and in some cases makes it worse. LN allows a non-cooperative party to delay things, which could be used maliciously during price swings.

* It's all still happening inside the crypto ecosystem, which is unpleasant to deal with. Think of say how people tried to buy their Tesla in BTC, then asked for their money back when the price rose. Why would a merchant want to deal with that kind of thing?

LN to me is a bit like putting lipstick on a pig -- it still leaves many significant problems in place, and adds some new ones on top in exchange for the benefits it provides.

onelastjob• 4 years ago

LN is too complicated imo. You can just use other chains if you want fast and cheap txs. Solana, Nano, Near, any of those.

lawn2• 4 years ago

Simply because LN isn't practical:

- You still need to open (and close) a channel, paying BTC fees.

- To accept a payment, you need to first lock up balance.

- You need to always be online, otherwise your channel is closed.

- Sometimes your payment can fail, if you cannot find a route. This risk increases with the payment amount.

- Sometimes, you cannot even find a payment route, so you need to open another channel.

- Sometimes, the other person on the other side of your channel might close your channel.

- Despite all this, payments might still have a relatively expensive fee (in addition to the BTC fees).

People are trying to create solutions for these problems, but they're often either quite complex, introduce third-party dependency or both.

3np3• 4 years ago

I think it’s just a matter of businesses perceiving the potential revenue increase not worth the overhead, combined with the resulting slow growth and development of ecosystem of service providers.

Running an independent node does take some management above that of a normal bitcoin node and merchant tooling and open source integrations are still coming together (though there are some good and dependable options). A merchant will need to keep an eye on their incoming liquidity, or use a service provider that does.

That being said, once you’re actually using it it’s a great experience, and for the individual enthusiast running a node can be great fun.

One service provider is Bitrefill, where you can buy Steam credits (and much else) over Lightning with a throwaway email faster than it takes for me to dig and type out a credit card out of my wallet or go through the SMS2FA BS of whatever virtual credit card-supporting bank I can find in the country I happen to be living in. Just copy and paste an invoice or scan a QR, depending on your wallet interface.

I do hope we see Lightning support in Coinbase Commerce et al soon. Unfortunately BitPay, one of the oldest and I think the most widely used payment service provider for Bitcoin, has become pretty much unusable as of lately and even if they did add lightning support it wouldn’t be interesting.

skybrian2• 4 years ago

Could people create fake game items and use Bitcoin to pay themselves as a way of converting it to cash? Is that a thing?

So the game item and the transaction are fake, as in they’re not actually there to play games.

trillic• 4 years ago

Yes, this is colloquially known as "money laundering". It's one of Bitcoin's most promising use-cases!

Duralias4• 4 years ago

It isn't as widespread as it probably would be with crypto (start selling shit game, buy game with crypto, get fiat), but Steam already has problems with people doing this, it is usually just more creative as it is hard to buy stuff with stolen credit cards, but we know from a ton of news that it is very common on grey market selling sites.

mmaunder• 4 years ago

“did someone try to send something other then bitcoin to a ₿ address?”

Like what? Cottage cheese?

Transaction failures and and fees are not fraud. The quote is specific.

Regarding lightning: https://twitter.com/nikzh/status/1356335970300416001?s=20&t=...

SilasX2• 4 years ago

Sorry, I went to the article and it wasn't any more specific on what a fraudulent transaction means in this context, and I don't know what that would mean here (for the context of a purchase via Bitcoin on a user's Steam account).

All I can imagine is a case where the user claims they didn't make the purchase, "please refund", but that would be easy to disprove.

tenuousemphasis2• 4 years ago

That dude is an absolute idiot.

Tenoke• 4 years ago

“did someone try to send something other then bitcoin to a ₿ address?” Like what? Cottage cheese?

Most commonly btc via lightning network to a place that doesn't support it or bch. It happens all the time.

jpollock• 4 years ago

There is substantial exchange rate risk.

If Valve didn't want to see any forex risk on the sale, they end up incurring it on refund. If people are using it as an easy way to store money in USD and then convert back to BTC when the rate goes up, that can get expensive in a hurry.

It could also be that they used Coinbase or some other provider to act as a processor, and Coinbase charged the merchant if there were chargebacks on Coinbase's accounts.

sebzim45002• 4 years ago

If people are using it as an easy way to store money in USD and then convert back to BTC when the rate goes up, that can get expensive in a hurry.

Why would anyone do this? In what universe is buying games and then requesting refunds easier than clicking buy/sell on coinbase/kraken/etc.

HWR_142• 4 years ago

Iirc, Steam refunded money in your local fiat, and used a third party processor. There was a small forex risk on the sale (when the btc transfer started vs when it was sold), but that should even put in the long term and they're selling now bits so they have the ability to absorb the cost.

Beltalowda3• 4 years ago

Steam marked me as a "fraud" because I used my European Revolut card to try and make a purchase when I lived in Indonesia.

I get that they don't want European people to pay Indonesian prices through a VPN or whatnot, but I was living in Indonesia and living off a local salary; I thought marking me as a "fraud" was rather harsh; with the increased ease of international banking there are loads of cases where this is perfectly legit (Spotify also doesn't allow it, but is far less harsh in how they communicate it – Netflix posed no problems; it's also circumventable by using gift cards, which is how I used Spotify, but I never tried this for Steam).

Anyway, I'd wager a significant chunk of the "fraud" cases is stuff like this: circumvention of regional pricing.

dehrmann• 4 years ago

I used to work for a company that does this sort of fraud detection. Using a credit card from a rich country in a developing country for an online transaction screams stolen credit card number. Fraudsters often use services like Steam where you can buy something fairly cheap to test the card number, then they go to the effort of trying a bigger transaction.

andai2• 4 years ago

I'm on vacation in Croatia and my Spotify Premium expired. I tried to renew it with my Dutch card and was rejected, so I had to use a VPN set to Amsterdam...

mindslight• 4 years ago

I think you figured it out. In general "fraud" gets used as an abstraction-primacy obfuscation term just like the more extreme "identity theft". The claim is obviously not akin to credit card fraud, and Valve doesn't describe the mechanics of what they're calling "fraud". So it's likely the one of the least offensive possibilities - like routing around their regional price discrimination. Which would make perfect sense as there's no identifying metadata tying a payment source to a location in the way that say a credit card does. Of course from the customer's perspective this is simply making the market more efficient, and I'll make sure to play my tiniest violin.

bena4• 4 years ago

Unfortunately no details were given about what makes 50% of all bitcoin transactions “fraudulent” ?

And? They don't report to you. So they don't have to explain anything to you. They don't have to defend their decisions to you.

isodev2• 4 years ago

Fraudulent also includes tricking people into purchasing without understanding what they are buying or how much it would cost.

In the case of crypto, there is no actual bank or payment provider through which to make a claim or facilitate a reimbursement.

In the case of the EU, the law imposes guaranteed minimal protection for online purchases. For example, any online purchase is fully reversible (including network fees) within the first 14 days following the transaction.

I don't think there are reasonable ways to meet this level of consumer service with crypto.

vhold• 4 years ago

Another possibility is that people were using it for money laundering.

One method is to create lower-than-shovelware games, buy them with shadily acquired cryptocurrency, stolen credit cards or scammed gift cards and take real money payment from Valve. Egregious example: https://mmofallout.com/valve-bans-yet-another-laundering-gam...

kova122• 4 years ago

What exactly does it mean "fraudulent transaction" in the context of bitcoin? It's not like you can use someone else's account number to purchase stuff.

chii• 4 years ago

i suspect that steam was using a payment processor which identified that the coins were on a blacklist of sorts, and was not legitimately acquired (e.g., either stolen, or purchased with stolen money etc).

hashimotonomora2• 4 years ago

How does Walmart compare to that regarding purchases with ill-gotten cash?

swid2• 4 years ago

The people who buy the game then resell the key on other websites for less than you find it on steam. They can buy many licenses when the game is on sale, so even if there is no chargeback, the devs can lose money through these methods. Otherwise it is still a money laundering tactic.

Here’s a blog post where they talk about this eco system.

https://factorio.com/blog/post/fff-303

flotzam5• 4 years ago

OK that kind of makes sense: "fraud" = making geographical or time-limited price discrimination less effective

kova122• 4 years ago

I'm failing to understand why is this considered fraudulent. Buy low sell high, this is how all trade works. People buying multiple keys for resale is just an unintended consequence of underpricing the product.

Duralias4• 4 years ago

Money laundering I'd imagine.

Criminal creates shit game, buys game using crypto and gets paid out in fiat because *very* few developers would accept being paid in crypto.

rosndo20• 4 years ago

This does precisely nothing to “clean” the money as it doesn’t eliminate the direct link between you and the dirty bitcoins.

duxup• 4 years ago

There's a difference between what it should be and what it really is currently in the real world.

I feel like that when I speak with bitcoin enthusiasts. Lots of ideology that I don’t necessarily disagree with… but the ecosystem is something else…

vmception• 4 years ago

The enthusiasts are excited and altering the network towards what it should be, even if that’s simply use and being an addition to the collective conscious

Many saw something that wasn’t done and go contribute

Others saw something as static

Others saw something as stagnant and went to contribute to another network that experiences the same path towards its ideals

ta988• 4 years ago

That's the thing if you talk to people from any political party or ideology, there are some really general ideas that may not be shocking. What matters is the reality of the actions of those people and those they believe in.

space_rock2• 4 years ago

This article is incoherent. Say what you like about Bitcoin but fraudulent payments are not possible. And yes Gabe is right that people in crypto are criminals running scam projects

AlexandrB• 4 years ago

Fraudulent payments are very much possible in the "buying stuff with a stolen credit card" kind of way. This is a much more common type of fraud than the "double spend" attacks Bitcoin protects against.

Bitcoin is only resilient to fraud only if you define fraud as "violating the rules of the blockchain". Any definition of fraud that involves meatspace is possible.

allisdust2• 4 years ago

Stolen credit cards are a problem for the merchant because the charges could be reversed by the bank and merchant will incur the loss.

I don't see how that is even remotely possible with Crypto. How did Steam lose money ? My guess is they might be accepting it through some payment provider (so not a true crypto) who has in their T&C to be able to reverse transactions (which must be happening in Cash on the Steam facing side).

space_rock2• 4 years ago

Yes fraud is possible with credit cards. You correctly left out Bitcoin. As fraudulent payments are not possible with Bitcoin

IgorPartola2• 4 years ago

At this point is BTC a good idea? Does it actually provide any damn value at all at a macro level?

reaperducer5• 4 years ago

Does it actually provide any damn value at all at a macro level?

It provides macro value to coinbros and wantrapreneurs who think that bragging on social media about fake money is the same thing as owning real money. I guess that's something.

newaccount74• 4 years ago

The only real use case that people keep mentioning is transferring large-ish amounts of money (>1000 USD) internationally.

thallium2052• 4 years ago

Which is not hard if you have a bank account that is in any tier above poor person consumer level.

ipaddr4• 4 years ago

It provided a great way to buy weed before it was legalized and transaction fees skyrocketed.

Bitcoin at $5,000 a coin was extremely useful for transactions. Bitcoin at $50,000 make it less useful because of scaling issues.

doomroot10• 4 years ago

Have you tried lightning network its extremely fast and cheap and pretty reliable these days. Many great mobile wallets support it now, Blue wallet, Muun, Phoenix. Hell even Cash App supports outgoing lightning payments now. Scan a QR code few seconds later done, final, irreversible.

mccorrinall2• 4 years ago

You currently pay about 10 pennies for a transaction which is included in the next block.

Using Lightning is even cheaper.

Finnucane• 4 years ago

No.

abi• 4 years ago

Say you're a Ukrainian fleeing refuge and you want store your life's savings somewhere safe. Pretty damn useful there. If you don't want to deal with the price fluctuations of BTC or ETH, buy stablecoins instead.

pfooti• 4 years ago

there's also banks.

IgorPartola2• 4 years ago

Right so other crypto is just as good if not better for this?

PragmaticPulp2• 4 years ago

Say you're a Ukrainian fleeing refuge and you want store your life's savings somewhere safe.

Doesn’t make sense. Why would anyone wire your bank account money to a crypto exchange, convert it to crypto, transfer the crypto to a different bank in another country, then withdraw it when they could just wire the money directly to the other country’s bank?

If you can’t wire money out of your bank account to somewhere else, you probably can’t exchange it for crypto either.

doomroot10• 4 years ago

It's a permission-less payment network, can you not think of a single thing that would be useful for?

rabuse2• 4 years ago

Xi angrily joins the chat.

EVa5I7bHFq9mnYK• 4 years ago

Well, my friend in Russia just yesterday donated $10,000 in Bitcoin to Ukrainian defense fund. Had he done that using paypal, he'd already be in Gulag being raped with a broken bottle.

Now he wants to leave Russia, but Russia is being banned from the SWIFT network, so he can't get any of his savings out. Enter Bitcoin again.

tiahura• 4 years ago

And of the 50% that were legit, what percentage was with stolen or fraudulently obtained bitcoins?

woah2• 4 years ago

Completely incoherent article. What does “fraudulent” even mean? Fraudulent credit card transactions for gift cards are common, because the gift card provides a way to cash out a stolen credit card number. But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”.

jayd168• 4 years ago

It's not cash so it's not cashed out. Simple as that.

deutschewelle2• 4 years ago

I feel like your comment is unjustified and incoherent. It is obvious to many of us what "fraudulent" mean here, it could be an array of:

- previously flagged wallets moving through mixers

- purchases and refunds to facilitate money laundering

- converting to and from steam wallet to crypto etc.

It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so.

Bitcoin is a public ledger where all transactions are PERMANENTLY recorded. The law enforcement agencies have much better deobfuscation tools than 10 years ago and the tools will just continue to improve as they have INFINITE resources.

But if a criminal has access to someone else’s Bitcoin, it’s already “cashed out”.

You are describing one type of crime that has existed far long before crypto as basis to discredit Gabe's claims and its an unconvincing argument/poorly baked logic that they tell in maximalist echo chambers.

Rather I ask, what is it that you fear so much whenever criticisms are raised? Did you transfer your savings to purchase jpegs and other insane APY that seasoned hedge fund managers can't produce?

gruez7• 4 years ago

It is obvious to many of us what "fraudulent" mean here, it could be an array of:
- previously flagged wallets moving through mixers

So if someone robbed a bank, used that money to buy drugs, that money ended up in my hands somehow (eg. I bought from the same drug dealer), and I used that to buy a big mac, my big mac purchase is "fraudulent" as well?

- purchases and refunds to facilitate money laundering

How does that even work? You can only refund to the same person. It's not like you can buy a game, gift it to someone, and have that person "refund" the game to cash out

- converting to and from steam wallet to crypto etc.

There isn't an official way to convert steam wallet to crypto

It is NOT at all ambiguous which is what you are insinuating as the basis for not reading past the headline and discouraging others from doing so.

1. You say it's "NOT at all ambiguous" but you yourself listed 3 very different possible reasons. That sounds pretty ambiguous to me.

2. I skimmed the article and there isn't really much in the body either.

woah2• 4 years ago

There's the old anecdote about 20% of dollar bills having been used to snort cocaine at some point in the past. Who knows if it's true, but it seems plausible. Would it make sense for a merchant to say "we tested bills and found that 20% of dollar transactions were drug-related"?

TrapLord_Rhodo9• 4 years ago

i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up.

I don't understand this sentiment. A) 50% of btc transaction were fraudulent makes zero sense. The technology behind BTC ensures it can't be fraudulent. So unless someone wants to explain to me how the hackers broke BTC's consensus to buy... videogames? it makes noe sense.

reaperducer5• 4 years ago

i can pay for anything in the economy right now with BTC. It's called a crypto debit card... look it up.

Not every organization accepts debit cards. Look it up.

TrapLord_Rhodo9• 4 years ago

I don't think i've ever run into one here in the US that didn't let me use my crypto card.

I don't even remember the last time i carried cash?

jlkuester7• 4 years ago

This sounds eerily similar to various debates regarding adult content, that some companies (clearly not all becuause OnlyFans) have decided that customer segment is not worth pursuing. Not because there is no money in it, but just because it is not worth the trouble...

I am specifically thinking of the drama between payment processors and porn sites. I don't really think that Visa's position is "porn = bad" or that they would deliberately sever a profitable relationship with customers unless they were experiencing or anticipating something bad for business.

Valve seems to be thinking in the same vein here, where it is just not even worth trying to play the crypto game (pun intended...).

lokar4• 4 years ago

There seems to be a basic misunderstanding on the part of the pro-btc ppl here all saying "how is that fraud?" or "how is that steams problem?"

If you run a business that can be used in a money laundering scheme, even if you are not a victim, you have a legal responsibility to try to limit/prevent that actually.

The crypto crowd may not like that, but it's not up to them.

rosndo20• 4 years ago

The basic misunderstanding is on your part.

“Money laundering” wasn’t mentioned by anyone but you. Stop inventing things.

This is about valve getting fucked because they were accepting bitcoin payments with zero confirmations.

felipellrocha• 4 years ago

Why take it personally? They brought up an important issue.

lokar4• 4 years ago

Did you even read the other threads? It comes up almost every time.

httpsterio• 4 years ago

I think assuming money laundering was a fair assumption as the article only describes fraudulent activity and nothing else on the matter.

m348e9124• 4 years ago

I'd like to know what Gabe meant by fraudulent too. The whole idea of crypto is that if you send it and it's confirmed you can't get it back, which makes fraud (on the payers side) nearly impossible.

You brought up the point about zero confirmations. Zero-conf itself is fairly reliable, it certainly doesn't account for 50% transactions being fraudulent. Bitcoin introduced replace by fee in 2016. In 2017, bitcoin transition fees were high, and there was large increase in the bitcoin mempool, which led to a backlog of stuck low-fee transactions.

Replace by fee adds a major loophole to zeroconf, low-fee, stuck transactions could be rebroadcast with a higher fee and sent somewhere else even after they were "received" but not yet "confirmed" by Steam. Users could sign up, pay with Bitcoin, steam sees the payment but doesn't want the user to wait 3 days for confirmation, so steam completes the signup. After that the user rebroadcasts the transaction back to themselves with a higher fee and quicker confirmation. The original transaction doesn't go through.

Here's and discussion on how reliable zero-conf is when RBF is not part of the protocol and instead bigger blocks are mined.

https://www.youtube.com/watch?v=TIt96gFh4vw

hungryforcodes2• 4 years ago

There is absolutely no definition of fraud that I read in the article.

lokar4• 4 years ago

I was referring the the comment threads here

phil21• 4 years ago

The crypto crowd may not like that, but it's not up to them.

I think you'll find many of the "crypto crowd" strongly disagree with your assessment.

In fact, reality on the ground highly suggests it is indeed at least partly up to them.

This is probably where the fundamental "talking past each other" happens on forums like HN.

lokar4• 4 years ago

I honestly don't know how to read that. Do you mean they think US law on money laundering is up to them? Or that a company like valve could reasonably get away with ignoring it?

StanislavPetrov2• 4 years ago

You seem to have a basic misunderstanding of what was happening here. It had nothing to do with money laundering. Steam was accepting transactions before they were confirmed by the bitcoin blockchain. Its like accepting a check and handing over the merchandise before the check clears. It is also why most places don't take checks anymore.

ike0790• 4 years ago

bitcoin should be seen in the mainstream as a universal payment network. I believe its best use case for the average(non-cypherpunk libertarian) person/company is to accept it by using a service that automatic exchanges it for dollars on their end.

For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account. It allows for bitcoin to be held by those who don't mind the volatile nature of its market value, AND allows for those wanting to accept without holding it in the short term. Win Win for both parties :)

jayd168• 4 years ago

You're forgetting the tax implications here. Steam is still on the hook for sales(and other) taxes. The problem was never just picking an exchange currency. It was the legal hurdles that made this complicated. Those hurdles are still there. They apply to everyone but especially in Valve's case as they are not under the radar.

PragmaticPulp2• 4 years ago

For example, someone in africa could pay .001 BTC($40 currently) for a game and all steam would see on their end is a debit transaction for $40(cash not bitcoin) in their account.

Transaction fees and exchange fees will diminish that received value and force the customer to pay a fee to pay for something.

The net cost of Bitcoin transaction fees and exchange fees is higher than just using a random, common credit card processing company. It’s also slower for users.

Let’s be real: Gamers don’t really want to pay extra transaction fees for the privilege of sending Bitcoin and waiting as much as an hour or more for the transaction (my latest Bitcoin payment took longer than an hour) before they can play their game. Not when they can type in a credit number and get it done right away for 0 fees (or negative fees with reward cards)

devit• 4 years ago

How can a Bitcoin transaction be fraudulent?

They are irreversible and if the Bitcoin is stolen that's not the merchant's problem.

The whole point of Bitcoin is to eliminate the possibility of chargebacks and thus the need for merchant to care about whether the buyer is in good faith and whether the money is stolen.

jayd168• 4 years ago

Just because a computer says it's ok doesn't mean you can just start dealing in stolen goods.

mdoms• 4 years ago

if the Bitcoin is stolen that's not the merchant's problem

It is if half the transactions at the merchant eventually get refunded.

The whole point of Bitcoin is to eliminate the possibility of chargeback

I'm sorry I'm having trouble keeping up with the "the point" of Bitcoin is this week. So it's chargeback avoidance now?

giaour6• 4 years ago

They are irreversible and if the Bitcoin is stolen that's not the merchant's problem.

This seems consistent with the bitcoin ethos but incompatible how the economy and legal system work. If someone buys a physical item from your physical store with a hot check, a stolen credit card, or marked bills that were just stolen from a bank, you don't get to keep the money, even if police aren't able to recover the item you sold. This is normally referred to as being defrauded.

olalonde3• 4 years ago

I do believe that you get to keep cash. I don't think I've ever heard of an instance of "dirty cash" getting seized back from a merchant. Do you have an example of that?

cuteboy19• 4 years ago

The whole point of Bitcoin is to eliminate the possibility of chargebacks

This is obviously false. There is absolutely nothing that compels normal payments companies to honor chargebacks. Since you don't need Bitcoin to complete this goal, this goal cannot be Bitcoins purpose.

The reason that they do it is because being consumer friendly is more important than being merchant friendly. Even merchants would attest to this fact

DangitBobby2• 4 years ago

This article I think contains the original interview with Gabe. It at least mentions the nature of the fraud [1]. He actually says "the vast majority" which sounds like more than 50% to me.

Another thing was that the vast majority of those transactions, for whatever reason, were fraudulent, where people were repudiating transactions or using illegal sources of funds and things like that. And that's just out of control, right? You want that number, realistically, in a couple of percent, not half of all transactions turning out to be fraudulent transactions. Similarly, with the actors that are currently in this NFT space, they're just not people you really are wanting to be doing business with. That doesn't say anything about the underlying technology, it's just a reflection of the people right now who are viewing it as an opportunity to rip customers off, or engage in money laundering, or other things like that.

1. https://www.rockpapershotgun.com/gabe-newell-interview-steam...

doomroot10• 4 years ago

Context on what I believe they mean by "fraudulent".

Steam back in the day used to accept 0 confirmation bitcoin spends. This means that the transaction has been gossiped on the bitcoin p2p network but had not yet been mined into a block and thus had minimal finality guarantees. Steam could see that they were going to receive a bitcoin payment (when the transaction was mined into a block) and would credit the users account instantly for a better purchase UX.

Turns out anyone with some deeper understanding of bitcoin could construct another transaction spending the same bitcoin back to themselves before their original transaction was ever put in a block. The bitcoin community moved away from accepting '0 conf' transactions pretty much everywhere because of this reason.

In fact the high fee era (2016-2018) saw many wallets incorporating this "double spend" feature into their wallets. This is known as RBF, "replace by fee" and is really useful when you need to bump your transaction up the queue. You replace your old transaction, that is waiting to be mined, with a new one that offers a higher fee to incentivize miners to add it to a new block.

I think its rather unfortunate that 0 conf transactions were written off so quickly. There are many context where a 0conf tx makes sense, mostly IRL. But, if you are running a business online and you don't trust you customers you should wait 3-6 blocks after the transaction has been mined before delivering your goods.

marcus_cemes• 4 years ago

There are many context where a 0conf tx makes sense, mostly IRL.

I'm curious, like what? To me this is more like "someone wrote a cheque but there's no guarantee that they'll give it to you".

qvrjuec• 4 years ago

I think more like "someone wrote a check and there's no guarantee it won't bounce". So really, it's quite analogous to how 0conf works in practice.

alickz• 4 years ago

I only have a layman understanding of bitcoin, and I've never used a cheque in my life, but would it not be more like "someone wrote you a cheque and there's no guarantee it won't bounce when you try to cash it in"?

Which, again maybe showing my complete lack of knowledge of cheques, is how I thought they worked in the first place.

doomroot10• 4 years ago

Anything where the buyer doesn't leave 15-30 mins after making the payment or the purchaser is id'd.

snissn• 4 years ago

so anywhere where a check makes sense, in a trusted or doxxed environment for example like IRL

aasasd• 4 years ago

and you don't trust you customers

Seeing as “remember the password” does about nothing in the desktop app on my own machine near which only I ever come—Steam's attitude toward the users is crystal clear, and I'd say it's weird that they lived almost two years with that arrangement.

sangnoir• 4 years ago

Convenience and security are always in tension - and steam account takeovers are very common, as they can have tradable assets worth hundreds or thousand of dollars.

delusional• 4 years ago

In the same era steam stored your password on disk if you used "remember my password".

sidewndr462• 4 years ago

Steam back in the day used to accept 0 confirmation bitcoin spends. This means that the transaction has been gossiped on the bitcoin p2p network but had not yet been mined into a block and thus had minimal finality guarantees.

Why? Why would anyone ever accept this?

philsquared_2• 4 years ago

Because I am pretty sure it isn't true. I am one of the few people who used bitcoin on steam during this time and I don't remember it ever being instant. I would like to see clarification to the top point because I don't think it is true...

In my opinion when he says "fraudulent" he is probably talking about how people would use it to avoid bans. Steam would track banned users that remake accounts by checking their CC. They would also verify the people by making sure the address on the CC was close or the same to the address on the account.

With Bitcoin you could avoid any tracking from remaking an account which leads to more 'bad actors' using Bitcoin. For reference you needed to spend something like $5 - $10 to enable trading on the platform. From their people would phish, scam, and break the TOS on the account.

CyberDildonics• 4 years ago

Because they can revoke your game from your steam account if the transaction doesn't get picked up.

exitb• 4 years ago

Shouldn’t it make most sense in contexts exactly like Steam, where the merchant can take the goods back in case of a fraudulent transaction?

gambiting3• 4 years ago

It did, and they did. That's probably exactly why they allowed it like that in the first place - if the transaction is fraudulent then simply remove the user's entitlement, but offer instant access for better experience.

LanceH2• 4 years ago

You say wait 3-6 blocks -- which makes sense for large transactions, but are there cases where 1 blocks have been getting reversed? Is this happening now because some parts of the network are on stale or diverging info?

doomroot10• 4 years ago

These are called "orphan blocks" and they happen very regularly, like everyday.

https://bitcoin.stackexchange.com/questions/2170/how-often-f...

ezoe• 4 years ago

You don't even need to do anything on bitcoin side if you value the 0 confirmation. You offer the goods or services before you receive the payment. It's like a restaurant that serve the food first and receive payment later. The restaurant do that because they trust the customer to pay up.

elcomet2• 4 years ago

This doesn't work,people don't know the amount to pay before they finish their meal.

kadoban3• 4 years ago

Depending on what it is, 3-6 is a _lot_. For something like a Steam game, it seems like waiting for 1 should be more than enough.

I say "more than enough" because can't they just revoke the key of whatever was purchased if it gets double-spent? Seems easy enough.

doomroot10• 4 years ago

it seems like waiting for 1 should be more than enough.

Not in bitcoin land, orphaned blocks happen a few times a day: https://bitcoin.stackexchange.com/questions/2170/how-often-f...

If you're willing to tolerate this risk then by all means go for it.

(I'm with you I think steam should be able to tolerate this risk.)

donkarma• 4 years ago

It was my understanding that RBF does not work by double spending, but by making a transaction with a much higher fee that depends on the parent transaction which means you would need to mine both to get the higher fee.

sparkie• 4 years ago

This is known as CPFP (Child pays for parent)

freeAgent4• 4 years ago

BCH is trying to keep 0-conf alive by eliminating the artificial block space constraint, removing RBF (which is really dangerous when you have an RBF-flagged grandparent tx that maybe your wallet is t looking for), and implementing double spend proofs to warn tx recipients as soon as a double spend tx appears on the network. It’s obviously impossible for an unconfirmed Bitcoin tx to be guaranteed secure, but the risk can be minimized, which is nice for everyday, low value transactions.

doomroot10• 4 years ago

With no RBF how will you prevent TX's from getting stuck in a high fee environment? I know BCH thinks block space should be unlimited which means TX fees will never get high but i don't think the economics works out there.

rmbyrro2• 4 years ago

Appreciate the explanation, thank you.

I was imagining it was something on the line of drug cartels and human traffickers laundering money through trading game assets.

mFixman• 4 years ago

How would you prevent the fraudulent transactions you just posted if you accept 0 conf proof?

elevenoh• 4 years ago

Steam back in the day used to accept 0 confirmation bitcoin spends

This is ridiculous. 1 block confirmation would've prevented near-all transactions from being retracted.

kirso• 4 years ago

Correct, but why to deal with this at all considering the % of all BTC TXs compared to fiat.

pinephoneguy• 4 years ago

SSH caused serious security problems
I don't know what "null cipher" means but it sounds very technical and is probably the best one.

The whole UX excuse is a bit silly considering modern Steam games take an hour to download anyway.

lawn2• 4 years ago

The bitcoin community moved away from accepting '0 conf' transactions pretty much everywhere because of this reason.

They moved away from 0 conf because of the high fees, making payments sometimes get stuck for days or weeks, making 0 conf much less trustworthy.

Lochleg• 4 years ago

In my estimation, most of the activity done with people's inventory on Steam, especially skins in major games, involve one illicit scheme or another. I guess you can't or shouldn't stop people from using their skins on gambling sites. However, it doesn't seem like many of the metafeatures that the company started to build around Steam actually serve regular gamers just looking to enjoy themselves.

xyst• 4 years ago

I am more surprised that Gabe Newell is still the CEO of valve/steam and it's privately owned

dhosek• 4 years ago

The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense. I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in. Then again, people still get suckered into Ponzi schemes 100 years later so ?

StanislavPetrov2• 4 years ago

The big thing here is that blockchain is a solution in search of a problem and none of the applications that have been mooted have made sense.

People and countries who are prevented from accessing the banking system or making money transfers would beg to differ.

I have no doubt that it's going to collapse, but I wouldn't dare to put a date on it. I was pointing out the absurdity of it 10 years ago and it's still sucking people in.

The same can be said about every fiat currency. Which will collapse first? Or, more importantly, which will collapse faster?

whatever_dude• 4 years ago

The number of people in this site that can't accept that half of the transactions was fraudulent is astounding.

If you're in the space, going "well actually" in every article critical of blockchain based finance doesn't help your mission at all. Ultimately you're just making up excuses for the toxic parts of the system.

jake_morrison• 4 years ago

I ran a web hosting business. We had a word for people who wanted to pay for servers with an untraceable currency: criminals.

blunte• 4 years ago

What a pointless fluff piece.

How did they know the payments were fraudulent?

Yes there are a ton of pitfalls and shams and bad things happening in the crypocurrency world, but this "article" is the media equivalent to the garbage projects in the crypto world. It is designed not to provide something useful, but rather to make money with questionable promises.

id02009• 4 years ago

"People didn't figure out why we need distributed ledger"

Means rather Gabe didn't figure it out, the team didn't understand how it works, and for burned. The reasons for distributed ledger are actually quite obvious.

farzher• 4 years ago

what a dumb title. bitcoin transactions can't be fraudulent. obviously some kind of clickbait

'50% of transactions were fraudulent' when Steam accepted Bitcoin for payments

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