The Criminal State of the Crypto Economy

Crypto currency and the blockchain held the potential key to an economic revolution. Unfortunately, I don’t believe it will reach its potential due to the rampant criminal activity saturating the crypto atmosphere. Bitconnect and endless other HYIP scams steal people’s crypto on a daily basis. And then you have fiat to crypto conversion platforms like BitPay manipulating the fees involved to realistically utilize your crypto. As a BitPay user I have grown increasingly frustrated with the inflation of fees and passing the blame off to the “miners.” Here’s a blog explaining and expressing exactly what I’m referencing and how I feel about it:

https://cryptohq.org/inflating-bitcoin-miner-fees-bitpay-payment-protocol/

“INFLATING THE BITCOIN MINER FEES WITH BITPAY PAYMENT PROTOCOL
BY FLORIAN GHEORGHE JANUARY 25, 2018

If you happen to use Bitcoin as an actual means of payment, you may have already stumbled upon a problem. You no longer can use the wallet of your choice in order to make a payment to a vendor who accepts Bitcoin. And that’s because BitPay – the payment processor that basically has monopoly on the market – has recently transitioned to a new system called the Payment Protocol or BIP-70 .

The change was initially announced on November 28, 2017, in a blog that discussed in depth the company’s ‘obsession with improving the Bitcoin payment experience.’ According to the blog, the Payment Protocol ‘eliminates user error in Bitcoin payments.’

OUR GOAL ISN’T TO LIMIT USERS’ WALLET CHOICES. WE REQUIRE PAYMENT PROTOCOL-COMPATIBLE WALLETS TO PROTECT USERS FROM COMMON, EXPENSIVE PAYMENT MISTAKES.

Instead of copying and pasting the address and the amount to send, the user has to copy and paste a URL that has all the information required for a successful payment. When the user pastes the URL, the address and amount are automatically filled, therefore he or she can’t make any more mistakes.

“If their wallet also ‘speaks’ Payment Protocol, the correct receiving bitcoin address and the correct sending amount are locked in automatically,” the company explains.

Nevertheless, there is a catch: you have to use a wallet that speaks the ‘Payment Protocol’ language. Thus, if you want to use an online wallet like blockchain.info, you are out of luck because you won’t be able to pay using such wallets. In fact, there are only a handful of Bitcoin wallets that can process the protocol: Copay, Mycelium, Airbitz, Electrum, Bitcoin Core, and of course, Bitpay Wallet.

What about other options? BitPay explains in the Help Section: “Our goal isn’t to limit users’ wallet choices. We require Payment Protocol-compatible wallets to protect users from common, expensive payment mistakes.”

Supporting The Bitcoin Network Or Just Abusing Its Power?

Many have come forward since the integration of the Payment Protocol expressing various concerns over the ‘bold’ move. Some have even called BitPay a ‘bully’ and ‘abuser.’

“We absolutely do not support Bitpay in aggressively using their dominant position of market share to bully wallet providers into supporting their business plans or bully users into a system that degrades their privacy and the fungibility of bitcoin as a whole,” the Samourai Wallet PR team said in a blog. “…widespread implementation of BIP70 introduces an exposure to increased risk of AML/KYC surveillance and monitoring of on-chain transactions and more effective blacklists.”

WIDESPREAD IMPLEMENTATION OF BIP70 INTRODUCES AN EXPOSURE TO INCREASED RISK OF AML/KYC SURVEILLANCE AND MONITORING OF ON-CHAIN TRANSACTIONS AND MORE EFFECTIVE BLACKLISTS.

“We do share some of the concerns but do not feel as strongly as Samourai Wallet,” Co-Founder and CEO of AirBitz, Paul Puey told Bitcoin Magazine. “In the case of the acquisition of a payment QR code from a website, one is already trusting SSL public key infrastructure to know that a public address is from the owner. Adding BIP70 to that makes it no worse. However, if one is doing a peer-to-peer transaction between two wallets that are physically next to each other, there is no need to rely on an https server query to obtain a public address, and that process absolutely introduces more risk than necessary.”

“Not showing addresses is a big change in how people use Bitcoin, and, as of January 2018, I think it’s premature to force this change ecosystem-wide, but BitPay is only insisting upon this for people who want to use BitPay,” president of the company that develops Jaxx Wallet, Addison Cameron-Huff added in the same article.

Unfortunately, the options for people who want to use some other payment processor aren’t simply there as of January 2018. Most vendors accepting Bitcoin process the transaction via BitPay.

The company defended its position and the new Payment Protocol in a blog published on January 10, 2018: “Before Payment Protocol, wallets or exchange accounts not suitable for spending (along with user error) created more than a thousand of these errors for BitPay purchasers every week.”

(NOT) Protecting Users from Unnecessary Bitcoin Miner Fees

In the same blog, the company tried to explain how BIP-70 protects users from ‘unnecessary miner fees:’ “While a terrible user experience is one thing, adding to the congestion on the Bitcoin network and paying unnecessary fees to miners is another. In recent months, miner fees have increased dramatically as usage of the Bitcoin network has skyrocketed.”

What BitPay fails to explain however is how this new BIP-70 system maintains this status-quo to the point it even protects and encourages ‘dramatically increased’ miner fees.

In the blog from November 28, 2017, the company tried to explain how the Payment Protocol will solve once and for all the miner fee problem: “We can also analyze transactions to make sure an adequate bitcoin miner fee is included. If the fee isn’t sufficient to allow the transaction to confirm on the bitcoin network on time, BitPay can return a helpful message back to the wallet to let the user know.”

We at CryptoHQ tested these claims recently in two instances and found the claims to be completely inaccurate.

First, we compared the BitPay miner fees recommendation with other popular wallets like blockchain.info. The differences in numbers were quite staggering in both instances.

In the first instance, the normal fee in blockchain’s case was 40 satoshi per byte. The BitPay Wallet recommended a ‘regular’ fee of 429 satoshi per byte. YES, THAT’S OVER 10 TIMES HIGHER! To make a payment and buy a product with Bitcoin, we took blockchain’s recommendation and gave a fee based on 80 satoshi per byte. Indeed, the BitPay Wallet warned us the confirmation could take a very long time yet, we ignored the message anyway and sent the amount using ‘just 80 satoshi per byte.’ The transaction was added right in the next block so the experience was flawless in terms of waiting time.

In the second instance, the normal fee in blockchain’s case was around 70 satoshi per byte. The BitPay Wallet recommended a ‘regular’ miner fee of 378 satoshi per byte. To prove our point, we took a risk and set the fee at just 50 satoshi per byte. Again, BitPay warned us about our small fee but, yet again, we ignored it. Yes, the transaction wasn’t exactly instant but it took around an (ONE) hour to confirm.

Again, big discrepancy between what a user should actually pay as miner fees and what BitPay recommends. Even the Super Economy recommendation is way off if we assume the blockchain.info estimation is more realistic (and our two instances proved blockchain.info is indeed right).

Do Your Own Research Beforehand!

The conclusion is more than obvious: always do your research whenever you try out the Bitcoin & Cryptocurrency experience and NEVER take any kind of recommendation for granted. Almost always, given the current market structure, any particular crypto recommendation has nothing to do with user or customer experience and is actually based on maximizing profits for one particular side.

In the current ecosystem, there is NO win-win. There is only greed and the greater fool theory aka one may pay a price that seems ‘foolishly’ high because one may rationally have the expectation that the item can be resold to a ‘greater fool’ later.

We at CryptoHQ are still unsure as to why BitPay is intentionally trying to inflate the Bitcoin miner fees. Early last year, the company introduced a new fee called the Network Cost. Ever since, when you make a payment, besides the actual amount of Bitcoin involved, you will also see this additional fee added to the total cost of your transaction.

In a blog, BitPay argued that the introduction of the network cost is due to the ever-growing miner fees. Fees currently inflated by them as proved in the previous sub-chapter.

Is this how a Bitcoin company should act in its attempt to support the crypto financial revolution?”

One of, if not THE biggest potential perks of crypto currency was the decentralized aspect. It’s not governed and is intended to be transparent and recorded for all to see. However, I believe some amount of regulation needs to come from within. There are blockchain conferences taking place around the world all year long. One of the prevalent topics needs to be coming up with solutions to help reign in the abuse of blockchain and cryptocurrency. Perhaps boycotts are in order. I for one, am never using BitPay again.

HYIP scams, manipulation of the market, inflation of fees, endless creation of useless coins and ICO’s... these are reasons people are getting turned off to bitcoin and the decentralized economy. The environment is too hostile to newcomers to take the risk. Now look at the price of BTC today. The criminals in crypto continue to rip people off because they get away with it. Roger Ver however, won’t get away with scamming one more fraction of my bitcoin. #boycottbitpay