Critics of unregulated virtual currencies like Bitcoin have long argued that the core utility of these payment systems lies in facilitating illicit commerce, such as buying drugs or stolen credit cards and identities. But recent spikes in the price of Bitcoin — and the fees associated with moving funds into and out of it — have conspired to make Bitcoin a less useful and desirable payment method for many crooks engaged in these activities.
Bitcoin’s creator(s) envisioned a currency that could far more quickly and cheaply facilitate payments, with tiny transaction fees compared to other, more established and regulated forms of payment (such as credit cards). And indeed, until the beginning of 2017 those fees were well below $1, frequently less than 10 cents per transaction.
But as the price of Bitcoin has soared over the past few months to more than $15,000 per coin, so have the Bitcoin fees per transaction. This has made Bitcoin far less attractive for conducting small-dollar transactions (for more on this shift, see this Dec. 19 story from Ars Technica).
As a result, several major underground markets that traffic in stolen digital goods are now urging customers to deposit funds in alternative virtual currencies, such as Litecoin. Those who continue to pay for these commodities in Bitcoin not only face far higher fees, but also are held to higher minimum deposit amounts.
“Due to the drastic increase in the Bitcoin price, we faced some difficulties,” reads the welcome message for customers after they log in to Carder’s Paradise, a Dark Web marketplace that KrebsOnSecurity featured in a story last week.
“The problem is that we send all your deposited funds to our suppliers which attracts an additional Bitcoin transaction fee (the same fee you pay when you make a deposit),” Carder’s Paradise explains. “Sometimes we have to pay as much as 5$ from every 1$ you deposited.”
The shop continues:
“We have to take additionally a ‘Deposit fee’ from all users who deposit in Bitcoins. This is the amount we spent on transferring your funds to our suppliers. To compensate your costs, we are going to reduce our prices, including credit cards for all users and offer you the better bitcoin exchange rate.”
“The amount of the Deposit Fee depends on the load on the Bitcoin network. However, it stays the same regardless of the amount deposited. Deposits of 10$ and 1000$ attract the same deposit fee.”
“If the Bitcoin price continues increasing, this business is not going to be profitable for us anymore because all our revenue is going to be spent on the Bitcoin fees. We are no longer in possession of additional funds to improve the store.”
“We urge you to start using Litecoin as much as possible. Litecoin is a very fast and cheap way of depositing funds into the store. We are not going to charge any additional fees if you deposit Litecoins.”
On Carder’s Paradise, the current minimum deposit amount is 0.0066 BTCs, or approximately USD $100. The deposit fee for each transaction is $15.14. That means that anyone who deposits just the minimum amount into this shop is losing more than 15 percent of their deposit in transaction fees.
Incredibly, the administrators of Carder’s Paradise apparently received so much pushback from crooks using their service that they decided to lower the price of stolen credit cards to make potential buyers feel better about higher transaction fees.
“Our team made a decision to adjust the previous announcement and provide a fair solution for everyone by reducing the credit cards [sic] prices,” the message concludes.
Mainstream merchants that accept credit card payments have long griped about the high cost of transaction fees, which average $2.50 to $3.00 on a $100 charge. What’s fascinating about the spike in Bitcoin transaction fees is that crooks could end up paying five times as much in fees just to purchase the same amount in stolen credit card accounts!
This is a Security Bloggers Network syndicated blog post authored by BrianKrebs. Read the original post at: Krebs on Security