Decentralization can't stop scams? Uncover a piece of the dark history of Bitcoin and PayPal's past. E-commerce scams are on the rise. As early as more than a decade ago, PayPal opened up users to buy bitcoin from others through the platform, only to have bitcoin holders defrauded by fake buyers to lose bitcoins. In fact, PayPal played a key role in Bitcoin's first transaction with the US dollar, a historic transaction that did not happen recently, but was completed in October 2009. Ironically, as early as fifteen years ago, PayPal had become a tool for fraud syndicates to defraud Bitcoin.
In the online world, e-commerce relies heavily on financial institutions acting as trusted third parties to process electronic payments. Satoshi Nakamoto pointed out at the beginning of the Bitcoin white paper that while existing electronic payment systems work well in most transactions, there are still fundamental flaws based on the trust model. The birth of Bitcoin is Satoshi's revolutionary attempt to solve the problem of excessive centralization of transactions and prevent fraud. However, although Bitcoin can prevent doublespending at the technical level, it is still difficult to prevent fraud caused by human operations. ( This article was originally published in the Blockworks Newsletter )
Bitcoin Market was once the prototype of modern cryptocurrency exchanges.
A developer named dwdollar has established a platform called Bitcoin Market, serving as a marketplace for Bitcoin commodities. He stated in a Bitcoin forum that through this platform, people can exchange Bitcoin for US dollars and engage in speculative investments on the value of Bitcoin, theoretically creating a real-time exchange rate system that allows users to understand the real-time value of Bitcoin relative to the US dollar.
Soon after, Bitcoin Market became the first publicly operating Bitcoin exchange. Its pricing mechanism is based on market supply and demand, rather than mining costs, which is similar to modern cryptocurrency exchanges. The platform supports BTC trading using fiat currencies (such as USD, AUD) and gold grams, completing all transactions off-chain with centralized servers.
Payment processing mechanisms at the time also segmented for different transaction pairs, but this made the overall transaction process more complex. In the case of PayPal, eventually it stopped letting users trade on the Bitcoin Market through PayPal accounts. Therefore, if you still want to buy Bitcoin in USD with a PayPal account, you need to buy and sell BMBTC/PPUSD through a dedicated transaction.
PayPal Fraudulently used by fraud groups to obtain bitcoins
The Bitcoin Market uses a custodial mechanism, where the platform holds the sellers' Bitcoins. The seller releases the Bitcoins to the buyer's account only after confirming receipt of the buyer's PayPal payment. In short, the role of the platform is like that of an intermediary or custodial agent in a PayPal transaction.
However, after PayPal opened Bitcoin transactions, users on Bitcoin Market quickly encountered fraud attacks. Fraud groups applied for refunds to PayPal immediately after receiving Bitcoin. Since PayPal's policy allows buyers to request refunds when claiming they have not received the goods, this became a method for fraudsters to implement "Double Spending": they pretended not to have received the goods after receiving Bitcoin and then applied for a refund from PayPal, causing financial losses to sellers.
Satoshi Nakamoto's original intention: to combat double spending fraud.
Satoshi Nakamoto proposed a decentralized Bitcoin system that aims to fundamentally prevent fraud through ledgers, peer-to-peer networks, Merkle Tree, timestamps, encryption mechanisms, consensus algorithms, and incentive systems. Blockchain technology applies timestamps and encryption algorithms to transaction information, so that once a transaction is recorded, it cannot be changed, and all transactions need to be verified by nodes to avoid forgery.
Due to the fact that transaction records are distributed across multiple nodes in the network, if a hacker wants to tamper with the ledger, they must control the vast majority of the computational resources, which is almost impossible to achieve. It is precisely for this reason that blockchain systems possess a high level of security and have a natural inhibitory effect on malicious behavior.
To successfully carry out a blockchain attack, hackers need to establish a network capable of creating blocks at a faster rate and replace the main chain with their new chain at the appropriate moment, while also employing other complex attack methods. This threshold is extremely high for most attackers.
However, when Satoshi Nakamoto published the white paper, there were no exchanges for Bitcoin or any virtual currencies in the market. His innovative design was created to prevent fraud, but over time, it has still been difficult to completely guard against fraud perpetrated by individuals in the real world.
Today, PayPal has allowed users to directly buy, hold, and sell Bitcoin within its application, and supports withdrawing BTC to external wallets. Perhaps, with continuous technological advancements, past vulnerabilities will gradually be addressed.
The first Bitcoin transaction on PayPal took place in 2009, shortly after which users were targeted by scammers, first appearing in Chain News ABMedia.
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PayPal's first Bitcoin transaction took place in 2009, and users were soon targeted by scams.
Decentralization can't stop scams? Uncover a piece of the dark history of Bitcoin and PayPal's past. E-commerce scams are on the rise. As early as more than a decade ago, PayPal opened up users to buy bitcoin from others through the platform, only to have bitcoin holders defrauded by fake buyers to lose bitcoins. In fact, PayPal played a key role in Bitcoin's first transaction with the US dollar, a historic transaction that did not happen recently, but was completed in October 2009. Ironically, as early as fifteen years ago, PayPal had become a tool for fraud syndicates to defraud Bitcoin.
In the online world, e-commerce relies heavily on financial institutions acting as trusted third parties to process electronic payments. Satoshi Nakamoto pointed out at the beginning of the Bitcoin white paper that while existing electronic payment systems work well in most transactions, there are still fundamental flaws based on the trust model. The birth of Bitcoin is Satoshi's revolutionary attempt to solve the problem of excessive centralization of transactions and prevent fraud. However, although Bitcoin can prevent doublespending at the technical level, it is still difficult to prevent fraud caused by human operations. ( This article was originally published in the Blockworks Newsletter )
Bitcoin Market was once the prototype of modern cryptocurrency exchanges.
A developer named dwdollar has established a platform called Bitcoin Market, serving as a marketplace for Bitcoin commodities. He stated in a Bitcoin forum that through this platform, people can exchange Bitcoin for US dollars and engage in speculative investments on the value of Bitcoin, theoretically creating a real-time exchange rate system that allows users to understand the real-time value of Bitcoin relative to the US dollar.
Soon after, Bitcoin Market became the first publicly operating Bitcoin exchange. Its pricing mechanism is based on market supply and demand, rather than mining costs, which is similar to modern cryptocurrency exchanges. The platform supports BTC trading using fiat currencies (such as USD, AUD) and gold grams, completing all transactions off-chain with centralized servers.
Payment processing mechanisms at the time also segmented for different transaction pairs, but this made the overall transaction process more complex. In the case of PayPal, eventually it stopped letting users trade on the Bitcoin Market through PayPal accounts. Therefore, if you still want to buy Bitcoin in USD with a PayPal account, you need to buy and sell BMBTC/PPUSD through a dedicated transaction.
PayPal Fraudulently used by fraud groups to obtain bitcoins
The Bitcoin Market uses a custodial mechanism, where the platform holds the sellers' Bitcoins. The seller releases the Bitcoins to the buyer's account only after confirming receipt of the buyer's PayPal payment. In short, the role of the platform is like that of an intermediary or custodial agent in a PayPal transaction.
However, after PayPal opened Bitcoin transactions, users on Bitcoin Market quickly encountered fraud attacks. Fraud groups applied for refunds to PayPal immediately after receiving Bitcoin. Since PayPal's policy allows buyers to request refunds when claiming they have not received the goods, this became a method for fraudsters to implement "Double Spending": they pretended not to have received the goods after receiving Bitcoin and then applied for a refund from PayPal, causing financial losses to sellers.
Satoshi Nakamoto's original intention: to combat double spending fraud.
Satoshi Nakamoto proposed a decentralized Bitcoin system that aims to fundamentally prevent fraud through ledgers, peer-to-peer networks, Merkle Tree, timestamps, encryption mechanisms, consensus algorithms, and incentive systems. Blockchain technology applies timestamps and encryption algorithms to transaction information, so that once a transaction is recorded, it cannot be changed, and all transactions need to be verified by nodes to avoid forgery.
Due to the fact that transaction records are distributed across multiple nodes in the network, if a hacker wants to tamper with the ledger, they must control the vast majority of the computational resources, which is almost impossible to achieve. It is precisely for this reason that blockchain systems possess a high level of security and have a natural inhibitory effect on malicious behavior.
To successfully carry out a blockchain attack, hackers need to establish a network capable of creating blocks at a faster rate and replace the main chain with their new chain at the appropriate moment, while also employing other complex attack methods. This threshold is extremely high for most attackers.
However, when Satoshi Nakamoto published the white paper, there were no exchanges for Bitcoin or any virtual currencies in the market. His innovative design was created to prevent fraud, but over time, it has still been difficult to completely guard against fraud perpetrated by individuals in the real world.
Today, PayPal has allowed users to directly buy, hold, and sell Bitcoin within its application, and supports withdrawing BTC to external wallets. Perhaps, with continuous technological advancements, past vulnerabilities will gradually be addressed.
The first Bitcoin transaction on PayPal took place in 2009, shortly after which users were targeted by scammers, first appearing in Chain News ABMedia.