Why No Merchant Should Accept Bitcoin

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I buy a lot of sketchy stuff on the internet. Penis pills. Farmville Credits. WoW gold. Not those exact items, but you get the idea.

Online purveyors of sketchy stuff use second-rate payment processors, because reputable processors won’t take them.

These merchants see a lot of fraud and chargebacks. See, it’s easy to get a fake credit card past a high-risk merchant. Inferior payment processors validate card details, but neglect to authorize with the issuing bank. Not until a couple days later is payment denied. By then, I’ve run off with my Farmville credits and the merchant is screwed.

A perfect solution is Bitcoin, where transactions are irreversible once confirmed.

But customers don’t like Bitcoin. I prefer my Visa, with consumer fraud protection.

So merchants provide discounts to make the Bitcoin option more attractive.

33offbtc

When I see something like this, I know that I am purchasing from a site that deals with a lot of fraud.

The bitcoin discount is only attractive to an honest buyer who would have paid with a real credit card anyway. A fraudulent customer doesn’t care about discounts. It’s not even his credit card.

So people who would have otherwise used real cards take steep Bitcoin discounts, and fraudy customers continue to defraud. The merchant loses.

Stolen Credit Cards

I’ve had my credit card info stolen. A lot. Probably because I buy sketchy stuff on the internet.

The first thing people do with a stolen card is buy gift cards. Amazon, Starbucks, gas stations. Gift cards are easy to churn and offload.

Bitcoin helps here as well. It used to be difficult to sell a gift card without leaving a paper trail. Now there are sites to sell stolen gift cards for Bitcoin.

For buyers, it’s a good way to get discounts on reputable merchants (Amazon and Starbucks*). For a fraudster, it’s a great way to launder money.

But wait, you might say. I thought Bitcoin transactions could all be traced! Wrong. Bitcoin mixing services tumble coins together until it’s impossible to tell what came from where.

Even though online payments is not Bitcoin’s killer use case, internet fraud still is.

You might think that rampant theft makes me not want to use my credit card on the internet. Naw, the buyer protection is great. All I have to do is call up my card issuer and say, Hey! I did not buy $750 worth of Blockbuster gift cards! And the charge is reversed.

Great for me, sucks for the merchant. Which is why it’s easy to convince them to add a Bitcoin payment option that does them no good.

Disclosure: I work for a Bitcoin company that builds payment solutions for merchants to accept Bitcoin.

*Disclosure #2: The founders of these gift card services are friends of mine. I suspect they honestly believe that their users are innocent recipients of thousands of dollars in gift cards, every week. Maybe their target users have generous, card-skimming grandmothers.

One last thing: Many card issuers allow you to generate single-use numbers for an account. You can even set a maximum amount and expiry date. I highly recommend this if you buy sketchy stuff on the internet.

How to Measure Diversity

Aww, I thought John Doerr’s joke was funny. Many people didn’t know it was a joke, but I think that was Kim-Mai’s intention.

Doerr’s comment surfaces a real issue, however. In Silicon Valley, diversity has become a pissing match.

    We’re so diverse, we just hired eight women.
    Oh yeah? We’re so diverse, we hired two illegal immigrants.
    Well we’re so diverse, we added Caitlyn Jenner to our advisory board.
    Please. We’re so diverse, we hired an amputee, seven dwarves, and a donkey.
    Well we’re so diverse, I can’t pronounce any of my coworkers’ names!

We’ve lost sight of what “diversity” even means.

Let’s bring it back to science.

The evolutionary relationships between ethnic groups. The numbers denote bootstrap values, or confidence levels for each branch.
The evolutionary relationships between ethnic groups.

First we examine genetic diversity. Genetic diversity can be measured in terms of genetic distance between population groups. In many genetic variation studies, 100 distinct Alu elements, or genomic mutations, are quantified [1]. Descendants from the same continent have about 86% of these mutations in common, but descendants of different continents only have 10% in common.

An appropriate diversity metric would be the variance in genetic distance using Alu elements.

Geographic distance is plotted against genetic distance for pairwise comparisons between population groups.
Geographic distance is plotted against genetic distance for pairwise comparisons between population groups.

Genetic distance in the above chart is calculated using Nei’s standard genetic distance [2].

Let jX be the probability for two members of population X having the same Alu element at a particular locus, and jY be the corresponding probability in group Y. Also, let jXY be the probability for a member of X and a member of Y having the same Alu element. Now let JX, JY, and JXY represent the arithmetic mean of jX, jY, and jXY over 100 Alu elements.

Then, distance is expressed as:

distance

And variance in genetic distance is:

CodeCogsEqn (1)

where N is the number of employees.

A note on gender: The human genome is estimated to contain 20,000-25,000 genes. The Y chromosome has 231. Because X chromosomes are matching pairs, any genetic difference between sexes would be isolated to the Y chromosome, for a less than 1.2% difference. A European male is more genetically similar to a European female than he is to an Asian male.

Of course, we cannot rely on genetic variance alone — Otherwise we would soon see tech companies trying to hire employees with extra chromosomes to increase diversity.

We must account for environmental factors.

Assume that every trait with phenotype value P is determined by genetic (G) and environmental factors (E) and their interaction (G x E), expressed as [3]:

CodeCogsEqn (2)

Then the true variance should be calculated as

CodeCogsEqn (3)

A simplified representation for environmental factor (E) could be the year that population group was allowed to vote: 1828 for Jewish Americans, 1856 for poor people, 1870 for African Americans, 1910 for the illiterate, 1920 for women, 1924 for Native Americans, 1952 for Asian Americans, and never for convicted felons.

Finally, we note that a group of entirely Native American engineers is no more diverse than a group of entirely white engineers; however only one is worth advertising.

Thus we conclude that when we say “diversity”, we really mean “check your privilege.” So just do that and everything will be cool.

References:
1. Watkins WS, Rogers AR, Ostler CT, et al. Genetic Variation Among World Populations: Inferences From 100 Alu Insertion Polymorphisms. Genome Research. 2003;13(7):1607-1618. doi:10.1101/gr.894603
2. Masatoshi Nei. Genetic Distance between Populations. The American Naturalist. 1972;106(949):283-292
3. Wu R, Ma CX, Casella G. Statistical Genetics of Quantitative Traits: Linkage, Maps and QTL. Springer 2007.

Note: I am not a geneticist nor a statistician. If any of this sounds like crap, please call me out.

Anne Frank: Too Hot For TechCrunch Disrupt

Our TechCrunch Disrupt Hackathon entry was blocked from the submission gallery.

Here’s what we made:

Build-a-Buddy: Create Your Own Virtual Friend with a Custom Personality

We characterized over a hundred different personalities using the autobiographies of famous people from Anne Frank to Donald Trump.

When a user creates a new buddy profile, we match it to the closest existing personality in our database using the shortest total Euclidean distance between all the personality traits.

Then, we load the dialog file corresponding to the matching personality. We enable conversation using the IBM Watson Dialog Service API.

Screen Shot 2015-09-20 at 10.19.08 PM

We had chosen to include Anne Frank to illustrate diversity. There’s no shortage of autobiographical material to profile powerful white males. With Anne Frank, we gain the personality of a persecuted 13-year-old girl.

But fine whatever. We had been up for over 24 hours and had no desire to argue. I replaced Anne Frank with Ben Franklin, a noncontroversial Anglo-Saxon slaveowner.

Screen Shot 2015-09-20 at 10.22.53 PM

Screen Shot 2015-09-20 at 10.23.01 PM

The Diary of Anne Frank was on my fourth grade reading list. It tells the story of six million genocide victims through the voice of a child.

When it came time for presentations, three separate hackathon organizers approached our team to ensure we would not include or display anything about “Anne Frank”. A TechCrunch editor stopped us (and only us) to review the app before we could be allowed on stage.

How did one of the most important cultural figures of the 20th century become grounds for controversy?

I’m sad about the state of Silicon Valley. I’m sad that an event that awards $5000 to a Donald Trump drinking game finds Anne Frank “potentially offensive”. I’m sad that an industry that bills itself as “disruptive” needs to police its public image.

And most of all I’m sad that writers for a leading tech publication can’t even spell “Anne Frank”.

Build-A-Buddy: Create Your Own Virtual Friend with a Custom Personality

Enabling the Invasion of Privacy

Crystal is a cool service that I’ve been trying. Type in the name of any human on the internet. It searches for everything written/tweeted/posted by that individual and generates a personality profile to tell you how to talk to that person.

For example:

marc-andreessen-4776

They also create email templates to communicate effectively with that person. You could pretty much automate all your communication to Crystal and disappear off the planet. No one would even notice.

I think services like these will become something like Google: It’s obviously cheating at life, but everyone’s gonna do it anyway so you better keep up.

I, for one, welcome our new computer overlords.

What a Real Company Looks Like

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I went to a dinner event at IBM yesterday. More specifically, it was a recruiting event for women in tech.

They ran out of food by the time I got to the table, which made me sad.

"dinner"
What happened was that IBM’s own employees, both male and female, came in and pilfered the food under the guise of networking. Look, I was a grad student for six years, I know how these things work.

Why were IBM employees acting like hungry students?

Because IBM is a real company, dammit.

IBM isn’t some Silicon Valley startup with venture-backed funding to burn. Nor is it bubble-inflated Google/Facebook with cash spewing from every orifice.

It’s lean, it’s mean, it’s been around since 1880 and acts its damn age.

Each attendee received company schwag to excite us about the prospect of working at IBM. This was my schwag:

It’s a pocket that sticks to the back of your phone. You can put a credit card in it. To make it easier to go shopping, you know.
It’s a pocket that sticks to the back of your phone. You can put a credit card in it.

A VC-funded startup down the street gives branded Cabernet to its visitors, but IBM says Fuck That, we get our company schwag from the Five and dime like sensible adults.

Look at what IBM pays its Bay Area employees.

Google pays similarly-experienced employees nearly twice as much. What waste! IBM assigns salaries based on last century’s market rates because IBM is playing the long game, bitches.

As for food? IBM keeps its workforce hungry, because hungry people are scrappy. IBM employees have gravel in their gut and spit in their eye. That much was clear from the way they vultured in on the girls’ dinner table.

In a nuclear apocalypse, IBM employees would eat those soft and squishy Googlers for breakfast.

Okay, I went to last night’s event because I’m genuinely interested in some of the stuff IBM is doing. Open-source technology for smart contracts on the blockchain. Artificial General Intelligence with Watson.

But maybe they need to rethink their recruiting strategy.

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