The irreversibility of Bitcoin transactions makes for some unusual dynamics in exchanges, along with the entire altcoin ecosystem (probably the most interesting altcoin scam to me was the Bytecoin scam+anonymity innovation). I learned of an interesting example in May 2013, when a Reddit post introduced me to a Tor hidden site which offers you double your money back if you send it some bitcoins. A scam, right? Well, it is a scam, but it’s not quite the scam it looks like…

To start, there is a comment from someone claiming that they tried it and the way the scam worked was that it doubled your money the first time you sent it some bitcoins, but then kept anything you sent it subsequently; the idea being that the first transaction will be a ‘test’ by suspicious users, who will then send a ‘real’ transactions which can be stolen in toto. Specifically:

Oh dude. I actually tried this like 5 Days ago. I sent 0.5btc and got one back, so technically it works. However, when I sent my 1btc back (and emailed the guy about it) he kept it and didn’t respond at all. So it’s a scam, obviously, but the way it works is kind of interesting in that it actually works the first time, to lure you in and send even more. EDIT: I SHOULD PROBABLY ADD: DON’T SEND MONEY TO THIS GUY

This is reasonable enough—ponzis are careful to allow withdrawals early on, and runners of ponzis, like the classic 2006 “Currin trading” EVE Online ponzi scheme (part 1, 2), record how people would do 1 or 2 test transactions and then deposit large ‘real’ sums with the ponzi.

Except… the person claiming it worked for them is an unused account, and so are the people expressing skepticism of him! It gets more interesting when you note that the scam as claimed is trivially exploitable (or scammed) by anyone who knows how it works (send a large amount the first transaction, and never send again), and more interesting still when you remember that Bitcoin transactions are public and so the first commenter could have partially proven that the scam worked as they claimed it worked for them yet has not provided any evidence despite being challenged to do so and given 9 days’ grace, and finally, we see 2 Redditors sending in token amounts and claiming they received nothing back.

So what are we looking at here? I can’t know this for sure, but this is what I think is going on.

We are looking at a meta scam: the scam is that you think it’s a scam that you can scam, but you get scammed as you try to scam the scam. The original scammer puts up a scam website, makes 4 shill accounts to claim it works and lay out the rules—send it X it sends you 2X back, and then the second time it keeps your money when you presumably sent it 2X+Y—but actually, the site simply keeps any money sent to it, and so the people who planned to scam the scam wind up being scammed.

If we think of deception as having levels, this is a little confusing; but the site will either return your money or not. The first level is that the site works as it claims: it returns your money, it doubles any money you send it. (This is understood by anyone who can read the page.) The second level is that level 1 is a lie: it does not return your money, it simply steals any money you send it. (This is understood by anyone with a brain who has read the page.) However, then we get to a third level: level 2 is not quite right, the site will either return your money or not, depending on how many transactions you’ve done—the site is a scam which will steal your money, but it will do so only after 1 successful transaction. (Understood by anyone who reads the Reddit comments and blindly trusts them.) The fourth level, the level originally above mine until I became more suspicious, is that level 3 is a lie too, and actually, level 2 was the real truth—the site simply steals your money.

Phew! How fascinating! Honestly, I almost feel like sending the dude a buck or two just for implementing such an interesting little scam for me to think about, although he could’ve done it a bit better and shuffled some bitcoins around on the blockchain 7 days in advance to match his shill account’s claims. (He didn’t invent the meta-scam, however, since it seems to have precedents like in Runescape as the “doubling money scam”.)

An even more recent (2018) Ethereum-based scam exploits Ethereum’s ‘gas’ transaction fees and smart contracts: the scammer pretends to accidentally post publicly in a chat room his private key to an address with a large amount of some asset in it and a smart contract, but the address happens to have insufficient ‘gas’ to allow immediate withdrawal; everyone stampeding to withdraw the asset has to send some gas to the address first to unlock it… except that smart contract, which they didn’t have time to inspect closely, merely receives all gas deposits & immediately transfers them away to another account, so everyone who sends gas loses it and the original assets remain in place.

So in a way, this scam embodies the old saw “you can’t cheat an honest man” . Well, of course in the real world honest men get cheated all the time, so I prefer to think of it as Nash equilibriums: