Case Proposal: A proprietary cryptocurrency must be bought to do transactions

Phoenix Case Discussions
1

I propose the following data to be a new case:

Fields Data
Name A proprietary cryptocurrency must be bought to do transactions.
Description Because this service uses its own cryptocurrency, administrators may be able to set the sell/buy prices arbitrarily, and even halt the buying/purchasing of the cryptocurreny altogether.
Classification bad
Topic Topic Payments (ToS;DR Phoenix)
Weight 85

Examples:
HackenProof

I gave this case a similar weight as Case 497: Prices and fees may be changed at any time, without notice to you because it has a very similar impact, except this one is retroactive. Though it should be mentioned that on the example, the condition only applies to companies, not researchers.

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@Agnes_de_Lion Can this be implemented?

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bump.

Perhaps this could be changed to “The service uses a proprietary cryptocurrency”. Unlike an “open” cryptocurrency like bitcoin or ethereum, the value of a proprietary crypto can be arbitriraly modified by the issuing company. People who have not “chashed-out” their crypto will see their savings diminish in value.

Normally, people can cash them out their cryptos for USD currency at any time, but with proprietary cryptos, the issuing company can choose to cease all “cashing-out” activities at any given moment and there is nothing people holding it could do.

The use of a proprietary cryptocurrency gives the issuing company arbitrary control over its holders’ savings. For this reason, I think this case point should be added.

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4

I’m not sure if this is “bad” instantly.
Having your own utility token is like announcing that you use PayPal and Stripe as payment providers.

Have you read something in HKN’s smart contract which would infer that the company has special privileges themselves?

I just have and havn’t found anything unusual (but might have overlooked it, reading Smart Contracts is exhausting)

It looks like a regular utility token, where each token corresponds to an amount of service offered.

In my opinion buying HKN via a crypto-swap is the same as buying 250 points on shutterstock via credit card Stock Photo, Royalty-Free Image Prices and Plans - Shutterstock

Yes exchange rates can change and I’m too annoyed by crypto’s volatility, but exchange rates in fiat money also change. You wouldn’t give me a bad rating because I have all my prices in EUR, correct?

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To specify:
Having a utility token might even be better for the customer if the bought budget corresponds to the same amount of service, because this cancels out the volatility.

However having a business practice as you have described is of course bad… but having a utility token is by itself not the problem.

Edit / Speculation: In the specific case with Hacken/Hackenproof I can guess that the reason for doing this is because doing penetration tests, even under contract by the “attacked” company, is illegal in many jurisdictions and by masking the payment to the pen-testers via crypto helps them getting paid at all.

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I know absolutely nothing about smart contracts, so if anyone else who reads this is able to corroborate what Philipp said, that be fantastic.

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