One of the worst experiences with banking is when you get charged a “overdraft” fee for going over your balance.
Bank of America charged me $35 each time I used my debit card without enough balance, for a $2 cup of coffee I would get charged a $35 fee and my balance would go to negative by $37 and they wouldn’t even warn me happily letting me rack up more charges, the worst thing was THEY WOULD NOT LET YOU SHUT OFF THAT FEATURE! It makes logical sense you should not spend more than you have but banks know people’s spending habits well and they profit immensely off such things. Such predatory practices put a very bad taste in peoples mouths. It made me utterly sick and was one of the things, among many other examples of banking greed and incompetence, that drove us to start Paxful.
As of May 8th 2018 there are no longer negative balances on Paxful. We eliminated the feature because of consumer complaints. But why did we even have it in the first place?
Every-time you send bitcoin there is a mining fee. Before Segwit and Lightning Network (two new bitcoin network features that optimize fees and reduce congestion ) the fee’s were pretty bad around 0.008 btc which was only a few cents when bitcoin was $80 when we began Paxful but then it hit $20,000 with a highly congested network the fee could go as high as $40 OUCH! This mining fee has to be paid on each and every transaction and goes to the “miners” who maintain the computers that run the bitcoin network. That is the technical side but there was a human element that came into play as well.
Early on in Paxful we had many users who needed to send small amounts of btc, around $2.50’s worth, and they needed to send exactly that amount. Since they were newbies many of them did not understand how much bitcoin they would get back and after succeeding with their first transaction, often a grueling affair for a non technical person on a smart phone, they were horrified to discover that they needed another $0.55 of bitcoin to send their $2.50. We wanted to spare them the pain and implemented the “Paxful pays” feature which would spare them the mining fee which would come from our own pocket so they could do their transaction without hassel. We thought we were doing them a favor by paying the fee for them so they could carry on with their business. Their account would go negative and the next time they needed to use it the miner fee would come from their new purchase. It was like we were giving them an interest free loan. We thought this would a cool feature and in the beginning it did help alot of newbies. We’d pay the fee for them if they didn’t have enough, what could go wrong?
This is my personal apology for this mess. Our hearts were in the right place but as always it was bad communication that caused people so much pain. We did not make it clear to people that there was a fee and we were paying it for them, so when they came back to use their account they saw a negative balance and wondered “what the heck?!?! what did I do??” Understandably people were angry and blew up on forums accusing Paxful of scamming them and me the CEO of running away with their funds. Many users even made new accounts, did an internal transfer to the new account and sent out to get by the mining fee. We didn’t mind those work arounds as along as people could actually do what they were there to do but the confusion and resentment it caused was not acceptable. We want everyone to have a GOOD experience with bitcoin and this new non fiat world to welcome them.
We are no longer paying the mining fee for users and it now won’t let you send out unless you have the funds. There is alot to learn here, mostly about proper communication. Sometimes we think we are helping people but we actually end up hurting them. It was never our intention and we have fixed our mistake.
Our apologies from the entire Paxful staff. Our CTO Artur worked around the clock to get this feature out right in the middle of a complete redesign. We hope to serve you better in the future.