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I can't see how that compares at all. A bubble is just that, a bubble. It may break. What Madoff did was a Ponzi scheme.

by Tor3 8y ago

Kye 8y ago
Some of them probably did this knowing they were bogus. Those would be the targets of anti-fraud actions.
mannykannot 8y ago
A bubble is, in some ways, a self-organizing Ponzi scheme, in that the apparent growth has essentially nothing behind it but the inflow of new funds. Promoting something you know to be a bubble may be morally equivalent to running a Ponzi scheme, but you have to make some specific and clear-cut misrepresentations for it to be a crime. I would not be completely surprised if it turns out that some ICOs crossed the line, though ordinary take-the-money-and-run fraud seems more likely.
m-i-l 8y ago
If I were to describe a scheme that disproportionately rewards early adopters[0] and requires a constant addition of new adopters just to sustain the price[1] - would an ordinary reasonable person[2] think "the future of money" or "traditional pyramid scheme"? And then if I were to describe a second scheme extending the first scheme where the main attraction is the supposedly constant pressure for buying into that scheme in order to participate in other new schemes launched with that scheme[3] - would an ordinary reasonable person think "new financial paradigm" or "traditional ponzi scheme"? And then if I was to describe those new schemes based on the second scheme based on the first scheme... [0] Both via difficulty adjustments every 2 weeks (mostly increasing) and rewards halving every 4 years [1] To counteract the deflationary nature of new coin generation [2] https://en.wikipedia.org/wiki/Reasonable_person https://en.wikipedia.org/wiki/Reasonable_person [3] i.e. buying into the "platform" in order to "invest" in tokens for subschemes issued with the "platform" (no one advertised that the subschemes would eventually have to dump their "shares" of the platform afterwards)
- nonbel 8y ago
  >"requires a constant addition of new adopters just to sustain the price[1] [...] [1] To counteract the deflationary nature of new coin generation" I think you've got some confusion going on here. 1) There is no requirement to "sustain the price" for any (normal) cryptocurrency. 2) New coin generation is "inflationary" in the sense that the number of coins is increased. This "inflationary" attribute would put the downward pressure on price you are referring to.
  - m-i-l 8y ago
    1. There's nothing at the code and protocol level about sustaining the price, but at the human level the early adopters (i.e. the 4% owning 97% of assets) are incentivised to try to sustain or increase the price through whatever means they can (e.g. funding pro-crypto press, social media, lobbyists etc.). 2. There's a big debate about whether it is inflationary, or deflationary, or hyper-deflationary, or different things at different times (e.g. inflationary wile new coins are being mined and deflationary from when the maximum number of coins has been reached). But whatever you call it, the point is that if there are the same people holding assets and there are more of those assets enabled, then all else being equal each of those assets would naturally be worth less, and as per point 1 the people at the top are incentivised to take action to counteract this, e.g. by introducing more people into the system below them.
    - nonbel 8y ago
      >"There's nothing at the code and protocol level about sustaining the price, but at the human level the early adopters (i.e. the 4% owning 97% of assets) are incentivised to try to sustain or increase the price through whatever means they can (e.g. funding pro-crypto press, social media, lobbyists etc.)." Ok, but this is trivial. It is true for everything for which there is a market. And both early and late adopters have the same incentive to increase the price. Why does the timing matter to you? >"There's a big debate about whether it is inflationary, or deflationary, or hyper-deflationary, or different things at different times" Who is debating this? It seems pretty straightforward that creating new coins is inflationary. >"if there are the same people holding assets and there are more of those assets enabled, then all else being equal each of those assets would naturally be worth less" Yes, this is literally the definition of inflation, I don't understand how someone can debate that this is actually an instance of deflation. "Worth less" == Prices (of other things denominated in the cryptocurrency) go up. I see no room for any disagreement about this: https://en.wikipedia.org/wiki/Inflation https://en.wikipedia.org/wiki/Inflation >"the people at the top are incentivized to take action to counteract this" Isn't anyone holding the currency incentivized to do the same? What does "at the top" matter?
Nursie 8y ago
The comparison is that a fund run in contravention of the law has been at least partially unwound, with investors who are out of pocket being reimbursed. If some of the larger ICOS are found to have been in contravention of the law, it's possible some sort of unwinding via lawsuit could occur. What some ICOs have done, and what many more may be found to have done in future, is sell illegal unregistered securities.

I can't see how that compares at all. A bubble is just that, a bubble. It may break. What Madoff did was a Ponzi scheme.

by Tor3 8y ago

I can't see how that compares at all. A bubble is just that, a bubble. It may break. What Madoff did was a Ponzi scheme.

Kye 8y ago

Some of them probably did this knowing they were bogus. Those would be the targets of anti-fraud actions.

mannykannot 8y ago

A bubble is, in some ways, a self-organizing Ponzi scheme, in that the apparent growth has essentially nothing behind it but the inflow of new funds. Promoting something you know to be a bubble may be morally equivalent to running a Ponzi scheme, but you have to make some specific and clear-cut misrepresentations for it to be a crime. I would not be completely surprised if it turns out that some ICOs crossed the line, though ordinary take-the-money-and-run fraud seems more likely.

m-i-l 8y ago

If I were to describe a scheme that disproportionately rewards early adopters[0] and requires a constant addition of new adopters just to sustain the price[1] - would an ordinary reasonable person[2] think "the future of money" or "traditional pyramid scheme"? And then if I were to describe a second scheme extending the first scheme where the main attraction is the supposedly constant pressure for buying into that scheme in order to participate in other new schemes launched with that scheme[3] - would an ordinary reasonable person think "new financial paradigm" or "traditional ponzi scheme"? And then if I was to describe those new schemes based on the second scheme based on the first scheme... [0] Both via difficulty adjustments every 2 weeks (mostly increasing) and rewards halving every 4 years [1] To counteract the deflationary nature of new coin generation [2] https://en.wikipedia.org/wiki/Reasonable_person https://en.wikipedia.org/wiki/Reasonable_person [3] i.e. buying into the "platform" in order to "invest" in tokens for subschemes issued with the "platform" (no one advertised that the subschemes would eventually have to dump their "shares" of the platform afterwards)

nonbel 8y ago
>"requires a constant addition of new adopters just to sustain the price[1] [...] [1] To counteract the deflationary nature of new coin generation" I think you've got some confusion going on here. 1) There is no requirement to "sustain the price" for any (normal) cryptocurrency. 2) New coin generation is "inflationary" in the sense that the number of coins is increased. This "inflationary" attribute would put the downward pressure on price you are referring to.
- m-i-l 8y ago
  1. There's nothing at the code and protocol level about sustaining the price, but at the human level the early adopters (i.e. the 4% owning 97% of assets) are incentivised to try to sustain or increase the price through whatever means they can (e.g. funding pro-crypto press, social media, lobbyists etc.). 2. There's a big debate about whether it is inflationary, or deflationary, or hyper-deflationary, or different things at different times (e.g. inflationary wile new coins are being mined and deflationary from when the maximum number of coins has been reached). But whatever you call it, the point is that if there are the same people holding assets and there are more of those assets enabled, then all else being equal each of those assets would naturally be worth less, and as per point 1 the people at the top are incentivised to take action to counteract this, e.g. by introducing more people into the system below them.
  - nonbel 8y ago
    >"There's nothing at the code and protocol level about sustaining the price, but at the human level the early adopters (i.e. the 4% owning 97% of assets) are incentivised to try to sustain or increase the price through whatever means they can (e.g. funding pro-crypto press, social media, lobbyists etc.)." Ok, but this is trivial. It is true for everything for which there is a market. And both early and late adopters have the same incentive to increase the price. Why does the timing matter to you? >"There's a big debate about whether it is inflationary, or deflationary, or hyper-deflationary, or different things at different times" Who is debating this? It seems pretty straightforward that creating new coins is inflationary. >"if there are the same people holding assets and there are more of those assets enabled, then all else being equal each of those assets would naturally be worth less" Yes, this is literally the definition of inflation, I don't understand how someone can debate that this is actually an instance of deflation. "Worth less" == Prices (of other things denominated in the cryptocurrency) go up. I see no room for any disagreement about this: https://en.wikipedia.org/wiki/Inflation https://en.wikipedia.org/wiki/Inflation >"the people at the top are incentivized to take action to counteract this" Isn't anyone holding the currency incentivized to do the same? What does "at the top" matter?

Nursie 8y ago

The comparison is that a fund run in contravention of the law has been at least partially unwound, with investors who are out of pocket being reimbursed. If some of the larger ICOS are found to have been in contravention of the law, it's possible some sort of unwinding via lawsuit could occur. What some ICOs have done, and what many more may be found to have done in future, is sell illegal unregistered securities.