32 ms·

The more complex crypto seems, the higher the pyramid schemes can go

190 points by RuffleGordon 5y ago

noah89 5y ago
It is not that complex actually, you just have to learn more about it and read a lot of information on the internet. Right now cryptocurrencies might not be that popular but in the future I am sure that they will replace regular currencies, but for now people don't really trust the technology. Many years ago when credit cards came out, the majority of people didn't trust the technology and preferred using cash, I still know some people who are like that. So invest in it now before it's too late.
SavantIdiot 5y ago
The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. I'm certain this technology will find a place in the future after it has matured, but hoo boy are there gonna be big winners and big losers until it shakes out.
- beervirus 5y ago
  > I'm certain this technology will find a place in the future after it has matured Why? It doesn’t solve any real problem that anyone has ever had.
  - radicalbyte 5y ago
    It solves the problem of: how can I start a pyramid scheme relatively anonymously.
  - haolez 5y ago
    While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.
    - arcticbull 5y ago
      This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...
      - o_p 5y ago
        You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
        arcticbull 5y ago
        No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
  - Kinrany 5y ago
    It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down.
    - hoppyhoppy2 5y ago
      >It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down. You could say the same thing about Walmart's money orders and check-cashing services, but that doesn't use an entire country's worth of electricity, suck up the world's supply of GPUs, or support the same number of scammers.
  - nyolfen 5y ago
    how about this: https://i.imgur.com/lSfdTfK.jpg https://i.imgur.com/lSfdTfK.jpg
    - arcticbull 5y ago
      This chart affects 0.35% of the global population. This one is far more representative [1]. Notice how after Bretton-Woods ended, things got really nice and stable? That's successful active management. Venezuela's problem isn't inflation - that's a symptom. Venezuela's problem is the Maduro government. Solve the latter and you solve the former. [1] https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
      - arberx 5y ago
        "If only they did this!" -- that's not a solution. The goal is to prevent this from even being possible in the first place. There are very real challenges from inflationary monetary supplies in countries like Argentina, Turkey, Venezuela and notably Zimbabwe.
        arcticbull 5y ago
        When you have a bad government, the currency is the least of your problems. When you resolve the government, the currency is no longer a problem. Seriously, in Venezuela there have been recently shortages of: milk, meat, coffee, rice, oil, precooked flour, butter, toilet paper, personal hygiene products and medicines. Some Venezuelans have resorted to eating wild fruit and garbage [1]. Somehow resolving inflation through a cryptocurrency with $50 transaction fees that loses 27% of its value in one week every few months doesn't change any of that. It's just a different set of problems. However, overthrowing the government will resolve both issues. Sometimes there are no easy answers. [1] https://en.wikipedia.org/wiki/Shortages_in_Venezuela https://en.wikipedia.org/wiki/Shortages_in_Venezuela
        deleted 5y ago
        [deleted]
  - _Microft 5y ago
    Crypto technologically solves the social problem of trust. I‘ll leave the interpretation of this statement up to you ;)
    - zepto 5y ago
      Crypto really has nothing to do with trust. It provides a mechanism that enables distant parties to be confident that they hold copies of the same document. That’s all.
      - Udik 5y ago
        Enables distant parties to be confident that there is only one specific version of the document that is valid, even when each of the parties could have an interest in creating and spreading its own version.
        zepto 5y ago
        Valid for what?
      - _Microft 5y ago
        The blockchain, consensus algorithms and the whole shebang are only needed because cryptocurrencies do not want transactions to be mediated by a central authority that would need to be trusted. Crypto is about trust, or rather a lack thereof.
        zepto 5y ago
        Crypto users may be distrustful, but crypto doesn’t create trust or solve any problems to do with it. It’s just currency for the distrustful.
        Hjfrf 5y ago
        Despite all that, people mostly trade crypto on centralized exchanges. The users really hate the decentralized aspect of crypto, as shown by immediately giving away their wallet to some "trusted" third party if it reduces fees.
  - FDSGSG 5y ago
    It solved the problem of paying for drugs which you ordered online. It solved the problem of ransomware payments, before winlockers used to ask for gift cards which didn't scale well. It solved the liberty reserve problem where the US government shuts down your sketchy no-KYC money transfer platform. At a very general level cryptocurrency has solved the "anonymous online payments"-problem. These are all very real problems solved by cryptocurrency.
    - oblio 5y ago
      So what you're saying is that it solves a set of problems for a bunch of very problematic people for which we'd rather have a better solution? (maybe jail?)
      - FDSGSG 5y ago
        What's your point? Those people have money.
  - base698 5y ago
    Ever want your money to earn interest? Banks used to do this, and you could get good returns on savings. You can earn interest parking your crypto here: https://compound.finance/ https://compound.finance/
    - aphextron 5y ago
      You can also do this with the stock market by investing in revenue generating companies that are innovative and creating value. This is literally no different than investing in gold.
      - rawtxapp 5y ago
        But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. The parent comment is talking about interest, which is "risk-free" money (risk-free if the smart contract doesn't have any bugs, etc).
        aphextron 5y ago
        >But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. Then just invest in a Vanguard ETF. There's no such thing as "risk free" money short of US treasuries or an FDIC insured CD, and those don't require any research.
      - o_p 5y ago
        Unless you are participating in an IPO. Buying stocks its not investing in the true sense you mention, you are just transfering ownership of stocks but that money doesnt fund any enterprise.
        8192kjshad09- 5y ago
        But the share price going up enables the company to raise money easier by offering more shares. See TSLA for example.
  - o_p 5y ago
    I hoped HN to have a more informed take but I guess not. Blockchains solve the problem of having a decentralized public database, currency is just a particular use
    - dilyevsky 5y ago
      So like git?
      - o_p 5y ago
        But you host git on a centralized server, blockchain git when
        dilyevsky 5y ago
        That’s github model, you can host it on many “servers” if you so choose
        Udik 5y ago
        It's not guaranteed to be unique. Blockchains are.
    - Nasrudith 5y ago
      A decentralized public database is a solution, not a problem (snark aside about bitcoin). The question is "What is the purpose of it being decentralized and public?".
    - oblio 5y ago
      > Blockchains solve the problem of having a decentralized public database. That's not a problem. A problem is something like this: "as a video editor/doctor/..., I need something that helps me...". Yours is just a tech description.
    - bryananderson 5y ago
      What problem does a decentralized public database solve? As far as I can tell, over a decade in, blockchain is still hunting for one.
  - SavantIdiot 5y ago
    Un-alterable ledgers like blockchain are incredibly useful for legal and economic applications. Unfortunately there are a lot of caveats that need to be worked out, and crypto is finding them at scale.
- arcticbull 5y ago
  > The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. We have very little evidence to substantiate the actual quantity of real dollars in this system. The NYAG settlement with Tether shows that it's backed by bailing wire, chewing gum and hope [1]. USDC has stopped publishing their attestations as of January (which, btw, - and I can't believe I'm going to cite Tether's Saul Goodman but - aren't audits [2]) and since then it's market cap has doubled. USDT and USDC both use similar weasel wording about the nature of what backs them. An attempted ETF a couple of years ago admitted 95% of all trading volume in the crypto space was fake. [3] The CFTC smacked Coinbase because literally 99% of all Litecoin trading volume in 2017 was one dude, Charlie Lee - the LTC founder, wash trading internally [4]. Lee then took advantage of the market cap he synthesized, dumped literally all his holdings at the peak and sailed off to an island. This is just a couple of examples off the top of my head. It's all fraudulent. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://twitter.com/bitcoinlawyer/status/1386146486359150597 https://twitter.com/bitcoinlawyer/status/1386146486359150597 [3] https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-of-bitcoin-trade-volume-is-fake-real-market-is-or https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-o... [4] https://cftc.gov/PressRoom/PressReleases/8369-21 https://cftc.gov/PressRoom/PressReleases/8369-21
  - SavantIdiot 5y ago
    This is really useful information. I have a cadre of friends who are serious crypto heads and I almost dread hanging out with them because they are so deep into it. I'd be curious to hear their perspective after I understand these links.
  - Animats 5y ago
    We have very little evidence to substantiate the actual quantity of real dollars in this system. This is especially true of NFTs. With each item unique, there's no meaningful market price. There are just occasional stories about sales. This is important. With a commodity that has an active market, prices have some meaning. You can usually sell your asset at roughly the current market price. This is not true of unique items. You have to find a buyer who wants your specific thing. This works just like collectables on eBay. Here's a current collectable.[1] "Rare Tag Error Retired Ty Beanie Baby Claude The Crab 1996 Collector - US $1,235.00 [ 0 bids ]" Note the "0 bids". Now keep scrolling down until something shows up with a bid.[2] "Princess diana beanie baby 1st edition 1997 w/o tag US $0.99 [ 1 bid ]" That's what a willing buyer is prepared to pay. You can scroll through page after page of Beanie Baby asking prices without seeing anything with a bid. That's what an NFT market looks like when you want to sell. The NFT market is useful only to those with a fan base they can monetize. If you're the fan, you're the sucker. [1] https://www.ebay.com/itm/194065105880 https://www.ebay.com/itm/194065105880 [2] https://www.ebay.com/itm/254955747357 https://www.ebay.com/itm/254955747357
- rawtxapp 5y ago
  Similar to dot-com bubble where people were investing their life savings into companies that just had a domain name with no business plan whatsoever. Lots of them blew up, but the ones that made it through ended up becoming trillion dollar companies.
  - arcticbull 5y ago
    Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s. That's why it's much, much worse. The dot-com bubble was driven by margin, enthusiasm and poor decision making. This one's got all those plus the hallmarks of the 20s: insane leverage (see: DeFi), bonkers leverage (see: BitMEX), and a fictional currency being printed at a rate of billions of dollars per week that's then used to prop up the prices of the assets themselves. It's basically the dot-com bubble, the roaring 20s and 2008's CDO shell game rolled into one.
    - SavantIdiot 5y ago
      Exactly. I -really- hope crypto ETFs don't end up in ordinary people's 401Ks, but I fear it is heading that way.
    - aphextron 5y ago
      >"Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s." If you think the modern day SEC is doing anything about the current levels of market manipulation and wild speculation, I've got a bridge to sell you.
  - grey-area 5y ago
    Only if you use a circular definition of made it through which means became a trillion dollar company. Plenty of companies made it through but never recovered their dotcom market cap or prestige, a few prominent examples: Csco, hpq (only recently passed the 2000 price), yhoo, emc, vrsn, real networks. There were plenty of also-rans who limped through but didn’t justify the hype pricing years later, and the real revolution came to fruition years later with mobile computing and mass-market online stores, but there was definitely underneath it all an obvious and real information revolution which the dotcom bubble was merely irrational euphoria about - everyone knew sonething big was happening, even if they rejected the crazy prices. I sincerely don’t think this crypto bubble is similar, because there is no there there amd because almost all assets are severely overpriced right now - crypto is full of scams and nobody is actually using it any more as a currency, this means all these joke coins worth 100s of millions are going to zero, no doubt just after joe public buys in. There’s a reason coin base insiders are frantically selling as soon as they can and more and more frauds are coming to light. Even the more legitimate companies in this space are full of fraud.
- Zamicol 5y ago
  >being thrown around a technology that is dodgy at best I have yet to meet someone that says this who has foreseen the implications of defi. In my mind, as an early bitcoiner, that was the original promise of bitcoin. A list of coins by market cap is full of absolute junk: https://www.coingecko.com/en https://www.coingecko.com/en A list of tokens by locked in value is full of systems that are revolutionizing finance: https://defipulse.com/ https://defipulse.com/ Defi protocols are providing useful services and are making money. I doubt I could overstate their enormity. There's a huge difference between the two worlds. Don't confuse dogecoin's "I like the stonk" hype with Maker's muscle. The "blockchain" isn't the point. The systems made possible on top were always the point, and that's what makes "blockchain" so valuable.
  - TechBro8615 5y ago
    FYI, but this is HN, so you might like to know that "enormity" has a specific meaning with negative connotation, it's not just a way to describe something as "really big," (enormous) but rather "really evil."
    - staticautomatic 5y ago
      It’s bizarre that this is being downvoted. I wouldn’t call it “really evil” but the negative connotation is legit. See...any dictionary.
      - deleted 5y ago
        [deleted]
      - Udik 5y ago
        (in neutral use) large size or scale. "I began to get a sense of the enormity of the task"
        staticautomatic 5y ago
        Is that a quote from a dictionary or what?
- jrochkind1 5y ago
  Yes. And I think the OP correctly suggests that this... not unique, it's increasing parts of the economy. > It is understandable enough to want to participate in such collective delusions. It’s much more fun to be awed by not getting a movie than to realize that you do get it and it’s just boring. This same idea also helps explain speculative bubbles. It’s more fun to believe in magic than to recognize how much of financialized capitalism is just scams and pyramid schemes. Nonetheless, if the popular press is full of explainers “clarifying” what a “very complicated” investment phenomenon is all about, hide your wallet: You are being shilled into a game of Three-Card Monte.
- danaris 5y ago
  > The fact that there is so much money, SO much money, being thrown around This is the kind of thing that happens when the wealthiest people have so much more than everyone else: there are enough people with vast amounts of money that they have no idea what to do with that they can easily fund a bubble like this, especially when they are promised by smart-sounding geeks that this is The Next Big Thing that will a) let them get in on the ground floor of a whole new currency, and b) give them a way to leverage their wealth to retain and increase their power as we gradually move more and more toward a post-scarcity society.
- wickoff 5y ago
  It's understandable why people consider 100% of crypto to be a scam. But several projects have an actual P/E ratio now. You can't deny a P/E ratio. Value is being created here. In 2013 bubble everything was bitcoin clone but "better". No cash flow. In 2017 it was unregulated securities - illegal, no cash flow. In 2021 with Defi you don't need to struggle to explain anything. People get paid for providing capital at a higher rates than in traditional finance because smart contracts are removing friction. Stakeholders get paid dividends for governance, just like a normal company.
  - meltedcapacitor 5y ago
    LOL defi is a neat idea but the current reality is order of magnitude slower and orders of magnitude more expensive than "legacy". It adds a lots of friction. Players "get paid" because folks can't read smart contracts and see that behind the cover story it's just flows from new players to exiting players, which looks good as long as inflows are larger than outflows, which of course will last forever.
  - Daishiman 5y ago
    > now. You can't deny a P/E ratio. Value is being created here. Which ones?
    - wickoff 5y ago
      https://sushi.com https://sushi.com is the best example.
  - Nasrudith 5y ago
    Madoff had a price to earning ratio too. I don't think that variable doesn't say what you think it does. Higher rates implies more risk which certainly applies to cryptocurrencies.
  - SavantIdiot 5y ago
    > You can't deny a P/E ratio. Value is being created here. Oh yes, yes you can. You're talking about a currency exchange, not a commodity. I guess you weren't around for the last two bubbles. There literally is no value being created. Coinbase earnings are based on people paying to use its service, and that service is trading imaginary currency with no intrinsic value. Unlike a semiconductor, oil, or even industrial labor.
- legulere 5y ago
  A lot of people that invest simply lack better alternatives. On the other hand the people that could invest reasonably like homeowners in energy efficiency do not have the money to do so, with the current monetary policy. Even if they had, they would gain more from investing in overvalued assets that have a growth in value detached from reality, driven by loose money supply for investors.
  - dehrmann 5y ago
    > A lot of people that invest simply lack better alternatives Yeah, stocks haven't had a good year in over a decade /s
    - legulere 5y ago
      Widespread access to low-fee index-fonds is pretty new and alternatives were not as bad as they are now. You could at least get inflation back by just letting your money stay at the bank, which is not possible now anymore.
      - dehrmann 5y ago
        The biggest change has been free trades and lower account minimums. For a long time, as long as you could hit the minimum (usually $2500-$5000), Vanguard was an amazing choice. The minimum wasn't great, but really, investing less isn't all that interesting, at least not as a missed opportunity for building wealth. Low-fee ETFs have also been around for a while, but the $10 per trade you'd pay in 2005 meant you didn't really want to buy less than $1,000 of anything.
  - SavantIdiot 5y ago
    > lack better alternatives What?! Wow, this is a painfully misinformed statement. Like, so misinformed I want to hug you. Index funds have consistently beaten inflation by double digits and have practically nil management fees. They are vastly more secure alternative to imaginary crypto exchanges.
    - 5y ago
- one2three4 5y ago
  That. Combined with the fact that so many productive people and healthy business have limited or no access to it.
- api 5y ago
  The last part is why so much money is in it. Everyone remembers how everyone said dot.com was over in 2002 when the biggest dot.coms were yet to come. Everyone remembers when everyone laughed at Tesla and SpaceX. Everyone remembers Bitcoin at $1. There is a hell of a lot of FOMO around. There are also record low interest rates not just in the USA but globally, and that is inflating every asset at once. If there is a crash I don’t think it will just be cryptocurrency. It will be broad and deep.
  - berryjerry 5y ago
    I see this too. Almost every asset class is moving together. When interest rates can't be dropped further then the real problems will begin. Banks have built floors into their loans so that variable rates can't drop below zero already. At the point when interest rates drop below zero, lower interest rates will actually harm the economy rather than help it and then we'll see everything come crashing down.
- gofreddygo 5y ago
  Crypto space feels like a decentralized slot machine spiraling out of control with shiny lights, loud sounds and exponential payouts. Always worth reiterating: the house always wins.
jdgoesmarching 5y ago
This is a really fantastic article above and beyond what the headline suggests. I recommend giving it a full read.
- gervwyk 5y ago
  Agreed. Writing of this quality is very rare, such a talented author.
- pierrebai 5y ago
  I disagree, but to each its own. I thought it was full of condescending takes. For example: - "getting" Memento does not make it boring. - Finding the art world being often vacuous does not mean you are an acculturated ignoramus. - Electricity does not make blockchain valuable, it's both the social and proof-of-work, the electricity cost is incidental and unrelated. (Bitcoins and NFT works even if you are ignorant of its inner workings.)
  - deleted 5y ago
    [deleted]
  - merdadicapra 5y ago
    > Bitcoins and NFT works even if you are ignorant of its inner workings but not without huge amounts of electricity, while cash money does.
tfang17 5y ago
Every technology comes with good and bad. Better and more rewarding to be an optimist!
- kabdib 5y ago
  Comparing tulip bulbs and NFTs: With one of them you can grow a flower, while the other isn't even good fertilizer. In the past weeks I've seen a ton of ads (on Youtube, Twitter, etc.) that look an awful lot like elements of pump-and-dump schemes. Even to this financial idiot, the scam factor looks very high.
RichardHeart 5y ago
People overpaying for serial numbers loosely related to jpgs is terrible in my opinion. There's truly intelligent and useful things going on in cryptocurrency. Don't like the bubbles? There's billions in stable coins tied to the dollar, like the $11 billion in US based USDC. There's scams galore, just like in all other markets, but this one actually makes technical progress day by day.
- dehrmann 5y ago
  > Don't like the bubbles? There's billions in stable coins tied to the dollar, like the $11 billion in US based USDC. Unless I'm trying to avoid high transaction fees when exchanging currency with an undeveloped banking system with dollars, what's the point? My dollars already work fine, and for large amounts, international wire transfers work well.
  - timbit42 5y ago
    > My dollars already work fine Only if you don't mind the deflation.
    - fwip 5y ago
      USDC is (supposedly) tied exactly to the price of USD. If USD deflates, USDC deflates.
- dmitriid 5y ago
  > like the $11 billion in US based USDC. "USDC is issued by regulated financial institutions, backed by fully reserved assets, redeemable on a 1:1 basis for US dollars" $11 billion dollars in reserved assets? Instantly redeemable? Why does this remind me of another scam with similarly "backed by assets" USDTs
  - 0tt049 5y ago
    Try to cash $11B out of a bank then
diego 5y ago
The author of the article may have some valid points, but she doesn't understand crypto so she completely discounts any mechanisms of value creation that might come from it. Near the end of the article it gets really bad. She attempts to make the case that paper menus are more efficient than apps, without doing any math whatsoever: > For example, delivery apps make it feel “easy” to order food, when in fact we are spending much more in buying the phone, keeping it charged, paying our data plan, paying our subscriptions, and so on, for every order — in other words, we are using more hours of our labor to do so. Before smartphones, we could call the restaurant with a landline, but we also had to have previous knowledge of the restaurant as well as potentially a menu or at least a phone book’s yellow pages. The app replaces the drawerful of menus with a commensurate amount of electricity, which we pay for when we buy and charge our phone and pay our phone bill, which the restaurant pays for on their end in keeping their computers up, and which the app skims a huge percentage of to pay back venture-capitalist investors and keep the servers running. If you look at only a single transaction, the app is much more efficient: Instead of requiring the restaurant to hire a printer and someone to deliver menus to you, you just press a button. But with a paper menu, restaurants have to do that only once, whereas you need to marshal the same amount of energy each time you use the app. By the third or fourth time you order takeout from a particular place, suddenly the paper menu is looking like an ecological marvel.
- scandox 5y ago
  I thought you were going to provide the math(s)? A little disappointed.
  - diego 5y ago
    I'm just quoting her. My point is that she provides no math.
- fsociety 5y ago
  To your point paper production is a wasteful process, I’ve heard figures of 10-20L of freshwater are used per one piece of A4 paper in addition to transportation costs and running a pulp mill. Pulp mills produce waste as well. The phone has a lot of waste on metals but in a less consumerist world - read don’t upgrade your phone every year - it has the property of reuse for every restaurant and durability compared to a restaurant menu. Even better you can power your phone with the rays from the sun.
hparadiz 5y ago
Why is this garbage on hacker news? The author clearly doesn't understand crypto or how they work.
antpls 5y ago
How one does explain that the price of Ethereum follows the price of Bitcoin, while both networks are separated, and follow a different roadmap?
- georgyo 5y ago
  Arbitrage. Many exchanges deal only in crypto currencies, where exchange rates are relative to other coins. Price differences between both coins and exchanges create an ability for someone to make money while equalizing the market. It also means that all coins are inevitably linked together in some way. And why obvious scam coins also follow same curves.
  - fighterpilot 5y ago
    Arbitrage isn't the fundamental explanation. There's no pure arb relationship between ETH and BTC. The real reason they're linked is for macro reasons. Hype for ETH is correlated with hype for BTC. Regulatory environment for ETH is correlated to that for BTC. Statistical arbitraguers then front run the resulting macro flows, but the core reason they're linked is the macro flows, not the arbitrageurs.
- shepardrtc 5y ago
  Market makers. They have to determine a price, but ETH hasn't yet evolved to a point where it operates in its own world, so they lazily (but understandably) follow the price fluctuations of BTC while allowing people to buy or sell within a certain range. Obviously if a huge buy comes in, or a lot of people are buying, they'll let it go up (or down if its the opposite), but once that dies down they'll again follow BTC price swings. However, I expect this to change as cryptocurrencies mature.
  - fighterpilot 5y ago
    Market makers can't force a correlation to exist. They're neither a sufficient or necessary condition for it. They only front run an already existing correlation. The correlation exists because of non market makers.
dehrmann 5y ago
Not sure if this is a nit or not, but NFTs rarely represent ownership of anything other than the NFT. You're not really buying the art, you're buying association with the art. At least if I buy a Jackson Pollock, but the world realizes he's a one-gimmick artist, I can still enjoy the painting. If the world stops caring about NFTs, you're left with "cool story, bro."
- saurik 5y ago
  Buying these NFTs is more like buying your name on some dedication plaque no one will read unless directed to do so; people do this, sometimes with millions of dollars, because it is, in fact, a "cool story" vs. merely sending an anonymous envelope of cash to the owners of the building (maybe a University or local government).
  - kibwen 5y ago
    It's quite a bit different, since your donation doesn't imply ownership of the plaque (or even of anything built by the donation). The non-fungibility of the plaque is irrelevant because you don't own it, and therefore can't resell it, and therefore can't expect it to appreciate in value, and therefore nothing approaching a pyramid scheme is possible.
    - saurik 5y ago
      I appreciate it isn't exactly like (hence why I merely said "more like" ;P). I think people are way too focused on the idea of the value of these NFTs going up in value: most of the discussion about why they are actually valuable in the relevant communities is merely as an alternative to Patreon-style interactions. (And so like, I totally agree that a lot of scams are being built over them: I am just defending why the "cool story" part actually is worth real value to some people.)
      - kibwen 5y ago
        Yes, I could have been more clear: I was trying to suggest that if someone wants to give money to an artist in the form of a Patreon-style interaction, then they can just... donate. :P It's clear to me that the hype is precisely because people want their tokens to appreciate in value; you can design a non-transferable-token if you want to give patrons the "cool story" without muddying the waters with pseudo-investment shenanigans (of course, I suppose at this point there's nothing stopping anyone from issuing an NFT on your NTTs, sigh...).
badkitty99 5y ago
Crypto isn’t for everyone, Karen
loup-vaillant 5y ago
Okay, I use NoScript. It's a hassle, but it's an eye opener, so I keep using it. Here, I needed yet again to enable JavaScript to read what ought to be a static, text heavy article. Nothing new so far. What's interesting however is that instead of the article, I didn't get the usual blank page. Instead, I could read the following quote: > "Appropriate technology" was a movement beginning in the late 1960s that aimed to shift the emphasis from mass technology to smaller-scale, affordable technologies, informed and targeted to local needs and customs. Many of its ideas are as relevant today. So is one of its major shortcomings: why would we rely on technology to mitigate the harm technology does? Turns out I got redirected to https://reallifemag.com/appropriate-measures/ https://reallifemag.com/appropriate-measures/ How ironic. When trying to disable a technology that's quite useless as displaying text (and more often than not is more about tracking me than serving me), I got a lecture on appropriate technology. And a fairly good one at that, which should probably be reflected on by proponents of crypto currencies.
- unnouinceput 5y ago
  I have NoScript too. I, too, had nothing on the screen but instead of enabling the JS for the site I switched to reader mode and boom! the static text heavy article was before my eyes. ¯\_(ツ)_/¯
  - loup-vaillant 5y ago
    Go figure. Personally I'm able to reproduce the issue: with JavaScript on, no problem. Disable it, I'm not redirected yet, but I see the appropriate measure quote. Re-enable it, and I'm redirected to the appropriate measure article. I still argue that JavaScript is no an appropriate technology to display static text (at least not if we care about screen readers).
cannabis_sam 5y ago
Sure, but so is the world economy apparently: https://www.forbes.com/sites/jeffmcmahon/2019/04/05/the-world-economy-is-a-pyramid-scheme-steven-chu-says/ https://www.forbes.com/sites/jeffmcmahon/2019/04/05/the-worl...
jb775 5y ago
My Occam's Razor: NFTs are tax avoidance and/or bribe money vehicles that happen to be attracting useful idiots. They are perfect because: 1) an unlimited number of them can be created quickly and easily 2) "artwork" value is subjective and therefore the value and short term appreciation/depreciation can't be easily questioned
- akomtu 5y ago
  NFTs compete with sketchy charities in this case. Donating to a politician's charity works just as well, except that the charity's funds are difficult to spend later. NFTs solve this problem.
- Balgair 5y ago
  Forgive my ignorance, but NFTs use the same algos as bitcoin, correct? And are the blockchains public, so that you may know who owns the NFT for the physical item? If that is all true, then trying to launder money via an NFT means that law enforcement can access the blockchain and see the whole chain of custody too, right? I feel that I am missing something key though.
  - Veen 5y ago
    Blockchains are public, and everyone can see transactions, but they are tied to an address and not to a person. The person who controls the address can make transactions without revealing who they are. That’s how we know Satoshi owns billions of dollars worth of bitcoins but we don’t know who Satoshi is. However, if the address is revealed to belong to a person in the real word, they are no longer anonymous and you can see all of their transactions.
cevered 5y ago
The more complex our global monetary system seems, the higher the pyramid scheme can go.
- deleted 5y ago
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- deleted 5y ago
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astoor 5y ago
A successful pyramid scheme has a couple of valuable attributes: "plausible deniability", i.e. the ability to disguise the pyramid scheme to convince as many people as possible that it isn't actually a pyramid scheme, and "self-sustainability", i.e. the ability to keep the scheme going for as long as possible without collapsing. The article's headline suggests the article is about "plausible deniability". This has indeed been improving over time as the schemes have become more sophisticated. With Bitcoin for example, articipants could say "it's not a pyramid scheme because you can buy a pizza with it", although that was about the extent of it in practical terms (excluding more nebulous claims like "it is going to change the world", "it is the internet of money" etc.). However, with more sophisticated schemes like Ethereum, participants used to say things like "it's not a pyramid scheme because you can run DApps on it", now say things like "it's not a pyramid scheme because you can do DeFi with it", and may in future have something else with which to deny it is a pyramid scheme. However, the article itself talks specifically about NFTs. These aren't so much about "plausible deniability", but about "self-sustainability". People need to buy Ethereum to buy the NFTs. It is like the ICOs - people needed to buy Ethereum to participate in the ICOs. When the ICOs dried up and the ICO companies started cashing out their Ethereum the prices collapsed, but now we have NFTs to take their place. If NFT sales dry up and NFT sellers cash out the prices may collapse again, but by then there may be something else to take their place and keep the scheme self-sustaining.
mgamache 5y ago
NFTs are dodgy as all hell, I will not defend them. But she is politically motivated and her arguments against Bitcoin don't really hold up. A key giveaway is when people attack crypto for it's 'libertarian' nature. Like other far left people she knows crypto is a threat to state currencies. Without state control of the money it makes redistribution of wealth more difficult. These people often believe in MMT (Modern Monetary Theory). They hand-wave away inflation. This text is rife with Russell Conjugations and should not be taken seriously as a critique of Bitcoin. There are legitimate critiques of BTC of course, but not here. Yes, this is the author who wrote 'In Defense Of Looting'.
noxer 5y ago
Miss leading title. This is about NFTs and not about crypto or a pyramid scheme thereof.

190 points by RuffleGordon 5y ago

It is not that complex actually, you just have to learn more about it and read a lot of information on the internet. Right now cryptocurrencies might not be that popular but in the future I am sure that they will replace regular currencies, but for now people don't really trust the technology. Many years ago when credit cards came out, the majority of people didn't trust the technology and preferred using cash, I still know some people who are like that. So invest in it now before it's too late.

SavantIdiot 5y ago

The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. I'm certain this technology will find a place in the future after it has matured, but hoo boy are there gonna be big winners and big losers until it shakes out.

beervirus 5y ago
> I'm certain this technology will find a place in the future after it has matured Why? It doesn’t solve any real problem that anyone has ever had.
- radicalbyte 5y ago
  It solves the problem of: how can I start a pyramid scheme relatively anonymously.
- haolez 5y ago
  While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.
  - arcticbull 5y ago
    This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...
    - o_p 5y ago
      You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
      - arcticbull 5y ago
        No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
- Kinrany 5y ago
  It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down.
  - hoppyhoppy2 5y ago
    >It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down. You could say the same thing about Walmart's money orders and check-cashing services, but that doesn't use an entire country's worth of electricity, suck up the world's supply of GPUs, or support the same number of scammers.
- nyolfen 5y ago
  how about this: https://i.imgur.com/lSfdTfK.jpg https://i.imgur.com/lSfdTfK.jpg
  - arcticbull 5y ago
    This chart affects 0.35% of the global population. This one is far more representative [1]. Notice how after Bretton-Woods ended, things got really nice and stable? That's successful active management. Venezuela's problem isn't inflation - that's a symptom. Venezuela's problem is the Maduro government. Solve the latter and you solve the former. [1] https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
    - arberx 5y ago
      "If only they did this!" -- that's not a solution. The goal is to prevent this from even being possible in the first place. There are very real challenges from inflationary monetary supplies in countries like Argentina, Turkey, Venezuela and notably Zimbabwe.
      - arcticbull 5y ago
        When you have a bad government, the currency is the least of your problems. When you resolve the government, the currency is no longer a problem. Seriously, in Venezuela there have been recently shortages of: milk, meat, coffee, rice, oil, precooked flour, butter, toilet paper, personal hygiene products and medicines. Some Venezuelans have resorted to eating wild fruit and garbage [1]. Somehow resolving inflation through a cryptocurrency with $50 transaction fees that loses 27% of its value in one week every few months doesn't change any of that. It's just a different set of problems. However, overthrowing the government will resolve both issues. Sometimes there are no easy answers. [1] https://en.wikipedia.org/wiki/Shortages_in_Venezuela https://en.wikipedia.org/wiki/Shortages_in_Venezuela
        deleted 5y ago
        [deleted]
- _Microft 5y ago
  Crypto technologically solves the social problem of trust. I‘ll leave the interpretation of this statement up to you ;)
  - zepto 5y ago
    Crypto really has nothing to do with trust. It provides a mechanism that enables distant parties to be confident that they hold copies of the same document. That’s all.
    - Udik 5y ago
      Enables distant parties to be confident that there is only one specific version of the document that is valid, even when each of the parties could have an interest in creating and spreading its own version.
      - zepto 5y ago
        Valid for what?
    - _Microft 5y ago
      The blockchain, consensus algorithms and the whole shebang are only needed because cryptocurrencies do not want transactions to be mediated by a central authority that would need to be trusted. Crypto is about trust, or rather a lack thereof.
      - zepto 5y ago
        Crypto users may be distrustful, but crypto doesn’t create trust or solve any problems to do with it. It’s just currency for the distrustful.
      - Hjfrf 5y ago
        Despite all that, people mostly trade crypto on centralized exchanges. The users really hate the decentralized aspect of crypto, as shown by immediately giving away their wallet to some "trusted" third party if it reduces fees.
- FDSGSG 5y ago
  It solved the problem of paying for drugs which you ordered online. It solved the problem of ransomware payments, before winlockers used to ask for gift cards which didn't scale well. It solved the liberty reserve problem where the US government shuts down your sketchy no-KYC money transfer platform. At a very general level cryptocurrency has solved the "anonymous online payments"-problem. These are all very real problems solved by cryptocurrency.
  - oblio 5y ago
    So what you're saying is that it solves a set of problems for a bunch of very problematic people for which we'd rather have a better solution? (maybe jail?)
    - FDSGSG 5y ago
      What's your point? Those people have money.
- base698 5y ago
  Ever want your money to earn interest? Banks used to do this, and you could get good returns on savings. You can earn interest parking your crypto here: https://compound.finance/ https://compound.finance/
  - aphextron 5y ago
    You can also do this with the stock market by investing in revenue generating companies that are innovative and creating value. This is literally no different than investing in gold.
    - rawtxapp 5y ago
      But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. The parent comment is talking about interest, which is "risk-free" money (risk-free if the smart contract doesn't have any bugs, etc).
      - aphextron 5y ago
        >But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. Then just invest in a Vanguard ETF. There's no such thing as "risk free" money short of US treasuries or an FDIC insured CD, and those don't require any research.
    - o_p 5y ago
      Unless you are participating in an IPO. Buying stocks its not investing in the true sense you mention, you are just transfering ownership of stocks but that money doesnt fund any enterprise.
      - 8192kjshad09- 5y ago
        But the share price going up enables the company to raise money easier by offering more shares. See TSLA for example.
- o_p 5y ago
  I hoped HN to have a more informed take but I guess not. Blockchains solve the problem of having a decentralized public database, currency is just a particular use
  - dilyevsky 5y ago
    So like git?
    - o_p 5y ago
      But you host git on a centralized server, blockchain git when
      - dilyevsky 5y ago
        That’s github model, you can host it on many “servers” if you so choose
        Udik 5y ago
        It's not guaranteed to be unique. Blockchains are.
  - Nasrudith 5y ago
    A decentralized public database is a solution, not a problem (snark aside about bitcoin). The question is "What is the purpose of it being decentralized and public?".
  - oblio 5y ago
    > Blockchains solve the problem of having a decentralized public database. That's not a problem. A problem is something like this: "as a video editor/doctor/..., I need something that helps me...". Yours is just a tech description.
  - bryananderson 5y ago
    What problem does a decentralized public database solve? As far as I can tell, over a decade in, blockchain is still hunting for one.
- SavantIdiot 5y ago
  Un-alterable ledgers like blockchain are incredibly useful for legal and economic applications. Unfortunately there are a lot of caveats that need to be worked out, and crypto is finding them at scale.
arcticbull 5y ago
> The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. We have very little evidence to substantiate the actual quantity of real dollars in this system. The NYAG settlement with Tether shows that it's backed by bailing wire, chewing gum and hope [1]. USDC has stopped publishing their attestations as of January (which, btw, - and I can't believe I'm going to cite Tether's Saul Goodman but - aren't audits [2]) and since then it's market cap has doubled. USDT and USDC both use similar weasel wording about the nature of what backs them. An attempted ETF a couple of years ago admitted 95% of all trading volume in the crypto space was fake. [3] The CFTC smacked Coinbase because literally 99% of all Litecoin trading volume in 2017 was one dude, Charlie Lee - the LTC founder, wash trading internally [4]. Lee then took advantage of the market cap he synthesized, dumped literally all his holdings at the peak and sailed off to an island. This is just a couple of examples off the top of my head. It's all fraudulent. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://twitter.com/bitcoinlawyer/status/1386146486359150597 https://twitter.com/bitcoinlawyer/status/1386146486359150597 [3] https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-of-bitcoin-trade-volume-is-fake-real-market-is-or https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-o... [4] https://cftc.gov/PressRoom/PressReleases/8369-21 https://cftc.gov/PressRoom/PressReleases/8369-21
- SavantIdiot 5y ago
  This is really useful information. I have a cadre of friends who are serious crypto heads and I almost dread hanging out with them because they are so deep into it. I'd be curious to hear their perspective after I understand these links.
- Animats 5y ago
  We have very little evidence to substantiate the actual quantity of real dollars in this system. This is especially true of NFTs. With each item unique, there's no meaningful market price. There are just occasional stories about sales. This is important. With a commodity that has an active market, prices have some meaning. You can usually sell your asset at roughly the current market price. This is not true of unique items. You have to find a buyer who wants your specific thing. This works just like collectables on eBay. Here's a current collectable.[1] "Rare Tag Error Retired Ty Beanie Baby Claude The Crab 1996 Collector - US $1,235.00 [ 0 bids ]" Note the "0 bids". Now keep scrolling down until something shows up with a bid.[2] "Princess diana beanie baby 1st edition 1997 w/o tag US $0.99 [ 1 bid ]" That's what a willing buyer is prepared to pay. You can scroll through page after page of Beanie Baby asking prices without seeing anything with a bid. That's what an NFT market looks like when you want to sell. The NFT market is useful only to those with a fan base they can monetize. If you're the fan, you're the sucker. [1] https://www.ebay.com/itm/194065105880 https://www.ebay.com/itm/194065105880 [2] https://www.ebay.com/itm/254955747357 https://www.ebay.com/itm/254955747357
rawtxapp 5y ago
Similar to dot-com bubble where people were investing their life savings into companies that just had a domain name with no business plan whatsoever. Lots of them blew up, but the ones that made it through ended up becoming trillion dollar companies.
- arcticbull 5y ago
  Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s. That's why it's much, much worse. The dot-com bubble was driven by margin, enthusiasm and poor decision making. This one's got all those plus the hallmarks of the 20s: insane leverage (see: DeFi), bonkers leverage (see: BitMEX), and a fictional currency being printed at a rate of billions of dollars per week that's then used to prop up the prices of the assets themselves. It's basically the dot-com bubble, the roaring 20s and 2008's CDO shell game rolled into one.
  - SavantIdiot 5y ago
    Exactly. I -really- hope crypto ETFs don't end up in ordinary people's 401Ks, but I fear it is heading that way.
  - aphextron 5y ago
    >"Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s." If you think the modern day SEC is doing anything about the current levels of market manipulation and wild speculation, I've got a bridge to sell you.
- grey-area 5y ago
  Only if you use a circular definition of made it through which means became a trillion dollar company. Plenty of companies made it through but never recovered their dotcom market cap or prestige, a few prominent examples: Csco, hpq (only recently passed the 2000 price), yhoo, emc, vrsn, real networks. There were plenty of also-rans who limped through but didn’t justify the hype pricing years later, and the real revolution came to fruition years later with mobile computing and mass-market online stores, but there was definitely underneath it all an obvious and real information revolution which the dotcom bubble was merely irrational euphoria about - everyone knew sonething big was happening, even if they rejected the crazy prices. I sincerely don’t think this crypto bubble is similar, because there is no there there amd because almost all assets are severely overpriced right now - crypto is full of scams and nobody is actually using it any more as a currency, this means all these joke coins worth 100s of millions are going to zero, no doubt just after joe public buys in. There’s a reason coin base insiders are frantically selling as soon as they can and more and more frauds are coming to light. Even the more legitimate companies in this space are full of fraud.
Zamicol 5y ago
>being thrown around a technology that is dodgy at best I have yet to meet someone that says this who has foreseen the implications of defi. In my mind, as an early bitcoiner, that was the original promise of bitcoin. A list of coins by market cap is full of absolute junk: https://www.coingecko.com/en https://www.coingecko.com/en A list of tokens by locked in value is full of systems that are revolutionizing finance: https://defipulse.com/ https://defipulse.com/ Defi protocols are providing useful services and are making money. I doubt I could overstate their enormity. There's a huge difference between the two worlds. Don't confuse dogecoin's "I like the stonk" hype with Maker's muscle. The "blockchain" isn't the point. The systems made possible on top were always the point, and that's what makes "blockchain" so valuable.
- TechBro8615 5y ago
  FYI, but this is HN, so you might like to know that "enormity" has a specific meaning with negative connotation, it's not just a way to describe something as "really big," (enormous) but rather "really evil."
  - staticautomatic 5y ago
    It’s bizarre that this is being downvoted. I wouldn’t call it “really evil” but the negative connotation is legit. See...any dictionary.
    - deleted 5y ago
      [deleted]
    - Udik 5y ago
      (in neutral use) large size or scale. "I began to get a sense of the enormity of the task"
      - staticautomatic 5y ago
        Is that a quote from a dictionary or what?
jrochkind1 5y ago
Yes. And I think the OP correctly suggests that this... not unique, it's increasing parts of the economy. > It is understandable enough to want to participate in such collective delusions. It’s much more fun to be awed by not getting a movie than to realize that you do get it and it’s just boring. This same idea also helps explain speculative bubbles. It’s more fun to believe in magic than to recognize how much of financialized capitalism is just scams and pyramid schemes. Nonetheless, if the popular press is full of explainers “clarifying” what a “very complicated” investment phenomenon is all about, hide your wallet: You are being shilled into a game of Three-Card Monte.
danaris 5y ago
> The fact that there is so much money, SO much money, being thrown around This is the kind of thing that happens when the wealthiest people have so much more than everyone else: there are enough people with vast amounts of money that they have no idea what to do with that they can easily fund a bubble like this, especially when they are promised by smart-sounding geeks that this is The Next Big Thing that will a) let them get in on the ground floor of a whole new currency, and b) give them a way to leverage their wealth to retain and increase their power as we gradually move more and more toward a post-scarcity society.
wickoff 5y ago
It's understandable why people consider 100% of crypto to be a scam. But several projects have an actual P/E ratio now. You can't deny a P/E ratio. Value is being created here. In 2013 bubble everything was bitcoin clone but "better". No cash flow. In 2017 it was unregulated securities - illegal, no cash flow. In 2021 with Defi you don't need to struggle to explain anything. People get paid for providing capital at a higher rates than in traditional finance because smart contracts are removing friction. Stakeholders get paid dividends for governance, just like a normal company.
- meltedcapacitor 5y ago
  LOL defi is a neat idea but the current reality is order of magnitude slower and orders of magnitude more expensive than "legacy". It adds a lots of friction. Players "get paid" because folks can't read smart contracts and see that behind the cover story it's just flows from new players to exiting players, which looks good as long as inflows are larger than outflows, which of course will last forever.
- Daishiman 5y ago
  > now. You can't deny a P/E ratio. Value is being created here. Which ones?
  - wickoff 5y ago
    https://sushi.com https://sushi.com is the best example.
- Nasrudith 5y ago
  Madoff had a price to earning ratio too. I don't think that variable doesn't say what you think it does. Higher rates implies more risk which certainly applies to cryptocurrencies.
- SavantIdiot 5y ago
  > You can't deny a P/E ratio. Value is being created here. Oh yes, yes you can. You're talking about a currency exchange, not a commodity. I guess you weren't around for the last two bubbles. There literally is no value being created. Coinbase earnings are based on people paying to use its service, and that service is trading imaginary currency with no intrinsic value. Unlike a semiconductor, oil, or even industrial labor.
legulere 5y ago
A lot of people that invest simply lack better alternatives. On the other hand the people that could invest reasonably like homeowners in energy efficiency do not have the money to do so, with the current monetary policy. Even if they had, they would gain more from investing in overvalued assets that have a growth in value detached from reality, driven by loose money supply for investors.
- dehrmann 5y ago
  > A lot of people that invest simply lack better alternatives Yeah, stocks haven't had a good year in over a decade /s
  - legulere 5y ago
    Widespread access to low-fee index-fonds is pretty new and alternatives were not as bad as they are now. You could at least get inflation back by just letting your money stay at the bank, which is not possible now anymore.
    - dehrmann 5y ago
      The biggest change has been free trades and lower account minimums. For a long time, as long as you could hit the minimum (usually $2500-$5000), Vanguard was an amazing choice. The minimum wasn't great, but really, investing less isn't all that interesting, at least not as a missed opportunity for building wealth. Low-fee ETFs have also been around for a while, but the $10 per trade you'd pay in 2005 meant you didn't really want to buy less than $1,000 of anything.
- SavantIdiot 5y ago
  > lack better alternatives What?! Wow, this is a painfully misinformed statement. Like, so misinformed I want to hug you. Index funds have consistently beaten inflation by double digits and have practically nil management fees. They are vastly more secure alternative to imaginary crypto exchanges.
  - 5y ago
one2three4 5y ago
That. Combined with the fact that so many productive people and healthy business have limited or no access to it.
api 5y ago
The last part is why so much money is in it. Everyone remembers how everyone said dot.com was over in 2002 when the biggest dot.coms were yet to come. Everyone remembers when everyone laughed at Tesla and SpaceX. Everyone remembers Bitcoin at $1. There is a hell of a lot of FOMO around. There are also record low interest rates not just in the USA but globally, and that is inflating every asset at once. If there is a crash I don’t think it will just be cryptocurrency. It will be broad and deep.
- berryjerry 5y ago
  I see this too. Almost every asset class is moving together. When interest rates can't be dropped further then the real problems will begin. Banks have built floors into their loans so that variable rates can't drop below zero already. At the point when interest rates drop below zero, lower interest rates will actually harm the economy rather than help it and then we'll see everything come crashing down.
gofreddygo 5y ago
Crypto space feels like a decentralized slot machine spiraling out of control with shiny lights, loud sounds and exponential payouts. Always worth reiterating: the house always wins.

jdgoesmarching 5y ago

This is a really fantastic article above and beyond what the headline suggests. I recommend giving it a full read.

gervwyk 5y ago
Agreed. Writing of this quality is very rare, such a talented author.
pierrebai 5y ago
I disagree, but to each its own. I thought it was full of condescending takes. For example: - "getting" Memento does not make it boring. - Finding the art world being often vacuous does not mean you are an acculturated ignoramus. - Electricity does not make blockchain valuable, it's both the social and proof-of-work, the electricity cost is incidental and unrelated. (Bitcoins and NFT works even if you are ignorant of its inner workings.)
- deleted 5y ago
  [deleted]
- merdadicapra 5y ago
  > Bitcoins and NFT works even if you are ignorant of its inner workings but not without huge amounts of electricity, while cash money does.

tfang17 5y ago

Every technology comes with good and bad. Better and more rewarding to be an optimist!

kabdib 5y ago
Comparing tulip bulbs and NFTs: With one of them you can grow a flower, while the other isn't even good fertilizer. In the past weeks I've seen a ton of ads (on Youtube, Twitter, etc.) that look an awful lot like elements of pump-and-dump schemes. Even to this financial idiot, the scam factor looks very high.

RichardHeart 5y ago

People overpaying for serial numbers loosely related to jpgs is terrible in my opinion. There's truly intelligent and useful things going on in cryptocurrency. Don't like the bubbles? There's billions in stable coins tied to the dollar, like the $11 billion in US based USDC. There's scams galore, just like in all other markets, but this one actually makes technical progress day by day.

dehrmann 5y ago
> Don't like the bubbles? There's billions in stable coins tied to the dollar, like the $11 billion in US based USDC. Unless I'm trying to avoid high transaction fees when exchanging currency with an undeveloped banking system with dollars, what's the point? My dollars already work fine, and for large amounts, international wire transfers work well.
- timbit42 5y ago
  > My dollars already work fine Only if you don't mind the deflation.
  - fwip 5y ago
    USDC is (supposedly) tied exactly to the price of USD. If USD deflates, USDC deflates.
dmitriid 5y ago
> like the $11 billion in US based USDC. "USDC is issued by regulated financial institutions, backed by fully reserved assets, redeemable on a 1:1 basis for US dollars" $11 billion dollars in reserved assets? Instantly redeemable? Why does this remind me of another scam with similarly "backed by assets" USDTs
- 0tt049 5y ago
  Try to cash $11B out of a bank then

diego 5y ago

The author of the article may have some valid points, but she doesn't understand crypto so she completely discounts any mechanisms of value creation that might come from it. Near the end of the article it gets really bad. She attempts to make the case that paper menus are more efficient than apps, without doing any math whatsoever: > For example, delivery apps make it feel “easy” to order food, when in fact we are spending much more in buying the phone, keeping it charged, paying our data plan, paying our subscriptions, and so on, for every order — in other words, we are using more hours of our labor to do so. Before smartphones, we could call the restaurant with a landline, but we also had to have previous knowledge of the restaurant as well as potentially a menu or at least a phone book’s yellow pages. The app replaces the drawerful of menus with a commensurate amount of electricity, which we pay for when we buy and charge our phone and pay our phone bill, which the restaurant pays for on their end in keeping their computers up, and which the app skims a huge percentage of to pay back venture-capitalist investors and keep the servers running. If you look at only a single transaction, the app is much more efficient: Instead of requiring the restaurant to hire a printer and someone to deliver menus to you, you just press a button. But with a paper menu, restaurants have to do that only once, whereas you need to marshal the same amount of energy each time you use the app. By the third or fourth time you order takeout from a particular place, suddenly the paper menu is looking like an ecological marvel.

scandox 5y ago
I thought you were going to provide the math(s)? A little disappointed.
- diego 5y ago
  I'm just quoting her. My point is that she provides no math.
fsociety 5y ago
To your point paper production is a wasteful process, I’ve heard figures of 10-20L of freshwater are used per one piece of A4 paper in addition to transportation costs and running a pulp mill. Pulp mills produce waste as well. The phone has a lot of waste on metals but in a less consumerist world - read don’t upgrade your phone every year - it has the property of reuse for every restaurant and durability compared to a restaurant menu. Even better you can power your phone with the rays from the sun.

hparadiz 5y ago

Why is this garbage on hacker news? The author clearly doesn't understand crypto or how they work.

antpls 5y ago

How one does explain that the price of Ethereum follows the price of Bitcoin, while both networks are separated, and follow a different roadmap?

georgyo 5y ago
Arbitrage. Many exchanges deal only in crypto currencies, where exchange rates are relative to other coins. Price differences between both coins and exchanges create an ability for someone to make money while equalizing the market. It also means that all coins are inevitably linked together in some way. And why obvious scam coins also follow same curves.
- fighterpilot 5y ago
  Arbitrage isn't the fundamental explanation. There's no pure arb relationship between ETH and BTC. The real reason they're linked is for macro reasons. Hype for ETH is correlated with hype for BTC. Regulatory environment for ETH is correlated to that for BTC. Statistical arbitraguers then front run the resulting macro flows, but the core reason they're linked is the macro flows, not the arbitrageurs.
shepardrtc 5y ago
Market makers. They have to determine a price, but ETH hasn't yet evolved to a point where it operates in its own world, so they lazily (but understandably) follow the price fluctuations of BTC while allowing people to buy or sell within a certain range. Obviously if a huge buy comes in, or a lot of people are buying, they'll let it go up (or down if its the opposite), but once that dies down they'll again follow BTC price swings. However, I expect this to change as cryptocurrencies mature.
- fighterpilot 5y ago
  Market makers can't force a correlation to exist. They're neither a sufficient or necessary condition for it. They only front run an already existing correlation. The correlation exists because of non market makers.

dehrmann 5y ago

Not sure if this is a nit or not, but NFTs rarely represent ownership of anything other than the NFT. You're not really buying the art, you're buying association with the art. At least if I buy a Jackson Pollock, but the world realizes he's a one-gimmick artist, I can still enjoy the painting. If the world stops caring about NFTs, you're left with "cool story, bro."

saurik 5y ago
Buying these NFTs is more like buying your name on some dedication plaque no one will read unless directed to do so; people do this, sometimes with millions of dollars, because it is, in fact, a "cool story" vs. merely sending an anonymous envelope of cash to the owners of the building (maybe a University or local government).
- kibwen 5y ago
  It's quite a bit different, since your donation doesn't imply ownership of the plaque (or even of anything built by the donation). The non-fungibility of the plaque is irrelevant because you don't own it, and therefore can't resell it, and therefore can't expect it to appreciate in value, and therefore nothing approaching a pyramid scheme is possible.
  - saurik 5y ago
    I appreciate it isn't exactly like (hence why I merely said "more like" ;P). I think people are way too focused on the idea of the value of these NFTs going up in value: most of the discussion about why they are actually valuable in the relevant communities is merely as an alternative to Patreon-style interactions. (And so like, I totally agree that a lot of scams are being built over them: I am just defending why the "cool story" part actually is worth real value to some people.)
    - kibwen 5y ago
      Yes, I could have been more clear: I was trying to suggest that if someone wants to give money to an artist in the form of a Patreon-style interaction, then they can just... donate. :P It's clear to me that the hype is precisely because people want their tokens to appreciate in value; you can design a non-transferable-token if you want to give patrons the "cool story" without muddying the waters with pseudo-investment shenanigans (of course, I suppose at this point there's nothing stopping anyone from issuing an NFT on your NTTs, sigh...).

badkitty99 5y ago

Crypto isn’t for everyone, Karen

loup-vaillant 5y ago

Okay, I use NoScript. It's a hassle, but it's an eye opener, so I keep using it. Here, I needed yet again to enable JavaScript to read what ought to be a static, text heavy article. Nothing new so far. What's interesting however is that instead of the article, I didn't get the usual blank page. Instead, I could read the following quote: > "Appropriate technology" was a movement beginning in the late 1960s that aimed to shift the emphasis from mass technology to smaller-scale, affordable technologies, informed and targeted to local needs and customs. Many of its ideas are as relevant today. So is one of its major shortcomings: why would we rely on technology to mitigate the harm technology does? Turns out I got redirected to https://reallifemag.com/appropriate-measures/ https://reallifemag.com/appropriate-measures/ How ironic. When trying to disable a technology that's quite useless as displaying text (and more often than not is more about tracking me than serving me), I got a lecture on appropriate technology. And a fairly good one at that, which should probably be reflected on by proponents of crypto currencies.

unnouinceput 5y ago
I have NoScript too. I, too, had nothing on the screen but instead of enabling the JS for the site I switched to reader mode and boom! the static text heavy article was before my eyes. ¯\_(ツ)_/¯
- loup-vaillant 5y ago
  Go figure. Personally I'm able to reproduce the issue: with JavaScript on, no problem. Disable it, I'm not redirected yet, but I see the appropriate measure quote. Re-enable it, and I'm redirected to the appropriate measure article. I still argue that JavaScript is no an appropriate technology to display static text (at least not if we care about screen readers).

cannabis_sam 5y ago

Sure, but so is the world economy apparently: https://www.forbes.com/sites/jeffmcmahon/2019/04/05/the-world-economy-is-a-pyramid-scheme-steven-chu-says/ https://www.forbes.com/sites/jeffmcmahon/2019/04/05/the-worl...

jb775 5y ago

My Occam's Razor: NFTs are tax avoidance and/or bribe money vehicles that happen to be attracting useful idiots. They are perfect because: 1) an unlimited number of them can be created quickly and easily 2) "artwork" value is subjective and therefore the value and short term appreciation/depreciation can't be easily questioned

akomtu 5y ago
NFTs compete with sketchy charities in this case. Donating to a politician's charity works just as well, except that the charity's funds are difficult to spend later. NFTs solve this problem.
Balgair 5y ago
Forgive my ignorance, but NFTs use the same algos as bitcoin, correct? And are the blockchains public, so that you may know who owns the NFT for the physical item? If that is all true, then trying to launder money via an NFT means that law enforcement can access the blockchain and see the whole chain of custody too, right? I feel that I am missing something key though.
- Veen 5y ago
  Blockchains are public, and everyone can see transactions, but they are tied to an address and not to a person. The person who controls the address can make transactions without revealing who they are. That’s how we know Satoshi owns billions of dollars worth of bitcoins but we don’t know who Satoshi is. However, if the address is revealed to belong to a person in the real word, they are no longer anonymous and you can see all of their transactions.

cevered 5y ago

The more complex our global monetary system seems, the higher the pyramid scheme can go.

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astoor 5y ago

A successful pyramid scheme has a couple of valuable attributes: "plausible deniability", i.e. the ability to disguise the pyramid scheme to convince as many people as possible that it isn't actually a pyramid scheme, and "self-sustainability", i.e. the ability to keep the scheme going for as long as possible without collapsing. The article's headline suggests the article is about "plausible deniability". This has indeed been improving over time as the schemes have become more sophisticated. With Bitcoin for example, articipants could say "it's not a pyramid scheme because you can buy a pizza with it", although that was about the extent of it in practical terms (excluding more nebulous claims like "it is going to change the world", "it is the internet of money" etc.). However, with more sophisticated schemes like Ethereum, participants used to say things like "it's not a pyramid scheme because you can run DApps on it", now say things like "it's not a pyramid scheme because you can do DeFi with it", and may in future have something else with which to deny it is a pyramid scheme. However, the article itself talks specifically about NFTs. These aren't so much about "plausible deniability", but about "self-sustainability". People need to buy Ethereum to buy the NFTs. It is like the ICOs - people needed to buy Ethereum to participate in the ICOs. When the ICOs dried up and the ICO companies started cashing out their Ethereum the prices collapsed, but now we have NFTs to take their place. If NFT sales dry up and NFT sellers cash out the prices may collapse again, but by then there may be something else to take their place and keep the scheme self-sustaining.

mgamache 5y ago

NFTs are dodgy as all hell, I will not defend them. But she is politically motivated and her arguments against Bitcoin don't really hold up. A key giveaway is when people attack crypto for it's 'libertarian' nature. Like other far left people she knows crypto is a threat to state currencies. Without state control of the money it makes redistribution of wealth more difficult. These people often believe in MMT (Modern Monetary Theory). They hand-wave away inflation. This text is rife with Russell Conjugations and should not be taken seriously as a critique of Bitcoin. There are legitimate critiques of BTC of course, but not here. Yes, this is the author who wrote 'In Defense Of Looting'.

noxer 5y ago

Miss leading title. This is about NFTs and not about crypto or a pyramid scheme thereof.