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Again you are confusing the word "scam" with ponzi scheme. You are arguing that the crypto ecosystem is a scam or a scheme. Nothing you go on to describe past t

by anm89 5y ago

Again you are confusing the word "scam" with ponzi scheme. You are arguing that the crypto ecosystem is a scam or a scheme. Nothing you go on to describe past there has a resemblance to the specific type of scheme called a Ponzi scheme.

lamontcg 5y ago
Yeah it is, the people cashing out now are being paid by the people buying in now and the whole thing is a grossly balance sheet insolvent entity. When the cash in the pot hits zero and there's people lined up waiting to take their money out the the Ponzi scheme is busted. This is precisely what happened to Madoff when he had no cash to meet redemptions as the market crashed in 2008. This is what is going to happen to crypto eventually, but there's no one person in charge of crypto. Hence, distributed Ponzi scheme.
- makomk 5y ago
  Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is. The defining feature of a Ponzi scheme is that it claims to offer interest on deposits in excess of what the person running the scheme can actually earn, such that the only way to pay out that interest is by stealing from other people's deposits. It's this key feature that means that Ponzi schemes inevitably fail - those interest payments mean that the amount of money the scammer tells people they have in their accounts grows larger than the actual cash available at an exponential rate, and the only way to keep the scheme going is to find an exponentially increasing amount of new cash. Tether doesn't have this issue. They don't pay interest at all, so in theory there's absolutely no reason they can't structure the thing to be fully backed at all times (whilst probably also making money from interest themselves on the cash-like instruments they use to back it).
  - lamontcg 5y ago
    > Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is. There's an underlying cash flow to the business you're buying and the stock is supposed to give you a claim to dividends paid out by the corporation from those cash flows. The fact that the stock market is acting more and more like a Ponzi scheme doesn't make crypto any less of one. We're just forgetting how the stock market is supposed to operate. Oh also Madoff's Ponzi was an investment scheme where he just produced above average return on investment. He always beat the market, so people invested. He dealt with charities which didn't extract money often, so he had more predictable withdrawals. He was operating like a mutual fund. He wasn't promising a fixed percentage interest, he just always beat the market claimed to never lose money.
  - deleted 5y ago
    [deleted]
- anm89 5y ago
  copy pasted from a response to another person arguing the same fallacy, and the same point that several others are pointing out. me >This is the most egregious of misdefinitions of a ponzi scheme that gets thrown around because it literally fits the profile of every security and commodity in existence. You are describing the law of supply and demand in an open market place. other person >> Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones. me >>> Surely we cannot agree on this. Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow. Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.

by anm89 5y ago

lamontcg 5y ago

Yeah it is, the people cashing out now are being paid by the people buying in now and the whole thing is a grossly balance sheet insolvent entity. When the cash in the pot hits zero and there's people lined up waiting to take their money out the the Ponzi scheme is busted. This is precisely what happened to Madoff when he had no cash to meet redemptions as the market crashed in 2008. This is what is going to happen to crypto eventually, but there's no one person in charge of crypto. Hence, distributed Ponzi scheme.

makomk 5y ago
Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is. The defining feature of a Ponzi scheme is that it claims to offer interest on deposits in excess of what the person running the scheme can actually earn, such that the only way to pay out that interest is by stealing from other people's deposits. It's this key feature that means that Ponzi schemes inevitably fail - those interest payments mean that the amount of money the scammer tells people they have in their accounts grows larger than the actual cash available at an exponential rate, and the only way to keep the scheme going is to find an exponentially increasing amount of new cash. Tether doesn't have this issue. They don't pay interest at all, so in theory there's absolutely no reason they can't structure the thing to be fully backed at all times (whilst probably also making money from interest themselves on the cash-like instruments they use to back it).
- lamontcg 5y ago
  > Everyone cashing out of the stock market now is also being paid by the people cashing in now. That's not what a Ponzi scheme is. There's an underlying cash flow to the business you're buying and the stock is supposed to give you a claim to dividends paid out by the corporation from those cash flows. The fact that the stock market is acting more and more like a Ponzi scheme doesn't make crypto any less of one. We're just forgetting how the stock market is supposed to operate. Oh also Madoff's Ponzi was an investment scheme where he just produced above average return on investment. He always beat the market, so people invested. He dealt with charities which didn't extract money often, so he had more predictable withdrawals. He was operating like a mutual fund. He wasn't promising a fixed percentage interest, he just always beat the market claimed to never lose money.
- deleted 5y ago
  [deleted]
anm89 5y ago
copy pasted from a response to another person arguing the same fallacy, and the same point that several others are pointing out. me >This is the most egregious of misdefinitions of a ponzi scheme that gets thrown around because it literally fits the profile of every security and commodity in existence. You are describing the law of supply and demand in an open market place. other person >> Surely we can agree that every security in existence does not solely rely on inflows from new investors in order to pay out old ones. me >>> Surely we cannot agree on this. Explain to me what would happen if I was holding an Oz of gold or copper and suddenly the entire bid side of the market dissapeared (ie there was no inflows to the market). What is the new market clearing price for the commodity. 0. That's literally what buying a thing is(in all cases and for everything). It's a an asset inflow exchanged for an asset outflow. Now replace gold or copper with any equity. Let's assume one that doesnt pay a dividend not to complicate things. Literally nothing changes. The sale value of your equity is zero when there are zero inflows to the market.