19 ms·

Why I have zero faith in crypto venture capitalists

234 points by shoto_io 5y ago

WJW 5y ago
Would you say that the relation is... trustless?
- marvindanig 5y ago
  Exactly! I suspect most of the folks complaining about crypto space in general are 'brick and mortar' investors of a centralized web. These people invest only in their closed network, in people they meet face to face and "like" in general. I wouldn't put much weight on this whining really. Edit: Looks like I touched a raw nerve of some bay area folks. lol.
giansegato 5y ago
The VC model has always flirted with being a Ponzi scheme, but ultimately some startups _do_ make money somewhat consistently, so the model is risky but fair to retail investors. But a crypto project is not a traditional scalable company. It does not make money as platforms traditionally do. It's open source and distributed. I truly cannot understand how it differs from a huge Ponzi scheme.
- borrowcheckfml 5y ago
  I agree with you, but looking at what comes out of Silicon Valley these days, there is a fine line between "ponzi scheme" (in the broad sense) and "re-invest everything in growth and hope to get acquired". I'd push back that many traditional startups, most of which end up never being profitable but still exit in one way or another due to hype and investor relationships, are just as close to pump and dump schemes as many crypto projects are. It just isn't as obvious because the time scale is usually a bit longer. > But a crypto project is not a traditional scalable company Why is that true? There are DeFi crypto projects that are scalable companies with big revenue streams. Sure, the space is driven by speculation, but you can argue the same about Robinhood.
  - throwaaskjdfh 5y ago
    Cryptocurrencies, DeFi, and retail trading are all areas where more skilled traders take money from less skilled traders. These venues can be distinguished from a Ponzi scheme because the participants are traders in a market, not investors in a company or managed financial product.
    - borrowcheckfml 5y ago
      But I am referring to investing into a DeFi project as a VC (= receiving tokens), not trading in Defi. Why is that not equivalent to investing in Robinhood as a startup?
      - throwaaskjdfh 5y ago
        With that clarification I agree that it would be a Ponzi scheme. If the project is mainly accepting money from new buyers and routing it to early participants who are selling, then it's a Ponzi.
    - smt88 5y ago
      I agree with you generally and consider stock-picking to be gambling. But retail traders can use the markets to make bets on overall economic growth. Buying a stake in hundreds or thousands of public companies is a clear bet, and you actually do own something in a legal sense. With crypto trading, it's unclear what your bet is -- other than the continuation of the Ponzi scheme. You don't own anything, and the coin has no value as soon as people stop believing in it. If retail investors understood that nature of crypto, I'd be fine with them gambling on it. But most of them are tricked into believing there is underlying value in the coin when there actually isn't (see also: NFTs).
      - throwaaskjdfh 5y ago
        I agree; cryptocurrencies are a scam. But in general they're not Ponzis, with some exceptions e.g. the situation the parent poster describes where VC investors get "early coins" which are sold to later buyers.
- indigochill 5y ago
  In theory, a crypto project could provide value (not money, they're different things) to its users. For instance, there are experiments with distributed games where assets are NFTs. In theory, this provides the basis for independent games sharing unique assets among themselves. In practice, nobody's doing this (even those game devs who are minting assets as NFTs are keeping the assets to one game, making the whole exercise pointless) and it seems probable that nobody really wants it. But the point being I do believe theoretically there are "legitimate" applications where the decentralization of assets is useful. I just have yet to see an example in the wild (or even to imagine a concrete thing I could make where this would really be the case).
  - ganafagol 5y ago
    There is still no value over a trusted third party, keeping all this in a central database. These games you are talking about just agree on this third party and that's it. And they already do that. The third party is states backing traditional banking systems.
    - xur17 5y ago
      > There is still no value over a trusted third party, keeping all this in a central database. These games you are talking about just agree on this third party and that's it. There is value - with a trusted third party, you are "trusting" that the third party will stick around, won't block you, and won't arbitrarily change the rules on you.
      - arcticbull 5y ago
        And who hosts those assets? How does this not apply to them?
      - ganafagol 5y ago
        Same goes for all makers of those "independent games". If just one of those goes rogue, th system is void. You need trust in all of them, not just those that you are playing. Worse, if your game currency is a decentraliced ledger, then it's much harder to do something about the rogue participant. That's by design. If it's instead a central entity, they can kick out that party on a whim.
- ralusek 5y ago
  I think why people treat them differently comes down to informed consent. With a true Ponzi scheme, the managing investor makes you believe that they're doing something that they're not. You think you're investing in some underlying asset, but you're just buying out they previous wave of investors. With crypto/VC/normal stocks all having many characteristics in common with Ponzi schemes, at least the game is relatively well understood. For all of them, there are institutional investors capable of market manipulation, as well as the information and know-how so as to typically adjust their positions so that the majority of the people left holding the bag are retail investors.
  - MomoXenosaga 5y ago
    I challenge the notion that people who invest in crypto "understand the system". There is no regulation in this market to protect the fools from themselves and it shows.
runawaybottle 5y ago
Honestly, all these cryptos have to do is bake themselves into in-game currency for any video game. Fortnite crypto could be a multi billion dollar market. I would love to just buy an army in Starcraft, pillage your base and take your crypto, then sell it on Coinbase. If we are truly to live in a job-less world with basic income, I’m gonna need shit to do.
- deleted 5y ago
  [deleted]
- throwaway6734 5y ago
  Sounds like you want to play Eve Online
- indigochill 5y ago
  There are games that are thinking in this direction or are already implemented this way. For example: https://www.kotaku.com.au/2021/05/how-a-philippines-community-turned-to-an-nft-game-during-covid-19/ https://www.kotaku.com.au/2021/05/how-a-philippines-communit... But it's financially just like poker. Even at best, value isn't being generated, it's just being funneled from suckers to sharks (and the house).
- edent 5y ago
  Why does that require crypto though? Why not Euros, Dollars, Pounds? Or even XBox Live Points?
- thinkmassive 5y ago
  Or skip the middleman and awards BTC directly. This is what Zebedee has done with Infuse: https://zebedee.io/infuse https://zebedee.io/infuse They had an esports arena at the Bitcoin Conference in Miami last week. It was a lot of fun, and a successful proof of concept. I think we’ll start seeing a lot more events like this, and also see it expanded to other mainstream games in addition to CS:GO.
- deleted 5y ago
  [deleted]
- 5y ago
leifg 5y ago
It’s always hilarious to me how so many crypto/blockchain startups have words like “trust” and “transparency” written all over their landing pages. In reality you have an insane amount of fraud and shadiness going in order to increase some arbitrary token value.
- ericbarrett 5y ago
  I’ve always considered unregulated advertising claims to be a reflection of the weakness of the product: A food with “Quality” in the brand name is almost always the low-shelf cheap version. “Comfort” in a motel means you’ll have a cheap bed and noisy, rattling air conditioning. Etc. The unbridled crypto space is chock full of these signals.
  - barkingcat 5y ago
    It's like how many dictatorships have the word "Democratic" in their official country name.
    - redisman 5y ago
      Wait so you’re saying the coin “safeMoon” is neither safe or going to the moon?
    - zild3d 5y ago
      and of course the "united" states
      - arcticbull 5y ago
        That's an interesting one because when it began, it was much closer to the 'loosely affiliated states' but over time, it has become more tight-knit under regulatory and leadership frameworks. That's not to say there isn't a bunch of internal disagreements. IMO.
        koheripbal 5y ago
rvz 5y ago
For example look at the real price history of a VC funded token called "Internet Computer" [0] by selecting "ALL" on Coinbase. Out of no where on launch, it was listed on Coinbase and Binance already with the top 10 coins of the largest market capitalisations. Only VCs and angel investors with such connections to these exchanges could have made such a listing like that possible. After that, then came the VC dump with the price now at $59 - $60 for weeks with the bagholders entering at >$200 or >$400 on listing day. When I see charts like that, that is what you call a VC pump and dump. [0] https://www.coinbase.com/price/internet-computer https://www.coinbase.com/price/internet-computer
- ralston 5y ago
  Was just talking with friends yesterday about this - Internet Computer getting absolutely dumped by the VCs who pumped it so hard from the beginning. Once I saw that they were headquartered in the Bay, had their entire team in the Bay, and wanted to be the “everything for everyone” computer, that was kinda my sign that this was a scam.
  - artfulhippo 5y ago
    Internet Computer aka DFINITY is not a scam. The price action is fishy, but when you investigate the project’s vision, the technical architecture, the team behind it, and the community building on it, you’ll discover that it’s perhaps the most serious, innovative, and ambitious system out there.
    - zajd 5y ago
      lol
    - vgatherps 5y ago
      I agree that people often use scam to mean “it’s not worth what people think it is”, “this is going to be vaporware”, “this doesn’t have much real world use”. I expect that the folks at DFINITY are actually trying to build something. But it’s a little beside the point. I’ve seen some of how the sausage was made in creating and listing new crypto projects, and it’s pretty ugly. There’s a lot of focus on pumping, shilling each other (all while putting in a facade of independence), “tokenomics” which is 50% euphemism for Ponzi scheme. There are likely scam-like qualities to the way that this was listed, who was involved in providing early liquidity / pricing (the initial listing price/pump matters a lot in keeping the price stable above a certain value), and a suite of lesser benefits the inner crowd get. I left before ICP so I don’t have any facts, but what I saw with projects before that make me confident the exact same thing happened.
pavlov 5y ago
Venture capitalists are in the “buy low, sell high” business. Their motivation is not “is this thing I’m buying going to be useful to someone?” (although that’s a nice side effect that gives them something to talk about at parties.) Rather it’s: “Can I offload this thing I bought with exclusive access to someone else in a reasonable time horizon?” Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) If there’s a good chance of exit in 3-5 years, it makes absolutely no difference if the project never ships anything.
- dweekly 5y ago
  I think you may have confused venture capital with hedge funds. The overwhelming majority of VC funds are set up with a 10y time horizon and option to extend to 15y. They make their investments in the first 2-3y of the fund and then hope to earn their carry by "returning the fund". For a typical mid-sized $200m fund this means turning one of their $5-10m Series A checks into a liquidity event far above $200m (valuing the company in turn at over a billion to return this amount to the firm), in other words counting on a >>20-40x return for the lucky breakout in their portfolio and taking the others mostly as a (relative) loss. While some secondary activity exists, it is rare for a regular fund to manage to achieve these kinds of multiples in a secondary sale versus an IPO or acquisition. And an acquisition that exits after 3-5 years is extremely unlikely to have this kind of multiple -- and consequently those are not deals in which the partners will earn carry. (And going from Series A to IPO in 3-5 years is extremely unusual - median time to IPO is 9-11 years, though SPACs may have at least temporarily changed some of the calculus on this.) So no, I don't know of any VCs who target companies that hope to be bought in 3-5 years and don't care if the company ships anything.
- rvz 5y ago
  > Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) It was not really an IPO, its was actually a direct listing and it was planned when BTC price action was breaking another all time high. Upon listing day, it is the same cycle of the VCs selling at the top with the retail investors bag holding $375 - $425 which I continuously warned against buying into the hype. [0] It has never recovered over those prices and is sitting at around $225 - $228. When everyone and their goldfishes and the media are hyping everything at the same time during the build up to an angel or VC funded project they will unload a large amount of their investment onto the retail trader at expensive prices. You lose nothing by ignoring the hype. This is how the VCs always keep winning. [0] https://news.ycombinator.com/item?id=26826826 https://news.ycombinator.com/item?id=26826826
steveBK123 5y ago
I find crypto super interesting and have dipped my toes in with some small real money just to force myself to try out different products. That said, so far, almost 10 years in, there really are not a lot of real world use cases. Sure there are glorified POCs of things that could potentially lead in the direction of real world use cases. But most of these products/tokens are just extremely meta. Tokens you get paid/pay for when you trade/borrow/lend/invest/stake your other tokens. Derivative tokens which allow you to get exposure to underlying tokenX on chainY. The transactions are slow, or fast.. cheap or expensive, good luck understanding which in advance. It doesn't feel like we are any closer to normal people using it for normal real world transactions/finance. Right now it just feels like pump&dump/frontrunning/private placement games on each new token before it hits mainstream, completely nothing to do with what the alleged business behind that token is supposed to be doing or its prospects of success. It's just a game of getting hold of difficult to acquire tokens before they hit the more normie venues like Binance, Coinbase, etc.
- borrowcheckfml 5y ago
  I think of it like this. Various tokens give you certain types of exposures with different risk profiles. Yields are so high because of the risk. This really isn't so different from the centralized financial system where we have built complex structures (exotic derivatives, structured products, etc) to give you certain types of exposures. The difference is that DeFi is globally accessible and permissionless. Even if DeFi never moves beyond these "financial speculation" use cases, if it replaces what's currently centralized in government-regulated financial markets, that's a multi-trillion dollar opportunity. I'm doubtful we'll see any retail use cases or mass option beyond speculation soon, just like your average retail user does not buy exotic derivatives. That doesn't mean it's not useful.
  - slg 5y ago
    Except those "exotic derivatives, structured products, etc" do have real investments at the heart of them. What is at the heart of those "DeFi" investments? It seems to mostly be criminal and criminal-like behavior (this includes transferring money in ways the local government doesn't approve of which can admittedly be great if the local government is oppressive).
127 5y ago
VC for crypto by definition is a pre-mine, so yeah...
- vmception 5y ago
  It’s usually a convertible security that can convert to claims of tokens and/or equity Sometimes it is an investment directly for a premine Other time it is a secondary offering of the issuing organizations tokens Your statement is reductive only because most everything in the market involves pre generated stakes in the network. The market tolerates that because it has since the 1600s joint stock company. Crypto ideology can just be dropped, there is no standard that makes a crypto better just because it can’t be purchased to launch.
iSnow 5y ago
So basically the first example is of a coin that was never launched and the chart is from some wildcat clone someone else launched. The second one took 3 weeks to reach peg but then did. IDK, I DO think there's too much money flowing into crypto startups lately, but the article is about as poor as the dd of some in the space.
- the_sleaze_ 5y ago
  Agreed. "Why didn't anyone pay attention to me when I @'d them ??? UGH all crypto VCs are bad!!!" VCs are shady and water is wet.
curation 5y ago
Crypto is the next reframing of the repo market regular cycle of failures. Virtual money is not new, it's what the eurodollar system is (US dollars outside of the US also called shadow bank system that know one knows the value of). The offer on hand will be that blockchain will help keep track of the liquidity and rehypothecation; in reality it is yet another patching of an economic system that more closely resembles feudalism than capitalism. (Perry Anderson, Jeffrey P. Snider, Yanis Varofakis).
vmception 5y ago
The author has faith in their ability to make money He has no faith in seeing their presence as validation in the project That’s an accurate view and he shouldn’t limit that to crypto VCs, its the same in other venture capital. Crypto just helped lower the distortion field, while non-crypto VCs just still have better marketing unbeknownst to him They all get discounted and preferential liquidity if they’re any good at deal making. That’s what you hire a VC to do The crypto VCs are absolutely crushing it in deal flow, some of the things they negotiate are phenomenal such as perpetual block rewards that never get diluted, while node operates are all competing amongst each other for their own share. Fund performance decks are way below reality as it is very dependent on the limited partner’s time in the fund, unlike in a liquid fund strategy a private equity investor only has exposure to the positions and contracts they got exposure to from after they joined the fund and exited the fund.
- shoto_io 5y ago
  I think that’s a very good comment. I don’t understand all parts of it though. What do you mean by - discounted and preferential liquidity? - perpetual block? - the entire last sentence? I’d love to get a deeper understanding
  - vmception 5y ago
    > - discounted and preferential liquidity? Private Equity (PE) investors, of which Venture Capital (VC) firms are a subset, typically buy stakes in organizations that are different and better than what anyone else is able to own. Founders and employees in startups typically get common stock, VC firms typically get preferred stock, a completely separate class of shares that has more privileges than common stock. Even investors in the public markets after a stock market listing only get access to common stock. Not only do PE/VC get preferred stock, they often wind up with this exposure (whether it is via preferred stock or another instrument) at a price much lower than the current agreed upon or price derived valuation. Preferred stock further mitigate almost all risk by having covenants (contractual conditions) such "liquidity preferences", meaning that there are many events where a preferred stock holder gets paid first, meeting the amount of their initial investment or several multiples of their initial investment. Even if exposure via preferred stock is not initially arranged, similar outcomes are entered into via convertible notes. This is a form of lending to an organization, giving them capital with no initial change to the cap table or share structure, which then converts at a later date to shares at almost any price. This is a way to circumvent buying in at market price as the convertible note acts like an options contract negotiated sometimes years in advance. Analogous to a loan shark, almost any arrangement can be pledged and it can be very lucrative such that the loan shark almost never loses. Now, these same concepts translate into the crypto market. The speculators are taking up all the spotlight but are playing a very different game, just like in the equities and bond markets the speculators are only providing liquidity for the funds to dump on them. And occasionally complaining the few times they notice, such as when a founder sells. The founder takes all the heat, while the VC/PE and Hedge funds get none and only profits. (None of them should get any heat or attention, or it should be evenly applied or the speculators should have considered the possibility of that and chosen not to trade that asset) > - perpetual block [rewards]? This is a concept somewhat unique to crypto currencies. Although it exists in currencies and equities under different names. It mostly means perpetual issuance, where more of the asset is created and this is exchangeable for cash as long as the market continues to post liquidity - or as long as the market keeps putting up cash to buy more of the asset. But for a concrete example lets look at Helium. Google Ventures invested in crypto asset project Helium. Their private equity deal gives them the right to the block reward. Like the Bitcoin network, the Helium network is a blockchain that appends new blocks to the chain, not dissimilar to additional nodes in a linked list. Like, Bitcoin, new Helium network uses the addition of blocks to also distribute new Helium tokens to the people that helped validate the existence of the new block. This is called the block reward. Like Bitcoin, Helium network participants are competing for the block reward and this competitive process decreases how much of the block reward any single participant receives. Unlike Bitcoin, the block reward is also split with the private equity investors. The organization needed capital after pivoting several times before creating the Helium blockchain network, and nobody else would give them the time of day. So there are two portions of the block reward, one that people compete for and split amongst themselves, and a separate portion that is simply given to the private equity investors who maintain the same split forever (well till the year 2070 in this specific case), as there are no more private equity investors. Deals like this exist across the entire space. > - the entire last sentence? This was hard for me to articulate. But let's say you run across a VC / PE firm pitch deck, it might say "we've returned 500% in capital over X years" with a nice line chart showing how it beats the S&P500 and even Bitcoin price over the same time period. This might be their only way of showing broad relative accounting across the whole fund, but any particular investor in the fund actually might have much higher returns. 8,000% perhaps? This is due to the nature of the accounting. If a fund invested in Facebook in 2010, and you knew their IPO was going to happen in 2012 and make the fund billions of dollars, there is no way for you to invest into the fund in 2011 and earn that appreciation. If you invested in 2011 you would only get exposure to things the fund invested into after 2011, you wouldn't have exposure to the 2010 positions. The fund itself will have your capital and report a greater amount of assets under management (AUM), and by 2013, after the Facebook IPO, this greater AUM reduces what the whole fund can report as "performance". So you really need to understand the nature of the deal flow to determine if it is a good place to park your capital. You are more so hiring people to make deals, which is very different than hoping for some "trading genius" to analyze publicly traded markets full time. In a liquid fund, all the money is pooled into the same strategy that is ultimately priced at the whim of the market, so in those kinds of funds the performance is more easily seen in a pitch deck.
latchkey 5y ago
I concur with this article quite a bit, but let's also talk about solutions instead of just problems. Projects need to get funded to pay people salaries. The current VC alternative solution to this is to form a DAO. Recent example of a fairly successful DeFi DAO: https://medium.com/badgerdao/badgers-in-the-sett-a-dao-treasury-retrospective-volume-i-29ab5aa96048 https://medium.com/badgerdao/badgers-in-the-sett-a-dao-treas...
- wmf 5y ago
  Maybe if the SEC came down on every VC who "unintentionally" pump-and-dumps crypto...
IAmGraydon 5y ago
Everyone wants to talk about the future of crypto in terms of how it can be used. Not enough people are talking about the fact that a single breakthrough in computing could undo the encryption that these currencies are reliant upon, instantly driving the value to zero. This is a vulnerability that does not have an analogue in any other currencies, securities or stores of wealth. Because of that, crypto is and will be an extremely high-risk asset to hold. It’s a time bomb. Like all things of this nature, everyone will ignore it until it happens, which means that crypto will be incorrectly priced by markets until then.
- DethNinja 5y ago
  I don’t get this argument especially here in the hackernews; 1. If they can crack the cryptocurrencies then it means that they can easily crack crypto of online banking systems as well, entire world would crash regardless of whichever asset you hold. 2. There are already quantum resistant crypto algorithms, crypto currencies can easily switch to them once it is clear that current crypto algorithms can be cracked. It would mean that people who did transactions between the detection period would probably lose their money but it wouldn’t be the end of crypto currencies.
  - dehrmann 5y ago
    > If they can crack the cryptocurrencies then it means that they can easily crack crypto of online banking systems as well They're very different because the blockchain is public. Getting access to a bank's database touches a lot more systems and algorithms. Even something less interesting like intercepting web traffic to (or between) banks isn't interesting because you need physical access to the medium and you'd need a hole in TLS. Like Bitcoin, TLS uses SHA-256, but breaking it probably doesn't give you access to any plaintext, and you could force a downgrade to TLS 1.2 to use MD5-SHA-1. This is only per-connection; the Bitcoin ledger is set in stone.
  - xwolfi 5y ago
    Well hacking a bank doesn't give legal value to your transfer order, a simple employee could revert by calling the target bank on the phone under threat of pursuit if no reversal. Bank account are not protected by cryptography, they're protected by law. What you want is bitcoin to have the same, not say that since a banks' https website could be hacked, let's do nothing about the main weakness of crypto. But anyway the point is moot: it's certain developers would upgrade the network with time as new events unfold.
barnabee 5y ago
I’m not sure this article understands how VCs in general often operate. I’ve met many VCs who will invest in a team with barely an idea, or where they have a lot of scepticism about the idea, because they believe the team have a sufficiently high chance of figuring it out, or executing and scaling, and generating the outsized returns they need — whether with the original idea, a heavily evolved or refined version of it, or a complete “pivot”. The lack of rigour around the specifics of the idea, the tech or maths behind it, etc. is not new or unique to crypto VCs (look at some of the nonsense that gets funded!). What’s more unusual is that anyone can often read the same papers and look at the code and decide the idea is dumb/illegal/won’t work. We can’t usually see what it is that made the VC invest, though. But sure, if you’re looking for VC funding as a signal of great tech or an obvious market need or problem being solved, you have to at least be really picky about which VCs you follow and how much you read into their pronouncements (some are surely better than others, though). Also, those projects that do have good tech and a viable product/solution will almost certainly benefit from the support of top quality VCs.
- dehrmann 5y ago
  At a per-investment level, you have a point, but in aggregate, none of the crypto startups have done much beyond creating digital trading cards for speculation and illegal transactions, and most have failed to even do that. It's the premise of the fund, so it's not like they have a choice, but it's almost a meta bet on the space. Despite the space having produced so little, there are smart people who will figure out something for the space, and then the team you bet on will execute on it.
jl2718 5y ago
Just wait until he sees how much BS is baked into startups that don’t have to expose their entire codebase to the world, get independently audited, etc.
BTCOG 5y ago
All marketing is a scam to sell something. The only cryptocurrency that exists is Bitcoin. All else below it, including Ethereum are scams. They are not decentralized, and anything using Proof of Stake is just as bad as a fiat currency. Every banker here commenting as usual about how Bitcoin is boiling the oceans and only for criminals will feel free to censor me and downvote my post but should also realize they are a fake individual who parrots for an oppressive state. There is no future without Bitcoin. The US is now at 5% inflation and rising. Keep saving those paper IOU's and we'll talk again in a few years.
Animats 5y ago
The same author also has an article on Tether.[1] Tether remains scary. Tether has a market cap of US $62 billion. They're approaching the market cap of General Motors, and are up there with big mutual funds. And nobody has any idea where the money is being stored. The "commercial paper" story does not hold water. If Tether really had that much commercial paper, Tether would be the 7th largest buyer of it. Since commercial paper is short-term, a few months at most, they'd have to have a busy trading desk rolling over their commercial paper. They don't. The big players in commercial paper are not seeing any Tether activity.[2] Uh oh. Their "commercial paper" is probably just notes from other crypto companies. Or their own crypto company. [1] https://bennettftomlin.com/2021/06/10/how-big-is-tether/ https://bennettftomlin.com/2021/06/10/how-big-is-tether/ [2] https://www.ft.com/content/342966af-98dc-4b48-b997-38c00804270a https://www.ft.com/content/342966af-98dc-4b48-b997-38c008042...
Black101 5y ago
Venture capitalists in general are pretty clueless...
Growling_owl 5y ago
Crypto VC understand that how people feel about something is just important as its utility. People have a deeply rooted fear of inflation, they are afraid of being diluted in their societal standing. They also have a strong preference for deflation which allows them to do work once and then see their past work appreciate in value. Enter Bitcoin. Bitcoin wins because it's giving to the market what existing players (meaning governments) won't do: a deflationary currency. Governments won't give people a deflationary currency because they project what is going to happen with a deflationary currency and they don't like the total chaos which would mean for the country, but the real world doesn't work that way, the population wants to try and see for themselves what are these outcomes, and if they are less taxing than inflation.
Forrest7778 5y ago
Wonderful blog by Bennett! What's also very fascinating is how fast the scammers have caught up. https://reddit.com/r/cryptomoonshots https://reddit.com/r/cryptomoonshots Enjoy the read

234 points by shoto_io 5y ago

WJW 5y ago

Would you say that the relation is... trustless?

marvindanig 5y ago
Exactly! I suspect most of the folks complaining about crypto space in general are 'brick and mortar' investors of a centralized web. These people invest only in their closed network, in people they meet face to face and "like" in general. I wouldn't put much weight on this whining really. Edit: Looks like I touched a raw nerve of some bay area folks. lol.

giansegato 5y ago

The VC model has always flirted with being a Ponzi scheme, but ultimately some startups _do_ make money somewhat consistently, so the model is risky but fair to retail investors. But a crypto project is not a traditional scalable company. It does not make money as platforms traditionally do. It's open source and distributed. I truly cannot understand how it differs from a huge Ponzi scheme.

borrowcheckfml 5y ago
I agree with you, but looking at what comes out of Silicon Valley these days, there is a fine line between "ponzi scheme" (in the broad sense) and "re-invest everything in growth and hope to get acquired". I'd push back that many traditional startups, most of which end up never being profitable but still exit in one way or another due to hype and investor relationships, are just as close to pump and dump schemes as many crypto projects are. It just isn't as obvious because the time scale is usually a bit longer. > But a crypto project is not a traditional scalable company Why is that true? There are DeFi crypto projects that are scalable companies with big revenue streams. Sure, the space is driven by speculation, but you can argue the same about Robinhood.
- throwaaskjdfh 5y ago
  Cryptocurrencies, DeFi, and retail trading are all areas where more skilled traders take money from less skilled traders. These venues can be distinguished from a Ponzi scheme because the participants are traders in a market, not investors in a company or managed financial product.
  - borrowcheckfml 5y ago
    But I am referring to investing into a DeFi project as a VC (= receiving tokens), not trading in Defi. Why is that not equivalent to investing in Robinhood as a startup?
    - throwaaskjdfh 5y ago
      With that clarification I agree that it would be a Ponzi scheme. If the project is mainly accepting money from new buyers and routing it to early participants who are selling, then it's a Ponzi.
  - smt88 5y ago
    I agree with you generally and consider stock-picking to be gambling. But retail traders can use the markets to make bets on overall economic growth. Buying a stake in hundreds or thousands of public companies is a clear bet, and you actually do own something in a legal sense. With crypto trading, it's unclear what your bet is -- other than the continuation of the Ponzi scheme. You don't own anything, and the coin has no value as soon as people stop believing in it. If retail investors understood that nature of crypto, I'd be fine with them gambling on it. But most of them are tricked into believing there is underlying value in the coin when there actually isn't (see also: NFTs).
    - throwaaskjdfh 5y ago
      I agree; cryptocurrencies are a scam. But in general they're not Ponzis, with some exceptions e.g. the situation the parent poster describes where VC investors get "early coins" which are sold to later buyers.
indigochill 5y ago
In theory, a crypto project could provide value (not money, they're different things) to its users. For instance, there are experiments with distributed games where assets are NFTs. In theory, this provides the basis for independent games sharing unique assets among themselves. In practice, nobody's doing this (even those game devs who are minting assets as NFTs are keeping the assets to one game, making the whole exercise pointless) and it seems probable that nobody really wants it. But the point being I do believe theoretically there are "legitimate" applications where the decentralization of assets is useful. I just have yet to see an example in the wild (or even to imagine a concrete thing I could make where this would really be the case).
- ganafagol 5y ago
  There is still no value over a trusted third party, keeping all this in a central database. These games you are talking about just agree on this third party and that's it. And they already do that. The third party is states backing traditional banking systems.
  - xur17 5y ago
    > There is still no value over a trusted third party, keeping all this in a central database. These games you are talking about just agree on this third party and that's it. There is value - with a trusted third party, you are "trusting" that the third party will stick around, won't block you, and won't arbitrarily change the rules on you.
    - arcticbull 5y ago
      And who hosts those assets? How does this not apply to them?
    - ganafagol 5y ago
      Same goes for all makers of those "independent games". If just one of those goes rogue, th system is void. You need trust in all of them, not just those that you are playing. Worse, if your game currency is a decentraliced ledger, then it's much harder to do something about the rogue participant. That's by design. If it's instead a central entity, they can kick out that party on a whim.
ralusek 5y ago
I think why people treat them differently comes down to informed consent. With a true Ponzi scheme, the managing investor makes you believe that they're doing something that they're not. You think you're investing in some underlying asset, but you're just buying out they previous wave of investors. With crypto/VC/normal stocks all having many characteristics in common with Ponzi schemes, at least the game is relatively well understood. For all of them, there are institutional investors capable of market manipulation, as well as the information and know-how so as to typically adjust their positions so that the majority of the people left holding the bag are retail investors.
- MomoXenosaga 5y ago
  I challenge the notion that people who invest in crypto "understand the system". There is no regulation in this market to protect the fools from themselves and it shows.

runawaybottle 5y ago

Honestly, all these cryptos have to do is bake themselves into in-game currency for any video game. Fortnite crypto could be a multi billion dollar market. I would love to just buy an army in Starcraft, pillage your base and take your crypto, then sell it on Coinbase. If we are truly to live in a job-less world with basic income, I’m gonna need shit to do.

deleted 5y ago
[deleted]
throwaway6734 5y ago
Sounds like you want to play Eve Online
indigochill 5y ago
There are games that are thinking in this direction or are already implemented this way. For example: https://www.kotaku.com.au/2021/05/how-a-philippines-community-turned-to-an-nft-game-during-covid-19/ https://www.kotaku.com.au/2021/05/how-a-philippines-communit... But it's financially just like poker. Even at best, value isn't being generated, it's just being funneled from suckers to sharks (and the house).
edent 5y ago
Why does that require crypto though? Why not Euros, Dollars, Pounds? Or even XBox Live Points?
thinkmassive 5y ago
Or skip the middleman and awards BTC directly. This is what Zebedee has done with Infuse: https://zebedee.io/infuse https://zebedee.io/infuse They had an esports arena at the Bitcoin Conference in Miami last week. It was a lot of fun, and a successful proof of concept. I think we’ll start seeing a lot more events like this, and also see it expanded to other mainstream games in addition to CS:GO.
deleted 5y ago
[deleted]
5y ago

leifg 5y ago

It’s always hilarious to me how so many crypto/blockchain startups have words like “trust” and “transparency” written all over their landing pages. In reality you have an insane amount of fraud and shadiness going in order to increase some arbitrary token value.

ericbarrett 5y ago
I’ve always considered unregulated advertising claims to be a reflection of the weakness of the product: A food with “Quality” in the brand name is almost always the low-shelf cheap version. “Comfort” in a motel means you’ll have a cheap bed and noisy, rattling air conditioning. Etc. The unbridled crypto space is chock full of these signals.
- barkingcat 5y ago
  It's like how many dictatorships have the word "Democratic" in their official country name.
  - redisman 5y ago
    Wait so you’re saying the coin “safeMoon” is neither safe or going to the moon?
  - zild3d 5y ago
    and of course the "united" states
    - arcticbull 5y ago
      That's an interesting one because when it began, it was much closer to the 'loosely affiliated states' but over time, it has become more tight-knit under regulatory and leadership frameworks. That's not to say there isn't a bunch of internal disagreements. IMO.
      - koheripbal 5y ago

rvz 5y ago

For example look at the real price history of a VC funded token called "Internet Computer" [0] by selecting "ALL" on Coinbase. Out of no where on launch, it was listed on Coinbase and Binance already with the top 10 coins of the largest market capitalisations. Only VCs and angel investors with such connections to these exchanges could have made such a listing like that possible. After that, then came the VC dump with the price now at $59 - $60 for weeks with the bagholders entering at >$200 or >$400 on listing day. When I see charts like that, that is what you call a VC pump and dump. [0] https://www.coinbase.com/price/internet-computer https://www.coinbase.com/price/internet-computer

ralston 5y ago
Was just talking with friends yesterday about this - Internet Computer getting absolutely dumped by the VCs who pumped it so hard from the beginning. Once I saw that they were headquartered in the Bay, had their entire team in the Bay, and wanted to be the “everything for everyone” computer, that was kinda my sign that this was a scam.
- artfulhippo 5y ago
  Internet Computer aka DFINITY is not a scam. The price action is fishy, but when you investigate the project’s vision, the technical architecture, the team behind it, and the community building on it, you’ll discover that it’s perhaps the most serious, innovative, and ambitious system out there.
  - zajd 5y ago
    lol
  - vgatherps 5y ago
    I agree that people often use scam to mean “it’s not worth what people think it is”, “this is going to be vaporware”, “this doesn’t have much real world use”. I expect that the folks at DFINITY are actually trying to build something. But it’s a little beside the point. I’ve seen some of how the sausage was made in creating and listing new crypto projects, and it’s pretty ugly. There’s a lot of focus on pumping, shilling each other (all while putting in a facade of independence), “tokenomics” which is 50% euphemism for Ponzi scheme. There are likely scam-like qualities to the way that this was listed, who was involved in providing early liquidity / pricing (the initial listing price/pump matters a lot in keeping the price stable above a certain value), and a suite of lesser benefits the inner crowd get. I left before ICP so I don’t have any facts, but what I saw with projects before that make me confident the exact same thing happened.

pavlov 5y ago

Venture capitalists are in the “buy low, sell high” business. Their motivation is not “is this thing I’m buying going to be useful to someone?” (although that’s a nice side effect that gives them something to talk about at parties.) Rather it’s: “Can I offload this thing I bought with exclusive access to someone else in a reasonable time horizon?” Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) If there’s a good chance of exit in 3-5 years, it makes absolutely no difference if the project never ships anything.

dweekly 5y ago
I think you may have confused venture capital with hedge funds. The overwhelming majority of VC funds are set up with a 10y time horizon and option to extend to 15y. They make their investments in the first 2-3y of the fund and then hope to earn their carry by "returning the fund". For a typical mid-sized $200m fund this means turning one of their $5-10m Series A checks into a liquidity event far above $200m (valuing the company in turn at over a billion to return this amount to the firm), in other words counting on a >>20-40x return for the lucky breakout in their portfolio and taking the others mostly as a (relative) loss. While some secondary activity exists, it is rare for a regular fund to manage to achieve these kinds of multiples in a secondary sale versus an IPO or acquisition. And an acquisition that exits after 3-5 years is extremely unlikely to have this kind of multiple -- and consequently those are not deals in which the partners will earn carry. (And going from Series A to IPO in 3-5 years is extremely unusual - median time to IPO is 9-11 years, though SPACs may have at least temporarily changed some of the calculus on this.) So no, I don't know of any VCs who target companies that hope to be bought in 3-5 years and don't care if the company ships anything.
rvz 5y ago
> Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) It was not really an IPO, its was actually a direct listing and it was planned when BTC price action was breaking another all time high. Upon listing day, it is the same cycle of the VCs selling at the top with the retail investors bag holding $375 - $425 which I continuously warned against buying into the hype. [0] It has never recovered over those prices and is sitting at around $225 - $228. When everyone and their goldfishes and the media are hyping everything at the same time during the build up to an angel or VC funded project they will unload a large amount of their investment onto the retail trader at expensive prices. You lose nothing by ignoring the hype. This is how the VCs always keep winning. [0] https://news.ycombinator.com/item?id=26826826 https://news.ycombinator.com/item?id=26826826

steveBK123 5y ago

I find crypto super interesting and have dipped my toes in with some small real money just to force myself to try out different products. That said, so far, almost 10 years in, there really are not a lot of real world use cases. Sure there are glorified POCs of things that could potentially lead in the direction of real world use cases. But most of these products/tokens are just extremely meta. Tokens you get paid/pay for when you trade/borrow/lend/invest/stake your other tokens. Derivative tokens which allow you to get exposure to underlying tokenX on chainY. The transactions are slow, or fast.. cheap or expensive, good luck understanding which in advance. It doesn't feel like we are any closer to normal people using it for normal real world transactions/finance. Right now it just feels like pump&dump/frontrunning/private placement games on each new token before it hits mainstream, completely nothing to do with what the alleged business behind that token is supposed to be doing or its prospects of success. It's just a game of getting hold of difficult to acquire tokens before they hit the more normie venues like Binance, Coinbase, etc.

borrowcheckfml 5y ago
I think of it like this. Various tokens give you certain types of exposures with different risk profiles. Yields are so high because of the risk. This really isn't so different from the centralized financial system where we have built complex structures (exotic derivatives, structured products, etc) to give you certain types of exposures. The difference is that DeFi is globally accessible and permissionless. Even if DeFi never moves beyond these "financial speculation" use cases, if it replaces what's currently centralized in government-regulated financial markets, that's a multi-trillion dollar opportunity. I'm doubtful we'll see any retail use cases or mass option beyond speculation soon, just like your average retail user does not buy exotic derivatives. That doesn't mean it's not useful.
- slg 5y ago
  Except those "exotic derivatives, structured products, etc" do have real investments at the heart of them. What is at the heart of those "DeFi" investments? It seems to mostly be criminal and criminal-like behavior (this includes transferring money in ways the local government doesn't approve of which can admittedly be great if the local government is oppressive).

127 5y ago

VC for crypto by definition is a pre-mine, so yeah...

vmception 5y ago
It’s usually a convertible security that can convert to claims of tokens and/or equity Sometimes it is an investment directly for a premine Other time it is a secondary offering of the issuing organizations tokens Your statement is reductive only because most everything in the market involves pre generated stakes in the network. The market tolerates that because it has since the 1600s joint stock company. Crypto ideology can just be dropped, there is no standard that makes a crypto better just because it can’t be purchased to launch.

iSnow 5y ago

So basically the first example is of a coin that was never launched and the chart is from some wildcat clone someone else launched. The second one took 3 weeks to reach peg but then did. IDK, I DO think there's too much money flowing into crypto startups lately, but the article is about as poor as the dd of some in the space.

the_sleaze_ 5y ago
Agreed. "Why didn't anyone pay attention to me when I @'d them ??? UGH all crypto VCs are bad!!!" VCs are shady and water is wet.

curation 5y ago

Crypto is the next reframing of the repo market regular cycle of failures. Virtual money is not new, it's what the eurodollar system is (US dollars outside of the US also called shadow bank system that know one knows the value of). The offer on hand will be that blockchain will help keep track of the liquidity and rehypothecation; in reality it is yet another patching of an economic system that more closely resembles feudalism than capitalism. (Perry Anderson, Jeffrey P. Snider, Yanis Varofakis).

vmception 5y ago

The author has faith in their ability to make money He has no faith in seeing their presence as validation in the project That’s an accurate view and he shouldn’t limit that to crypto VCs, its the same in other venture capital. Crypto just helped lower the distortion field, while non-crypto VCs just still have better marketing unbeknownst to him They all get discounted and preferential liquidity if they’re any good at deal making. That’s what you hire a VC to do The crypto VCs are absolutely crushing it in deal flow, some of the things they negotiate are phenomenal such as perpetual block rewards that never get diluted, while node operates are all competing amongst each other for their own share. Fund performance decks are way below reality as it is very dependent on the limited partner’s time in the fund, unlike in a liquid fund strategy a private equity investor only has exposure to the positions and contracts they got exposure to from after they joined the fund and exited the fund.

shoto_io 5y ago
I think that’s a very good comment. I don’t understand all parts of it though. What do you mean by - discounted and preferential liquidity? - perpetual block? - the entire last sentence? I’d love to get a deeper understanding
- vmception 5y ago
  > - discounted and preferential liquidity? Private Equity (PE) investors, of which Venture Capital (VC) firms are a subset, typically buy stakes in organizations that are different and better than what anyone else is able to own. Founders and employees in startups typically get common stock, VC firms typically get preferred stock, a completely separate class of shares that has more privileges than common stock. Even investors in the public markets after a stock market listing only get access to common stock. Not only do PE/VC get preferred stock, they often wind up with this exposure (whether it is via preferred stock or another instrument) at a price much lower than the current agreed upon or price derived valuation. Preferred stock further mitigate almost all risk by having covenants (contractual conditions) such "liquidity preferences", meaning that there are many events where a preferred stock holder gets paid first, meeting the amount of their initial investment or several multiples of their initial investment. Even if exposure via preferred stock is not initially arranged, similar outcomes are entered into via convertible notes. This is a form of lending to an organization, giving them capital with no initial change to the cap table or share structure, which then converts at a later date to shares at almost any price. This is a way to circumvent buying in at market price as the convertible note acts like an options contract negotiated sometimes years in advance. Analogous to a loan shark, almost any arrangement can be pledged and it can be very lucrative such that the loan shark almost never loses. Now, these same concepts translate into the crypto market. The speculators are taking up all the spotlight but are playing a very different game, just like in the equities and bond markets the speculators are only providing liquidity for the funds to dump on them. And occasionally complaining the few times they notice, such as when a founder sells. The founder takes all the heat, while the VC/PE and Hedge funds get none and only profits. (None of them should get any heat or attention, or it should be evenly applied or the speculators should have considered the possibility of that and chosen not to trade that asset) > - perpetual block [rewards]? This is a concept somewhat unique to crypto currencies. Although it exists in currencies and equities under different names. It mostly means perpetual issuance, where more of the asset is created and this is exchangeable for cash as long as the market continues to post liquidity - or as long as the market keeps putting up cash to buy more of the asset. But for a concrete example lets look at Helium. Google Ventures invested in crypto asset project Helium. Their private equity deal gives them the right to the block reward. Like the Bitcoin network, the Helium network is a blockchain that appends new blocks to the chain, not dissimilar to additional nodes in a linked list. Like, Bitcoin, new Helium network uses the addition of blocks to also distribute new Helium tokens to the people that helped validate the existence of the new block. This is called the block reward. Like Bitcoin, Helium network participants are competing for the block reward and this competitive process decreases how much of the block reward any single participant receives. Unlike Bitcoin, the block reward is also split with the private equity investors. The organization needed capital after pivoting several times before creating the Helium blockchain network, and nobody else would give them the time of day. So there are two portions of the block reward, one that people compete for and split amongst themselves, and a separate portion that is simply given to the private equity investors who maintain the same split forever (well till the year 2070 in this specific case), as there are no more private equity investors. Deals like this exist across the entire space. > - the entire last sentence? This was hard for me to articulate. But let's say you run across a VC / PE firm pitch deck, it might say "we've returned 500% in capital over X years" with a nice line chart showing how it beats the S&P500 and even Bitcoin price over the same time period. This might be their only way of showing broad relative accounting across the whole fund, but any particular investor in the fund actually might have much higher returns. 8,000% perhaps? This is due to the nature of the accounting. If a fund invested in Facebook in 2010, and you knew their IPO was going to happen in 2012 and make the fund billions of dollars, there is no way for you to invest into the fund in 2011 and earn that appreciation. If you invested in 2011 you would only get exposure to things the fund invested into after 2011, you wouldn't have exposure to the 2010 positions. The fund itself will have your capital and report a greater amount of assets under management (AUM), and by 2013, after the Facebook IPO, this greater AUM reduces what the whole fund can report as "performance". So you really need to understand the nature of the deal flow to determine if it is a good place to park your capital. You are more so hiring people to make deals, which is very different than hoping for some "trading genius" to analyze publicly traded markets full time. In a liquid fund, all the money is pooled into the same strategy that is ultimately priced at the whim of the market, so in those kinds of funds the performance is more easily seen in a pitch deck.

latchkey 5y ago

I concur with this article quite a bit, but let's also talk about solutions instead of just problems. Projects need to get funded to pay people salaries. The current VC alternative solution to this is to form a DAO. Recent example of a fairly successful DeFi DAO: https://medium.com/badgerdao/badgers-in-the-sett-a-dao-treasury-retrospective-volume-i-29ab5aa96048 https://medium.com/badgerdao/badgers-in-the-sett-a-dao-treas...

wmf 5y ago
Maybe if the SEC came down on every VC who "unintentionally" pump-and-dumps crypto...

IAmGraydon 5y ago

Everyone wants to talk about the future of crypto in terms of how it can be used. Not enough people are talking about the fact that a single breakthrough in computing could undo the encryption that these currencies are reliant upon, instantly driving the value to zero. This is a vulnerability that does not have an analogue in any other currencies, securities or stores of wealth. Because of that, crypto is and will be an extremely high-risk asset to hold. It’s a time bomb. Like all things of this nature, everyone will ignore it until it happens, which means that crypto will be incorrectly priced by markets until then.

DethNinja 5y ago
I don’t get this argument especially here in the hackernews; 1. If they can crack the cryptocurrencies then it means that they can easily crack crypto of online banking systems as well, entire world would crash regardless of whichever asset you hold. 2. There are already quantum resistant crypto algorithms, crypto currencies can easily switch to them once it is clear that current crypto algorithms can be cracked. It would mean that people who did transactions between the detection period would probably lose their money but it wouldn’t be the end of crypto currencies.
- dehrmann 5y ago
  > If they can crack the cryptocurrencies then it means that they can easily crack crypto of online banking systems as well They're very different because the blockchain is public. Getting access to a bank's database touches a lot more systems and algorithms. Even something less interesting like intercepting web traffic to (or between) banks isn't interesting because you need physical access to the medium and you'd need a hole in TLS. Like Bitcoin, TLS uses SHA-256, but breaking it probably doesn't give you access to any plaintext, and you could force a downgrade to TLS 1.2 to use MD5-SHA-1. This is only per-connection; the Bitcoin ledger is set in stone.
- xwolfi 5y ago
  Well hacking a bank doesn't give legal value to your transfer order, a simple employee could revert by calling the target bank on the phone under threat of pursuit if no reversal. Bank account are not protected by cryptography, they're protected by law. What you want is bitcoin to have the same, not say that since a banks' https website could be hacked, let's do nothing about the main weakness of crypto. But anyway the point is moot: it's certain developers would upgrade the network with time as new events unfold.

barnabee 5y ago

I’m not sure this article understands how VCs in general often operate. I’ve met many VCs who will invest in a team with barely an idea, or where they have a lot of scepticism about the idea, because they believe the team have a sufficiently high chance of figuring it out, or executing and scaling, and generating the outsized returns they need — whether with the original idea, a heavily evolved or refined version of it, or a complete “pivot”. The lack of rigour around the specifics of the idea, the tech or maths behind it, etc. is not new or unique to crypto VCs (look at some of the nonsense that gets funded!). What’s more unusual is that anyone can often read the same papers and look at the code and decide the idea is dumb/illegal/won’t work. We can’t usually see what it is that made the VC invest, though. But sure, if you’re looking for VC funding as a signal of great tech or an obvious market need or problem being solved, you have to at least be really picky about which VCs you follow and how much you read into their pronouncements (some are surely better than others, though). Also, those projects that do have good tech and a viable product/solution will almost certainly benefit from the support of top quality VCs.

dehrmann 5y ago
At a per-investment level, you have a point, but in aggregate, none of the crypto startups have done much beyond creating digital trading cards for speculation and illegal transactions, and most have failed to even do that. It's the premise of the fund, so it's not like they have a choice, but it's almost a meta bet on the space. Despite the space having produced so little, there are smart people who will figure out something for the space, and then the team you bet on will execute on it.

jl2718 5y ago

Just wait until he sees how much BS is baked into startups that don’t have to expose their entire codebase to the world, get independently audited, etc.

BTCOG 5y ago

All marketing is a scam to sell something. The only cryptocurrency that exists is Bitcoin. All else below it, including Ethereum are scams. They are not decentralized, and anything using Proof of Stake is just as bad as a fiat currency. Every banker here commenting as usual about how Bitcoin is boiling the oceans and only for criminals will feel free to censor me and downvote my post but should also realize they are a fake individual who parrots for an oppressive state. There is no future without Bitcoin. The US is now at 5% inflation and rising. Keep saving those paper IOU's and we'll talk again in a few years.

Animats 5y ago

The same author also has an article on Tether.[1] Tether remains scary. Tether has a market cap of US $62 billion. They're approaching the market cap of General Motors, and are up there with big mutual funds. And nobody has any idea where the money is being stored. The "commercial paper" story does not hold water. If Tether really had that much commercial paper, Tether would be the 7th largest buyer of it. Since commercial paper is short-term, a few months at most, they'd have to have a busy trading desk rolling over their commercial paper. They don't. The big players in commercial paper are not seeing any Tether activity.[2] Uh oh. Their "commercial paper" is probably just notes from other crypto companies. Or their own crypto company. [1] https://bennettftomlin.com/2021/06/10/how-big-is-tether/ https://bennettftomlin.com/2021/06/10/how-big-is-tether/ [2] https://www.ft.com/content/342966af-98dc-4b48-b997-38c00804270a https://www.ft.com/content/342966af-98dc-4b48-b997-38c008042...

Black101 5y ago

Venture capitalists in general are pretty clueless...

Growling_owl 5y ago

Crypto VC understand that how people feel about something is just important as its utility. People have a deeply rooted fear of inflation, they are afraid of being diluted in their societal standing. They also have a strong preference for deflation which allows them to do work once and then see their past work appreciate in value. Enter Bitcoin. Bitcoin wins because it's giving to the market what existing players (meaning governments) won't do: a deflationary currency. Governments won't give people a deflationary currency because they project what is going to happen with a deflationary currency and they don't like the total chaos which would mean for the country, but the real world doesn't work that way, the population wants to try and see for themselves what are these outcomes, and if they are less taxing than inflation.

Forrest7778 5y ago

Wonderful blog by Bennett! What's also very fascinating is how fast the scammers have caught up. https://reddit.com/r/cryptomoonshots https://reddit.com/r/cryptomoonshots Enjoy the read