19 ms·

Iron Finance’s DeFi bank run – and how Mark Cuban got ‘rekted’

mouzogu 5y ago
Another interesting article on this subject: https://irony-97882.medium.com/the-melting-of-iron-89469b01e083 https://irony-97882.medium.com/the-melting-of-iron-89469b01e... The iron finance devs have a history of failed projects (at least 4) and tbh the space between a rugpull, incompetence and a genuine mistake is a gray area. https://www.rekt.news/ https://www.rekt.news/ lists a lot of these cases and the cynic in me believes many such cases are inside jobs.
- space_rock 5y ago
  Anyone that knows the tech and can see how disingenuous these coin sale schemes are from the beginning don't assume good faith
- eru 5y ago
  I'm honestly amazed by their ability to attract so much capital after so many failed attempts.
xunn0026 5y ago
Sure, you enter a pool with a trillion % APY and then wonder why it collapsed!? Oddly, the article doesn't mention the LINK Oracle they used rounded the price to a number of decimals and since TITAN went too low the price returned was $0 and thus the IRON contract itself would fail since it had an assert price > 0!
rvz 5y ago
> Iron Finance says the crash was not a rug pull — a malicious tactic where crypto developers abandon the project and run away with investors’ money — but poor tokenomics resulting in “the world’s first large-scale crypto bank run.” The project detailed the sequence of events that unfolded in a post-mortem blog post: So what is the difference between these three chart patterns then? [0] [1] [2] [0] https://coinmarketcap.com/currencies/iron-titanium-token/ https://coinmarketcap.com/currencies/iron-titanium-token/ [1] https://coinmarketcap.com/currencies/defi100/ https://coinmarketcap.com/currencies/defi100/ [2] https://coinmarketcap.com/currencies/dogelon/ https://coinmarketcap.com/currencies/dogelon/
- donmatito 5y ago
  They are just asserting the intent, not the result.
  - rvz 5y ago
    That isn't going to get their money back though and I don't buy it and neither do the bag holders. Cuban also doesn't see it like that and wants the whole thing regulated.
carlosgj94 5y ago
There is an NFT project that tried to reward people that got rekt by it by giving a free NFT. The link is: proofofrug.com
H8crilA 5y ago
Saying "rekted" instead of "rekt" - how do you do, fellow kids? I am pointing out an insignificant detail, but it does remind that the journalist usually has no first hand experience, and they're just re-telling heard stories.
- gedassan 5y ago
  I was also triggered by this.
- naveen99 5y ago
  Ah yes, the old redundundant past tense !
  - nvader 5y ago
    Pasted tense
  - np_tedious 5y ago
    Why not? You only YOLO once
- null_object 5y ago
  > that the journalist usually has no first hand experience, and they're just re-telling heard stories. Is this supposed to be some sort of dig at anyone writing or commenting specifically about crypto-currencies needing to have "first hand experience" or do you think any journalist has to have directly experienced themselves whatever they're writing about. In my view, "re-telling heard stories" is a good definition of journalism, in itself. But I suspect in this case it's meant to de-legitimize the contents of any crypto-skeptical article? edit: after the downvotes I thought I'd check the journalist's history - I thought there might be some justification for the skepticism of the post I quoted. But she has a pretty solid background writing about crypto-currency economics. So the minor linguistic mistake is obviously just a simple way to discredit the opinions she's expressing as a whole.
  - H8crilA 5y ago
blunte 5y ago
Cuban and Musk are not savvy (crypto) investors. Just because they are rich and successful in one domain does not make them experts in others. Perhaps they are only surrounded by Yes Men who don’t attempt to educate them or advise when they are wrong/under-informed.
- coldcode 5y ago
  Billionaires can afford to be stupid since they never bet the farm.
  - kibwen 5y ago
    This is why extreme wealth inequality leads to wildly inefficient markets, and eventually the collapse of the market system entirely. If there exists an actor for whom the loss of money has no consequences, then the idea that the market represents an efficient allocation of resources does not hold; it is too distorted by their whims.
- Tenoke 5y ago
  Cuban maybe but why Musk? If because of Doge - it's been pretty clear he's just meme-ing and not making huge bets on it but just playing around.
  - peteretep 5y ago
    > it's been pretty clear Do you mean something other than “my guess is” here?
    - Tenoke 5y ago
      At minimum he's never presented it as a savvy investment the way Cuban (who talks of crypto projects specifically as an important part of his investment portfolio) has and most if not every single time he's posted about it has been in a meme/joke format.
  - blunte 5y ago
BlueTemplar 5y ago
> Algorithmic stablecoins such as $IRON/$TITAN are typically built in a vacuum where in theory everything goes up. Most cannot perform in a severe stress test environment. Sadly, this goes for the whole capitalism itself...
apples_oranges 5y ago
I always suspected that if US millionaires like Cuban, Musk or Ravikant and the like, eventually hop onto the Bitcoin wagon, they will have to learn some hard lessons..
danbruc 5y ago
Why does the simplest possible thing - you give me a dollar, I put it into my bank account and give you a token, you give me a token, I give you a dollar from my bank account back - not work? Why is this extra complexity necessary to maintain a constant exchange rate of one? If you can get a token for one dollar, no buyer should be willing to pay more than that, if you can sell a token for one dollar, no seller should be willing to sell for less than that. Sure, there will be some imperfections, there will be transaction fees, people might want to buy or sell some tokens faster than wiring money around, but can this really push the price significantly up or down? If, how? Some chain of arbitrage opportunities? Would the price at least stabilize or is there a runaway tendency without active management?
- jtbayly 5y ago
  One problem there is that you lock up 100% of the money, which is not ideal for a lot of parties. The other problem is related: you can’t make nearly as much money off your scheme.
  - danbruc 5y ago
    If your goal is a guaranteed exchange rate of one, then that seems to be almost the only way to do it and therefore ideal to reach that goal. Even in this case there is still some risk that you or your bank goes bankrupt but if you start investing the money of your users you either make some additional money for you - which your users probably do not care about much - or you lose some of their money. You would need an investment with less risk than holding cash in a bank account to improve the service for your users. And there is probably something to be said about negative interest rates which would obviously cause you some trouble.
- beervirus 5y ago
  That works fine if you want to be 100% collateralized in cash. Nobody wants to do that because it’s expensive. edit: https://youtube.com/watch?v=PDNZX2nql2Y https://youtube.com/watch?v=PDNZX2nql2Y
  - 5y ago
geeB 5y ago
> Mark Cuban has called for stablecoin regulation in the wake of the TITAN collapse, telling Bloomberg in an email: “There should be regulation to define what a stable coin is and what collateralization is acceptable.” is kind of ironic given this: > One place that these organizations are VERY DIFFERENT is that they are not based in the USA and they are not corporations. They are foundations. They are Decentralized in their governance. NO ONE owns majority control (although the founders certainly have significant influence). This is not only because of the ethos of Decentralized Autonomous Organizations (DAOS), but also because of the ABSOLUTE STUPIDITY of our regulators forcing some of the most impactful and innovative entrepreneurs of this generation to foreign countries to run their businesses. From the original blog post at https://blogmaverick.com/2021/06/13/the-brilliance-of-yield-farming-liquidity-providing-and-valuing-crypto-projects/ https://blogmaverick.com/2021/06/13/the-brilliance-of-yield-... In fairness, I'll grant him that it's possible that regulating stable coins in that way is not the same kind of regulations that drive entrepreneurs to foreign countries.
- vmception 5y ago
  I do think that some kind of fiduciary duty framework can be applied to directors/deployers/admins so that users/investors/consumers can at least choose between services we can all jump through an increasing number of hoops and use off shore unregulated financial products who have simply learned not to bother with US citizens, but most of us stick with the ones with fiduciary duties
- formerly_proven 5y ago
  > most impactful and innovative entrepreneurs As per HN rules I request an example of positive, non-shitcoin-speculation impact that cryptocurrencies have had in the last twelve years.
  - useful 5y ago
    Remittance. Moving suitcases of money back and forth is hard if it is not an equal flow back and forth. Do you own every location?

Another interesting article on this subject: https://irony-97882.medium.com/the-melting-of-iron-89469b01e083 https://irony-97882.medium.com/the-melting-of-iron-89469b01e... The iron finance devs have a history of failed projects (at least 4) and tbh the space between a rugpull, incompetence and a genuine mistake is a gray area. https://www.rekt.news/ https://www.rekt.news/ lists a lot of these cases and the cynic in me believes many such cases are inside jobs.

space_rock 5y ago
Anyone that knows the tech and can see how disingenuous these coin sale schemes are from the beginning don't assume good faith
eru 5y ago
I'm honestly amazed by their ability to attract so much capital after so many failed attempts.

xunn0026 5y ago

Sure, you enter a pool with a trillion % APY and then wonder why it collapsed!? Oddly, the article doesn't mention the LINK Oracle they used rounded the price to a number of decimals and since TITAN went too low the price returned was $0 and thus the IRON contract itself would fail since it had an assert price > 0!

rvz 5y ago

> Iron Finance says the crash was not a rug pull — a malicious tactic where crypto developers abandon the project and run away with investors’ money — but poor tokenomics resulting in “the world’s first large-scale crypto bank run.” The project detailed the sequence of events that unfolded in a post-mortem blog post: So what is the difference between these three chart patterns then? [0] [1] [2] [0] https://coinmarketcap.com/currencies/iron-titanium-token/ https://coinmarketcap.com/currencies/iron-titanium-token/ [1] https://coinmarketcap.com/currencies/defi100/ https://coinmarketcap.com/currencies/defi100/ [2] https://coinmarketcap.com/currencies/dogelon/ https://coinmarketcap.com/currencies/dogelon/

donmatito 5y ago
They are just asserting the intent, not the result.
- rvz 5y ago
  That isn't going to get their money back though and I don't buy it and neither do the bag holders. Cuban also doesn't see it like that and wants the whole thing regulated.

carlosgj94 5y ago

There is an NFT project that tried to reward people that got rekt by it by giving a free NFT. The link is: proofofrug.com

H8crilA 5y ago

Saying "rekted" instead of "rekt" - how do you do, fellow kids? I am pointing out an insignificant detail, but it does remind that the journalist usually has no first hand experience, and they're just re-telling heard stories.

gedassan 5y ago
I was also triggered by this.
naveen99 5y ago
Ah yes, the old redundundant past tense !
- nvader 5y ago
  Pasted tense
- np_tedious 5y ago
  Why not? You only YOLO once
null_object 5y ago
> that the journalist usually has no first hand experience, and they're just re-telling heard stories. Is this supposed to be some sort of dig at anyone writing or commenting specifically about crypto-currencies needing to have "first hand experience" or do you think any journalist has to have directly experienced themselves whatever they're writing about. In my view, "re-telling heard stories" is a good definition of journalism, in itself. But I suspect in this case it's meant to de-legitimize the contents of any crypto-skeptical article? edit: after the downvotes I thought I'd check the journalist's history - I thought there might be some justification for the skepticism of the post I quoted. But she has a pretty solid background writing about crypto-currency economics. So the minor linguistic mistake is obviously just a simple way to discredit the opinions she's expressing as a whole.
- H8crilA 5y ago

blunte 5y ago

Cuban and Musk are not savvy (crypto) investors. Just because they are rich and successful in one domain does not make them experts in others. Perhaps they are only surrounded by Yes Men who don’t attempt to educate them or advise when they are wrong/under-informed.

coldcode 5y ago
Billionaires can afford to be stupid since they never bet the farm.
- kibwen 5y ago
  This is why extreme wealth inequality leads to wildly inefficient markets, and eventually the collapse of the market system entirely. If there exists an actor for whom the loss of money has no consequences, then the idea that the market represents an efficient allocation of resources does not hold; it is too distorted by their whims.
Tenoke 5y ago
Cuban maybe but why Musk? If because of Doge - it's been pretty clear he's just meme-ing and not making huge bets on it but just playing around.
- peteretep 5y ago
  > it's been pretty clear Do you mean something other than “my guess is” here?
  - Tenoke 5y ago
    At minimum he's never presented it as a savvy investment the way Cuban (who talks of crypto projects specifically as an important part of his investment portfolio) has and most if not every single time he's posted about it has been in a meme/joke format.
- blunte 5y ago

BlueTemplar 5y ago

> Algorithmic stablecoins such as $IRON/$TITAN are typically built in a vacuum where in theory everything goes up. Most cannot perform in a severe stress test environment. Sadly, this goes for the whole capitalism itself...

apples_oranges 5y ago

I always suspected that if US millionaires like Cuban, Musk or Ravikant and the like, eventually hop onto the Bitcoin wagon, they will have to learn some hard lessons..

danbruc 5y ago

Why does the simplest possible thing - you give me a dollar, I put it into my bank account and give you a token, you give me a token, I give you a dollar from my bank account back - not work? Why is this extra complexity necessary to maintain a constant exchange rate of one? If you can get a token for one dollar, no buyer should be willing to pay more than that, if you can sell a token for one dollar, no seller should be willing to sell for less than that. Sure, there will be some imperfections, there will be transaction fees, people might want to buy or sell some tokens faster than wiring money around, but can this really push the price significantly up or down? If, how? Some chain of arbitrage opportunities? Would the price at least stabilize or is there a runaway tendency without active management?

jtbayly 5y ago
One problem there is that you lock up 100% of the money, which is not ideal for a lot of parties. The other problem is related: you can’t make nearly as much money off your scheme.
- danbruc 5y ago
  If your goal is a guaranteed exchange rate of one, then that seems to be almost the only way to do it and therefore ideal to reach that goal. Even in this case there is still some risk that you or your bank goes bankrupt but if you start investing the money of your users you either make some additional money for you - which your users probably do not care about much - or you lose some of their money. You would need an investment with less risk than holding cash in a bank account to improve the service for your users. And there is probably something to be said about negative interest rates which would obviously cause you some trouble.
beervirus 5y ago
That works fine if you want to be 100% collateralized in cash. Nobody wants to do that because it’s expensive. edit: https://youtube.com/watch?v=PDNZX2nql2Y https://youtube.com/watch?v=PDNZX2nql2Y
- 5y ago

geeB 5y ago

> Mark Cuban has called for stablecoin regulation in the wake of the TITAN collapse, telling Bloomberg in an email: “There should be regulation to define what a stable coin is and what collateralization is acceptable.” is kind of ironic given this: > One place that these organizations are VERY DIFFERENT is that they are not based in the USA and they are not corporations. They are foundations. They are Decentralized in their governance. NO ONE owns majority control (although the founders certainly have significant influence). This is not only because of the ethos of Decentralized Autonomous Organizations (DAOS), but also because of the ABSOLUTE STUPIDITY of our regulators forcing some of the most impactful and innovative entrepreneurs of this generation to foreign countries to run their businesses. From the original blog post at https://blogmaverick.com/2021/06/13/the-brilliance-of-yield-farming-liquidity-providing-and-valuing-crypto-projects/ https://blogmaverick.com/2021/06/13/the-brilliance-of-yield-... In fairness, I'll grant him that it's possible that regulating stable coins in that way is not the same kind of regulations that drive entrepreneurs to foreign countries.

vmception 5y ago
I do think that some kind of fiduciary duty framework can be applied to directors/deployers/admins so that users/investors/consumers can at least choose between services we can all jump through an increasing number of hoops and use off shore unregulated financial products who have simply learned not to bother with US citizens, but most of us stick with the ones with fiduciary duties
formerly_proven 5y ago
> most impactful and innovative entrepreneurs As per HN rules I request an example of positive, non-shitcoin-speculation impact that cryptocurrencies have had in the last twelve years.
- useful 5y ago
  Remittance. Moving suitcases of money back and forth is hard if it is not an equal flow back and forth. Do you own every location?