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I wonder if this is actually unique to crypto, or if it's common in any industry where participants have a massive financial incentive to "cheat"? There's plent
by thebean11 5y ago
I wonder if this is actually unique to crypto, or if it's common in any industry where participants have a massive financial incentive to "cheat"? There's plenty of instances of hedge funds and stock traders acting like this. I bet there would be more if they were under as little regulation as the crypto exchanges..
- qeternity 5y agoWell, I spent most of my career as a hedge fund trader so I can also comment on this: of course everyone is looking for the upper hand and people will bend or break rules to achieve this. But this is universal to all games, and fundamentally the game is fair. In crypto, the game is not fair. The refs are players and there are no rules.
- thebean11 5y agoCould you be more specific about what makes crypto less fair than the other markets hedge funds trade in?
- qeternity 5y agoRead my original comment. For all of the Occupy Wall Street rhetoric, overwhelming majority of people in finance are law abiding participants. That’s not to say that they’re particularly moral or honest people. But in regulated markets, regulators seek to make rule breaking a negative EV outcome, so rule following becomes the logical behavior for a self interested actor. Regulators might not always succeed, but it still shifts the outcome distribution massively. In crypto, the opposite is true. Because there are no penalties, otherwise malicious behavior is encouraged. First and foremost: exchanges trading against customers. This would never be allowed in a regulated market, just like we would never allow judges to wager on the cases over which they preside. It creates a horrible conflict of interest. But in crypto, conflicts of interest are the most successful business models (across a load of projects). Crypto is mostly regulatory arbitrage. I’ll be the first to change my mind when the facts change, and maybe I’m just not as visionary as every other lambo hopeful. But as it stands today, this is the reality.
- thebean11 5y agoLet’s say hypothetically all financial regulation is lifted tomorrow, I have a hard time believing the current “honest” participants won’t have a similar free for all. We may be saying the same thing: the difference is the regulation, not the moral character of participants.
- geofft 5y agoBut the entire value proposition of cryptocurrency is how difficult it is to regulate via traditional law enforcement mechanisms. Which can be used for good, of course - the standard example being things like "transferring money across immoral embargoes". But in this case, if the difference is regulation, then the question for ordinary folks who are not themselves trying to pull a scam is - would you rather work with dishonest con men who believe they will get in trouble with law enforcement if they actually con you, or with dishonest con men who believe they can get away with it?
- thebean11 5y agoI think the underlying value prop is totally orthogonal to this thread. The fundamental value prop is that software can trustlessly, directly, and irreversibly make financial transactions, which certainly does enable regulatory arbitrage. I understand why other applications haven’t convinced most people, but that’s a different discussion.
- sizzle 5y agoInsider trading in Defi is rampant and unregulated for starters
- mensetmanusman 5y agoI think we learned in 07/08 that even when the game isn’t fair, no one cares, and no one goes to jail :)