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Could you be more specific about what makes crypto less fair than the other markets hedge funds trade in?

qeternity 5y ago
Read 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 ago
  Let’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 ago
    But 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 ago
      I 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.
      - ketzo 5y ago
        “regulatory arbitrage” is a pretty hilarious way to spell “extremely profitable crime”
        thebean11 5y ago
        It's not a crime, that's the point. The regulation does not exist (yet)
      - rednerrus 5y ago
        Your value prop has to outweigh the potential negatives or there is no value prop. What OP is saying is that you can't have unregulated markets in this space the incentives to cheat are too great.
        thebean11 5y ago
        Sure, and I'm not making an argument against regulation. My point is that there is nothing inherent in cryptocurrency to create these forms of fraud except the lack of regulation, otherwise the same fraud would exist in traditional markets.
        geofft 5y ago
        But that point doesn't support the message you're trying to say. Suppose I were to say "Elbonia is a dangerous lawless country, where corruption abounds and you're not safe on the streets," and you were to respond by saying "There's nothing inherent to Elbonia to create those conditions except the lack of laws against corruption or mugging. And corruption and mugging happen in the US, too, and you'd see more of it if there weren't any laws against it. There's nothing about the Elbonians as a people that makes them more inclined to crime." I would respond by saying "Thank you for proving my point that Elbonia is a dangerous place."
  - refulgentis 5y ago
    You are saying the same thing
sizzle 5y ago
Insider trading in Defi is rampant and unregulated for starters

Read 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 ago
Let’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 ago
  But 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 ago
    I 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.
    - ketzo 5y ago
      “regulatory arbitrage” is a pretty hilarious way to spell “extremely profitable crime”
      - thebean11 5y ago
        It's not a crime, that's the point. The regulation does not exist (yet)
    - rednerrus 5y ago
      Your value prop has to outweigh the potential negatives or there is no value prop. What OP is saying is that you can't have unregulated markets in this space the incentives to cheat are too great.
      - thebean11 5y ago
        Sure, and I'm not making an argument against regulation. My point is that there is nothing inherent in cryptocurrency to create these forms of fraud except the lack of regulation, otherwise the same fraud would exist in traditional markets.
        geofft 5y ago
        But that point doesn't support the message you're trying to say. Suppose I were to say "Elbonia is a dangerous lawless country, where corruption abounds and you're not safe on the streets," and you were to respond by saying "There's nothing inherent to Elbonia to create those conditions except the lack of laws against corruption or mugging. And corruption and mugging happen in the US, too, and you'd see more of it if there weren't any laws against it. There's nothing about the Elbonians as a people that makes them more inclined to crime." I would respond by saying "Thank you for proving my point that Elbonia is a dangerous place."
- refulgentis 5y ago
  You are saying the same thing

sizzle 5y ago

Insider trading in Defi is rampant and unregulated for starters