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The video interview at the bottom of the article discusses the source of capital for this enterprise to "keep" the peg. The interviewee claims that the source o
by Barrera 4y ago
The video interview at the bottom of the article discusses the source of capital for this enterprise to "keep" the peg. The interviewee claims that the source of the capital was basically a crowdfund. The team issued a lot of the tokens, kept a lot of it (about 1/2), and sold the rest. Perpetual motion is possible in finance, but you need fancy licenses and government appointments to do it. These guys are going to prison.
This thing isn't just one token, but apparently at least three. One of them (Anchor) claims a 20% yield on savings. This alone should be a red flag because that's about 1900 basis points above what you can expect to get from a good savings account or short-term treasury.
I don't have time to dive into the Rube Goldberg machine that this thing appears to be, but when it ends, it will end very badly.
Every Bitcoin era seems to have its Ponzi scheme. In 2017 it was BitConnect. They offered something very similar to what Anchor appears to be offering.
- 0des 4y ago
- atian 4y ago> These guys are going to prison. It will be interesting where, if, or how. The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly.
- toomuchtodo 4y agoThey just hired another 20 people onto their crypto team, so hopefully they’re gearing up for more enforcement. https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-regulation-staff.html https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-r...
- dragonwriter 4y ago> The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly. The effort that produced this order in their favor in February? https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kwon-ordered-to-comply-with-sec-subpoena-related-to-mirror-protocol-investigation/ https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kw... How did they fail?
- atian 4y agoThey are not located in the US.
- dragonwriter 4y agoThat certainly could be a factor that might contribute to the SEC failing, I’m asking for the evidence that the SEC did fail. US courts have regularly exercised jurisdiction over parties located outside of the US.
- atian 4y ago> That certainly could be a factor that might contribute to the SEC failing You are correct.
- dragonwriter 4y agoYou have yet to substantiate that they failed, in any way.
- imwillofficial 4y agoThey failed to establish jurisdiction over their intended targets.
- jahewson 4y agoNo they did not.
- 93po 4y agoYou're both right and wrong. The SEC was told by a US court that they can in fact deliver a subpoena, so from the SEC perspective they've been given "jurisdiction". However the other side of the coin is that they've been granted permission to serve a subpoena to someone who isn't American, and to a company that doesn't have a presence in the US. If Do Kwon decides to visit the US and hasn't complied, he may find himself getting arrested. If his company decides to have assets in the US, they may be seized. However until either of those things happen, which they won't*, then the US has zero teeth in this. * assuming he doesn't visit the US again
- rmbyrro 4y agoIt seems it turned out the opposite earlier this year, didnt it? [1] [1] https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kwon-ordered-to-comply-with-sec-subpoena-related-to-mirror-protocol-investigation/ https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kw...
- cormacrelf 4y agoYep. People should learn the difference between Kwon filing an opposing statement [that may have seemed convincing] and a judge actually ruling that way. By "late last year but failed spectacularly" I think /u/atian just accepted that process story (nov/dec) as being the result, perhaps because first the SEC filed and then Kwon filed a response. Every question before the court in cases like these has at least three documents typed up in Times New Roman and looking like that. Only the last one matters, the first and second are not useful to lay folk except to indicate that things are still chugging along. In summary: the judge agreed with the SEC. The subpoena is being enforced.
- jcranmer 4y ago> Every question before the court in cases like these has at least three documents typed up in Times New Roman and looking like that. At risk of being excessively pedantic, there's generally the motion, the response, and then movants' reply, and then the judge's order. Sometimes the brief and the motion are separate documents (particularly when you're moving for a temporary restraining order or the like). So that's generally 4, not 3, documents that you'd expect to see. Also, different courts have different rules on what the appropriate font is. There are some jurisdictions that explicitly prescribe a list of acceptable fonts (e.g., apparently Connecticut gives you a choice between Arial and Univers), and Times New Roman isn't necessarily on that list.
- cormacrelf 4y agoYeah, a bit pedantic, each of those points was rhetorically preferable and accurate enough. Re the number, that's why I said "at least three". The point I'm making is that it is practically never 2, so one should not conclude that the SEC lost simply because another story appeared that seemed to contradict its view. You have to wait for the one that actually says it's a judge's orders, counting is not my proposed method. As for the font, sure. It was just another way of saying "official-seeming", I'm trying to encourage people to look past the official-ness because all the filings look pretty similar and you do have to read the title. Nevertheless in the federal courts (except SCOTUS) and in California, which are the cases you see most often on HN, it seems to be Times New Roman everywhere.
- abirch 4y agoWithout cashflow things usually end badly. The salt in the wound is that this is the year Buffett really attacked Bitcoin.
- tehlike 4y agoAttack how exactly?
- BEEdwards 4y agocalled it worthless. https://www.news.com.au/finance/money/investing/warren-buffett-thinks-bitcoin-is-worthless-elon-musk-responds/news-story/8858f9d4dae797aaa0d4b8986f87ad3c https://www.news.com.au/finance/money/investing/warren-buffe...
- tehlike 4y agoHe and munger have been saying that almost every year now.
- therealcamino 4y agoDon't they often say it about gold, too?
- gitfan86 4y agoYes, their point is that if you buy a cashflow negative asset you are now stuck having to figure out how to sell that asset to the next person. If you buy a cashflow positive asset the opposite situation happens. You don't have to convince anyone of anything.
- throw8383833jj 4y agolike equities? from a macro level, dividends on the s&p500 is like 1.3%, so the difference between productive and nonproductive assets isn't very high, not nearly as high as it once was. munger and buffet come from an era when dividends were still 4.5% or higher. those days are over, with the sky high valuations we have now.
- encoderer 4y ago> One of them (Anchor) claims a 20% yield on savings. This alone should be a red flag 20% is risk parity for keeping your money in smart contracts
- ethbr0 4y ago>> 20% is risk parity for keeping your money in smart contracts That is an insane sentence.
- anamax 4y agoHow much would you want to keep some of your money in smart contracts?
- mikeyouse 4y agoThe point isn’t how much would you want — it’s what could they possibly be doing on the other side of that debt instrument to yield more than that.
- vkou 4y agoMore than any legitimate enterprise in that space could possibly provide.
- codefreeordie 4y ago
- vmception 4y agoto the semi-invisible flagged comment, I met Carlos at Art Basel last year absolutely crushing it on the dance floor! what a guy memes galore
- collegeburner 4y agoI'm surprised he's be at an art event like that, didn't he lose everything?
- vmception 4y ago> didn't he lose everything? .... 5 years ago? how do you think that works? I just don't think there is enough information to extrapolate anybody's financial position, anyone anywhere
- biztos 4y agoA couple months ago I was trying to figure out how they did “stablecoins” across multiple IRL currencies, which of course can fluctuate wildly against each other IRL. Their Discord helpfully explained that it’s just incentivized validator-oracles, which IMO is like crack candy for any crypto-Soros[0] out there. Not that I think this is what’s happened, it just stood out that the grand claims didn’t even have any fine print, you had to go actually ask the community, “hey um what about this apparent contradiction?” To their credit the community was super nice and helpful. [0]: I cite him as the world’s (former?) greatest currency speculator, not for his politics.
- peteradio 4y agoWell its not really a peg, more of a pigeon hole and when the pigeon goes in the hole we peg it, its pretty messy to be honest but we aren't really interested in pigeon holes are we? No, we are interested in pegging.
- dragontamer 4y agoThese algorithmic stablecoins are just the CDO reinvented. You slice up the risk into different pools and play funny games with the risk. You can therefore build an AAA bond out of subprime mortgage crap, and everything is fine Well, except for 2008 but who was paying attention to that anyway?
- dan-robertson 4y agoDividing things into different senior/junior tranches or grouping together things to reduce uncorrelated risks is not a recent innovation. It’s been important to finance for a long time. I don’t think this has much to do with CDOs.
- dragontamer 4y agoFair. Still, CDOs are the most recent example where they went wrong on a very large scale, enough to wreck the USA's real estate market in 2008... and then topple down a lot of banks as well.
- gzer0 4y agoCarlos Matos, an absolute legend. Five years later, nothing was learned, but at least we have this amazing masterpiece for the books. https://www.youtube.com/watch?v=vabXXkZjKiw https://www.youtube.com/watch?v=vabXXkZjKiw
- ulzeraj 4y agoMaybe the real store of value was the memes we did along the way. https://youtu.be/e5nyQmaq4k4 https://youtu.be/e5nyQmaq4k4
- corndoge 4y ago>I don't have time to dive into Just admit that you would rather state your opinion without informing it. How anchor offered 20% (it doesn't anymore, as you are not aware) and why that 20% was not sustainable is perfectly understandable without reverting to "it's a Ponzi scheme!" That's like the Godwin's Law of finance, if you have no idea what you're talking about but want to be sensational the lowest effort thing you can say is point at a thing and call it a Ponzi scheme. There are valid criticisms of Anchor - anyone even remotely familiar with the protocol could and would speak about the yield reserve, how Anchor yields are generated from stake rewards of other tokens, the risks and failure scenarios of that design etc - but you clearly have no clue about any of this. Usually the appropriate thing to do when you have nothing useful to contribute is not contribute.
- charcircuit 4y ago>it doesn't anymore https://app.anchorprotocol.com/ https://app.anchorprotocol.com/ lists the deposit APR of UST to be 20.41%. Maybe it only says 20% due to the value of UST dipping?
- corndoge 4y ago2 days ago it was 17.5%. The rate used to be fixed at 20% (until last month) and was recently changed to variable. Today the rate is up because a lot of people removed UST from Anchor (deposits decreased by about 50% since Friday). Less depositors collecting interest from the yield reserve. OP implied the fixed 20% rate is what is currently offered, but that is not true, the rate is variable.
- charcircuit 4y agoThat makes sense.
- Mo3 4y ago> how Anchor yields are generated from stake rewards of other tokens Ahh, so a distributed Ponzi scheme. Thanks for clearing that up.
- huevosabio 4y agoAs with the Lebanese Pound, if you are getting >10% on savings deposits you are being scammed.
- bfz 4y agoFWIW many of these yield generation products work by selling options under the hood.
- muhammedbash 4y agoSelling options is not riskless. They would be collecting pennies until there is a big market move and they are on the hook for dollars.
- giantg2 4y agoHow do you feel about StableGains, the ycombinator backed one?
- sicromoft 4y agoStableGains is just a thin layer on top of Anchor. See https://blog.stablegains.com/stablegains-earns-you-yield-by-accessing-anchor-protocol-what-is-anchor-and-how-does-it-work-f259870998de https://blog.stablegains.com/stablegains-earns-you-yield-by-...
- bb88 4y agoI'm not OP, but the money has to come from somewhere, because people want dollars, not some $shitcoin which may drop 90% in value overnight. A credit card typically maybe has 15-19% interest. So I'd be surprised if the average credit card gets 10% profit per year from interest payments minus defaults. But somehow you're going to get a guaranteed 15% rate from algorithms? Smart contracts?
- charcircuit 4y agoIt's not a guaranteed 15%.
- vishnugupta 4y agoLet me reiterate what I wrote ~3 months ago[1] In Anchor's case there are way more lenders than borrowers so Anchor is resorting to pay those high yields from their reserves. It's cutting close to being a Ponzi scheme at the moment. In a traditional banking world businesses take a loan either to cover for a short-term cashflow crunch (example an invoice that's delayed by their client) or for longer term investment. That money usually goes into economic activities which are expected (hoped?) to bear fruit to repay the loan. In the crypto world however such loans are taken only to be put back into the crypto world; to be swapped into some hot new coin to be staked and what not. The music has got to stop at some point. [1] https://news.ycombinator.com/item?id=30335625 https://news.ycombinator.com/item?id=30335625
- arcbyte 4y agoMy hypothesis is that investing 500 million in the yield reserve is cheap if it gives you control of $19 billion during the next bull market on which you reap 100% of the returns. It's a bet for sure but not totally insane.
- grey-area 4y agoThe music has already stopped.
- jacklizhui 4y agoNo, what I'm saying is the music has slowed down; if the music had would have stopped already, we'd be already living in the streets of San Francisco without a roof above our heads. FTX and Alameda are dumping crap into the market; the biggest excrements are about to appear
- namdnay 4y agoA man of culture I see
- phyalow 4y ago>> "there are three ways to make a living in this business... Be first, be smarter, or cheat. Well I don’t cheat, and even though I like to think we have got some pretty smart people in this building of the two remaining options, it sure is a hell of alot easier to just be first." SBF & Co. are about to be first.
- dheera 4y agoWhat if someone created a USD stablecoin but programmatically only allowed people to trade it at $1.00 so it never loses peg?
- LegionMammal978 4y agoIf you had such a coin, there'd always be the risk that no one will want to buy it from you, making it worthless. Therefore, real stablecoins generally have a backing organization with a supply of another currency that is guaranteed to give you a dollar-equivalent for your coin. The problem arises when nobody wants to buy your coin and the backing organization doesn't actually have the money to back it up.
- dheera 4y agoMaybe when all other coins are losing peg, people would be more interested in a coin that is enforced to be $1.00, even if it had nothing backing it?
- oarabbus_ 4y ago>people would be more interested in a coin that is enforced to be $1.00 I have some of these in my wallet right now, in fact. But as to your question - why would anyone be interested in a $1 coin "even if it had nothing backing it"? The attractiveness of backed-by-nothing cryptocurrencies is the potential for wild upswings. That's lost in a hypothetical programmed-to-$1 digital currency. And to preempt any comments about fiat, the USD is backed by "the full faith and credit" of the US Government, which at the current time is made tangible through military and economic force. Finally, currency prices are dictated by the price people are willing to pay. There's no such thing as what you are suggesting if people refuse to pay $1 for it.
- kaoD 4y ago> real stablecoins generally have a backing organization with a supply of another currency that is guaranteed to give you a dollar-equivalent for your coin I can't see the difference. So what if nobody wants to buy that coin either? You just added an additional step.
- sunshinerag 4y agoExcept this has nothing to do with Bitcoin.
- rufusroflpunch 4y agoAre you sure? The Luna Foundation has been the largest buyer of Bitcoin the past couple of months because they knew their scam was crumbling and they needed an actual reserve asset. Yesterday they deployed their reserves to exchanges and OTC desks in order to start buying up their scam token and keep their scheme going a little bit longer.
- gitfan86 4y agoThe key to running a Ponzi scheme is to make it last a really long time. Ironically, Satoshi saw this behavior with the US federal government printing money and effectively scamming people on fixed income and anuities. He was right to be upset that people were effectively lied to about the value of their money. Now the shoe is on the other foot and the crypto world is full of predators who would be selling anuities to old people, but are now selling crypto scams to suckers.
- anonporridge 4y agoSociety itself is a kind of ponzi scheme. It relies on a continual influx (and ideally growth) of new people who do the actual work that the old, burnt out, and jaded don't want to do anymore. Eventually, there will be a generation that puts in the work, but receives no reward in the old age because the house of cards collapses. In my opinion, our goal as a society should be to prolong the ponzi scheme for as long as possible, ideally close to the heat death of the universe.