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> It's not really a ponzi scheme. They were paying existing holders a ridiculously high rate for staking. Where was this coming from if not from new buyers?
by unmole 4y ago
> It's not really a ponzi scheme.
They were paying existing holders a ridiculously high rate for staking. Where was this coming from if not from new buyers?
- jdasdf 4y agothe ponzi was really the cherry on top of the flawed algo
- Dylan16807 4y agoPaying with luna, right? That's more like a stock split than a ponzi. They weren't going to run out.
- unmole 4y agoAgain, why did the price of Luna keep going up if not for new buyers?
- Dylan16807 4y agoThe trading price can be based on a lot of factors and/or tiny volumes of trades. The price of a stock can change drastically with almost no money changing hands compared to the market cap. Which would then not be a Ponzi.
- unmole 4y ago1. The supply of Luna kept going up 2. The price of Luna kept going up 3. Volumes were massive
- Dylan16807 4y agoWhen the algorithm was coded, they didn't know those things. It could have worked equally well with minuscule volume. Supply and price could have multipled by a million with no new investment. A Ponzi uses new investments to pay interest. If it doesn't get exponentially increasing revenue it collapses. Paying someone in more tokens or stock is different. If it collapses, it's for different reasons under different circumstances. It's a lot easier to fabricate market cap than to fabricate cash.
- charcircuit 4y ago>Where was this coming from if not from new buyers? Anchor generated revenue in 2 ways. The first is that it collects staking rewards for collateral that was deposited. The second is that it collected interest on the loans it lent to people. Some of what it was able to collect can be attributed to new buyers because an increase demand for UST increases the value of Luna. This combined with more gas fees means that bLuna holders will be paid out more. bLuna is one of the assets which can be used as collateral on Anchor. Even without new buyers there would still be profit that could be awarded to depositors.
- dereg 4y agoIt is not a ponzi. The 20% they were paying out should be considered a cost of user acquisition paid out by the team themselves. If paying incentives to attract users is a crime, we’d have to shutter most startups. I’m not defending Terra, but we should be precise with our words lest we escape reality ourselves.
- unmole 4y agoCost of acquisition?! Were the holders investors or customers? Again, how were they funding the 20%?
- dlubarov 4y agoThe source of funding was the initial LUNA tokens that were allocated to Terra (or Do Kwon personally?). I think it was broadly understood that 20% yield wasn't going to be sustainable, but was a tool for short-term user acquisition.
- SilasX 4y agoEven if that part were a Ponzi, it wasn't related to the core problem with the stablecoin peg algorithm, which was what actually brought Terra down, and which could/would have been targeted regardless of this high yield staking program.
- unmole 4y agoI'd imagine the Ponzi part is what drove the demand for Terra in the first place. Why else would you buy it instead of USDT or USDC?