7 ms·

What's funny about this is that I can recall discussions here and elsewhere from only a few months ago questioning the "guaranteed" super-high returns. I forget

by jmyeet 4y ago

What's funny about this is that I can recall discussions here and elsewhere from only a few months ago questioning the "guaranteed" super-high returns. I forget who said this but someone awhile ago said in finance said that if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk. And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance". Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance. I'm just sitting on the sidelines watching people relearn all the lessons of finance the hard way, some because they think they understand finance because because they understand merkle trees and consensus protocols but really most just want to get rich quick.

theknocker 4y ago
vmception 4y ago
Usually there is an answer, I’m not familiar with the stablegains service but usually there is enough information for you to tell objectively why to use or avoid a service according to your risk profile. There was enough in the terra ecosystem to come to a conclusion of avoiding completely
- samhw 4y ago
  Consider what we see if there isn't enough information: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons And on a totally separate note, consider what we see in DeFi.
  - pyrale 4y ago
    That's a great point. Even if there were actually legitimate products that could somewhat use cryptocurrency as part of their offering, they would probably get rid of it eventually just to avoid the association with the endless scams that fester in the ecosystem.
- JumpCrisscross 4y ago
  > There was enough in the terra ecosystem to come to a conclusion of avoiding completely There is enough information in a ten or 20% yield to come to a conclusion. That doesn't stop unsophisticated investors from getting screwed. When they do so because they bought magic beans, I have no sympathy. When are lied to and sold deposit-like products [1], it's infuriating. [1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375569-What-happens-to-my-money-when-I-deposit-it-with-Stablegains-How-is-yield-generated- https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
koheripbal 4y ago
What most people don't understand about finance is that there are fundamental rules that you really cannot break without consequences. Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science. Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance. Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).
- throwk8s 4y ago
  Is the math meaningful though?
  - JumpCrisscross 4y ago
    > Is the math meaningful though? "Meaningful" is squishy. Is it strongly predictive, and in some cases, definitive? Yes.
  - state_less 4y ago
    If we could all get a stable (guaranteed) 15% per year, everyone would invest. But the world economy doesn’t grow at 15%.
    - tjs8rj 4y ago
      The US economy doesn’t grow at 7% a year but that’s what the s&p is expected to do
      - hrunt 4y ago
        Well, the S&P (assuming the S&P 500) doesn't represent the entire US economy, but 500 companies that represent, arguably, the "winners" of the US economy, so expecting them to grow 7% while the entire economy as a whole grows less is not unexpected.
reflexco 4y ago
The 20% APY provided by Anchor was way above the average yields for safe DeFi lending. Which indicated that even among crypto users, this was considered a degen play! The whole Terra saga was a typical example of speculative bubble. Everyone knew it was risky, but its sheer size and the caliber of people endorsing it (https://twitter.com/novogratz/status/1478535972560195585 https://twitter.com/novogratz/status/1478535972560195585) was providing an aura of safety. Too big to fail. It's also similar to the stock market as a whole before it started correcting. Everyone knew valuations were detached from every fundamental except liquidity, yet everyone went along thinking the music just had to keep going.
- lanstin 4y ago
  Every fundamental except liquidity - nice phrasing. It would be illuminating to see more analysis of liquidity in crypto markets and less purely technical analysis.
downandout 4y ago
And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance". If you believe the statement "if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk" it might be true that you don't understand DeFi to some degree. DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API. So when you have millions of markets with different returns that can be traded in every imaginable way (and some you probably haven't imagined), throw in an insane amount of dumb money, people willing to borrow at high interest rates (relative to the real world), and a laundry list of factors that introduce inefficiencies into the market, it's quite easy to find pockets of above-average returns if you're smart. I have no idea if Stablegains was actually smart, but it's more than possible to achieve above-market gains in DeFi without exposing yourself to outsized risks.
- JumpCrisscross 4y ago
  > it's more than possible to achieve above-market gains in DeFi without overexposing yourself to insane risks "Insane" is subjective. The point is nothing safe yields ten or 20%. Someone saying "you will not lose your funds" [1] when paying above-market yields is lying. [1] https://stablegains.zendesk.com/hc/en-us/articles/4402680425745 https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
  - downandout 4y ago
    I run arb and loan liquidation bots, and have for over a year now. These are atomic transactions almost always using flash swaps/loans that exist only exist for the life of the transaction. I am only exposed to potential losses on transaction fees, but have never had a losing day while running production code. My yield on my investment (mostly infrastructure costs) is closer to 5,000%...per month. I will not lose my funds, whether the market is good or bad. There are funds out there that conduct these activities, I know because I recently consulted for one. They are promising risk free returns and getting them. There are things that exist in DeFi (such as flash loans) that have no real world equivalent, which is why blanket statements made about traditional markets don't necessarily apply. If used properly, these things do in fact offer "too good to be true" types of returns.
deleted 4y ago
[deleted]
HL33tibCe7 4y ago
The fact that people are putting their money on the line without realising this extremely basic fact of finance is concerning to say the least. And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering.
- oefrha 4y ago
  > without realising this extremely basic fact of finance More like claiming they didn’t know when they lose it all. Admitting “I gambled and I lost” isn’t a recipe for sympathy and possible compensation.
- Nextgrid 4y ago
  > And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering. StableGains was skimming off the top so they weren’t directly exposed to the risk of the underlying asset.
zamalek 4y ago
In the linked Terra Revival post there's this gem of a term: > Pre-attack Luna I love how we went straight from "what happened" to "it was an attack."
- AlexandrB 4y ago
  I'm not surprised the attack narrative is so popular and rarely challenged. Whether there was an actual attack or not, the attack narrative gives everyone a convenient out. The creator can disavow responsibility for creating a stablecoin that doesn't work and the investors get to feel like they weren't taken in by a con but we're instead attacked by an outside entity.
- ricardobeat 4y ago
  Also the straight up call to start shilling the new network immediately or you won't get a cut: > Essential app developers looking to join for emergency allocation should signal public support for the net network on Twitter and social channels.
im3w1l 4y ago
Here's a funny little anecdote. In the early life of bitfinex, you could lend money to levered traders at ~1000% interest. I did so personally, but only fairly small sums, and I did not sleep easy at night lol. It was pretty obvious it could blow up at any time, but somehow it didn't. Times were different then of course, ecosystem so much smaller - more room to grow. https://web.archive.org/web/20130411113418/https://www.bitfinex.com/pages/stats https://web.archive.org/web/20130411113418/https://www.bitfi...
deleted 4y ago
[deleted]
SpectralTheory 4y ago
> Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance. I feel like the only benefit of all this is being able to see posttrade services rewritten with some sane API instead of crazy legacy garbage riddled with CSVs.
anonymoushn 4y ago
What I find upsetting about these developments is that over a year ago I shopped around an offer to borrow at higher rates with an early repayment option, backed by an actual arbitrage opportunity, and raised way less than these scammers.
empathy_m 4y ago
I invested money with Stablegains rather than in UST/Anchor more directly because of the YCombinator branding. I figured that if the system collapsed, I would be able to notice it early and withdraw, and that YC-affiliated investor money would help compensate me with more luck than if I had to liquidate out of the system myself. I withdrew after seeing a friend on Cryptography Twitter send a message showing the destabilization; this turned out to be many hours before Stablegains announced "we will honor withdrawals before this announcement at 1:1", and I got all my money back out. The YC brand worked here, I think.
- formerkrogemp 4y ago
  > The YC brand worked here, I think. Congratulations? You weren't one of those who lost all of their money to this YC supported scam. Scams and get-rich-quick or get-more-rich off of the backs of others: that's the YC brand here and increasingly elsewhere. Paul Graham started this accelerator to make himself and his wife rich. YC exists to enrich its owners not as your litmus test for trustworthiness. Money over morality is the motto here. Libertarian values, limited government, startups as silver bullets, founding workers working themselves to death to enrich venture capitalists, and Dunning-Kruger for days in the form of Paul Graham. Are you poor? 'Have you tried making a startup?' is Paul Graham's solution to poverty as with everything else. You might as well ask 'Have you tried not being poor?'
- nieve 4y ago
  It seems like what worked for you was having a source who was paying close attention, not the branding at all.
- oefrha 4y ago
  > YC-affiliated investor money would help compensate me Not sure why you believe a mere investor is liable for any compensation if the 15% APY gambling scheme goes under.
tomc1985 4y ago
> I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance. I think that this is the "innovator mentality" insofar that, as a group, we tend to idolize/cargo cult innovation as if it was always a good thing. As the pile of things that I miss grows much faster than the things that I feel that I've gained I have come to think of "innovation" as a force for destruction, rent-seeking, and greed, just as much as it can be a force for improvement. As you say, in many cases things are the way they are because reasons. And some snot-nosed wanterpreneur is just as likely to degrade the situation as they are to improve it.
drumhead 4y ago
Never forget, its always "different this time", even though as you've said its reached the place its in over thousands of years. The mistakes made and mania's are in all the text books and histories so really people should know better, but its seems that nothing is more influential on a person than greed.

by jmyeet 4y ago

theknocker 4y ago

vmception 4y ago

Usually there is an answer, I’m not familiar with the stablegains service but usually there is enough information for you to tell objectively why to use or avoid a service according to your risk profile. There was enough in the terra ecosystem to come to a conclusion of avoiding completely

samhw 4y ago
Consider what we see if there isn't enough information: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons And on a totally separate note, consider what we see in DeFi.
- pyrale 4y ago
  That's a great point. Even if there were actually legitimate products that could somewhat use cryptocurrency as part of their offering, they would probably get rid of it eventually just to avoid the association with the endless scams that fester in the ecosystem.
JumpCrisscross 4y ago
> There was enough in the terra ecosystem to come to a conclusion of avoiding completely There is enough information in a ten or 20% yield to come to a conclusion. That doesn't stop unsophisticated investors from getting screwed. When they do so because they bought magic beans, I have no sympathy. When are lied to and sold deposit-like products [1], it's infuriating. [1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375569-What-happens-to-my-money-when-I-deposit-it-with-Stablegains-How-is-yield-generated- https://stablegains.zendesk.com/hc/en-us/articles/4402680375...

koheripbal 4y ago

What most people don't understand about finance is that there are fundamental rules that you really cannot break without consequences. Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science. Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance. Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).

throwk8s 4y ago
Is the math meaningful though?
- JumpCrisscross 4y ago
  > Is the math meaningful though? "Meaningful" is squishy. Is it strongly predictive, and in some cases, definitive? Yes.
- state_less 4y ago
  If we could all get a stable (guaranteed) 15% per year, everyone would invest. But the world economy doesn’t grow at 15%.
  - tjs8rj 4y ago
    The US economy doesn’t grow at 7% a year but that’s what the s&p is expected to do
    - hrunt 4y ago
      Well, the S&P (assuming the S&P 500) doesn't represent the entire US economy, but 500 companies that represent, arguably, the "winners" of the US economy, so expecting them to grow 7% while the entire economy as a whole grows less is not unexpected.

reflexco 4y ago

The 20% APY provided by Anchor was way above the average yields for safe DeFi lending. Which indicated that even among crypto users, this was considered a degen play! The whole Terra saga was a typical example of speculative bubble. Everyone knew it was risky, but its sheer size and the caliber of people endorsing it (https://twitter.com/novogratz/status/1478535972560195585 https://twitter.com/novogratz/status/1478535972560195585) was providing an aura of safety. Too big to fail. It's also similar to the stock market as a whole before it started correcting. Everyone knew valuations were detached from every fundamental except liquidity, yet everyone went along thinking the music just had to keep going.

lanstin 4y ago
Every fundamental except liquidity - nice phrasing. It would be illuminating to see more analysis of liquidity in crypto markets and less purely technical analysis.

downandout 4y ago

And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance". If you believe the statement "if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk" it might be true that you don't understand DeFi to some degree. DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API. So when you have millions of markets with different returns that can be traded in every imaginable way (and some you probably haven't imagined), throw in an insane amount of dumb money, people willing to borrow at high interest rates (relative to the real world), and a laundry list of factors that introduce inefficiencies into the market, it's quite easy to find pockets of above-average returns if you're smart. I have no idea if Stablegains was actually smart, but it's more than possible to achieve above-market gains in DeFi without exposing yourself to outsized risks.

JumpCrisscross 4y ago
> it's more than possible to achieve above-market gains in DeFi without overexposing yourself to insane risks "Insane" is subjective. The point is nothing safe yields ten or 20%. Someone saying "you will not lose your funds" [1] when paying above-market yields is lying. [1] https://stablegains.zendesk.com/hc/en-us/articles/4402680425745 https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
- downandout 4y ago
  I run arb and loan liquidation bots, and have for over a year now. These are atomic transactions almost always using flash swaps/loans that exist only exist for the life of the transaction. I am only exposed to potential losses on transaction fees, but have never had a losing day while running production code. My yield on my investment (mostly infrastructure costs) is closer to 5,000%...per month. I will not lose my funds, whether the market is good or bad. There are funds out there that conduct these activities, I know because I recently consulted for one. They are promising risk free returns and getting them. There are things that exist in DeFi (such as flash loans) that have no real world equivalent, which is why blanket statements made about traditional markets don't necessarily apply. If used properly, these things do in fact offer "too good to be true" types of returns.

deleted 4y ago

[deleted]

HL33tibCe7 4y ago

The fact that people are putting their money on the line without realising this extremely basic fact of finance is concerning to say the least. And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering.

oefrha 4y ago
> without realising this extremely basic fact of finance More like claiming they didn’t know when they lose it all. Admitting “I gambled and I lost” isn’t a recipe for sympathy and possible compensation.
Nextgrid 4y ago
> And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering. StableGains was skimming off the top so they weren’t directly exposed to the risk of the underlying asset.

zamalek 4y ago

In the linked Terra Revival post there's this gem of a term: > Pre-attack Luna I love how we went straight from "what happened" to "it was an attack."

AlexandrB 4y ago
I'm not surprised the attack narrative is so popular and rarely challenged. Whether there was an actual attack or not, the attack narrative gives everyone a convenient out. The creator can disavow responsibility for creating a stablecoin that doesn't work and the investors get to feel like they weren't taken in by a con but we're instead attacked by an outside entity.
ricardobeat 4y ago
Also the straight up call to start shilling the new network immediately or you won't get a cut: > Essential app developers looking to join for emergency allocation should signal public support for the net network on Twitter and social channels.

im3w1l 4y ago

Here's a funny little anecdote. In the early life of bitfinex, you could lend money to levered traders at ~1000% interest. I did so personally, but only fairly small sums, and I did not sleep easy at night lol. It was pretty obvious it could blow up at any time, but somehow it didn't. Times were different then of course, ecosystem so much smaller - more room to grow. https://web.archive.org/web/20130411113418/https://www.bitfinex.com/pages/stats https://web.archive.org/web/20130411113418/https://www.bitfi...

deleted 4y ago

[deleted]

SpectralTheory 4y ago

> Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance. I feel like the only benefit of all this is being able to see posttrade services rewritten with some sane API instead of crazy legacy garbage riddled with CSVs.

anonymoushn 4y ago

What I find upsetting about these developments is that over a year ago I shopped around an offer to borrow at higher rates with an early repayment option, backed by an actual arbitrage opportunity, and raised way less than these scammers.

empathy_m 4y ago

I invested money with Stablegains rather than in UST/Anchor more directly because of the YCombinator branding. I figured that if the system collapsed, I would be able to notice it early and withdraw, and that YC-affiliated investor money would help compensate me with more luck than if I had to liquidate out of the system myself. I withdrew after seeing a friend on Cryptography Twitter send a message showing the destabilization; this turned out to be many hours before Stablegains announced "we will honor withdrawals before this announcement at 1:1", and I got all my money back out. The YC brand worked here, I think.

formerkrogemp 4y ago
> The YC brand worked here, I think. Congratulations? You weren't one of those who lost all of their money to this YC supported scam. Scams and get-rich-quick or get-more-rich off of the backs of others: that's the YC brand here and increasingly elsewhere. Paul Graham started this accelerator to make himself and his wife rich. YC exists to enrich its owners not as your litmus test for trustworthiness. Money over morality is the motto here. Libertarian values, limited government, startups as silver bullets, founding workers working themselves to death to enrich venture capitalists, and Dunning-Kruger for days in the form of Paul Graham. Are you poor? 'Have you tried making a startup?' is Paul Graham's solution to poverty as with everything else. You might as well ask 'Have you tried not being poor?'
nieve 4y ago
It seems like what worked for you was having a source who was paying close attention, not the branding at all.
oefrha 4y ago
> YC-affiliated investor money would help compensate me Not sure why you believe a mere investor is liable for any compensation if the 15% APY gambling scheme goes under.

tomc1985 4y ago

> I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance. I think that this is the "innovator mentality" insofar that, as a group, we tend to idolize/cargo cult innovation as if it was always a good thing. As the pile of things that I miss grows much faster than the things that I feel that I've gained I have come to think of "innovation" as a force for destruction, rent-seeking, and greed, just as much as it can be a force for improvement. As you say, in many cases things are the way they are because reasons. And some snot-nosed wanterpreneur is just as likely to degrade the situation as they are to improve it.

drumhead 4y ago

Never forget, its always "different this time", even though as you've said its reached the place its in over thousands of years. The mistakes made and mania's are in all the text books and histories so really people should know better, but its seems that nothing is more influential on a person than greed.