4 ms·

Are only things with worth regulated? Pyramid and Ponzi schemes are worth nothing and are regulated.

by garg 4y ago

DANK_YACHT 4y ago
Are they regulated or are they illegal? Such schemes have negative worth as they actively harm people.
- snarf21 4y ago
  Serious question: Do you think no people have been harmed by crypto? My guess is by the end, 10s of thousands of people will have been seriously financially harmed.
  - DANK_YACHT 4y ago
    People have definitely been harmed by crypto. I was pointing out that pyramid and ponzi schemes harm people by definition. There is no mathematical way for them to benefit a majority of participants. That doesn't necessarily hold for crypto.
    - the_gastropod 4y ago
      How not? The problem with pyramid schemes, gambling, ponzi schemes, and cryptocurrencies is: they're zero-sum games (or worse). As you say, there is no mathematical way for most people to benefit from cryptocurrencies.
      - DANK_YACHT 4y ago
        Cryptocurrencies are not zero-sum due to the ability to create money via lending. E.g. if I make a currency with 100 tokens, I can lend them to you for a year at a 10% interest rate. Even though there are only 100 coins in existence, I’ve created an asset worth 110 coins. This is how money gets created in a fiat system created money as well. See https://en.m.wikipedia.org/wiki/Money_creation https://en.m.wikipedia.org/wiki/Money_creation
        the_gastropod 4y ago
        The reason money creation is valuable in fiat currencies is because those are circular economies: the person taking on debt is presumably producing something of value, and able to pay back the interest. Crypto is not a circular economy. It's a speculative investment whose expected return is always negative.
        DANK_YACHT 4y ago
        How is taking a crypto loan and using it to produce something "of value" in the U.S. different than someone taking a USD loan and using it to produce something of value in Turkey?
        the_gastropod 4y ago
        Let me be more clear: the value in money creation is the loan itself. Money creation in USD does not make the USD more valuable. It makes the economic output of the economic system (GDP) more valuable. The point remains: someone spending $USD to acquire $<Crypto> should expect to lose $USD when they invariably want to sell their tokens for $USD later. Casino chips are also a negative-sum game, even though a loan shark may loan you some for interest.
        DANK_YACHT 4y ago
        Casino chips are a good example. It's the casino that is zero-sum, not the chips themselves. People don't do business in casino chips because of logistic and liquidity issues. If you could buy casino chips digitally from anywhere in the world, at any time, with no counter party risk, and write contracts against them, then I bet a lot of people would do so.
  - aetherson 4y ago
    Netflix has fallen more than Bitcoin has this year. Netflix has no or very little in the way of underlying physical assets to back up their valuation -- they do have intellectual property that may or may not be worth something, but is not an intrinsically scarce good like, say, real estate or even like iPhones. So, serious question for people who argue that Bitcoin deserves a special class of regulation: what differentiates Bitcoin and Netflix here?
    - clucas 4y ago
      One big difference is that Netflix is subject to securities regulations and must file regular reports with the federal government providing important information about how they have been making their money, how they plan to make their money in the future, and any potential issues they see on the horizon with their business plan. Major investors are disclosed. Names of managers are disclosed. And every potential investor can read these reports; they are public. If they lie, investors can sue. I don't think Bitcoin has anything like that - its ledger is public, yes. But the important part, where fiat currency is turned into Bitcoin or vice versa... that is opaque, for the most part. This is a very big difference, in my mind.
      - aetherson 4y ago
        Investors can sue if Netflix lies, though importantly if what you're worried about is a collapse in the value of the security, um... bad news. Suing is not going to recover the value of the security. I don't think that Netflix itself has a responsibility to report the flow of fiat currency into and out of Netflix, certainly not in a timely enough way to prevent people from being burned by the outflow of capital from it (as, indeed, has happened this year). The stock exchanges themselves provide visibility into that.
        clucas 4y ago
        Right, but if I'm sitting in the chair as a regulator whose goal is to reduce the harm that financial products can cause to an average member of the general public while still allowing the market to work on its own as much as possible... I'm going to look at Netflix and think "well, we did what we could." Do you honestly think I should look at Bitcoin and think the same?
  - Proven 4y ago
- supermatt 4y ago
  If they operate in regulated markets, then the regulations thereof determine their legality. A ponzi scheme in itself isnt illegal (which is why there are so many crypto ponzi schemes) - it is when it is considered securities fraud that it becomes illegal. The thought is that by regulating cryptocurrencies (i.e. treating it as a similar asset class as stocks, commodities, etc), such "investments" would be subject to the same rules - whether it has any real inherent value or not is irrelevant.
  - DANK_YACHT 4y ago
    Ponzi and pyramid schemes are illegal in many jurisdictions. It's possible to be charged with securities or commodities fraud for security-based ponzi schemes, but there are laws against such schemes outside of the securities market. E.g. https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/44/01731.htm https://www.azleg.gov/viewdocument/?docName=https://www.azle...
    - supermatt 4y ago
      I didnt mention pyramid schemes specifically because there are (usually) other laws that deal wit those (as you have pointed out). They dont apply because the very definition requires the product to NOT be what you are purchasing. When it is the nature of the product that matters, it is the respective regulation that applies. Crypto has no regulation, hence the desire to treat it as another regulated asset class, so the existing laws apply to it.

Are only things with worth regulated? Pyramid and Ponzi schemes are worth nothing and are regulated.

by garg 4y ago

Are only things with worth regulated? Pyramid and Ponzi schemes are worth nothing and are regulated.

DANK_YACHT 4y ago

Are they regulated or are they illegal? Such schemes have negative worth as they actively harm people.

snarf21 4y ago
Serious question: Do you think no people have been harmed by crypto? My guess is by the end, 10s of thousands of people will have been seriously financially harmed.
- DANK_YACHT 4y ago
  People have definitely been harmed by crypto. I was pointing out that pyramid and ponzi schemes harm people by definition. There is no mathematical way for them to benefit a majority of participants. That doesn't necessarily hold for crypto.
  - the_gastropod 4y ago
    How not? The problem with pyramid schemes, gambling, ponzi schemes, and cryptocurrencies is: they're zero-sum games (or worse). As you say, there is no mathematical way for most people to benefit from cryptocurrencies.
    - DANK_YACHT 4y ago
      Cryptocurrencies are not zero-sum due to the ability to create money via lending. E.g. if I make a currency with 100 tokens, I can lend them to you for a year at a 10% interest rate. Even though there are only 100 coins in existence, I’ve created an asset worth 110 coins. This is how money gets created in a fiat system created money as well. See https://en.m.wikipedia.org/wiki/Money_creation https://en.m.wikipedia.org/wiki/Money_creation
      - the_gastropod 4y ago
        The reason money creation is valuable in fiat currencies is because those are circular economies: the person taking on debt is presumably producing something of value, and able to pay back the interest. Crypto is not a circular economy. It's a speculative investment whose expected return is always negative.
        DANK_YACHT 4y ago
        How is taking a crypto loan and using it to produce something "of value" in the U.S. different than someone taking a USD loan and using it to produce something of value in Turkey?
        the_gastropod 4y ago
        Let me be more clear: the value in money creation is the loan itself. Money creation in USD does not make the USD more valuable. It makes the economic output of the economic system (GDP) more valuable. The point remains: someone spending $USD to acquire $<Crypto> should expect to lose $USD when they invariably want to sell their tokens for $USD later. Casino chips are also a negative-sum game, even though a loan shark may loan you some for interest.
        DANK_YACHT 4y ago
        Casino chips are a good example. It's the casino that is zero-sum, not the chips themselves. People don't do business in casino chips because of logistic and liquidity issues. If you could buy casino chips digitally from anywhere in the world, at any time, with no counter party risk, and write contracts against them, then I bet a lot of people would do so.
- aetherson 4y ago
  Netflix has fallen more than Bitcoin has this year. Netflix has no or very little in the way of underlying physical assets to back up their valuation -- they do have intellectual property that may or may not be worth something, but is not an intrinsically scarce good like, say, real estate or even like iPhones. So, serious question for people who argue that Bitcoin deserves a special class of regulation: what differentiates Bitcoin and Netflix here?
  - clucas 4y ago
    One big difference is that Netflix is subject to securities regulations and must file regular reports with the federal government providing important information about how they have been making their money, how they plan to make their money in the future, and any potential issues they see on the horizon with their business plan. Major investors are disclosed. Names of managers are disclosed. And every potential investor can read these reports; they are public. If they lie, investors can sue. I don't think Bitcoin has anything like that - its ledger is public, yes. But the important part, where fiat currency is turned into Bitcoin or vice versa... that is opaque, for the most part. This is a very big difference, in my mind.
    - aetherson 4y ago
      Investors can sue if Netflix lies, though importantly if what you're worried about is a collapse in the value of the security, um... bad news. Suing is not going to recover the value of the security. I don't think that Netflix itself has a responsibility to report the flow of fiat currency into and out of Netflix, certainly not in a timely enough way to prevent people from being burned by the outflow of capital from it (as, indeed, has happened this year). The stock exchanges themselves provide visibility into that.
      - clucas 4y ago
        Right, but if I'm sitting in the chair as a regulator whose goal is to reduce the harm that financial products can cause to an average member of the general public while still allowing the market to work on its own as much as possible... I'm going to look at Netflix and think "well, we did what we could." Do you honestly think I should look at Bitcoin and think the same?
- Proven 4y ago
supermatt 4y ago
If they operate in regulated markets, then the regulations thereof determine their legality. A ponzi scheme in itself isnt illegal (which is why there are so many crypto ponzi schemes) - it is when it is considered securities fraud that it becomes illegal. The thought is that by regulating cryptocurrencies (i.e. treating it as a similar asset class as stocks, commodities, etc), such "investments" would be subject to the same rules - whether it has any real inherent value or not is irrelevant.
- DANK_YACHT 4y ago
  Ponzi and pyramid schemes are illegal in many jurisdictions. It's possible to be charged with securities or commodities fraud for security-based ponzi schemes, but there are laws against such schemes outside of the securities market. E.g. https://www.azleg.gov/viewdocument/?docName=https://www.azleg.gov/ars/44/01731.htm https://www.azleg.gov/viewdocument/?docName=https://www.azle...
  - supermatt 4y ago
    I didnt mention pyramid schemes specifically because there are (usually) other laws that deal wit those (as you have pointed out). They dont apply because the very definition requires the product to NOT be what you are purchasing. When it is the nature of the product that matters, it is the respective regulation that applies. Crypto has no regulation, hence the desire to treat it as another regulated asset class, so the existing laws apply to it.