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Is it a Ponzi? A framework for evaluating crypto projects
- gregjor 4y agofunction is_a_scam(string crypto_project_name) { return true; }
- sv123 4y agoYour machine learning model is 99.999999% accurate.
- version_five 4y agoThere was a related blockchain decision framework published a few years ago: https://miro.medium.com/max/352/0*850OATxY25S23TGR.jpg https://miro.medium.com/max/352/0*850OATxY25S23TGR.jpg
- freeone3000 4y agoCertificate Transparency is an application of blockchain that isn't a scam!
- Nextgrid 4y agoIs it even a blockchain in the cryptocurrency sense of the word? It's a chain of trust where every addition cryptographically signs the previous entry (to prevent the database from being modified retroactively) but as far as I know there's no "mining" process nor decentralization - the log is still controlled by a central entity.
- theK 4y agoNot sure if the parent author meant a specific company or was just referring to the general domain of certificate verification. There are certificate verification projects in the blockchain space that go beyond what you describe.
- TheDong 4y agoThe parent post capitalized Certificate Transparency, so they probably meant the Certificate Transparency project, as described here: https://certificate.transparency.dev/ https://certificate.transparency.dev/ I hadn't seen any of these blockchain projects that try to provide a similar audit log for issued certificates that you reference... mind naming them? Particularly any that can actually be used?
- TheDong 4y agoCertificate transparency only uses a blockchain if you redefine a blockchain to mean "any use of a merkle tree", which is all certificate transparency logs are. You will notice the certificate transparency website makes zero mentions of blockchain anywhere: https://certificate.transparency.dev/howctworks/ https://certificate.transparency.dev/howctworks/ What a blockchain normally means is something that has added some sort of attempt at solving the two generals problem (https://en.wikipedia.org/wiki/Two_Generals%27_Problem https://en.wikipedia.org/wiki/Two_Generals%27_Problem), as the original bitcoin whitepaper outlined. That is to say, blockchains have a consensus mechanism to resolve multiple writers, with some of those being potentially untrusted. If Certificate Transparency is a blockchain, than so are the zfs filesystem (which also uses a merkle tree internally), git, and dynamodb.
- gregjor 4y agoYeah but those aren't called blockchain!
- usrn 4y agoI'd say this applies better to adjustable rate loans. Some crypto isn't a scam even if nearly all the tokens are.
- gregjor 4y agoAdjustable rate loans and all kinds of investment products don't make good financial sense, but that's not the same thing as a scam. An ARM is not fraudulent, it's just dangerous, in the same way that credit cards are easy to abuse but aren't scams or ponzi schemes.
- usrn 4y agoARMs are dangerous to the degree I'd say they're fraudulent. Certainly they are if all of crypto meets your standard.
- gregjor 4y agoARMs are not fraudulent because the terms are clearly disclosed. If someone chooses to borrow money and agrees to unfavorable terms they have supposedly made an informed decision. ARMs are not Ponzi schemes, and there’s no rug pull or fake valuations. They are just bad financial decisions for a lot of people. Even so, finding examples of scams or fraud or risky investments that aren’t crypto doesn’t validate crypto. People are capable of all kinds of scams and frauds. Crypto is just a near-perfect vehicle for scammers.
- pmcjones 4y agoThe ARMs in the 1980s in the United States were well-documented and the potential interest rate increase was both "rate-limited" and capped. They were not fraudulent.
- greatjack613 4y agoJust want to point out that according to the authors framework for determining if a project is a ponzi, Uber, Lyft, Doordash, and many more gig economy businesses would also qualify as ponzis since they have to spend move to get users then they bring in and have not been and probably will never be profitable
- qgin 4y agoThere’s a still-untested possibility that Uber / Lyft / DoorDash can become profitable when autonomous vehicles scale out and they can stop paying humans for labor and the use of their private vehicles. Hard to model the economics accurately since it’s still so early.
- mstipetic 4y agoCompany that owns that technology doesn't need Uber.
- qgin 4y agoThat’s definitely Uber’s biggest obstacle. But in some ways, until autonomous vehicles can go everywhere, they need a blend of autonomous cars and human-driven cars to be the first stop app for rides. Then they can route an autonomous car or human driven car depending on the ride needed. Otherwise riders will hit a wall if they request a ride outside the autonomous service zone.
- wmf 4y agoThat's why Uber was trying to develop their own self-driving tech. They knew that's where the value lies (if it works).
- freeone3000 4y agoIs this in dispute? Obviously these businesses should not be positively valued.
- fooey 4y agoThat's a very fair assessment Cities where they've allowed their infrastructure to stagnate due to reliance on those private companies are going to be in for a rough time when they inevitably fail or drastically raise their pricing. What comes next when private enterprises extinguish municipal services with unsustainable business practices? Can the municipalities recover? or are we watching hostile privatization?
- mabbo 4y ago> Gold is a tulip. ... The only reason we think it’s valuable is it’s sufficiently rare for other people to think it’s valuable. Absolutely not. Gold has a variety of functional uses in electronics. It's used for its physical properties in a lot of spacecraft. And until dentistry had modern options gold fillings were common (not even that long ago- my own mother has a couple gold fillings). He also skips over why it's called a Tulip: https://en.wikipedia.org/wiki/Tulip_mania https://en.wikipedia.org/wiki/Tulip_mania
- AbrahamParangi 4y agoTulips also have inherent utility as decorative flowers but that's tangential to the point.
- rafale 4y agoSo food is tulip. Steel is tulip... everything is tulip? It's not the existence of utility that matters but the degree. Gold is much more useful than tulips.
- sumy23 4y agoThe value of gold is detached from its utility, just as the value of tulips during tulip mania were detached from their decorative value. The value of steel, on the other hand, is not detached from its utility value.
- forum_ghost 4y agogold is a reliable hedge and store of value that survived 5000 years: longer than any empire, longer than any bond issue, longer than any real estate holding, longer than any fiat currency. financial utility IS utility. nothing is detached from anything.
- tsimionescu 4y agoEven more relevantly, gold was a relatively dense solid substance that didn't corrode or otherwise degrade. It was an excellent choice for currency, once you could get enough of it to avoid problems of currency supply.
- TacticalCoder 4y agoSomeone should make one for the various countries: "Is is a Ponzi? A framework for evaluating pension schemes".
- danuker 4y agoWe'll find out soon enough, as young taxpayers renounce their citizenships and move away.
- arcticbull 4y agoThis is not an issue for America of course as folks who move away without renouncing will continue to owe taxes to Uncle Sam for the rest of their natural lives and if they do renounce, they have to pay taxes on all of their assets as though they disposed of them at the time of renunciation - plus paying a significant fee.
- 1270018080 4y agoAn aside, I believe you only pay an exit tax if you have more than $2 million in assets.
- soco 4y agoIt could be funny if it wasn't sad, how worried some seem to be with how bad those people miles above their tax bracket are hit by taxes. I would have expected the "tax the rich" slogan had more popularity but no... so they either consider themselves in that rich group, or think they're gonna get there soon (hello ponzi). I can't figure any other explanation, maybe a few millions make you a philanthropist saint deserving a special untouchable statute?
- ypeterholmes 4y agoPonzi's rely on deception, but crypto projects are the complete opposite- they are entirely public. Literally every transaction is public. So the entire premise/title of this article is nonsense. Also the shade thrown at Cardano is ridiculous. They write "Their focus on convincing YouTube influencers to promote Cardano.." But the truth is the opposite. Cardano relies on thousands of validators to secure the network, who in turn are incentivized to market themselves. So it's not that YouTube influencers were convinced to do anything- it's highly technical people that were convinced to market the network. Big difference, and actually quite smart.
- deleted 4y ago[deleted]
- ATsch 4y ago> they are entirely public Yes, you're just not clever enough to understand all of the jargon I just invented and refuse to explain, audit every line of code, audit the organization that actually controls the project, spend a month brainstorming all of the possible failure modes and get a PhD in multiple disciplines to discover if any of my claims are deceptive.
- ccvannorman 4y agodisinformation is the new secrecy.
- ypeterholmes 4y agoTokenomics are generally aggregated and published by third party organizations for almost every project. Blockchain analytics are also big business. My point stands- it's hard to hide things on an open source, decentralized blockchain.
- JackFr 4y ago> it's hard to hide things on an open source, decentralized blockchain. And yet, why do ransomware attackers only accept crypto?
- ATsch 4y agoThe answer even according to this framework is pretty much a blanket "yes, unless it helps you buy illegal drugs", considering that's the only thing you can really purchase with cryptocurrencies that has any value outside of the network.
- JackFr 4y agoWell ackshually...most successful ransomware schemes also use crypto, so access to your own files is also something you can buy with crypto.
- dubswithus 4y agoAlso used to buy cheaper legal drugs you might have a prescription for from India or other countries.
- danuker 4y agoSometimes a tulip is more useful for storing value than national currency almost guaranteed to lose value every year. Sometimes even cans of beans do the trick.
- wmf 4y agoThis is a terrible argument. Yes, gambling is less bad than hyperinflation. But a well-designed stablecoin like DAI, RAI, or RSV is far less risky than gambling on tulips.
- danuker 4y agoI will try to rephrase the argument. A tulip might not make it to next year per se. I meant a "tulip" as in a value token with little value other than scarcity and speculation. The USD's purchasing power is bound to go down; there was an 8% increase in M2 supply in the past year, and velocity is constant. https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V As such, if a token has relatively constant supply and demand, its price should go up with the money supply. The problem is, I agree, that the demand is far from constant. But if you hold them so that their price is not correlated among each other, it might get smoother. Ray Dalio uses gold and a commodities index in his All-Weather portfolio, in case of inflation. http://www.lazyportfolioetf.com/allocation/ray-dalio-all-weather/ http://www.lazyportfolioetf.com/allocation/ray-dalio-all-wea...
- rsstack 4y agoThis article is this: https://sites.wustl.edu/meteoritesite/items/self-test-check-list/ https://sites.wustl.edu/meteoritesite/items/self-test-check-... When you can summarize the same result for 99.99% of the cases with a tweet: https://xkcd.com/1723/ https://xkcd.com/1723/
- wstuartcl 4y agoreturn true;
- djakaitis 4y agoYes.
- bricss 4y agoI would value more entirely public messenger w/o any free speech control, rather than some random bytes chained w/ hash sums produced out of thin air
- the_af 4y agoRe: Axie Infinity and Play 2 Earn games, it was explained to me that there is a significative number of people (many in the Philippines, apparently) making a living out of this. That is, their time is sunk into this game not because they enjoy it or derive any pleasure out of it -- from what I've seen, it's not an enjoyable game and wouldn't exist without the money reward aspect -- but because it's a way to earn a living. Are these people enjoying the game? Doubtful. They found a way to make a living. Is this a "productive" way to earn a living? Also doubtful. But is it any different from professional poker players (other than poker is probably a better game than Axie Infinity)? I know it rubs me the wrong way. I don't know what to call it though -- tulip, scam, ponzi, or just a wasteful use of human time that could be better spent in more pleasurable activities, if money wasn't an issue.
- Nextgrid 4y agoPoker is gambling - winners make money by taking losers' money, that is well understood. In Play 2 Earn my understanding is that it's not gambling, instead money "magically" appears from merely playing the game. The only way for this to be sustainable is if the output from playing the game is something that someone else finds valuable and can't be automated (otherwise why not automate it?) like Mechanical Turk or the various captcha-solving services. I don't believe this is the case, so the only other answer is that the buy-ins from newer players are used to reward existing ones - aka a Ponzi. Alternatively, it could be that the system isn't even a Ponzi and is instead bankrolled by the parent company which itself is bankrolled by clueless investors not realizing the above (Play 2 Earn will only work if the entire system produces an output that someone else values enough to pay for and can't get said output elsewhere for cheaper).
- tptacek 4y agoThat's not a useful definition of gambling. Lots of things that aren't gambling are zero-sum.
- milesvp 4y agoPoker is actually not that much different than what you describe. My father played a lot of poker in card rooms. He talked a lot about losing strategically to the fish, to keep them coming back. Without the fish, there generally is no poker ecosystem since money generally follows the button, and without particularly weak players money just tends to change hands. And since there is a rake at most tables, you need a constant influx of money just to support the play. There is common wisdom that the rake can kill a local poker ecosystem. There can be a lot if good games for weeks or months, then all the weak players can’t sustain any longer, and all the medium players start losing and lose interest, and there’s no one left to win money from and games get harder to form.
- rinze 4y agoI use the following algo, which is based on heuristics: [Is it a crypto thingy?] -----> Yes ----> Definitely a Ponzi or other scam. | | | |----> No ----> Perhaps a Ponzi, perhaps not.
- cholantesh 4y agoYes.
- arcticbull 4y agoThe answer is simple. It's straight up yes unless they're registered with the SEC.
- ouid 4y agoIs the claim that you will get rich by giving someone else your money now? yes -> it's a Ponzi scheme. no -> it's not a crypto project.
- javert 4y agoThe terminology here doesn't work. If you're calling something a "tulip," you're calling it an *unsustainable* bubble, because it comes from Dutch "tulip mania." But to take an easy example, gold isn't an unsustainable bubble. Neither is art. Not like Dutch tulips. It's too late to successfully redefine what "tulip" means. Even if you use a different word, the category doesn't work. The fact is, bitcoin and ethereum are each sui generis. Bitcoin, for example, differs from gold in *important* ways. There are various theories people have for why it might be able to hold value in the long run, and none of them are reducible to something that has existed before. It's a new experiment. People can argue that bitcoin won't hold value, but not by a 1:1 reduction to something that has existed before. On that note, the author is very right to point out that bitcoin is not, technically, a Ponzi scheme, and that point is much appreciated.
- jjtheblunt 4y agoWhat's meant by "L1" in the article?
- wasifbaig 4y agoIt's short for "Layer 1". Layer 2 solutions/protocols are built on top of layer 1 protocols like Ethereum and Cardano.
- compsciphd 4y agocrypto isn't gold because gold doesn't need any continuous work to be done to remain a "store of value". If every single gold miner would stop doing work, gold would still have "value". If every bitcoin miner stopped doing work, bitcoin would have zero value (as impossible to use as need miners to create new blocks on the chain). That is why I dislike any comparison to gold and why crypto feels like a ponzi to me, even if its not technically a ponzi. To me a ponzi is a scheme that requires a continuous inflow of new money to prop up the old invested money. Crypto seems that way, we have to constantly spend money on it (via mining) to prop it up. If we stopped spending that money, it would by definition collapse to zero. Just because there are incentives to keep on spending the money, doesn't take away from the fact that it requires it as well.