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Here's the thing I wonder though. If you sat each one down and explained that the whole thing was basically a ponzi scheme, or like a lottery where everyone los

Here's the thing I wonder though. If you sat each one down and explained that the whole thing was basically a ponzi scheme, or like a lottery where everyone loses except one person who wins big, I'm not certain you wouldn't see a majority of them say "Yeah, I know," or just keep "playing" after hearing the explanation. To borrow the cliche, you can't really use logic to change someone's mind when they didn't use logic to make up their mind in the first place. Also, gambling is powerfully addictive to a lot of people.

chatmasta 4y ago
A lot of people got rich from Madoff’s Ponzi scheme. The problem is they never cashed out their gains. You see the same thing in these kind of crypto trades - yes, you’re participating in a Ponzi scheme, but it actually works as long as it does keep getting new money to buy out your entry position… which can continue happening for quite a long time before actually collapsing. There are also layers to the Ponzi scheme. The alt-coin is just the first one. Even if you cash out for a profit, you probably didn’t even sell it for fiat directly, but sold it for some “less risky” currency like Ethereum or Bitcoin. One might argue you’ve only moved from one a smaller Ponzi scheme to a larger one. But then again… trading across pools of risk is widely accepted as a method of generating wealth. So who are we to judge?
- wpietri 4y ago
  For sure. It's only a profit when you directly hold more cash than you put in. Madoff's victims didn't lose their money when he finally crashed. They lost it when they put it in.
kenjackson 4y ago
This mentality was common with penny stocks around 1998 (maybe still true). But the belief (and reality) was that you just didn't want to be left holding the bag at the end. If you got in low enough and got out soon enough, that's all you wanted. So it was all pump and dump. No one believed in the companies, but they believed they could be in early enough and out just in the nick of time. At a larger scale, I'm not sure the difference with the NYSE or NASDAQ. I don't vote w/ any of the companies for which I own stock. I just hope I buy low and sell when it is much higher -- just the volumes are large enough that small players can't pump the value of the stock -- but reddit and TikTok has shown even this world can be gamed.
- cwmma 4y ago
  One difference with NYSE or NASDAQ is that those companies could release a dividend or get bought and either of those events would put actual hard currency in your pocket and the price of the stock is (theoretically) based on those events happening.
- avianlyric 4y ago
  On difference is dividends stock buybacks, and physical assets. Companies can support higher valuations buy owning more stuff, if their market cap is lower than the stuff they own, then they’re clearly underpriced. If a company starts paying out higher dividends due to higher profits, then their stock is worth more because otherwise the dividend repayment would trend towards zero (i.e. dividend payment per share ends up larger than the share price) If a company is doing stock buybacks, then they’re using their profits to prop up the price of their shares. But in all of these scenarios, the companies are producing profits, which are directly or indirectly used to pay for the increase is share value. Shitcoin on the other hand are zero sum, they produce no new value from their existence, they just store value and move it around a little bit.
  - solarkraft 4y ago
    You're talking about current value - true, companies have that - but a huge part of stock prices are expected future value, which (by its nature) can be quite speculative.
    - avianlyric 4y ago
      Well sure. But it’s substantially less speculative than shitcoins. Some degree of skill can be used to understand if a specific company is going to improve its situation long term via sound investments in new projects. You can look at companies stated goals and strategy and decide for yourself if those goals are valuable and if the strategy is viable. And thus make an educated call about future value (with appropriate error bars). With shitcoins there’s nothing to analysis. They fundamentally don’t do anything. Speculating on shitcoins is just trying to guess what a disorganised mass is going to do in the future. There’s no reasonable way to gain any understanding of what their behaviour is going to be, and if it’s going to increase or decrease the value of the shitcoin, because it’s a disorganised mess. Ultimately the value of a company present and future derived from the fact that it’s organised, and broadly predictable. Shitcoin value isn’t driven by anything organised, or predictable.
spoonjim 4y ago
A friend of mine made more than $10 million in crypto essentially knowing full well that it was a Ponzi. He simply believed that he could get in and get out quick enough to find a bagholder and he was right.
- wpietri 4y ago
  As much as I enjoy studying scams, I am clearly not suited to be a scammer, because I wouldn't be able to enjoy that money. Me living large off of the suffering of others would taste like ash.
  - elliekelly 4y ago
    It's shocking to me how many people don't really seem to mind so long as their victim is faceless and nameless and I think that's one of the reasons the blockchain is so compelling for this sort of scam. Ripping off an actual person is much harder than ripping off some dumbass on some computer somewhere in the world that you never have to see or hear or think about once you've secured the bag.
    - spoonjim 4y ago
      I don't think the arc of crypto looks much different if you subtracted the grifters. There were enough true believers in the space. I know people who have sold $1m of crypto but still HODLing 90% thinking it will go up.
wolfram74 4y ago
One description I've heard is web 3.0 people are mostly people who saw the financial crash in the late aughts and thought the only thing wrong with it was they didn't get to participate directly.
- cbozeman 4y ago
  > the only thing wrong with it was they didn't get to participate directly. Dear God, this really does sum up a lot of people running around trying to get rich nowadays.
arolihas 4y ago
It's greater fool theory, people betting on someone being even dumber than themselves.
thr0wawayf00 4y ago
Gambling plays a part, but I think it has more to do with the in-group dynamics of the crypto community. The Folding Ideas documentary on NFTs had an interesting segment on this topic. Crypto forums use a lot of in-group language to communicate their shared belief of the crypto project (i.e. hodling, to the moon, etc., etc.) in order to demonstrate their belonging to the community and they summarily reject skeptics essentially as non-believers. It's a quasi-cult mentality but without a true individual leader. These forums then become echo chambers that serve two primary purposes: to continue purging skeptics and to repeat the crypto mantras over and over again without thinking critically. This is effective because it tends to attract people who may exhibit significant intelligence in other aspects of their lives. Where people really get into trouble is when they start thinking: "of course I'm too smart to get wrapped up in a dumb ponzi scheme, and this definitely isn't one." This makes it really easy for the pump-and-dumpers to manipulate these people into making more and more risky crypto purchases.
- linohh 4y ago
  It's a cult. I'm not even joking. https://freedomofmind.com/cult-mind-control/bite-model/ https://freedomofmind.com/cult-mind-control/bite-model/
quantified 4y ago
I know it's a pyramid scheme, I'm just getting in early enough to make money on it!
vkou 4y ago
The reason ponzi schemes are so insidious is because it's logical to participate in them - as long as you expect there to be a bigger fool to offload to. This reasoning worked a little better before the Fed raised its rates.

chatmasta 4y ago

A lot of people got rich from Madoff’s Ponzi scheme. The problem is they never cashed out their gains. You see the same thing in these kind of crypto trades - yes, you’re participating in a Ponzi scheme, but it actually works as long as it does keep getting new money to buy out your entry position… which can continue happening for quite a long time before actually collapsing. There are also layers to the Ponzi scheme. The alt-coin is just the first one. Even if you cash out for a profit, you probably didn’t even sell it for fiat directly, but sold it for some “less risky” currency like Ethereum or Bitcoin. One might argue you’ve only moved from one a smaller Ponzi scheme to a larger one. But then again… trading across pools of risk is widely accepted as a method of generating wealth. So who are we to judge?

wpietri 4y ago
For sure. It's only a profit when you directly hold more cash than you put in. Madoff's victims didn't lose their money when he finally crashed. They lost it when they put it in.

kenjackson 4y ago

This mentality was common with penny stocks around 1998 (maybe still true). But the belief (and reality) was that you just didn't want to be left holding the bag at the end. If you got in low enough and got out soon enough, that's all you wanted. So it was all pump and dump. No one believed in the companies, but they believed they could be in early enough and out just in the nick of time. At a larger scale, I'm not sure the difference with the NYSE or NASDAQ. I don't vote w/ any of the companies for which I own stock. I just hope I buy low and sell when it is much higher -- just the volumes are large enough that small players can't pump the value of the stock -- but reddit and TikTok has shown even this world can be gamed.

cwmma 4y ago
One difference with NYSE or NASDAQ is that those companies could release a dividend or get bought and either of those events would put actual hard currency in your pocket and the price of the stock is (theoretically) based on those events happening.
avianlyric 4y ago
On difference is dividends stock buybacks, and physical assets. Companies can support higher valuations buy owning more stuff, if their market cap is lower than the stuff they own, then they’re clearly underpriced. If a company starts paying out higher dividends due to higher profits, then their stock is worth more because otherwise the dividend repayment would trend towards zero (i.e. dividend payment per share ends up larger than the share price) If a company is doing stock buybacks, then they’re using their profits to prop up the price of their shares. But in all of these scenarios, the companies are producing profits, which are directly or indirectly used to pay for the increase is share value. Shitcoin on the other hand are zero sum, they produce no new value from their existence, they just store value and move it around a little bit.
- solarkraft 4y ago
  You're talking about current value - true, companies have that - but a huge part of stock prices are expected future value, which (by its nature) can be quite speculative.
  - avianlyric 4y ago
    Well sure. But it’s substantially less speculative than shitcoins. Some degree of skill can be used to understand if a specific company is going to improve its situation long term via sound investments in new projects. You can look at companies stated goals and strategy and decide for yourself if those goals are valuable and if the strategy is viable. And thus make an educated call about future value (with appropriate error bars). With shitcoins there’s nothing to analysis. They fundamentally don’t do anything. Speculating on shitcoins is just trying to guess what a disorganised mass is going to do in the future. There’s no reasonable way to gain any understanding of what their behaviour is going to be, and if it’s going to increase or decrease the value of the shitcoin, because it’s a disorganised mess. Ultimately the value of a company present and future derived from the fact that it’s organised, and broadly predictable. Shitcoin value isn’t driven by anything organised, or predictable.

spoonjim 4y ago

A friend of mine made more than $10 million in crypto essentially knowing full well that it was a Ponzi. He simply believed that he could get in and get out quick enough to find a bagholder and he was right.

wpietri 4y ago
As much as I enjoy studying scams, I am clearly not suited to be a scammer, because I wouldn't be able to enjoy that money. Me living large off of the suffering of others would taste like ash.
- elliekelly 4y ago
  It's shocking to me how many people don't really seem to mind so long as their victim is faceless and nameless and I think that's one of the reasons the blockchain is so compelling for this sort of scam. Ripping off an actual person is much harder than ripping off some dumbass on some computer somewhere in the world that you never have to see or hear or think about once you've secured the bag.
  - spoonjim 4y ago
    I don't think the arc of crypto looks much different if you subtracted the grifters. There were enough true believers in the space. I know people who have sold $1m of crypto but still HODLing 90% thinking it will go up.

wolfram74 4y ago

One description I've heard is web 3.0 people are mostly people who saw the financial crash in the late aughts and thought the only thing wrong with it was they didn't get to participate directly.

cbozeman 4y ago
> the only thing wrong with it was they didn't get to participate directly. Dear God, this really does sum up a lot of people running around trying to get rich nowadays.

arolihas 4y ago

It's greater fool theory, people betting on someone being even dumber than themselves.

thr0wawayf00 4y ago

Gambling plays a part, but I think it has more to do with the in-group dynamics of the crypto community. The Folding Ideas documentary on NFTs had an interesting segment on this topic. Crypto forums use a lot of in-group language to communicate their shared belief of the crypto project (i.e. hodling, to the moon, etc., etc.) in order to demonstrate their belonging to the community and they summarily reject skeptics essentially as non-believers. It's a quasi-cult mentality but without a true individual leader. These forums then become echo chambers that serve two primary purposes: to continue purging skeptics and to repeat the crypto mantras over and over again without thinking critically. This is effective because it tends to attract people who may exhibit significant intelligence in other aspects of their lives. Where people really get into trouble is when they start thinking: "of course I'm too smart to get wrapped up in a dumb ponzi scheme, and this definitely isn't one." This makes it really easy for the pump-and-dumpers to manipulate these people into making more and more risky crypto purchases.

linohh 4y ago
It's a cult. I'm not even joking. https://freedomofmind.com/cult-mind-control/bite-model/ https://freedomofmind.com/cult-mind-control/bite-model/

quantified 4y ago

I know it's a pyramid scheme, I'm just getting in early enough to make money on it!

vkou 4y ago

The reason ponzi schemes are so insidious is because it's logical to participate in them - as long as you expect there to be a bigger fool to offload to. This reasoning worked a little better before the Fed raised its rates.