7 ms·

On the supposed “nihilism” of the Mango Markets arbitrageur

45 points by firloop 4y ago

kasey_junk 4y ago
This post doesn’t so much refute the idea that the mango markets manipulation is nihilistic as confirm it. I personally am fine with a strict view of these cryptos where the code is law. But it is a very paired down vision compared to existing systems and thus the “nihilism” label.
timetopay 4y ago
> one of the advantages of cryptocurrencies as the foundation of a separate financial system is that systems are, by necessity, subject to adversarial hardening This is what the law is for. > Perhaps it is true that Avraham committed illegal market manipulation (or some other violation of the law). However, does it really make sense to call for prosecution and imprisonment? Yes. They broke the law. Laws should be fairly enforced. > Furthermore, if there is any core ethos of crypto, it is one of independence from the authority of the state. No, that's the core ethos of a lot of people in cryptocurrencies. It turns out that there are a lot of "investors" in cryptocurrencies who do not feel that way :)
- googlryas 4y ago
  What law did they break?
  - nl 4y ago
    The Commodity Exchange Act (CEA), of 1936: https://en.wikipedia.org/wiki/Wash_trade https://en.wikipedia.org/wiki/Wash_trade
    - djbebs 4y ago
      Bitcoin is nor a commodity
      - pcthrowaway 4y ago
        This article has nothing to do with bitcoin
- betwixthewires 4y ago
  The whole point of this experiment is not to create an environment where law can be skirted, but to create a new type of environment where the law cannot be violated at all, by anyone. And of course it will attract lawbreakers, we need them to test our security. "The law" as it exists now, written in the wind and enforced when convenient or profitable, needs to go the way of the dinosaur. The law as written in self enforced, freely entered agreements that is public to all and impossible yo viate sounds like a better system to me.
simple-thoughts 4y ago
Avraham clearly is not skilled in public relations. Perhaps there is an element of nihilism, not in his wallets actions but in his willingness to surrender to the mob.
- wmf 4y ago
  I don't know how much work he put into this trade, but I would also prefer ~$50M free and clear over ~$110M with the threat of lawsuits attached.
nl 4y ago
> Illegality of market manipulation. Perhaps it is true that Avraham committed illegal market manipulation (or some other violation of the law).... Let us remember that Mango Markets is an unlicensed derivatives exchange run by a team of US citizens who also held an ICO for their protocol token, which likely qualifies as an illegal security ー do we really want to be tallying up legal infractions in this situation?... Almost everything in decentralized finance is illegal on multiple levels and we are all operating on very shaky ground here. What a absolutely stupid argument. Mango Markets ICO didn't allow US citizens to buy tokens, so it wouldn't be regulated as a security - so it is legal. But even so it's pretty easy to argue that the security itself should be legal if certain education requirements about risk are met. That's a very different class of offense to bald market manipulation for profit. > Furthermore, if there is any core ethos of crypto, it is one of independence from the authority of the state. So this piece argues. Personally, I'm all for regulation of financial markets - as someone on HN mentioned "crypto seems to be speedrunning the history of financial regulation".
- wmf 4y ago
  I don't think it's legal for secondary markets (e.g. Kraken) to allow Americans to trade ICO tokens either. Basically no ICOs have ever been done legally.
  - nl 4y ago
    Depends on the token type. There's a distinction between governance tokens (~= securities) and utility tokens (~= coin|currency|value store|something). Utility tokens don't fall under the Howey test so are ok to trade: https://www.blockchain-council.org/blockchain/security-tokens-vs-utility-tokens-a-concise-guide/ https://www.blockchain-council.org/blockchain/security-token...
    - wmf 4y ago
      Realistically, there are virtually no utility tokens.
- seanhunter 4y ago
woodruffw 4y ago
> In my view, one of the advantages of cryptocurrencies as the foundation of a separate financial system is that systems are, by necessity, subject to adversarial hardening. In this interpretation, Avraham’s actions act to strengthen the system in the long run. The language of "adversarial hardening" is torturous, and amounts to a tacit admission of failure: that cryptocurrency somehow needs to go through a process of making every single mistake that traditional finance has made and corrected for. The necessity of this repeated rake-to-face process is not elaborated or further justified.
- junofan 4y ago
  Why must it be justified? This is a financial system, not a battle of rhetoric. If you don’t want to participate, don’t. Evidently, enough people want to participate.
  - woodruffw 4y ago
    > This is a financial system, not a battle of rhetoric. No, this is a blog post about a well-understood failure mode in traditional finance. If cryptocurrency advocates want to lay claim to the "financial system" label, they should be prepared to explain how their schemes are efficient mechanisms for value transaction, not sandboxes for making sure the rules of financial crime haven't changed.
    - adnzzzzZ 4y ago
      No one needs to explain anything. I transact in it and it works, therefore it is an efficient mechanism for value transaction. If you don't want to participate then fine, but as the person you replied to said, evidently enough people do.
      - woodruffw 4y ago
        Sure. Let me rephrase: being taken seriously requires you to explain &c. This is a public forum; nobody particularly likes it when someone says "this is so" and doesn't offer an intelligible explanation. With enough incentives (including a large pool of greater fools), you can convince otherwise reasonable parties to use your scheme. But that doesn't make it a financial scheme; that makes it a financialized scam.
acjohnson55 4y ago
There will never be enough "adversarial hardening". It will never be possible for people to verify that their Lego blocks of finance are actually robust. The only thing that will create trust is time elapsed without an exploit, but that means that the only thing trustworthy will be the oldest, most ossified pieces. But as soon as you start composing those pieces with anything custom, you're back in danger. Welcome to the dark forest.
- A4ET8a8uTh0 4y ago
  << It will never be possible for people to verify that their Lego blocks of finance are actually robust. Eh. Tbh, I am not sure what robust means in this context. From what I have seen so far, a ridiculously high amount of finance moves through simple text files ( once you get down to that level ). From technical perspective, it is not hard to mess with ACH, but there are levels of compliance enforced by live humans that keep it together. I do think I agree with your conclusion though. The most ossified piece wins.
  - based69 4y ago
    Blacklisting/censorship of tokens/addresses is an existential crisis for defi that noone wants to talk about. Most of defi is based on collateral, and if locked collateral can be debased by censorship, the whole thing falls apart. A good reminder as to why crappy old dumb rock ossified btc with no features and 13 years of track record and no founder is something pretty special
    - rnk 4y ago
      I get the potential existential crisis issue - but bitcoin is subject to that, because can't governments blacklist a wallet? Then that person can't effectively take their btc away, just like in regular banking, based on some on govt identifying a criminal action, people lose their bank money when it is identified (drug dealers or whatever).
favflam 4y ago
For crypto, I think it has to be "code as law". Otherwise, what is the point. People will be better off depositing their funds in a brokerage and trading that way. Trading and settlement have to be merged to get the benefits from the crypto approact to money. I think the next step for smart contracts is to port risk engines (for leveraged trading) and treasury risk management into smart contracts. But I think there is little overlap between people who write risk engines (almost never open source) and people who write smart contracts with slick UIs, so I don't see this happening. I think SBF (see https://twitter.com/SBF_FTX/status/1580170203664904195?s=20&t=_G6ox4t9X_JYEX56EfYYew https://twitter.com/SBF_FTX/status/1580170203664904195?s=20&...) of FTX, who knows how leveraged trading works, explained what risk controls FTX implements. A simple risk control would be to have a single transaction rate limited in funds it can suck out of an account.
- clarkeni 4y ago
  Unfortunately in crypto transaction limits can be easily bypassed (send more transactions or spin up more accounts). Some good risk controls suggested here though: https://medium.com/@Austerity_Sucks/thoughts-on-110m-mango-markets-exploit-10e3d01ab0b5 https://medium.com/@Austerity_Sucks/thoughts-on-110m-mango-m...
betwixthewires 4y ago
I agree 100%, those of us that embrace the crypto markets wanted a wild west. you don't get to have a wild west only on the upswing and go crying for stability when the bullets start flying in the street. Either you want it or you don't, if you don't go buy google stock or something.

45 points by firloop 4y ago

This post doesn’t so much refute the idea that the mango markets manipulation is nihilistic as confirm it. I personally am fine with a strict view of these cryptos where the code is law. But it is a very paired down vision compared to existing systems and thus the “nihilism” label.

timetopay 4y ago

> one of the advantages of cryptocurrencies as the foundation of a separate financial system is that systems are, by necessity, subject to adversarial hardening This is what the law is for. > Perhaps it is true that Avraham committed illegal market manipulation (or some other violation of the law). However, does it really make sense to call for prosecution and imprisonment? Yes. They broke the law. Laws should be fairly enforced. > Furthermore, if there is any core ethos of crypto, it is one of independence from the authority of the state. No, that's the core ethos of a lot of people in cryptocurrencies. It turns out that there are a lot of "investors" in cryptocurrencies who do not feel that way :)

googlryas 4y ago
What law did they break?
- nl 4y ago
  The Commodity Exchange Act (CEA), of 1936: https://en.wikipedia.org/wiki/Wash_trade https://en.wikipedia.org/wiki/Wash_trade
  - djbebs 4y ago
    Bitcoin is nor a commodity
    - pcthrowaway 4y ago
      This article has nothing to do with bitcoin
betwixthewires 4y ago
The whole point of this experiment is not to create an environment where law can be skirted, but to create a new type of environment where the law cannot be violated at all, by anyone. And of course it will attract lawbreakers, we need them to test our security. "The law" as it exists now, written in the wind and enforced when convenient or profitable, needs to go the way of the dinosaur. The law as written in self enforced, freely entered agreements that is public to all and impossible yo viate sounds like a better system to me.

simple-thoughts 4y ago

Avraham clearly is not skilled in public relations. Perhaps there is an element of nihilism, not in his wallets actions but in his willingness to surrender to the mob.

wmf 4y ago
I don't know how much work he put into this trade, but I would also prefer ~$50M free and clear over ~$110M with the threat of lawsuits attached.

nl 4y ago

> Illegality of market manipulation. Perhaps it is true that Avraham committed illegal market manipulation (or some other violation of the law).... Let us remember that Mango Markets is an unlicensed derivatives exchange run by a team of US citizens who also held an ICO for their protocol token, which likely qualifies as an illegal security ー do we really want to be tallying up legal infractions in this situation?... Almost everything in decentralized finance is illegal on multiple levels and we are all operating on very shaky ground here. What a absolutely stupid argument. Mango Markets ICO didn't allow US citizens to buy tokens, so it wouldn't be regulated as a security - so it is legal. But even so it's pretty easy to argue that the security itself should be legal if certain education requirements about risk are met. That's a very different class of offense to bald market manipulation for profit. > Furthermore, if there is any core ethos of crypto, it is one of independence from the authority of the state. So this piece argues. Personally, I'm all for regulation of financial markets - as someone on HN mentioned "crypto seems to be speedrunning the history of financial regulation".

wmf 4y ago
I don't think it's legal for secondary markets (e.g. Kraken) to allow Americans to trade ICO tokens either. Basically no ICOs have ever been done legally.
- nl 4y ago
  Depends on the token type. There's a distinction between governance tokens (~= securities) and utility tokens (~= coin|currency|value store|something). Utility tokens don't fall under the Howey test so are ok to trade: https://www.blockchain-council.org/blockchain/security-tokens-vs-utility-tokens-a-concise-guide/ https://www.blockchain-council.org/blockchain/security-token...
  - wmf 4y ago
    Realistically, there are virtually no utility tokens.
seanhunter 4y ago

woodruffw 4y ago

> In my view, one of the advantages of cryptocurrencies as the foundation of a separate financial system is that systems are, by necessity, subject to adversarial hardening. In this interpretation, Avraham’s actions act to strengthen the system in the long run. The language of "adversarial hardening" is torturous, and amounts to a tacit admission of failure: that cryptocurrency somehow needs to go through a process of making every single mistake that traditional finance has made and corrected for. The necessity of this repeated rake-to-face process is not elaborated or further justified.

junofan 4y ago
Why must it be justified? This is a financial system, not a battle of rhetoric. If you don’t want to participate, don’t. Evidently, enough people want to participate.
- woodruffw 4y ago
  > This is a financial system, not a battle of rhetoric. No, this is a blog post about a well-understood failure mode in traditional finance. If cryptocurrency advocates want to lay claim to the "financial system" label, they should be prepared to explain how their schemes are efficient mechanisms for value transaction, not sandboxes for making sure the rules of financial crime haven't changed.
  - adnzzzzZ 4y ago
    No one needs to explain anything. I transact in it and it works, therefore it is an efficient mechanism for value transaction. If you don't want to participate then fine, but as the person you replied to said, evidently enough people do.
    - woodruffw 4y ago
      Sure. Let me rephrase: being taken seriously requires you to explain &c. This is a public forum; nobody particularly likes it when someone says "this is so" and doesn't offer an intelligible explanation. With enough incentives (including a large pool of greater fools), you can convince otherwise reasonable parties to use your scheme. But that doesn't make it a financial scheme; that makes it a financialized scam.

acjohnson55 4y ago

There will never be enough "adversarial hardening". It will never be possible for people to verify that their Lego blocks of finance are actually robust. The only thing that will create trust is time elapsed without an exploit, but that means that the only thing trustworthy will be the oldest, most ossified pieces. But as soon as you start composing those pieces with anything custom, you're back in danger. Welcome to the dark forest.

A4ET8a8uTh0 4y ago
<< It will never be possible for people to verify that their Lego blocks of finance are actually robust. Eh. Tbh, I am not sure what robust means in this context. From what I have seen so far, a ridiculously high amount of finance moves through simple text files ( once you get down to that level ). From technical perspective, it is not hard to mess with ACH, but there are levels of compliance enforced by live humans that keep it together. I do think I agree with your conclusion though. The most ossified piece wins.
- based69 4y ago
  Blacklisting/censorship of tokens/addresses is an existential crisis for defi that noone wants to talk about. Most of defi is based on collateral, and if locked collateral can be debased by censorship, the whole thing falls apart. A good reminder as to why crappy old dumb rock ossified btc with no features and 13 years of track record and no founder is something pretty special
  - rnk 4y ago
    I get the potential existential crisis issue - but bitcoin is subject to that, because can't governments blacklist a wallet? Then that person can't effectively take their btc away, just like in regular banking, based on some on govt identifying a criminal action, people lose their bank money when it is identified (drug dealers or whatever).

favflam 4y ago

For crypto, I think it has to be "code as law". Otherwise, what is the point. People will be better off depositing their funds in a brokerage and trading that way. Trading and settlement have to be merged to get the benefits from the crypto approact to money. I think the next step for smart contracts is to port risk engines (for leveraged trading) and treasury risk management into smart contracts. But I think there is little overlap between people who write risk engines (almost never open source) and people who write smart contracts with slick UIs, so I don't see this happening. I think SBF (see https://twitter.com/SBF_FTX/status/1580170203664904195?s=20&t=_G6ox4t9X_JYEX56EfYYew https://twitter.com/SBF_FTX/status/1580170203664904195?s=20&...) of FTX, who knows how leveraged trading works, explained what risk controls FTX implements. A simple risk control would be to have a single transaction rate limited in funds it can suck out of an account.

clarkeni 4y ago
Unfortunately in crypto transaction limits can be easily bypassed (send more transactions or spin up more accounts). Some good risk controls suggested here though: https://medium.com/@Austerity_Sucks/thoughts-on-110m-mango-markets-exploit-10e3d01ab0b5 https://medium.com/@Austerity_Sucks/thoughts-on-110m-mango-m...

betwixthewires 4y ago

I agree 100%, those of us that embrace the crypto markets wanted a wild west. you don't get to have a wild west only on the upswing and go crying for stability when the bullets start flying in the street. Either you want it or you don't, if you don't go buy google stock or something.