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The entire crypto ecosystem is a ponzi
- seydor 4y ago
- jrm4 4y agoThis. Today's stock market bears little relation to "a thing where you can buy shares of a company, and if it does well you can get paid by selling it."
- the_mitsuhiko 4y agoAnd yet there is a legal definition of a Ponzi scheme.
- yieldcrv 4y agoand yet every time it is actually prosecuted in court (not settled or plea dealed) the distinction blurs because the difference between something legal and illegal can’t be found
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- bcrosby95 4y agoYes, and all the currently operating network marketing companies, legally, aren't Ponzi schemes. Yet I bet many people would call them a Ponzi scheme.
- jrm4 4y agoLol. I'm a lawyer. If I went around correcting people because they weren't using the legal definition of things, I'd have no time to do anything else. (I will go ham on you if you try to say a smart contract is a contract :)
- Axien 4y agoThat is simply not true at all. Most stock prices are based upon earning or future potential earnings.
- fishcrackers 4y agolol
- tiahura 4y agoAsk Zuck if he’s laughing after FB’s profits fell.
- jrm4 4y agoThat's what it says in the textbook, but you are woefully misinformed if you believe that this strongly matches reality, especially for individuals and smaller players in this thing.
- danans 4y ago> This. Today's stock market bears little relation to "a thing where you can buy shares of a company, and if it does well you can get paid by selling it." So speculation? Seems like that is the primary way it works today. Also, dividends represent a major source of market returns. Some searching suggests as much as 30%.
- CPLX 4y agoThe extremely conspicuous Twitter story currently in everyone’s face provides a very easy to understand counterpoint.
- chrisgd 4y agoI don’t think that is true at all. There is economic value in a piece of equity in google. The price someone is willing to pay for it changes frequently. Crypto is closer to art than anything else. I get less value from a rothko than someone else may
- ratg13 4y agoRelevant Warren Buffet commentary on crypto: https://www.youtube.com/watch?v=HVm7Pfb0ilY https://www.youtube.com/watch?v=HVm7Pfb0ilY
- m00dy 4y agoI'm not sure he is able to understand blockchain concepts like proof of work etc.
- JumpCrisscross 4y ago> not sure he is able to understand blockchain concepts like proof of work Which is irrelevant to the value of a consensus-based currency, other than as a smoke screen for naive investors and catnip to the technically minded.
- tiahura 4y agoYou didn’t need to be a botanist to realize the market for tulip bulbs was going to crash.
- m00dy 4y agodude, everything crashed, stocks and even bonds. UK just bailed out pension funds. This proves that Bitcoin has became an asset class and it is very early.
- everfree 4y ago> There is economic value in a piece of equity in google. It doesn't entitle you to profits, it doesn't entitle you to assets (except in bankruptcy), you can't eat it, and it's only worth what other people will pay you for it. Unlike a rothko, I can't hang it in my living room. Where's the value?
- smitty1e 4y agoBut enough about the U.S. Federal Reserve.
- _uhtu 4y agoThis is one of those distraction comments that really adds nothing to the discussion. The article has real points about how crypto is deeply seeded with ponzi schemes all over and the entire currency in fact looks like a ponzi scheme, and the response is just "yeah but sometimes other things are kinda ponzi schemes". Yes, the stock/bond markets resemble ponzi schemes particularly for certain securities (cough Uber cough), but the existence of other things being sorta ponzi schemes doesn't remove or forgive all the evidence of deep-seeded ponzi schemes throughout the crypto ecosystem.
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- IncRnd 4y agoNo. Not everything is a ponzi to a degree. It is a specific sort of scam. A Ponzi scheme is an investment fraud where the earnings paid to earlier investors come from the funds of more recent investors.
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- cuteboy19 4y agoCrypto recreates everything Bitcoin was supposed to prevent. 1. Tether: infinite money printer central bank 2. Exchanges: banks 3. Binance: too big to fail 4. BSC shitcoins: fully centralized currency
- tradertef 4y agoYes. Also Bitcon =/= Crypto.
- cuteboy19 4y agoBut tether is propping up btc. Most large btc holders desperately want tether to hold together
- tradertef 4y agoI am not a large BTC holder (haha), but I would be happy that it collapses (if it is really not backed) and Bitcoin can move forward. I am really happy that Celsius, FTX, Luna etc are cleaned up and hope people will take a lesson and stick with basics.
- armored99 4y agothis.
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- jbverschoor 4y agoGood thing we can just convert, and hold our own bitcoins
- kybernetikos 4y agoI'm not sure what else you'd expect. Those things are caused by humans taking advantage of whatever system of value transfer exists, of course people will do the best they can to reinvent these things on top of new value systems. On the other hand, unlike the actual infinite money printer central bank, nobody forces you to use obvious scams like tether. You don't need to use a centralised exchange because smart contracts make it possible to use decentralised exchanges. Smart contracts allow you to do things on a small scale that would have required enormous institutions in the past. The ability for any individual to create their own tokens obviously allows institutions to do it too. Since cryptocurrencies are more powerful than previous systems, it shouldn't be surprising that they support a superset of the scams that previously ran. They also support an unprecedented level of programmability, default to open api access, a new spectrum of choices for trust, the ability to run transactions across financial products from different providers, faster settlement, are based on actually modern methods of cryptography (unlike bank accounts), and have injected a massive amount of energy into some extremely interesting zero knowledge cryptography. It's actually pretty surprising to me that the majority of 'hackers' on 'hackernews' don't seem more excited about the ability to create programmable tokens of their own.
- fishcrackers 4y ago
- dghlsakjg 4y agoEither this is sarcasm or you don’t understand where the money you ‘made’ came from.
- fishcrackers 4y agoat the end of the day it all comes from the same place, web3 just democratizes the path there are a small amout of scams that are overblown by people trying to control the narrative which won't work because the blockchains are decenteralized and free for all to investigate
- JumpCrisscross 4y ago> it all comes from the same place, web3 just democratizes the path To scamming people. Early guys will be fine. But I’d say the odds are good that any gains from here out will be subject to clawback in most competent jurisdictions.
- carewell 4y agoWhat are you talking about? > it all comes from the same place Which is? > a small amout of scams A small number by which metric? Is FTX collapse small? Was Bitconnect small? > the blockchains are decenteralized and free for all to investigate What does this have to do with anything? How can you prevent a scam by looking at the decentralized blockchain? At a maximum you can try to read contract source code, but even then only a tiny number of experts would be able to catch potential issues.
- sieabahlpark 4y agoActually it just means you were part of the few that profited from the ponzi scheme not that it wasn't a ponzi scheme.
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- throwup 4y agoAs a bitcoin holder, I have to agree. Much if not all of the crypto ecosystem is a ponzi.
- glennvtx 4y agoThis is a terrible argument, and clickbait. Obvious enough to anyone who actually understands how bitcoin, or eth work, it does not fit the definition of a ponzi scheme. Most tech stocks fit the definition better. Just because a few centralized banks, (FTX, centralized crypto exchanges are banks) have failed, means nothing, since the original idea of cryptocurrency was to do away with centralized institutions like this.
- _uhtu 4y agoIf the idea was to do away with the centralized institutions but overwhelmingly people use centralized institutions which frequently act like ponzi schemes, perhaps the "idea" no longer matters and the actual real-world situations matter more.
- ohgodplsno 4y agoClassic crypto-enthusiast denial. Your dreamt of, decentralized system that was imagined by Satoshi is gone. It will either never exist anymore and be gangrened by said centralized exchanges (which are the only things that are artificially prop up the value of your coins), or it will go back to the days where you can pay 10 000 BTC for a pizza because someone decided it would be fun. ETH would be worthless without exchanges (because its current value is only propped up by "what bullshit can I sell that mimics real world services but without any legal repercussions when I commit fraud and exchange it for cash, disappearing in the Bahamas in the process?"), doge would be worthless, USDT would be worthless, etc. A system that has no real world value will not exchange anything, unless scammers like Binance and FTX come in to sell get-rich-quick dreams to suckers and artificially bring in money and "volume". When 99% of your volume is just big traders sending money to one another and keeping the price high (because it makes cryptobros feel good when they see their big number go bigger), you don't have an economy, you have at best a really shit game of Monopoly.
- rosnd 4y ago> Your dreamt of, decentralized system that was imagined by Satoshi is gone What do you mean? There are tons of decentralized exchanges I can use to acquire cryptocurrency to buy drugs with.
- monero-xmr 4y agoCryptocurrency in its purest is money not issued or controlled by a government. Instead the supply inflation is controlled by transparent rules that are plain to see. “Protocol-based finance” vs. the existing government-based finance. Now there are all manner of divergences from the above paragraph. Coins that are totally controlled and issued by a small group or company. Black box rules rather than transparent. There are also huge trade offs with not having a central entity - lose your private key and lose your money for example. Does this make the entire industry a Ponzi? No. There are legitimate uses for crypto, and even if I listed a whole bunch here the HN skeptics would disagree, but certainly buying drugs online is a real use case, which crypto excels at. You may say that’s morally wrong but it is still a use case, for better or worse.
- JumpCrisscross 4y ago> Does this make the entire industry a Ponzi? No, the things you mentioned don’t. The argument the article made, that almost all the dollars and euros and yen crypto spits out come from investment, does. That some people are buying drugs and financing terrorism or Pyongyang dilutes the Ponzi case. Those are examples of utility. But I’m not sure that’s the defence crypto was looking for.
- monero-xmr 4y agoStablecoins such as USDC and Tether (although despised by many) are used for non-criminal cross border transfers and savings accounts. Here is a recent episode of EconTalk that explains the use case in Argentina https://podcasts.apple.com/us/podcast/econtalk/id135066958?i=1000582879756 https://podcasts.apple.com/us/podcast/econtalk/id135066958?i...
- JumpCrisscross 4y ago> USDC and Tether (although despised by many) are used for non-criminal cross border transfers and savings accounts One of these is almost certainly a fraud. The other provides utility, but largely in sidestepping money-laundering and banking rules.
- newbieuser 4y ago> This is of course far too good to be true. But no doubt some suckers will believe it and hand over their dollar stablecoins. And that is exactly what the platform wants. summary of all crypto exchanges
- cryptoole 4y agoAs a lay person who hasn't followed cryptocurrencies since Bitcoin was invented, could someone help correct my understanding of how modern ones work? It seems like owning a crypto token in a blockchain is conceptually the same as owning a share in a company. You purchase or mine a voting stake in that blockchain, correct? And the process by which new tokens can be minted is laid out ahead of time, like a gradual continuous stock split. Are there fundamental differences that I'm missing, or has the genius of crypto been to put enough window dressing around the idea to avoid being regulated as a stock market or traditional corporate entity?
- kristianpaul 4y agoI need to stop using my ssh crypto then
- Taniwha 4y agoSo long as you don't take any more bits out of it than you put in you'll be OK
- natas 4y agoThere were times when people believed the earth was flat, and astronomers were called heretics.
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- jtchang 4y ago> For stable funding, what you really need is retail deposits I would disagree. For stable funding what you need is the belief that the underlying currency will continue to have value. The fact that BTC hasn't gone to zero means there are some people who still believe it has value.
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- theknocker 4y ago
- boole1854 4y agoFor anyone familiar with actual rates of returns of real businesses, the fact that "Binance offers yields in excess of 65%" is enormously damning.
- orangussyy 4y agoThis reads as written from someone who doesn’t understand the technologies they are trying to describe. Poor journalist.
- carewell 4y agoAh! Did they forget to mention that blockchain is a glorified linked list?
- civilized 4y agoMore of a massively multiplayer online pump-and-dump if you ask me. The widespread deception about FDIC insurance is really horrifying.
- stephc_int13 4y agoThe success of crypto is very strange/alien to me. The scam seems so obvious, and yet it "works". I guess that I tend to underestimate how many people love gambling with money and/or are attracted to get-rich-quick schemes. There is seemingly also a small fraction of true believers, idealists and evangelists who seem convinced that all of this could replace both states and banks without ending up much worse.
- bb88 4y agoMadoff is the ultimate example of a ponzi scheme done well. 1. The "mark" trades his dollars for something he/she thinks is of value, in Madoff's case it was a balance in the Madoff fund. 2. The fund increases the "balance" for the marks, making them think their money is actually increasing in value. This discourages people from wanting their money back. Meanwhile the actual dollars is squirrelled away to some series of numbered accounts. 3. The ponzi scheme is only exposed when there's a run, which happened to Madoff in 2008 during the financial crisis.
- bmitc 4y agoI think it's similar to the CDOs used in the housing crisis. You take something of little to no value, wrap it up with all sorts of complexity but then present it as this simple thing you can buy and trade that supposedly has value. People lap it up without understanding the underlying value, which is effectively none. Bitcoin takes up energy to be born. Thus, a bitcoin starts life with negative value. It only attains "value" by someone willing to exchange normal currencies for it. Then it increases in value when someone else pays more. But there is no backing value. Yes, fiat currencies no longer have a gold standard, but there is a ton of value backing the fiat currencies. The dollar is backed in value by the U.S. economy. Bitcoin and other cryptocurrencies are entirely ephemeral. I think I saw someone relate them to the Beanie Baby crazy. At least at the end of that craze, you had a Beanie Baby left, as opposed to ones and zeroes on a hard drive with cryptocurrencies. > There is seemingly also a small fraction of true believers, idealists and evangelists who seem convinced that all of this could replace both states and banks without ending up much worse. I think a lot of that culture comes from staunch libertarian ideals and also the "free software" crowds, such as GPL enthusiasts. It just is not how human society works and will never work. I saw it in a thread in regarding a commonly used software library that has a GPL license. The author of the package said they would never consider any other license, even while the other thread posters were requesting a license that would allow them to use it in proprietary code but actually pay for that use. People were essentially stating that no one, other than hobbyists, will ever use the package because they can't in their jobs and companies but that they would be willing to pay for a non-GPL license, and the authors staunchly stood behind their ideals. Thus, no one uses it. I feel cryptocurrencies are very similar. Taking a hardline approach to the decentralization means it will never be incorporated into anything other than hobbyist and enthusiast use.
- OhNoNotAgain_99 4y ago
- cedivad 4y agoThis 50 minutes-old post with 145 points has been nuked from the first page. And the second, and the third. lol.
- yesimahuman 4y agoI noticed that. What do you think the reason is for that? Protecting YC-invested crypto companies? It’s very unfortunate because it was a well written recap of recent events.
- shagie 4y ago> What do you think the reason is for that? > > This 50 minutes-old post with 145 points has been nuked from the first page. --- https://news.ycombinator.com/item?id=16020089 https://news.ycombinator.com/item?id=16020089 > dang on Dec 28, 2017 > ... > We tend to call it the 'overheated discussion detector' these days, since it detects more than flamewars. However, that phrase is more awkward to say than 'flamewar detector'. If anyone can come up with a better name I'd love to hear it. > Turning that software off is not an option, because HN would be overwhelmingly more dominated by flamewars if we did so. It's not primarily the individual threads that I fear, it's the systemic effects of having them be more dominant. HN exists most of all for the quieter, deeper, more out-of-the-way finds that would be the first to get excluded under such a regime. That would really be an existential risk to HN. --- This post got too much attention, too quickly, with too many votes and comments. Just look at all of the flagged, dead, green name, comments that have gotten significant downvotes too. The moderation work needed to maintain the site if this isn't down ranked is in excess of the amount of value that the post brings to the site.
- pelasaco 4y agoThe dream is over. How we came from Satoshi to here is just one more example of how our civilization is weird. In one hand we create great technologies and at the same time, we have already people working to complete destroy it.
- tarkin2 4y agoThere is, at least, some demand for crypto that relates to real-world economics. It's an excellent intermediary currency. People use it successfully in hyper-inflationary countries and people use it to bypass currency transfer difficulties. These are definite and real use-cases. The rest of the demand looks like pure and simple speculation based on faith that the other various claimed uses will come good, i.e. a ponzi. It's not a complete ponzi, but I'd say about 80% of it is.
- dj_mc_merlin 4y agoExcuse my financial ignorance but.. shouldn't it be immediately illegal to claim "46% risk-free return"? That is impossible. Asking people to give you money to do something that is clearly impossible (make a shitton of money sustainably from.. nothing?) is just fraud. Why can't they just get sued as soon as they put a website up that is inciting people to send them money under false pretenses?
- TacticalCoder 4y ago> The entire crypto ecosystem is a ponzi That remains to be seen (for example I'm crossing fingers Brian Armstrong, the CEO of Coinbase, which is an HN unicorn, ain't at the head of a ponzi) but meanwhile something is certain: SBF was running a Ponzi (guaranteeing insane returns using previous investors and people's money: yup, that's a plain ponzi). And he was lying in nearly every single of his tweet, up to a few days before the downfall when he was tweeting that everything was fine. Or when he was saying the money was FDIC insured. Deleted the tweets? Too bad, people have copies of that. To me it seems like quite some people are pushing this "every crypto is a ponzi" now that their poster ponzi boy got caught with the hand in the cookie jar. But I'm not sure they'll succeed. I think there could be a future where, just as energy and commodities are still a thing after the Enron ponzi, Bitcoin may still exist after FTX/Alameda ponzi.
- bb88 4y agoCoinbase's stock value is down 86% in the past year. BTC lost more money this year than people did by just holding cash even at 7% inflation. Tether was banned by NY State from operating there, and also may be actually insolvent. FTX went belly up due to a ponzi. QuadrigaCX did the same thing before it. Rug pulls are common in the NFT world. Smart contracts are written to be too smart for normal investor people to follow them. Or not smart enough to keep hackers from manipulating them.
- kevmo 4y agoHow many crypto startups has y ombinator funded?
- tim333 4y ago>...crypto are every bit as dependent on a constant supply of greater fools. But it isn't really. The crypto market goes in approx four year cycles and the number of greater fools goes up and down but things like bitcoin don't cease to exist, they just go up and down in price.
- unabomber 4y agoAs capitalism is
- tempera 4y agoWell this is the Matrix level attack on Bitcoin. Conflate it with all the crypto Ponzi out there. Rendering the mind of the regular normie incapacitated, unable to ascertain what is true and what is false.
- rvalue 4y agoBut the entire banking system based on fractional reserve banking is a ponzi scheme. No?
- imachine1980_ 4y agoshort answer not. banks in fractional reserves make money for the commission of lending,if your account get more interest this year this means they also lend to more interest. yes isn't 100 but chase bank and citi bank is here for 200 YEARS. short answer no it isn't, i don't like the banking system but that doesn't mean is pyramid scheme. does crypto is inescapable pyramid scheme, no. even when the landscape is full of scam it doesn't mean that stripe or bitwage or usdt who pay you in crypto to easy international transfer process, they make small cut in the transaction like any other transfers company, for the contrast the number of companies whose only proposition ins the pump and dump the value of their virtual games from shinucrypto to literal ponzi scheme like bitconect. i wish you understand what i say, i will clarify what i say if you need, English inst my first langues
- clacla778 4y ago