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The 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 ga

The 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 ago
Madoff 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 ago
I 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.
koonsolo 4y ago
It always surprises me how a tech/startup oriented forum like HN is so negative towards crypto. I think it's insane that someone invented an algorithm to transfer value over the internet, without the involvement of a central party. Basically as soon as it has a tiny bit of value, you can transfer it, and so it has value. It goes so far that you could store the private key in your head, and therefore use your head as basically a bank account, only accessible to you. Plus, if you're living in Hong Kong and want to get paid for something the government thinks is illegal, you can always get paid in Monero, like this guy: https://news.ycombinator.com/item?id=31996612 https://news.ycombinator.com/item?id=31996612 Ok, you want to focus on all the scams and get-rich-quick schemes. It's more than that you know.
- stephc_int13 4y ago
  Is it though? I am pretty sure that building an anonymous payment system for illegal trades is possible without crypto. I have not seen a legitimate use of crypto yet. Not even once.
  - koonsolo 4y ago
    > I am pretty sure that building an anonymous payment system for illegal trades is possible without crypto. How? And then it turns out this system is owned by the FBI, like the ANOM phone. Oops. At least with Monero you know it's peer reviewed, and can check what is running on your system. You see that is the strange part here. There is a cool algorithmic solution, and HN says "Nah, some central authority could do that with software too".
  - cornholio 4y ago
    I think if we were trying to build a payment system for illegal use, what we would end up would look very much like crypto. This in itself should speak volumes. Of course, for my part I certainly wouldn't be able to independently come up with proof of work chains, the major contribution of Satoshi. Something like Wei b-money with a super-peer network that broadcasts transactions and countersigns those that are legitimate/first. It wouldn't have the strong anti-double-spending features of Bitcoin, but it would work much as current proof of stake coins, as long as the super-peer cabal was not majority-compromised. I know I could come up with it because I toyed with these concepts in the space of filesharing protocols before 2010, but decided the whole e-cash approach was too heavy. Always wondered what it could have led to if I implemented it back then.
tasuki 4y ago
> The scam seems so obvious If it is do obvious that all cryptocurrency is a scam, would you mind explaining why? Do you think national currencies are also a scam?
- stephc_int13 4y ago
  Yeah, it is pretty easy, crypto value is built either on Ponzi or on the Greater Fool principle. National currencies, issued by states are not a scam.
  - SparkyMcUnicorn 4y ago
    So crypto is more similar to stocks? Saying they're all scams just because of that seems harsh.
    - stephc_int13 4y ago
      No, stocks are not tied to thin air. Stocks can crash, and some of them are scams, but most of them are not, contrary to crypto.
  - tasuki 4y ago
    I agree cryptocurrencies need a greater fool to have value. But how then are national currencies different? The same greater fool principle applies: if no greater fool wants the national currency anymore, it ceases to have value.

bb88 4y ago

Madoff 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 ago

I 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.

koonsolo 4y ago

It always surprises me how a tech/startup oriented forum like HN is so negative towards crypto. I think it's insane that someone invented an algorithm to transfer value over the internet, without the involvement of a central party. Basically as soon as it has a tiny bit of value, you can transfer it, and so it has value. It goes so far that you could store the private key in your head, and therefore use your head as basically a bank account, only accessible to you. Plus, if you're living in Hong Kong and want to get paid for something the government thinks is illegal, you can always get paid in Monero, like this guy: https://news.ycombinator.com/item?id=31996612 https://news.ycombinator.com/item?id=31996612 Ok, you want to focus on all the scams and get-rich-quick schemes. It's more than that you know.

stephc_int13 4y ago
Is it though? I am pretty sure that building an anonymous payment system for illegal trades is possible without crypto. I have not seen a legitimate use of crypto yet. Not even once.
- koonsolo 4y ago
  > I am pretty sure that building an anonymous payment system for illegal trades is possible without crypto. How? And then it turns out this system is owned by the FBI, like the ANOM phone. Oops. At least with Monero you know it's peer reviewed, and can check what is running on your system. You see that is the strange part here. There is a cool algorithmic solution, and HN says "Nah, some central authority could do that with software too".
- cornholio 4y ago
  I think if we were trying to build a payment system for illegal use, what we would end up would look very much like crypto. This in itself should speak volumes. Of course, for my part I certainly wouldn't be able to independently come up with proof of work chains, the major contribution of Satoshi. Something like Wei b-money with a super-peer network that broadcasts transactions and countersigns those that are legitimate/first. It wouldn't have the strong anti-double-spending features of Bitcoin, but it would work much as current proof of stake coins, as long as the super-peer cabal was not majority-compromised. I know I could come up with it because I toyed with these concepts in the space of filesharing protocols before 2010, but decided the whole e-cash approach was too heavy. Always wondered what it could have led to if I implemented it back then.

tasuki 4y ago

> The scam seems so obvious If it is do obvious that all cryptocurrency is a scam, would you mind explaining why? Do you think national currencies are also a scam?

stephc_int13 4y ago
Yeah, it is pretty easy, crypto value is built either on Ponzi or on the Greater Fool principle. National currencies, issued by states are not a scam.
- SparkyMcUnicorn 4y ago
  So crypto is more similar to stocks? Saying they're all scams just because of that seems harsh.
  - stephc_int13 4y ago
    No, stocks are not tied to thin air. Stocks can crash, and some of them are scams, but most of them are not, contrary to crypto.
- tasuki 4y ago
  I agree cryptocurrencies need a greater fool to have value. But how then are national currencies different? The same greater fool principle applies: if no greater fool wants the national currency anymore, it ceases to have value.