[HN Gopher] Fake Tesla, Apple stocks have started trading on blo...
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Fake Tesla, Apple stocks have started trading on blockchains
Author : mgh2
Score : 50 points
Date : 2021-07-06 19:32 UTC (3 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| dasudasu wrote:
| Matt Levine has a good write-up on the situation as usual:
| https://www.bloomberg.com/opinion/articles/2021-07-06/blockc...
| minikites wrote:
| Bitcoin enthusiasts are learning first hand why financial
| regulations exist. It's a shame we can't seem to learn from
| history.
| nielsbot wrote:
| Reminds me of HSX (Hollywood Stock Exchange). It's a trading
| game/predictive market (no real money) where you trade shares in
| actors, movies, forthcoming movies, and even funds, e.g. "all
| Marvel movies." Pretty fun. https://www.hsx.com
| kgraves wrote:
| Why are we allowing this to happen? This blockchain madness needs
| to stop.
| ykat7 wrote:
| https://archive.is/W5PRQ
| bdcravens wrote:
| Robinhood does the same for Bitcoin
| nabla9 wrote:
| Many people are asking: Why government should regulate finance?
|
| In the US you should look at the so-called free-banking era
| (1837-1864) or the crisis era (1782-1930). Btw. Free banking
| didn't mean no rules. It just meant that there was no charter or
| permission is needed to start a bank,
|
| Finance was basically free for all. Easy to get in. Constant
| stream of economic recessions and banking crises harmed everyone.
| Wildcat banking increased incentives for risk-taking and fraud to
| high levels. It hindered economic growth, destroyed wealth of may
| hard working individuals.
|
| The US has huge financial industry partly because the regulation
| is so extensive. People from all over the world invest their
| money in the US because they know what when liquidity crisis
| happens, they still get their money back.
| logicalmonster wrote:
| > Wildcat banking increased incentives for risk-taking and
| fraud to high levels.
|
| The evidence points out that it's the current banking system
| that incentivizes risk taking because the international bankers
| know they're getting a bailout every time when they mess up.
|
| > The US has huge financial industry partly because the
| regulation is so extensive. People from all over the world
| invest their money in the US because they know what when
| liquidity crisis happens, they still get their money back.
|
| I'd like to know how this massive regulation helped consumers
| during the GameStop events at the end of January.
|
| Naked short selling is running rampant and the system is
| protecting these crooks who essentially resell the same shares
| repeatedly.
|
| Stock trading must inevitably take place on a blockchain: it is
| the only means to publicly verify accurate data. The current
| system with self-reported data and slap on the wrist fines is
| completely ridiculous.
| nradov wrote:
| There's no need to use blockchain technology for stock
| trading. The current centralized clearinghouse system works
| fine and is highly scalable. It also allows for transactions
| to be unwound in the case of mistakes or system failures. No
| one cares if a handful of retail investors lost money on
| foolish GameStop trades.
| donmcronald wrote:
| > Naked short selling is running rampant and the system is
| protecting these crooks who essentially resell the same
| shares repeatedly.
|
| > Stock trading must inevitably take place on a blockchain:
| it is the only means to publicly verify accurate data. The
| current system with self-reported data and slap on the wrist
| fines is completely ridiculous.
|
| I don't know if blockchain tech is up to the task, but I
| agree in the context of non-negotiable, immutable
| transparency. It's the only way we'll ever find out just how
| corrupt Wall Street actually is. IMO the answer is _very_!
| X6S1x6Okd1st wrote:
| One of the major innovative points of cryptocurrencies and the
| current DeFi wave is that many interesting things can be built
| which are non-custodial.
|
| Taking one of the largest DeFi exchanges for instance: Uniswap.
|
| If the devs of uniswap decide to try and steal all of the funds
| that have been locked up in their contracts they can't[1]
|
| That being said there are plenty of DeFi projects that claim to
| have no backdoor, but they do. And just because something is
| non-custodial doesn't mean that the value of the token won't go
| to zero, e.g. here's a good example of a project that went to
| zero even though there wasn't a known backdoor:
| https://www.rekt.news/iron-finance-rekt/
|
| [1]: Assuming no one has missed a backdoor in the code
| elevenoh wrote:
| As all information becomes increasingly accessible &
| transparent tools emerge, central-regulation becomes less &
| less necessary.
| ElViajero wrote:
| > The US has huge financial industry partly because the
| regulation is so extensive. People from all over the world
| invest their money in the US because they know what when
| liquidity crisis happens, they still get their money back.
|
| And that is one of the reasons so many people invest in crypto-
| scams. They are used to the safety of traditional banking, and
| think that it comes for free. Not realizing that it is a hard
| earned situation earned thru the pain of a past era and
| enforcement of regulations. Sadly, people that has no
| understanding of banking are for a surprise when they realize
| in what are they really investing and how little recourse they
| have when the crypto-scamsscams explode.
| mrkramer wrote:
| Investing in crypto projects is the same like investing in
| dot com companies back in the day. You invest in concepts not
| in the actual product or solution and ofc 99% of these
| projects are unrealistic or team behind them is incompetent.
| dragontamer wrote:
| No. There's a big difference.
|
| When Webvan went bankrupt, they truly bought all of those
| warehouses / refrigerated vans. They were honest about
| their business idea.
|
| When "Africrypt" (a recent Crypto group) stole $3.6 Billion
| from its customers, that's straight up fraud and would not
| stand even back in the dot-com boom in the 90s. That's the
| sort of thing US Regulators are trying to protect investors
| from.
|
| ----------
|
| You still might invest into a bad idea (ex: Webvan or
| Theranos), but those CEOs are truly spending money on vans
| / warehouses / poorly designed blood tests and not just
| actively stealing it from their investors.
|
| Even when companies criminally lie (ex: Enron or Worldcom),
| its a far lesser crime than what the Africrypt brothers did
| just a few weeks ago. The size and scope of the scams
| currently going on in the Blockchain world is far worse
| than what happens in US regulated markets.
| mrkramer wrote:
| I agree with you on Webvan but Theranos was pure fraud.
|
| The so called "Crypto" industry will mature when
| regulation happens and when real cryptographers and real
| computer scientists enter the scene and start innovating.
| Until then we have hyped up teens playing with the
| buzzwords like blockchain and decentralized finance.
|
| >The size and scope of the scams currently going on in
| the Blockchain world is far worse than what happens in US
| regulated markets.
|
| I somewhat tend to believe that governments all around
| the world are giving the "Blockchain world" grace period
| of not being tightly regulated so they can catch as many
| crypto criminals as they can because let's be honest if
| these guys were not stealing in the crypto world they
| would be stealing somewhere else. And I also tend to
| believe that current financial regulations are enough to
| regulate crypto as it is but governments are moving
| slowly as usual.
| arcticbull wrote:
| It's been almost 14 years, so where are the "real
| cryptographers" and "real computer scientists?" I suspect
| they've been searching and realized there's no "there"
| there.
| mrkramer wrote:
| I guess they are not interested; Microsoft recently shut
| down its Azure blockchain service[0] for example.
| Facebook made its own crypto coin but I am afraid that
| will lead to nowhere. Google and Amazon are not very
| interested as well so real cryptographers and real
| computer scientists are working on other stuff and on
| other problems.
|
| [0] https://www.zdnet.com/article/microsoft-is-shutting-
| down-its...
| elliekelly wrote:
| I like to follow the fallout from cyrpto/token scams on
| reddit as they happen and it's the same thing every time:
| People who had been touting the benefits of "no regulation"
| are suddenly angry and outraged that the government hasn't
| done more to prevent the scam from happening and isn't (in
| their minds) doing enough to get their money back.
|
| It's a leopards ate my face situation. And it's beyond
| frustrating but I can also sympathize with them a bit. Who
| among us hasn't stubbornly needed to see something for
| ourselves in order to learn a lesson we could have (and
| should have) learned by listening to the people with a bit of
| experience?
| sjg007 wrote:
| Crypto is the wild wild west.
| [deleted]
| yawaworht1978 wrote:
| Looks like cryptocurrencies are not very innovative. They keep
| reinstalling all the features that have been there and improved
| in the regular markets. Tether and stablecoins mimicking the USD,
| now this stuff mimicking stocks, how are the not getting in
| trouble with government institutions or Apple? What are the
| loopholes? No existing laws yet? Or they operate and reside in
| far away jurisdictions?
| delusional wrote:
| I don't think there's any political interest in looking at them
| right now. It's largely just a bunch of nerds playing with
| pretend money. It hasn't really hurt anybody outside of it yet.
| iseethroughbs wrote:
| This pretend money is currently the main driving mechanism
| behind the unprecedented business hacking and ransomware
| wave.
| yawaworht1978 wrote:
| And for things like paying for ddos attacks and money
| laundering in general. Ah yes, and the classic all things
| dark web. There is not one use case except speculation for
| people who are not amongst the non law abiding elements of
| society.
| arcticbull wrote:
| There's always speculation. But yeah, definitely nothing
| else.
| SkyMarshal wrote:
| That's true, though govts are definitely looking at them.
|
| On one hand, the crypto-economy is still too small to
| represent the same kind of systemic risk that took down the
| banking system in 2007/8, so there's less urgency to do
| anything about it.
|
| Additionally, both governments and regulators, in the US at
| least, tend to prefer to let new technologies incubate and
| evolve for a time before regulating it more strictly.
|
| On the other hand, it's too small to have the armies of
| lawyers defending it that the banking system does, so it's an
| easier target for regulators looking for wins than Wall
| Street is.
|
| The SEC, CFTC, Treasury are all looking at it in the US and
| doing some triage regulation, only going after the most
| blatant and worst problems atm. I'm sure they'll step it up
| if/when the crypto-economy continues to grow.
| baby wrote:
| I'm not sure how you're getting to "not innovative".
| elevenoh wrote:
| crypto already allows one to buy AAPL token, privately, at 3am
| EST, for a ~$.1-$5 tx fee.
|
| Not bad for the 1st decade of a long story.
| elliekelly wrote:
| A crypto-token tracking the listed security of a company that
| is itself so heavily invested in crypto that the security price
| more or less tracks with crypto reminds me of the new new
| internet from Silicon Valley.
| aewct wrote:
| From TFA:
|
| > Users can trade the tokens anonymously 24 hours a day, seven
| days a week, from anywhere, unhindered by capital controls,
| "know your client" rules imposed on broker-dealers, and other
| frictions of the traditional financial system.
|
| These are certainly new innovations and features, be they good
| or bad.
| yawaworht1978 wrote:
| Oh my, they cal KYC "friction", that is indeed creative
| writing.
| aewct wrote:
| An OS asking you to confirm that you want to delete a file
| is also friction. Like KYC, it is a positive, but friction
| nonetheless.
|
| In context, they also mention traditional markets being
| closed at certain days and times. This is also friction,
| but negative.
| baby wrote:
| How is it not friction?
| tablespoon wrote:
| >> Users can trade the tokens anonymously 24 hours a day,
| seven days a week, from anywhere, unhindered by capital
| controls, "know your client" rules imposed on broker-dealers,
| and other frictions of the traditional financial system.
|
| > These are certainly new innovations and features, be they
| good or bad.
|
| That's saying a car with its seat belts removed has an
| "innovative new feature." The usual word for that situation
| is "regression."
| aewct wrote:
| There's no benefit to the user to having no seatbelts.
| There's a huge benefit to having open markets at all times.
|
| The usual phrase for your argument is "false analogy."
| Traster wrote:
| >Binance may have violated securities rules when it issued the
| tokenized shares of Tesla, MicroStrategy Inc. and Coinbase, BaFin
| said in April.
|
| Microstrategy Inc. So just to be clear, they're created a
| synthetic crypto-instrument to track the performance of a share
| that is something like >90% correlated with BTC (since MSTR is
| basically a leveraged BTC bet now).
|
| This is absolutely snake eating it's own tail kinds of insane.
|
| >Dallas Mavericks owner Mark Cuban, an enthusiastic and
| influential investor in DeFi, recently called for regulations to
| address the cryptocurrencies after losing money when one crashed
| in value to zero.
|
| Sorry but Mark Cuban is the most sophisticated of investors, it
| should not be illegal for him to lose money.
| handmodel wrote:
| I don't feel bad for Mark Cuban - a sucker who should have
| known better - but clearly if his team fell for it than its
| good evidence the entire system needs much heavier regulation.
|
| I don't want to have to deal with the societal problems/have my
| taxes go to a bailout when there's billion dollar scams
| affecting average workers, a pension fund, or minority first-
| time investors.
| arcticbull wrote:
| This isn't about Mark Cuban's losses per se, I also have no
| issue with him (an accredited investor) getting bilked for some
| change between the couch cushions - the issue is even if an
| incredibly sophisticated investor like Mark could fall for such
| a rug-pull/failure then how can we possibly expect
| unsophisticated investors not to get bamboozled? Remember,
| those who wash out of trading end up beneficiaries of the state
| bankruptcy and welfare programs, so the state very much has an
| interest in this.
|
| Crypto now is like trading stocks was before and leading up to
| the great depression: a bunch of hucksters, shills, snake-oil
| salesmen and unrestricted margin. And a few well-intentioned
| people. Before the Securities Act, the Securities Exchange Act,
| Regulation T and the SEC.
|
| The great finance speed-run has reached mid-1929.
|
| [edit] Seriously if the Fed has to cough up $60 billion dollars
| to bail out Tether, I'm going to be incredibly pissed off.
| nradov wrote:
| That is exactly why no one should be trading cryptocurrency.
| Anyone who does so deserves to lose everything. I don't want
| the SEC wasting my tax money protecting those idiots.
| bko wrote:
| > But to oversimplify, under the Mirror Protocol, the idea is to
| keep prices of the synthetic -- or "mirrored" -- equities in the
| ballpark of the real thing by offering incentives for traders to
| arbitrage price discrepancies and manage the actual supply of
| tokens. Users can create, or "mint," new tokens when prices are
| too high by posting collateral, and destroy, or "burn," tokens
| when prices are too low, driving the price up or down.
|
| > Binance, the world's biggest cryptocurrency exchange, has
| already drawn the attention of Germany's financial regulator by
| offering tokens that are tied to the performance of popular U.S.
| stocks but backed by the actual equities. Binance may have
| violated securities rules when it issued the tokenized shares of
| Tesla, MicroStrategy Inc. and Coinbase, BaFin said in April.
|
| Binance's version of this seemed relatively straight forward,
| although you had considerable third party risk. But I imagine if
| they were regularly audited or had a redemption mechanism for the
| underlying stock, this is much preferable to the more complex
| method used in the Mirror protocol.
|
| So much of DeFi is focused on getting around regulatory barriers.
| I get that the state uses finance and money as a way to control
| nerfarious activity (illicit substance sales, tax avoidance etc),
| but it leads to giving up a lot in privacy and freedom. Maybe
| they should give up on trying to attack it at the money level and
| focus more upstream. Why shouldn't you allow just about anyone to
| buy Tesla stock?
| nradov wrote:
| Just about anyone is already allowed to buy Tesla stock.
| arcticbull wrote:
| Who isn't allowed to buy TSLA?
| tcoff91 wrote:
| people who live in countries that are under US sanctions i
| would presume? I'm not an expert on this stuff but I'd be
| surprised if buying or selling US securities was not heavily
| restricted for people in sanctioned countries like Iran.
| arcticbull wrote:
| There's a reason they got sanctioned, though, right?
| Broadly, attempting to develop nuclear warheads in unstable
| regions. So yeah, I'm ok with sanctioned people not trading
| TSLA to pressure the regime. Frankly, I can't think of a
| reason why that would be ok.
| tdhoot wrote:
| > But to oversimplify, under the Mirror Protocol, the idea is
| to keep prices of the synthetic -- or "mirrored" -- equities in
| the ballpark of the real thing by offering incentives for
| traders to arbitrage price discrepancies and manage the actual
| supply of tokens. Users can create, or "mint," new tokens when
| prices are too high by posting collateral, and destroy, or
| "burn," tokens when prices are too low, driving the price up or
| down.
|
| This seems pretty similar to the authorized participant model
| used successfully with ETFs, so not sure if it's actually an
| issue.
| ethn wrote:
| It's the redemption of the real underlying that allows ETFs
| to work.
| arcticbull wrote:
| Yes, its important for tracking that authorized
| participants are able to both create and redeem the ETFs
| for the underlying. This is why the Grayscale family does
| such a god-awful job of tracking the underlying. Check out
| the premium over time. [1]
|
| I suspect these are more like perpetual futures or CFDs?
|
| [1] https://ycharts.com/companies/GBTC/discount_or_premium_
| to_na...
| ethn wrote:
| I think this is illegal. This is effectively a CFD, which are
| absolutely illegal in the US regulated or not.
|
| https://en.m.wikipedia.org/wiki/Contract_for_difference
| syrrim wrote:
| Your reference says they are illegal only on regulated markets
| in the US.
| arcticbull wrote:
| Regulation S requires US persons no matter where they live to
| only trade at SEC regulated exchanges. [1] So broadly
| speaking it applies to all US persons - residents and
| citizens regardless of place of residency.
|
| I suspect accredited investors can do as they please though,
| but that's only a guess.
|
| [1] https://www.law.cornell.edu/cfr/text/17/230.903
| anonymoushn wrote:
| Does this mean that Archegos and all its counterparties were
| not permitted to trade CFDs?
| tgsovlerkhgsel wrote:
| Do they have a fixed end date? If not, it sounds more like
| other kinds of derivatives (legal if regulated, which this
| isn't).
| delusional wrote:
| How does this make sense? If they don't hold the underlying
| security, where does the value come from?
|
| This feel like it's another one of those "while money is flowing
| in it'll work, but if there's a run, it crashes spectacularly".
| If the liquidity dries up, i end up owning nothing. With a real
| security at least i end up owning a small part of apple, but here
| i literally own nothing.
| donmcronald wrote:
| If the hedge funds and prime brokers are allowed to sell the
| unsuspecting public a bunch of counterfeit shorts, why not let
| the crypto market do the same?
|
| I'm only half joking.
| tablespoon wrote:
| How does this make sense? If they don't hold the underlying
| security, where does the value come from?
|
| Come on, this is cryptocurrency. The whole point is to con
| people into thinking a fake thing is real because blockchain
| and cash in; with the off chance that if enough people believe,
| then their belief will make the fake thing real.
| elevenoh wrote:
| Benefits: 24/7, lower fees, less financial incumbent insiders
| front running your trades, less retail traders giving data of
| their every move to financial incumbent insiders, privacy.
|
| I think this'll be adopted widely in the near-future by savvy
| traders.
|
| It benefits the little guys.
|
| And I look forward to the day companies preferably issue equity
| directly atop decentralized networks - under what legal framework
| and/or sovereignty is yet to be determined.
| arcticbull wrote:
| Not in America they won't lol, it's illegal. In fact it's
| illegal for US persons to trade securities out of a non-SEC
| regulated brokerage account. See Regulation S.
|
| Isn't the new monetization strategy in crypto literally to
| reorder blocks and front-run transactions due to the massive
| time quanta?
|
| How exactly do you think the NBBO rule is to be implemented?
| [1]
|
| The little guys as always are the most likely to get hurt.
|
| [1] https://www.investopedia.com/terms/n/nbbo.asp
| elevenoh wrote:
| >Not in America they won't lol, it's illegal. In fact it's
| illegal for US persons to trade securities out of a non-SEC
| regulated brokerage account
|
| Is this comment referring companies issuing equity directly
| on-chain?
|
| Of course it's currently illegal.
|
| That doesn't mean it's illegal in all global jurisdictions or
| that savvy traders won't find a way to have financial
| liberty, even if it means moving countries/jurisdictions,
| opening up a corporation elsewhere etc..
|
| >Isn't the new monetization strategy in crypto literally to
| reorder blocks and front-run transactions due to the massive
| time quanta?
|
| What a disingenuous way to frame the concept of MEV.. That's
| quite an unobjective bias you have.
|
| >The little guys as always are the most likely to get hurt.
|
| The little guys are most likely to get hurt when there's a
| lack of transparency. In an internet age with transparent
| tools, the little guys should have freedom with
| accountability (e.g. they can't even invest in startups).
| arcticbull wrote:
| Why would we voluntarily give up the security afforded by
| the SEC?
|
| The front-running thing is literal observable fact. If you
| know what transactions are to be included in the next
| block, and you're in charge of ordering them on a multi-
| minute timeframe, and you know pricing on exchanges in
| real-time why would you not take advantage? Why would you
| _not_ front run? There 's no _law_ stopping you is there?
|
| > The little guys are most likely to get hurt when there's
| a lack of transparency. In an internet age with transparent
| tools, the little guys should have freedom with
| accountability (e.g. they can't even invest in startups).
|
| Which is exactly the issue with the blockchain. You're
| given a peek at the chain but that's not what matters.
| elevenoh wrote:
| >If you know what transactions are to be included in the
| next block, and you're in charge of ordering them on a
| multi-minute timeframe, and you know pricing on exchanges
| in real-time why would you not take advantage? Why would
| you not front run? There's no law stopping you is there?
|
| Check out time-lock encryption, auctioning transaction
| order rights, or Automata's conveyor service etc.
|
| There's some powerful ideas floating around to bring MEV
| to negligible levels.
|
| This is the beauty of crypto:
|
| users will flow to the most efficient blockchain. If MEV
| is their primary concern, they'll flow to that which
| nullifies it :)
| arcticbull wrote:
| Bitcoin is the world's least efficient blockchain, so how
| is it the largest? I suspect people flock to the number-
| go-uppest blockchain.
| elevenoh wrote:
| There's a lot involved in market dynamics - BTC or
| otherwise :)
| anonymoushn wrote:
| > What a disingenuous way to frame the concept of MEV..
| That's quite an unobjective bias you have.
|
| "stealing money from unsophisticated users" seems like a
| correct characterization of MEV
| elevenoh wrote:
| "the new monetization strategy" doesn't seem like a
| correct characterization of MEV.
| anonymoushn wrote:
| It will not be implemented, of course. But it's a bit
| interesting to bring up MEV and the NBBO rule together. The
| situation in the US is that retail order flow is goes to
| wholesalers, and wholesalers subscribe to the SIP feed (which
| is substantially delayed) and the direct feeds from venues,
| and they can decide whether they want to offer price
| improvement compared to the *delayed SIP feed* based on the
| more recent data from the direct feeds. It doesn't seem like
| retail is getting a great deal in that situation.
| notahacker wrote:
| If you think this is a good idea, I'm happy to sell you and
| other "savvy traders" the Brooklyn Bridge.
|
| Benefits: no intermediaries and absolutely no money wasted on
| lawyers or due diligence. Drawbacks: you don't have a bridge,
| or even an option on one.
| elevenoh wrote:
| No one is saying no intermediaries, and certainly no one is
| saying no due dilligence though..
|
| Optimal intermediaries emerge as a response to market
| conditions.
|
| Some are fine with the current financial industry
| intermediaries. Some aren't.
|
| Voice & exit.
|
| In the near future we'll have other crypto-afforded options
| to 'exit' to.
| tablespoon wrote:
| > Benefits: 24/7, lower fees, less financial incumbent insiders
| front running your trades, less retail traders giving data of
| their every move to financial incumbent insiders, privacy.
|
| The same can be said of monopoly money.
| Tenoke wrote:
| Calling synthentic assets - something otherwise fully embraced by
| traditional finance - 'fake stocks' repeatedly lets me think they
| might have had some sort of an agenda on this one..
|
| Disclosure: I have personally invested small sums in the
| mentioned SNX and MIR.
| yreg wrote:
| "Fake stocks" does make it sound like the users are being
| mislead into thinking that they are buying actual stocks. Which
| doesn't seem to be the case.
| elevenoh wrote:
| It's definitely not the case.
|
| "Fake stock" == "stock futures instrument" depending on the
| writers underlying motive.
|
| And the bloomberg motive is clear.
| arcticbull wrote:
| Equity futures are constructed around, on settlement date,
| delivery of the underlying shares to long contract holders
| from short contract holders. They're called SSFs for short.
| [1]
|
| There are cash-settled futures too, but they're usually for
| things that don't sit well in a brokerage account like "a
| NASDAQ" or crypto, for instance.
|
| [1] https://www.investopedia.com/articles/optioninvestor/06
| /sing...
| elevenoh wrote:
| Equity futures (e.g. perpetuals) exist in forms beyond
| the definition you've mentioned.
|
| example
|
| https://ftx.com/trade/FB/USD
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(page generated 2021-07-06 23:03 UTC)