[HN Gopher] Is it a Ponzi? A framework for evaluating crypto pro...
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Is it a Ponzi? A framework for evaluating crypto projects
Author : marban
Score : 73 points
Date : 2022-06-08 18:37 UTC (4 hours ago)
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| TacticalCoder wrote:
| Someone should make one for the various countries: _" Is is a
| Ponzi? A framework for evaluating pension schemes"_.
| danuker wrote:
| We'll find out soon enough, as young taxpayers renounce their
| citizenships and move away.
| arcticbull wrote:
| This is not an issue for America of course as folks who move
| away without renouncing will continue to owe taxes to Uncle
| Sam for the rest of their natural lives and if they do
| renounce, they have to pay taxes on all of their assets as
| though they disposed of them at the time of renunciation -
| plus paying a significant fee.
| 1270018080 wrote:
| An aside, I believe you only pay an exit tax if you have
| more than $2 million in assets.
| ypeterholmes wrote:
| Ponzi's rely on deception, but crypto projects are the complete
| opposite- they are entirely public. Literally every transaction
| is public. So the entire premise/title of this article is
| nonsense.
|
| Also the shade thrown at Cardano is ridiculous. They write "Their
| focus on convincing YouTube influencers to promote Cardano.." But
| the truth is the opposite. Cardano relies on thousands of
| validators to secure the network, who in turn are incentivized to
| market themselves. So it's not that YouTube influencers were
| convinced to do anything- it's highly technical people that were
| convinced to market the network. Big difference, and actually
| quite smart.
| [deleted]
| ATsch wrote:
| > they are entirely public
|
| Yes, you're just not clever enough to understand all of the
| jargon I just invented and refuse to explain, audit every line
| of code, audit the organization that actually controls the
| project, spend a month brainstorming all of the possible
| failure modes and get a PhD in multiple disciplines to discover
| if any of my claims are deceptive.
| usrn wrote:
| Token contracts have to be short to keep them cheap. If you
| get scammed with a token because you didn't read the contract
| you kind of deserve it IMO.
|
| No one reads them though, I've been surprised by the things
| I've found in some.
| dubswithus wrote:
| Some people read them but hackers exploit them long after
| they are published. Doesn't that suggest that they are not
| easily understood?
| ccvannorman wrote:
| disinformation is the new secrecy.
| ypeterholmes wrote:
| Tokenomics are generally aggregated and published by third
| party organizations for almost every project.
|
| Blockchain analytics are also big business.
|
| My point stands- it's hard to hide things on an open source,
| decentralized blockchain.
| JackFr wrote:
| > it's hard to hide things on an open source, decentralized
| blockchain.
|
| And yet, why do ransomware attackers only accept crypto?
| ypeterholmes wrote:
| Because the legacy banking system will just take their
| money. Decentralized systems are not only more
| transparent, they are also more inclusive. But note-
| dollars are far and away the largest medium of exchange
| for criminals. So if you want to get into that
| comparison, feel free.
| cuteboy19 wrote:
| Even simple questions like "did Do Kwon actually spend the $10
| billion btc to protect the UST peg" cannot be answered.
|
| The """transparency""" is just marketing. It is very easy to
| hide stuff with crypto
| wstuartcl wrote:
| return true;
| djakaitis wrote:
| Yes.
| ATsch wrote:
| The answer even according to this framework is pretty much a
| blanket "yes, unless it helps you buy illegal drugs", considering
| that's the only thing you can really purchase with
| cryptocurrencies that has any value outside of the network.
| dubswithus wrote:
| Also used to buy cheaper legal drugs you might have a
| prescription for from India or other countries.
| JackFr wrote:
| Well ackshually...most successful ransomware schemes also use
| crypto, so access to your own files is also something you can
| buy with crypto.
| bricss wrote:
| I would value more entirely public messenger w/o any free speech
| control, rather than some random bytes chained w/ hash sums
| produced out of thin air
| the_af wrote:
| Re: Axie Infinity and Play 2 Earn games, it was explained to me
| that there is a significative number of people (many in the
| Philippines, apparently) making a living out of this. That is,
| their time is sunk into this game not because they enjoy it or
| derive any pleasure out of it -- from what I've seen, it's not an
| enjoyable game and wouldn't exist without the money reward aspect
| -- but because it's a way to earn a living.
|
| Are these people enjoying the game? Doubtful. They found a way to
| make a living. Is this a "productive" way to earn a living? Also
| doubtful. But is it any different from professional poker players
| (other than poker is probably a better game than Axie Infinity)?
|
| I know it rubs me the wrong way. I don't know what to call it
| though -- tulip, scam, ponzi, or just a wasteful use of human
| time that could be better spent in more pleasurable activities,
| if money wasn't an issue.
| wmf wrote:
| AFAIK most players quit after the price tanked. Axie was only
| employing people for a few months.
|
| You need to ask where the money to pay those players comes
| from, and the answer is a mix of speculators and new players
| buying in to the game. So it's just another tulip/ponzi mix.
| Nextgrid wrote:
| Poker is gambling - winners make money by taking losers' money,
| that is well understood.
|
| In Play 2 Earn my understanding is that it's not gambling,
| instead money "magically" appears from merely _playing_ the
| game.
|
| The only way for this to be sustainable is if the output from
| playing the game is something that someone else finds valuable
| and can't be automated (otherwise why not automate it?) like
| Mechanical Turk or the various captcha-solving services.
|
| I don't believe this is the case, so the only other answer is
| that the buy-ins from newer players are used to reward existing
| ones - aka a Ponzi. Alternatively, it could be that the system
| isn't _even_ a Ponzi and is instead bankrolled by the parent
| company which itself is bankrolled by clueless investors not
| realizing the above (Play 2 Earn will only work if the entire
| system produces an output that someone else values enough to
| pay for and can 't get said output elsewhere for cheaper).
| tptacek wrote:
| That's not a useful definition of gambling. Lots of things
| that aren't gambling are zero-sum.
| milesvp wrote:
| Poker is actually not that much different than what you
| describe. My father played a lot of poker in card rooms. He
| talked a lot about losing strategically to the fish, to keep
| them coming back. Without the fish, there generally is no
| poker ecosystem since money generally follows the button, and
| without particularly weak players money just tends to change
| hands. And since there is a rake at most tables, you need a
| constant influx of money just to support the play.
|
| There is common wisdom that the rake can kill a local poker
| ecosystem. There can be a lot if good games for weeks or
| months, then all the weak players can't sustain any longer,
| and all the medium players start losing and lose interest,
| and there's no one left to win money from and games get
| harder to form.
| rinze wrote:
| I use the following algo, which is based on heuristics:
| [Is it a crypto thingy?] -----> Yes ----> Definitely a Ponzi or
| other scam. | | | |----> No ----> Perhaps
| a Ponzi, perhaps not.
| cholantesh wrote:
| Yes.
| javert wrote:
| The terminology here doesn't work. If you're calling something a
| "tulip," you're calling it an *unsustainable* bubble, because it
| comes from Dutch "tulip mania." But to take an easy example, gold
| isn't an unsustainable bubble. Neither is art. Not like Dutch
| tulips. It's too late to successfully redefine what "tulip"
| means.
|
| Even if you use a different word, the category doesn't work. The
| fact is, bitcoin and ethereum are each sui generis.
|
| Bitcoin, for example, differs from gold in *important* ways.
| There are various theories people have for why it might be able
| to hold value in the long run, and none of them are reducible to
| something that has existed before. It's a new experiment. People
| can argue that bitcoin won't hold value, but not by a 1:1
| reduction to something that has existed before. On that note, the
| author is very right to point out that bitcoin is not,
| technically, a Ponzi scheme, and that point is much appreciated.
| gregjor wrote:
| function is_a_scam(string crypto_project_name) { return true; }
| usrn wrote:
| I'd say this applies better to adjustable rate loans. Some
| crypto isn't a scam even if nearly all the tokens are.
| gregjor wrote:
| Adjustable rate loans and all kinds of investment products
| don't make good financial sense, but that's not the same
| thing as a scam. An ARM is not fraudulent, it's just
| dangerous, in the same way that credit cards are easy to
| abuse but aren't scams or ponzi schemes.
| usrn wrote:
| ARMs are dangerous to the degree I'd say they're
| fraudulent. Certainly they are if all of crypto meets your
| standard.
| sv123 wrote:
| Your machine learning model is 99.999999% accurate.
| version_five wrote:
| There was a related blockchain decision framework published a
| few years ago:
|
| https://miro.medium.com/max/352/0*850OATxY25S23TGR.jpg
| freeone3000 wrote:
| Certificate Transparency is an application of blockchain that
| isn't a scam!
| Nextgrid wrote:
| Is it even a blockchain in the cryptocurrency sense of the
| word? It's a chain of trust where every addition
| cryptographically signs the previous entry (to prevent the
| database from being modified retroactively) but as far as I
| know there's no "mining" process nor decentralization - the
| log is still controlled by a central entity.
| theK wrote:
| Not sure if the parent author meant a specific company or
| was just referring to the general domain of certificate
| verification. There are certificate verification projects
| in the blockchain space that go beyond what you describe.
| TheDong wrote:
| Certificate transparency only uses a blockchain if you
| redefine a blockchain to mean "any use of a merkle tree",
| which is all certificate transparency logs are.
|
| You will notice the certificate transparency website makes
| zero mentions of blockchain anywhere:
| https://certificate.transparency.dev/howctworks/
|
| What a blockchain normally means is something that has added
| some sort of attempt at solving the two generals problem
| (https://en.wikipedia.org/wiki/Two_Generals%27_Problem), as
| the original bitcoin whitepaper outlined.
|
| That is to say, blockchains have a consensus mechanism to
| resolve multiple writers, with some of those being
| potentially untrusted.
|
| If Certificate Transparency is a blockchain, than so are the
| zfs filesystem (which also uses a merkle tree internally),
| git, and dynamodb.
| gregjor wrote:
| Yeah but those aren't called _blockchain_!
| ouid wrote:
| Is the claim that you will get rich by giving someone else your
| money now?
|
| yes -> it's a Ponzi scheme.
|
| no -> it's not a crypto project.
| greatjack613 wrote:
| Just want to point out that according to the authors framework
| for determining if a project is a ponzi, Uber, Lyft, Doordash,
| and many more gig economy businesses would also qualify as ponzis
| since they have to spend move to get users then they bring in and
| have not been and probably will never be profitable
| qgin wrote:
| There's a still-untested possibility that Uber / Lyft /
| DoorDash can become profitable when autonomous vehicles scale
| out and they can stop paying humans for labor and the use of
| their private vehicles. Hard to model the economics accurately
| since it's still so early.
| mstipetic wrote:
| Company that owns that technology doesn't need Uber.
| qgin wrote:
| That's definitely Uber's biggest obstacle.
|
| But in some ways, until autonomous vehicles can go
| everywhere, they need a blend of autonomous cars and human-
| driven cars to be the first stop app for rides. Then they
| can route an autonomous car or human driven car depending
| on the ride needed.
|
| Otherwise riders will hit a wall if they request a ride
| outside the autonomous service zone.
| wmf wrote:
| That's why Uber was trying to develop their own self-
| driving tech. They knew that's where the value lies (if it
| works).
| yunohn wrote:
| But what's the Ponzi there? Who are the people building wealth
| by using or driving for Uber? At best, you save money compared
| to a traditional taxi.
| Nextgrid wrote:
| You _could_ save money because either investors were
| subsidizing it or drivers were getting screwed. The former
| has definitely ended and drivers are wisening up - Uber
| nowadays isn 't significantly more expensive than taxis.
| nl wrote:
| Uber might break even in 2022 and is credibly forecast (by
| analyst consensus) to turn a profit in 2023.
|
| https://finance.yahoo.com/amphtml/news/ubers-nyse-uber-profi...
| cuteboy19 wrote:
| Not profitable is not the same thing as ponzi. Ponzi means you
| rely on the next greater fool to buy your bags. If uber stock
| were advertised in the same way crypo is then you would be
| right
|
| Although it is telling that the best cryptos are compared with
| failing and unprofitable companies
| freeone3000 wrote:
| Is this in dispute? Obviously these businesses should not be
| positively valued.
| fooey wrote:
| That's a very fair assessment
|
| Cities where they've allowed their infrastructure to stagnate
| due to reliance on those private companies are going to be in
| for a rough time when they inevitably fail or drastically raise
| their pricing.
|
| What comes next when private enterprises extinguish municipal
| services with unsustainable business practices? Can the
| municipalities recover? or are we watching hostile
| privatization?
| danuker wrote:
| Sometimes a tulip is more useful for storing value than national
| currency almost guaranteed to lose value every year.
|
| Sometimes even cans of beans do the trick.
| wmf wrote:
| This is a terrible argument. Yes, gambling is less bad than
| hyperinflation. But a well-designed stablecoin like DAI, RAI,
| or RSV is far less risky than gambling on tulips.
| danuker wrote:
| I will try to rephrase the argument.
|
| A tulip might not make it to next year per se. I meant a
| "tulip" as in a value token with little value other than
| scarcity and speculation.
|
| The USD's purchasing power is bound to go down; there was an
| 8% increase in M2 supply in the past year, and velocity is
| constant.
|
| https://fred.stlouisfed.org/series/M2SL
|
| https://fred.stlouisfed.org/series/M2V
|
| As such, if a token has relatively constant supply and
| demand, its price should go up with the money supply.
|
| The problem is, I agree, that the demand is far from
| constant. But if you hold them so that their price is not
| correlated among each other, it might get smoother.
|
| Ray Dalio uses gold and a commodities index in his All-
| Weather portfolio, in case of inflation.
|
| http://www.lazyportfolioetf.com/allocation/ray-dalio-all-
| wea...
| jjtheblunt wrote:
| What's meant by "L1" in the article?
| wasifbaig wrote:
| It's short for "Layer 1".
|
| Layer 2 solutions/protocols are built on top of layer 1
| protocols like Ethereum and Cardano.
| arcticbull wrote:
| The answer is simple. It's straight up yes unless they're
| registered with the SEC.
| rsstack wrote:
| This article is this:
| https://sites.wustl.edu/meteoritesite/items/self-test-check-...
|
| When you can summarize the same result for 99.99% of the cases
| with a tweet: https://xkcd.com/1723/
| mabbo wrote:
| > Gold is a tulip. ... The only reason we think it's valuable is
| it's sufficiently rare for other people to think it's valuable.
|
| Absolutely not. Gold has a variety of functional uses in
| electronics. It's used for its physical properties in a lot of
| spacecraft. And until dentistry had modern options gold fillings
| were common (not even that long ago- my own mother has a couple
| gold fillings).
|
| He also skips over _why_ it 's called a Tulip:
| https://en.wikipedia.org/wiki/Tulip_mania
| SilasX wrote:
| But the (eon-persistent) price premium on gold is well beyond
| what's justified by functionality. That's what merits the
| bubble comparison.
| chanc3e wrote:
| It would be remiss not to mention Gold makes incredible
| jewellery. And jewellery - or the act of decorating ourselves
| to distinguish between one another - is an innate part of all
| our cultures.
|
| An item can last longer than a lifetime, be passed down
| generations, melted and reformed into something new whilst
| being the "same" material. These are astonishing properties.
| Tulips and currency both rot, but at different rates.
|
| The value of it is relative. In happy times, sure, not worth so
| much. Bartering to get yourself out of trouble...a Rolex tells
| the time and opens cell doors.
|
| Gold is most certainly not a Tulip.
| forum_ghost wrote:
| >until dentistry had modern options gold fillings were common
|
| gold inlays/crowns are still BY FAR the best dental material.
| People just don't like the looks of it, but it's still
| medically the absolute best.
|
| Gold crowns typically outlive the owners.
| AbrahamParangi wrote:
| Tulips also have inherent utility as decorative flowers but
| that's tangential to the point.
| rafale wrote:
| So food is tulip. Steel is tulip... everything is tulip? It's
| not the existence of utility that matters but the degree.
| Gold is much more useful than tulips.
| sumy23 wrote:
| The value of gold is detached from its utility, just as the
| value of tulips during tulip mania were detached from their
| decorative value. The value of steel, on the other hand, is
| not detached from its utility value.
| forum_ghost wrote:
| gold is a reliable hedge and store of value that survived
| 5000 years: longer than any empire, longer than any bond
| issue, longer than any real estate holding, longer than
| any fiat currency.
|
| financial utility IS utility.
|
| nothing is detached from anything.
| tsimionescu wrote:
| Even more relevantly, gold was a relatively dense solid
| substance that didn't corrode or otherwise degrade. It was an
| excellent choice for currency, once you could get enough of it
| to avoid problems of currency supply.
| yarg wrote:
| 100% not - but it sure does bubble up in price (due to
| speculation).
|
| Gold is malleable, and non-degrading.
|
| It can be readily converted between blocks for storage, and
| other forms required for function purposes.
|
| It does not degrade - it will not react with water or air (or
| the water there-in); it is an effective indefinite store
| (until, that is, it gets stolen).
| adhesive_wombat wrote:
| Gold is useful, but most of it's value doesn't derive from its
| industrial uses. Only 11% of gold production goes to non-
| jewellery industry.
|
| Furthermore, it's non-industrial value doesn't derive from its
| industrial use: if industry could switch to something else
| overnight (like fillings did), gold would still be a value
| store.
| gumby wrote:
| > gold would still be a value store.
|
| Gold as an asset reminds me of those NASDAQ-listed companies
| that assert they will never declare a dividend. Any intrinsic
| value their stock might have is simply the belief that
| someday, somebody else will buy it.
| smeagull wrote:
| In my country dividends are the only part of investing in
| stocks that is taxed.
|
| Consider: Any value my money has is simply the belief that
| someday, someone else will accept it in exchange for
| something else.
| helsinkiandrew wrote:
| Theres the startling fact that Indian housewives hold 11% of
| all gold - presumably predominantly decoration and wealth
| storage.
| bombcar wrote:
| Heh fun to assume the 11% in both are the same; all
| industrial usage of gold is limited to Indian housewives.
| gumby wrote:
| > presumably predominantly decoration _and wealth storage_.
|
| People without access to banks wear their wealth on them.
| That seems super risky but you see it every day on the
| street. I suppose they have no alternative.
|
| I have seen in photos that when my parents married my
| mother was draped in gold, which she never wore again. As a
| kid I once was with her when she visited her safety deposit
| box and I picked up one of the bangles which immediately
| bent out of circularity. It wasn't designed to be worn, or
| at least to be worn once, very carefully.
|
| Jewelry stores in the US don't seem to sell by weight. I
| remember jewelry stores always pulling out the scale and
| calculator to tell you the price -- it must have changed
| every day.
| anm89 wrote:
| Honestly, there is no one left who doesn't know the Tulip story
| at this point. It's not some niche historical thing. A vast,
| vast majority of everyone tangentially related to crypto or
| finance and the HN crowd know what it is.
| bakul wrote:
| Gold is even used in medicine since ancient times. Look up
| Swarna Bhasma, used in Ayurveda for several ailments. A more
| general article on bhasma:
| https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3960793/
| danuker wrote:
| > Gold has a variety of functional uses in electronics. It's
| used for its physical properties in a lot of spacecraft.
|
| The industrial uses made up 81.7 of the 474 tons in Q1 2022 (or
| 17.2%). That is not a lot.
|
| https://www.gold.org/goldhub/research/gold-demand-trends/gol...
| forum_ghost wrote:
| Total above-ground stocks (end-2021): 205,238 tonnes.
|
| 81 tons out of 205,238 tonnes used per year...
|
| rounding error.
| danuker wrote:
| Indeed, not a lot of gold gets traded, compared to what is
| mined. People joke that the metal is dug out of the ground
| just to be buried back (in vaults).
| unsupp0rted wrote:
| I'm likely one or two generations younger than your mother and
| I have a gold filling.
|
| I got it intentionally when I needed a crown on a back molar,
| to remind myself of where I came from: my grandparent's
| generation had to sell their gold fillings for safe passage
| from harm.
|
| That's where but for the grace of an uncaring universe go I.
| Negitivefrags wrote:
| I don't know why people are so keen to dismiss aesthetic value
| of gold as somehow not being relevant as a functional use.
|
| We don't just use gold for jewellery because it's valuable, we
| also use it for that because it looks good. Better than many
| other materials we could use.
|
| Now you could argue that we only think it looks good because
| it's valuable, and maybe that is how it came about, but I think
| it's been embedded into the culture deeply enough that gold as
| a material looks great to us on it's own merit at this point.
|
| Aesthetic value is real value, as we can tell due to peoples
| willingness to pay for artistic objects even if made from cheap
| materials.
| Imnimo wrote:
| I'm hardly an expert on gold aesthetics, but I would have
| guessed you could get all or nearly all gold's aesthetic
| properties from other cheaper materials. Like what's the
| cubic zirconium of gold?
| rhn_mk1 wrote:
| That's because aesthetic value is intertwined with the value
| coming from "it's valuable". If aesthetic value dominated,
| fake gold would be much closer in price than it actually is.
|
| The value of gold being embedded in society is similar to the
| value a dollar bill derives from being embedded in society.
| It's valued because it's valuable, which really means it's a
| reflection of values coming from other sources, and not
| something on its own.
| proc0 wrote:
| That's a good point, and I think there are many civilizations
| that have used gold only for its aesthetic value. The Incan
| empire had ornaments, statues, etc., in pure gold, yet they
| didn't use it as currency. One of the emperors gifted the
| Spanish conquistadors a big room full of gold, as a token of
| friendship. It all went downhill from there.
| cultofmetatron wrote:
| off the top of my head, gold is non corrosive. it doesn't react
| with anything.
|
| I'm convinced the great filter has something to do with the
| availability of gold to a species. There are all manner of gold
| based alloys that we haven't researched and There are all sorts
| of technological innovations locked away from us simply because
| gold is too expensive.
|
| case in point, a boat hull coated in a gold alloy could be non
| reactive. no more need for antifouling paint or sacrificial
| anodes.
| theK wrote:
| Wasn't this a theme in the Baroque cycle? </spoiler>
| thombat wrote:
| Generally alloys can selectively corrode, so with a
| combination of gold and iron the iron may still be attacked.
| But certainly some gold alloys provide improved hardness
| without being very vulnerable.
|
| For a boat the gold coating would need to include all metal
| parts in contact with the water (rudder pins, prop shaft,
| etc) and it would be an interesting experiment to learn
| whether it really prevents fouling (I can imagine that wear
| and damage to the coating might provide cervices for growth
| to anchor)
| helsinkiandrew wrote:
| Presumably barnacles would still stick to it though?
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