Comment by vmception | Hacker News Reader

Comment by vmception | Hacker News Reader

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The important things to look for here is:

1) Distribution schedule

2) Liquidity pool providers

3) Bots

1 is important because people can't sell it into liquidity if they never bought it first. How did they acquire it? Just minting it doesn't mean they have it, and without a liquidity pool they can't get it unless the token was sent to them by the issuer.

2 this is important because Automated Market Making systems (AMMs) allow for anyone to create a robust cross-routing and smart-routing exchange system for any asset with the click of a button. And when you create one of these, many bots look for them to immediately trade and distort the price. So the very first thing I did in response to this headline was look at the this asset on the AMM. The leading AMM on the BSC Blockchain is PancakeSwap. And you can see that many of the recent transactions on the block explorer are to a PancakeSwap SCAM liquidity pool. Who posted liquidity? The TikTok video suggests the guy doesn't own any or know how to sell any, so was he using a service that sets this up? What service is that because it seems pretty powerful and I want to know about it.

3 bots. Across all AMMs many bots have cropped up that immediately look for any 5-figure liquidity pool and immediately bid them up. Its gotten so predictable that people create copy-cat liquidity pools just to capture funds in the more liquid token and pull liquidity as they have now collected more of the liquid asset than they started with and have less of the illiquid asset they were trying to sell. This is considered to be an actual scam and called a 'rug pull'.

In this case, it is more likely that he posted liquidity in this asset, bots immediately bid it up, which immediately got validation attention from other people and people kept bidding it up on low liquidity. Only a fraction of the tokens in existence are in the pool, and this price discovery is being extrapolated to the total value of the asset. If something less likely occurred, I would like to know what that is because the ramifications are even more enticing.

Best comment of the day understands what has happened to crypto and the evolution of liquidity

At first we called them all scamcoins, shitcoins, then it became altcoins as the market matured

Now it's just all giant pools of liquidity to fuck around in. It doesn't matter what you think the value is. It's liquid or it isn't.

> Now it's just all giant pools of liquidity to fuck around in. It doesn't matter what you think the value is. It's liquid or it isn't.

So the idea of "value" just goes by the board? People just make up "pools of liquidity" out of nothing and are instant billionaires?

And this is supposed to replace money?

I don’t remember stirring the currency vs. store of value debate...

Is it necessary to agree with a market just to participate in it?

Yes and this is a good thing. It will become impossible to say how much money someone has; everything will become decentralized and competitive as it should be.

Exactly.

Currency was created because barter sucked, Cryptocurrency was created because some people didn't like some aspects of prevailing currencies, now the technology supporting cryptocurrencies has made barter not suck, so we're back to barter with just gigantic liquidity pools that can accurately route an order between two arbitrary assets and keep their prices in sync.

So if you're keeping up, barter doesn't suck any more and the market has accepted that, which is a game changer.

I think you might enjoy Debt: The First 5000 Years. Lots of great info on the history of money and how it’s used today.

I second that recommendation, but I liked all of David Graeber's books and essays; his untimely death was a real loss.

I was searching for a decent/academic review of Debt in order to post it here, but found one on Github [1] giving an itemised list of the book's main points, as seen from the reviewer's perspective, and containing a link at the top of the review to a .pdf of the book itself (on libcom.org and it seems to be complete).

https://github.com/advancedresearch/mix_economy/issues/19

If you like Graeber then you will also like Alfred Mitchell-Innes, a British diplomat, who in 1913-14 wrote two papers about money as credit. The first called "what is money?" [1] and the second called "the credit theory of money" [2]

Here are the opening paras from "what is money":

> The fundamental theories on which the modern science of political economy is based are these:

> That under primitive conditions men lived and live by barter;

> That as life becomes more complex barter no longer suffices as a method of exchanging commodities, and by common consent one particular commodity is fixed on which is generally acceptable, and which therefore, everyone will take in exchange for the things he produces or the services he renders and which each in turn can equally pass on to others in exchange for whatever he may want;

> That this commodity thus becomes a "medium of exchange and measure of value."

> That a sale is the exchange of a commodity for this intermediate commodity which is called "money;"

> That many different commodities have at various times and places served as this medium of exchange,—cattle, iron, salt, shells, dried cod, tobacco, sugar, nails, etc.;

> That gradually the metals, gold, silver, copper, and more especially the first two, came to be regarded as being by their inherent qualities more suitable for this purpose than any other commodities and these metals early became by common consent the only medium of exchange;

> That a certain fixed weight of one of these metals of a known fineness became a standard of value, and to guarantee this weight and quality it became incumbent on governments to issue pieces of metal stamped with their peculiar sign, the forging of which was punishable with severe penalties;

> That Emperors, Kings, Princes and their advisers vied with each other in the middle ages in swindling the people by debasing their coins, so that those who thought that they were obtaining a certain weight of gold or silver for their produce were, in reality, getting less, and that this situation produced serious evils among which were a depreciation of the value of money and a consequent rise of prices in proportion as the coinage became more and more debased in quality or light in weight;

> That to economize the use of the metals and to prevent their constant transport a machinery called "credit" has grown up in modern days, by means of which, instead of handing over a certain weight of metal at each transaction, a promise to do so is given, which under favorable circumstances has the same value as the metal itself. Credit is called a substitute for gold.

> So universal is the belief in these theories among economists that they have grown to be considered almost as axioms which hardly require proof, and nothing is more noticeable in economic works than the scant historical evidence on which they rest, and the absence of critical examination of their worth.

[1] https://www.newmoneyhub.com/www/money/mitchell-innes/what-is...

[2] https://www.newmoneyhub.com/www/money/mitchell-innes/the-cre...

This is such a simple but poorly-appreciated idea. Why is this absurd myth about the origins of money still taught in schools?

Thanks for the recommendation, that looks like a great resource.

Is it weird for me to wish that this kind of creative thinking would be put to better uses? :)

Yes I would say that is weird, although none of the above would be considered creative anymore. Maybe 10 months ago during the first two months of the first AMM releasing its updated version, Uniswap 2.0. It is very easy to have a node or python bot set up to look for liquidity pool deployment transactions and immediately create a transaction to buy the asset in the second argument field.

Uniswap 3.0 is coming out next week, so if it is as monumental as 2.0 last year, this summer should have just as much creativity as last summer, so you'll have plenty of things to criticize there. All the other AMMs came out after Uniswap 2.0 and have slight differences just using Uniswap 2.0 code. It is unlikely they will update exactly to Uniswap 3.0 but they'll follow the market.

This space moves extremely fast with lots of competitors if you know how to code and haven't been spending the last half a decade doing something meaningful like working for an ad-retargeting conglomerate while complaining about cryptocurrencies.

> haven't been spending the last half a decade doing something meaningful like working for an ad-retargeting conglomerate while complaining about cryptocurrencies

best line in this whole thread!

Wait until you discover traditional finance derivatives ;)

https://demonocracy.info/infographics/world/lqp/liquidity_py...

Except the barrier to entry in the crypto to space is nill.

Kids are learning order books and depth charts because they _can_ Not because traditional finance gave a fuck about them or even tried to educate them.

For better or worse, that's the game in 2021.

Be the change you'd like to see in the world.

What is AMM and liquidity pool@

AMM's are a category of decentralized, non-custodial exchanges that are also autonomous. Basically this means there is no incorporated or any financial intermediary needed to set them up, and no gatekeeper needed to set them up, and no custodian of funds that are used to trade on them.

In this type of exchange system, order books and market makers are replaced by liquidity pools, where individuals put up two assets (for example a liquid asset like Ethereum and a less liquid asset that they wish to have liquidity in). This process automatically spawns a smart contract from a smart contract factory, which has all the functions for maintaining that liquidity pool in perpetuity. The smart contract has no administrator and it allows other market participants to trade in that asset. The additional beauty is that the other market participants do not even need "Ethereum" the liquid side of the trading pair in order to buy the asset, as the smart contract factory will route whichever asset the trader owners between liquidity pools. For example, if they had Tether, the smart contract factory will find the Tether/Ethereum liquidity pool, and the Ethereum/NewToken liquidity pool and exchange it at the best price.

Also anybody else can add extra liquidity to the liquidity pool.

All liquidity pool providers earn trading fees from people that buy and sell. Turning them all into market makers.

The final point is that the market decided that these trading fees are not a good enough incentive to add liquidity to liquidity pools, so it is important to know that all liquidity pool providers actually receive a bearer token representing their share of the liquidity pool. Third parties have created additional financial products that allow depositing this bearer share and earning other assets for doing so. So people that want to passively earn have to provide liquidity and lock up that liquidity for some time, and it is working extremely well.

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