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Comment by mikewarot | Hacker News Reader

As I said 3 days ago, when he announced it

  "If you were to sell 0.001 token for $1.00, you'd then have a Billion Dollar Valuation.    ;-)

  This reminds me of a stock market simulation in my Econ 102 class. With a fellow student, we picked a few stocks, and sold them to each other for a very low price, and then bought all of them up as the other students watched the trends. We repeated this for 1/2 of the stocks in the simulation. We then sold each other 1 share of those stocks for $99.99 (the maximum price in the simulation), and ended up with almost all the money. 8)

  The professor thought we must have hacked the computer, but we played by the rules."

It is obvious that all the new cryptocurrencies are just like that econ 102 class simulation, and just as vulnerable to gaming, but this time with real money.

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I have a question:

> we picked a few stocks, and sold them to each other for a very low price, and then bought all of them up as the other students watched the trends. We repeated this for 1/2 of the stocks in the simulation.

I can see how you could use this strategy to exchange a fairly low amount of money for these stocks. But that would mean you have less money than you started with, and more stock.

> We then sold each other 1 share of those stocks for $99.99 (the maximum price in the simulation), and ended up with almost all the money.

And then this trade causes you to have the same amount of money and the same amount of stock. How did you get the money back? Did you actually end up with almost all of the money, or did you end up with almost all of the market capitalization?

It shouldn't be possible to make any sales of a stock at the maximum price, because the only thing that can happen to you, if you buy a stock at the maximum price, is that the price of your stock goes down.

The goal of the class was maximum stock portfolio value (as set by market valuation).

Everyone in the class started with a random set of stocks, and a set amount of funds. We looked at our portfolios and decided which to pump, and which to dump... then reversed when it was time to max out our portfolio values.

When everyone is focused on the small picture, it is really easy to play the macro game.

Note: You could put any price on a sell order, but someone had to match it in order to buy, so two people could quickly set the price of anything with a 1 share transaction.

It's been almost 40 years, but I think we maxed out things with few hours work across a semester.

You didn't answer the question though.

Sounds like the answer is "yes, we maxed the total market cap" which is distinctly different from "we ended up with almost all the money". You didn't have the money, you only had a fake stock valuation bubble.

That's a very good point!

Had the Prof been a better teacher, he might have pointed it out, instead of me learning that lesson on HN decades later. 8)

I never worried about the funds, only the portfolio value, since the funds were a zero sum game.

You go to the bank leverage your amazing portfolio, now you have real money. And when everything comes crushing down, you're too big to fall, so the govt/banks bail you out.

Amazing system we got.

I'm talking about the game. In reality, stocks don't have a maximum value.

But it also sounds like it's worth noting here that in reality, you cannot borrow money based on a stock valuation set by a very low-volume trade to which you were a party.

Unless you're the bank yourself. But they don't do stuff like, that, right? Right?

> The professor thought we must have hacked the computer, but we played by the rules."

Sounds like a terrible prof then. What is such a simulation supposed to teach if not that those kinds of attacks are possible? These are inherent in the construction of the system and your prof should have just given you cudos for having understood that.

It was the early 1980s, and someone had recently hacked the school's VAX system. It was a reasonable guess.

It is obvious that all the new cryptocurrencies are just like that econ 102 class simulation, and just as vulnerable to gaming, but this time with real money."

Isn't the whole stock market? I always wondered, they call these companies "billion dollar companies", but does that take into account the order book and how steep sorted order prices drop of?

As far as I can tell the only criteria is price at close. I assume that all the outstanding sell orders below a given price are filled first, so you couldn't just double the price of Apple, Inc. by swapping two shares at twice the previous closes.

"Banging the close" is definitely a thing, should probably use daily VWAP instead.

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