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And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance".
Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I'm just sitting on the sidelines watching people relearn all the lessons of finance the hard way, some because they think they understand finance because because they understand merkle trees and consensus protocols but really most just want to get rich quick.
There was enough in the terra ecosystem to come to a conclusion of avoiding completely
There is enough information in a ten or 20% yield to come to a conclusion. That doesn't stop unsophisticated investors from getting screwed.
When they do so because they bought magic beans, I have no sympathy. When are lied to and sold deposit-like products [1], it's infuriating.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).
"Meaningful" is squishy. Is it strongly predictive, and in some cases, definitive? Yes.
put another way, its easy to earn 20% on a dollar. its hard to earn 20% on a billion dollars.
https://www.pionline.com/hedge-funds/renaissance-technologie...
You are not addressing the substance of my comment, namely that many investments are finite, and this is why infinite riskless investments don't work.
I agree that "infinite riskless investments don't work" and agree with the "possibility of consistent good rate of return." Many investments are indeed finite on a human scale. An investor will almost always want their money back with some return, no? At some point they'll take their money out of the investment or market and spend it. The particular issue was the claim that the Medallion Fund from Renaissance Technologies was a good example for a consistent rate of return. They may have done that but how would we know? Their data is self reported, and as far as I'm aware there's no publically available audits of their performance. Even if there were, we have evidence of their cheating at taxes through abuse of options. If I were you, I would take their claims with a very large lump of salt. Do you know who else claimed guaranteed double digit rates of return? Bernie Madoff. We might not have found out about his fraud either if it weren't for some whistleblowing and for his admission of wrongdoing.
The Medallion Fund may have returned 30-70% over decades. Do we really know for sure? I think you'd have been better off simply suggesting index funds for consistent returns for the average person or citing Warren Buffett or Bill Gross for generating alpha/consistent returns.
Just because quantitative analysis has solid grounding doesn't mean that its use is unrelated to ethics. The finance establishment is an organized power structure whose decisions are political.
If you want an analogy, I'm pretty sure that you'll find plenty of people who used ballistics to achieve goals that you would find pretty unethical.
Refusing to take a side _is_ a side, it means you're fine with how things are going on their own.
This isn't corruption, it's just recognition that life has choices, and those choices have consequences, for yourself and others.
Except that there are humans involved. How do you boil arbitrary human action down to a HARD science?
However, the math approach to finance works because in its essence it is quantifying human reactions and or emotions, which in large crowds turns out to be more predictable. In the short run, still, software holds its edge with its probability approach but its not smart so that it is basically a rent seeker.
Physics is a science. Math is. Or Biology. Finance is not. Because it deals with the madness of crowds.
> Recipe for Disaster: The Formula That Killed Wall Street
> And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.
> Nassim Nicholas Taleb is particularly harsh when it comes to the copula. "People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked," he says. "Co-association between securities is not measurable using correlation," because past history can never prepare you for that one day when everything goes south. "Anything that relies on correlation is charlatanism."
If you follow the scientific method, it's science. If you write an observational essay, it's not. You can build theories around falsifiable, replicable experiments pertaining to the madness of crowds. The error bars are longer. But they are not infinite.
But when people say "finance is science" what they usually mean is "here is the complicated math that proves you can't lose money on this, we've modeled everything".
As the joke goes, 6 sigma events happen in finance every week.
100% agree. When I was an algorithmic derivatives trader, we joked that the math was there to scare up investors and scare off compliance. Little did we know...
That's a great science joke.
This is like saying physics is not science because the nutjobs claiming we will recieve divine revelation by praying to "the quantum energy field" use physics-y terms in their BS.
I feel like they are infinite? Because, for example, in hyperinflation, there's no upper bound on how long someone is going to keep printing money.
Any given instance will stop at a finite number, but you can't bank of that being the high water mark.
It's like the notion of a 100-year flood. Of course there could be a tsunami or a dam failure that completely inundates an entire city, but at some point you've got to accept a small risk and ensure you are covered for it.
No matter how hard you model you won’t be able to predict processes that are fundamentally unpredictable. And you would get fooled because you only observe finite amount of data.
It is surprising how complicated the math gets even if you try to model very simple processes (eg think of the n-body problem and how complexity increases with every addition of a body). It is not a given that complicated models mean you’re modelling a complicated process.
OP's claim was that quantitative finance was *hard science*. Requirements regarding predictability are way more stringent than merely observing stuff and seeing how it responds to an input.
These are colloquial terms [1]. We might as well argue about whether Pop Tarts are ravioli or tacos sandwiches.
Colloquial terms whose concrete meaning does not correspond to OP's claim.
There is no ambiguity in this: if your models are not testable and fail to predict behavior then it's not hard science.
It's not just social media and it is somewhat disingenuous to dismiss the idea that finance, specially specially international finance, does not have (some form of) power [that actually trumps and transcends political power].
This is a somewhat interesting film that I was watching the other day. It's mere existence addresses the first bit -- that perception is certainly not limited to "social media". And of course the film itself is about a super secret gathering of G8 ministers where they struggle with the decision to put in place some (undisclosed) policy change that they all know will have very drastic consequences for the global average joe.
The Confessions (2016): https://www.imdb.com/title/tt4647784
Your comment makes no sense. Just because there's modeling involved that does not make it a hard science. A hard science requires stuff like the ability to perform controlled experiments and replicability, in order to arrive at a high degree of accuracy in predictions.
Throwing around partial differential equations does not turn something into a hard science. You need to meet way more requirements before you're in a position to claim that.
The scientific mindset is there, but not the publishing because the publishing destroys the value of the model. Once your model is known, others trade against your model and it becomes invalid.
When informed the maths in economics is wrong, the economists don't go and fix their maths either.
Economics is more like sociology with some random incorrect formulas written on the black board as set dressing.
Economics might in self loathing claim they are the "dismal science", but the cold hard truth is they simply speaking are not doing their jobs properly. It's a broken research field.
This comment is why the humanities should be a prerequisite for all academical endeavors...
It is worrying to see that people tend to just click thumbs down when they don't agree rather than to pick the towel and build a strong argument against what they don't agree with.
The whole Terra saga was a typical example of speculative bubble. Everyone knew it was risky, but its sheer size and the caliber of people endorsing it (https://twitter.com/novogratz/status/1478535972560195585) was providing an aura of safety. Too big to fail.
It's also similar to the stock market as a whole before it started correcting. Everyone knew valuations were detached from every fundamental except liquidity, yet everyone went along thinking the music just had to keep going.
If you believe the statement "if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk" it might be true that you don't understand DeFi to some degree. DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API.
So when you have millions of markets with different returns that can be traded in every imaginable way (and some you probably haven't imagined), throw in an insane amount of dumb money, people willing to borrow at high interest rates (relative to the real world), and a laundry list of factors that introduce inefficiencies into the market, it's quite easy to find pockets of above-average returns if you're smart. I have no idea if Stablegains was actually smart, but it's more than possible to achieve above-market gains in DeFi without exposing yourself to outsized risks.
"Insane" is subjective. The point is nothing safe yields ten or 20%. Someone saying "you will not lose your funds" [1] when paying above-market yields is lying.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
There are funds out there that conduct these activities, I know because I recently consulted for one. They are promising risk free returns and getting them.
There are things that exist in DeFi (such as flash loans) that have no real world equivalent, which is why blanket statements made about traditional markets don't necessarily apply. If used properly, these things do in fact offer "too good to be true" types of returns.
Is your counterparty risk always zero (between you and the chain)? Custody? What if a chain is halted or amended?
These systems run on novel rails. You couldn’t honestly tell an investor “you will not lose your funds,” and you’d refrain from using the word “deposit.” Because you’re trying to honestly communicate an opportunity, not to defraud.
In the case of flash loans/swaps, the answer is yes. It's 0. Further, I never have any capital at risk, all of my bots use flash loans/swaps. These transactions are atomic, which means that either all parts of it succeed or they all fail (it's a "revert" in blockchain parlance). So I can borrow $200 million without any prior permission and do an arb/liquidation or anything else I want with it for the life of my transaction, with the only requirement being that I must return it by the end. If my arb/liquidation/whatever succeeds and I return the loan, I keep the profits. If not, it's as if the whole thing never happened. The only risk is the transaction fee, which on the chains I do this on are miniscule.
I realize that it sounds unbelievable, but it exists. My code does thousands of these daily. I am not the only one doing this. See https://eigenphi.io/ . With the exception of sandwich transactions, every one of the bots you see on there is making profits without any capital at risk.
The risk of the trade on chain defaulting is virtually non-existent, agreed. Custody risk is never zero. Dollar in / dollar out returns involve lots of counterparties.
As in, $100 in January becomes $500 in February, $2,500 in March, ... $976,562,500 in December?
Edit: actually I read that wrong, that would only be 500%. 5,000% per month (money x 50) would turn the $100 into $9,765,625,000,000,000,000 by December.
Unless by 5,000% yield you mean you get 50x your original investment on top of the original investment, like how 5% yield on a dollar gets me $1.05. In that case it would be more. But I think the 9.8 billion billion would be good enough for me.
Surely you see how even a 10% safe return on investment like these DeFi schemes offer is a whole different thing, when it's a compounding return. There's no way to sustain it. All the arbitrage opportunities in the world can't deliver the funds required to make investors' money grow exponentially.
I agree with you that throwing money at anyone who tells you they can take an unlimited investment and offer compounding returns on it is a recipe for disaster. But in DeFi, intelligence and strategy translate directly to greater yield. Math has proven time and again that those things matter very little in traditional markets.
You're all over the place with your usage of concepts.
Here you say that intelligence and strategy matter little in "traditional" (vague) markets. Yet, in DeFi, they do.
Not buying it. It feels like I could copy and replace your replace all of your uses of "DeFi" in this thread with <insert ponzi scheme>.
It's "different" than normal markets...I made it work personally (but not at scale)...
Right, but even then how deep are those pockets (what amount of investment can they absorb without being tapped out), how big a time window will they exist for, how will you know if those limits are being reached, and are you really sure you can quantify all the risks?
By definition if it’s a pocket of opportunity, it’s very constrained opportunity. As soon as those constraints are breached it will suddenly stop being low risk and might collapse completely. A lot of people have lost a lot of money on sure fire pockets of opportunity that were great when they lasted.
The point is that these opportunities exist, and they always will exist, you just have to be smart enough to be able to get into them. If someone needed money for infrastructure to run an arb bot, for example, and offered you above market, risk-free returns, it's at least possible they aren't lying to you. That was my point.
If you needed money for infrastructure for more arb bot, would you look for random novices and offer them 15% (and raise $3m in VC to market to random novices)? Or would you take out an unsecured personal loan from a bank at a lower rate, or a much lower cost loan from a counterparty involved crypto, especially one who understands the nature your trades?
There’s a very low chance of that happening, but not zero.
Millions of micro markets that produce what, exactly? Last time I checked there has to be at least something on the other side of the calculation what a coin is worth.
You think crypto coins magically make people work harder, better, faster, stronger?
That's not how the constraints of the physical world work.
You seem to be asking me to defend the merits of crypto, which is beyond the scope of this conversation. But generally speaking, most of the coins people actually buy are tied to protocols that are attempting to do things that interesting to at least some part of the population.
But, the ability to prove the provenance and ownership of any asset, whether physical or digital, has value. The ability to move value across borders instantly, cheaply, and reliably, has value.
In a world where so much has been made of fake news, imagine if you could know with absolute certainty that a given quote you read from someone in an article is authentic and given to the specific outlet you are reading it at, not taken from somewhere else, perhaps out of context. Imagine if Google integrated such information/quote verification into its search results, and could use it to prioritize sites with real quotes or information. SERPs wouldn’t be full of trash, and small sites that manage to scoop large ones could get instant #1 rankings. Authenticity verification has value.
The possibilities are endless.
This assumes that 100% of the ecosystem is already some form of blockchain.
And guess what: It isn't and it never will be due to the democratic nature of the proposed system architecture.
The flaws of every coin I've seen is that there are too many assumptions about markets, and dependencies of the markets in the sense of goods and/or services that are just "assumed" to migrate to their blockchain at some point. That's not how incentive proposals should work, as they will (logically) lead to exit scams because a couple of people cannot write and reinvent an ecosystem from scratch.
Look at how long IPFS took to mature. Look at how long DAT was refactored in a backwards-incompatible manner. Look at how long it took to write the hypercore protocol stack.
Systems like this and - especially markets like this - need time to evolve, which means that the proposed DeFi assumptions about rapid growth bullshit are anti-market proposals, and literally the same way hyped and unverified bonds in the legacy financial systems lead to market crashes.
This only works for assets which themselves exist on the blockchain and for whom the blockchain is the only source of truth - such as cryptocurrencies.
Anything else that involves off-chain activity would require a bulletproof way of keeping the on-chain and off-chain state in sync which is typically a neutral, trusted party, at which point you may as well just let them operate a conventional database and forget the whole blockchain bullshit.
> In a world where so much has been made of fake news, imagine if you could know with absolute certainty that a given quote you read from someone in an article is authentic and given to the specific outlet you are reading it at, not taken from somewhere else, perhaps out of context. Imagine if Google integrated such information/quote verification into its search results, and could use it to prioritize sites with real quotes or information. SERPs wouldn’t be full of trash, and small sites that manage to scoop large ones could get instant #1 rankings. Authenticity verification has value.
I don't see how blockchain/cryptocurrencies help here? Cryptographic signing is all you need.
Whoever thinks "millions of markets trading in every way" is a guarantee of making money is in for an awful surprise
It always happens with people who think they are smarter than the "dumb money" they're taking advantage of. "Sure it's a scam, but I'm smart enough to not be the one getting scammed!"
And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering.
More like claiming they didn’t know when they lose it all. Admitting “I gambled and I lost” isn’t a recipe for sympathy and possible compensation.
StableGains was skimming off the top so they weren’t directly exposed to the risk of the underlying asset.
> Pre-attack Luna
I love how we went straight from "what happened" to "it was an attack."
> Essential app developers looking to join for emergency allocation should signal public support for the net network on Twitter and social channels.
https://web.archive.org/web/20130411113418/https://www.bitfi...
I feel like the only benefit of all this is being able to see posttrade services rewritten with some sane API instead of crazy legacy garbage riddled with CSVs.
I figured that if the system collapsed, I would be able to notice it early and withdraw, and that YC-affiliated investor money would help compensate me with more luck than if I had to liquidate out of the system myself.
I withdrew after seeing a friend on Cryptography Twitter send a message showing the destabilization; this turned out to be many hours before Stablegains announced "we will honor withdrawals before this announcement at 1:1", and I got all my money back out.
The YC brand worked here, I think.
Congratulations? You weren't one of those who lost all of their money to this YC supported scam. Scams and get-rich-quick or get-more-rich off of the backs of others: that's the YC brand here and increasingly elsewhere. Paul Graham started this accelerator to make himself and his wife rich. YC exists to enrich its owners not as your litmus test for trustworthiness. Money over morality is the motto here. Libertarian values, limited government, startups as silver bullets, founding workers working themselves to death to enrich venture capitalists, and Dunning-Kruger for days in the form of Paul Graham. Are you poor? 'Have you tried making a startup?' is Paul Graham's solution to poverty as with everything else. You might as well ask 'Have you tried not being poor?'
Not sure why you believe a mere investor is liable for any compensation if the 15% APY gambling scheme goes under.
I think that this is the "innovator mentality" insofar that, as a group, we tend to idolize/cargo cult innovation as if it was always a good thing. As the pile of things that I miss grows much faster than the things that I feel that I've gained I have come to think of "innovation" as a force for destruction, rent-seeking, and greed, just as much as it can be a force for improvement.
As you say, in many cases things are the way they are because reasons. And some snot-nosed wanterpreneur is just as likely to degrade the situation as they are to improve it.
The company is Stablegains, Inc. and the people to name are Kamil Ryszkowski and Emil Rasmessen, co-founders and, I think, Board members. Copy Ken Paxton, Office of the Attorney General, P. O. Box 12548, Austin, Texas as well as his challenger George P. Bush at P. O. Box 26677, also in Austin. (Stablegains and its founders are in Texas. They are spearheading the criminal complaint.)
https://en.wikipedia.org/wiki/Ken_Paxton#State_securities_fr...
Successful "crypto startups" hardly exist, and most of those are selling shovels to suckers. What was the expectation here?
And certainly all of them can go away, they're mere digital storage systems. There's nothing permanent about any of it, not by any stretch of the imagination.
They're particularly, almost pathetically, temporary records. Most of these garbage coins will have no comprehensive financial records remaining several decades from now. By contrast, I know a lot of small businesses that have elaborate financial records going back 30-40 years, and the country is surely filled with similar (and most large corporations will have such).
The facts.
Copies of marketing you saw, statements showing what you invested and what you were paid, e-mails and other communication from the company and a statement of loss. There are links in this thread where promises were made that turned out to be lies; I would include those as well if you saw them ex ante.
Dear government I'm trying to subvert, I complain about the instability of your useful, fiat currency, so I entered into a get rich quick scheme with no intention of reporting gains on my taxes. This obvious scam fell apart. Please punish them with the government system I don't believe in.
Severely disappointing. I respect PG too much to believe he would knowingly condone this. The partner who did this didn't understand what they were investing in or should be decoupled with haste.
At the very least, the Alaska RMB, U of M Endowment, Bloomberg's family office and SMC should be asking why their capital is backing what should have been clear as day ex ante a fraud. Anyone living in Alaska, going to or an alumni of U of M or Stanford, or working for Bloomberg should be asking the same question.
Even if you think it's not fraudulent on the part of the founders, the industry is frothy and unproven and fraud-adjacent enough that investing in many companies in the space should appear to be a huge potential reputational risk beyond just losing some invested money. The people putting up the cash should be looking long and hard at this whole story.
And then once you get into the details, the moment you hear about one of the use cases for defi lending leading to these high interest rates being "put up crypto collateral to borrow to buy even more crypto since it's appreciating rapidly"... run!
This is their bread and butter.
VC doesn’t want to get out early #386. What drives their decisions is far more complex than your pithy summary.
Ah, yes, VC's decision making process is too great for us mere mortals to understand. Their motivation and calculus are beyond our ken. Woe to the uninformed laypeople who cannot fathom their singular desire for money and influence. The nuances of 'make more money' justify the great wealth which their discerning judgement deserves. As if a simple understanding of finance and deal making under advisement in most cases and a larger capacity for risk due to having excess wealth makes them any better than the rest of us humans.
I admit my second comment wasn’t much better, sorry.
VCs want to hold on to their successful investments as long as possible, with some limitations depending on the contracts for when LPs expect their money back. VCs obviously do not sellout their successful investment(s) as early as they could, usually they are buying into it and doubling down instead.
In some situations a VC might push to sell early: https://www.investopedia.com/terms/d/drive-bydeal.asp In others, they won’t, as is mentioned in that article. Perhaps if there is a good IRR they might wish to delay marking to market for as long as possible, so they can tell a story on their existing funds based on numbers that are not realistic? It really depends on the particular fund, the VC, the current market, and the specifics of each investment.
Disclaimer: I am an engineer.
I was not the original commenter with whom you were speaking. I'll admit that my comment could be rude, and for that I'm sorry. The length of the mockery was a bit much, but I don't think it was uncalled for. To assume that venture capital exists without the primary motivation and purpose of making money is misleading at best and delusional more generally. Tangential motivations such as investing for impact or being motivated by other considerations don't change the underlying goal and assumption of the act of venture capital.
> I admit my second comment wasn’t much better, sorry.
Placing venture capitalists within some special class whose reasoning or motivations are beyond the understanding of most people is where I take umbrage. Yes, there are considerations such as the underlying technology, exit strategy and timing, rounds of investing, and risk assumption. The vast majority of the time venture capital is performed under advisement of attorneys, accountants, and consiltants. Venture capitalists perform no special function beyond writing the check, transferring the money, and rarely coaching or dealmaking with founders. However the chief expectation is outsized returns for above average risk in a least a few of the ventures to make up for all of the startups that failed. If the aim was social good, there are very many worthy causes and charities that need that capital. 'Stablegains' is not and was not a charity working for the collective good of society and neither are an alarming number of startups and YC-backed startups these days.
Snarkiness, Mockery, Sarcasm are very strongly discouraged or outright “banned” depending on context. https://news.ycombinator.com/item?id=21187460 https://news.ycombinator.com/item?id=23482110
Your “replies” are not engaging, and it feels like you are mocking me with strawman shit I never said. That is very unpleasant, and nobody likes that. You have read an awful lot into sentences where I am just trying to be factual.
You have no idea what I think about VCs morally, so why are you responding with moral points?
For example: “To assume that venture capital exists without the primary motivation and purpose of making money is misleading at best and delusional more generally”. Who are you arguing against? Who assumes what? And “delusional” is an unpleasant flamebait word.
>> I admit my second comment wasn’t much better, sorry.
> Placing venture capitalists within some special class whose reasoning or motivations are beyond the understanding of most people is where I take umbrage
I mean, where is your reply even connected to what you quoted? Are you just baiting?
The quality of your two comments is extremely low in my opinion. Please, reread the guidelines (I do regularly), and try and learn to follow the unwritten standards the community follows.
At a bare minimum they should be doing due diligence for their own investors to prevent losses if not the higher standard of being a good citizen and shutting down the fraud.
We would not think it’s ok for a fund backing pharma startups to give cash to Avon Barksdale…
I'm beginning to agree.
Piercing the corporate veil is reserved for "serious misconduct" [1]. If you're told someone will sell an unlicensed deposit-like product [2], promise depositors (their words) "will not lose [their] funds" [3] and pay a ten or 20% interest rate, and you give them money to do it, you aided and abetted fraud. (At the very least you were grossly negligent with your LPs' money.) You should have to make the people you scammed and hoped to profit off whole.
[1]https://www.law.cornell.edu/wex/piercing_the_corporate_veil
[2] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
[3] https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
[a] Thank you nrmitch https://news.ycombinator.com/item?id=31462617
None of this will amount to anything, and you’ll feel awful until you give up. Then the healing can begin.
On the other hand, I’m not sure if I was mentally capable of hearing this advice back then, so…
But it’s true. It’s 2022 now. That’s almost a decade ago. In fact I forget when exactly Gox collapsed, which is how little it matters to me now. But back then, it felt like the end of the world.
You don't write to your A. G. to get your money back. (You won't.) You do as an act of civic service.
These people will defraud again. Their investors will back people who will defraud again. Putting people in jail doesn't get anyone's money back. But it deters the next fraud.
Write the letter, send the evidence, write off the loss and then move on.
It was a mistake I made, so I’m just hoping to help people realize that things get so much easier when you stop caring.
Also: are you suggesting they should look at themselves as a victim? They might be in one sense, but in other senses they might not be.
The way the rehabilitation proceedings are going you will either be able to recover ~20% of the cash, or ~20% of the BTC which would be a considerable gain at this point.
I'm... uh.... fairly certain this was not the crux of their marketing which severly downplayed the underlying risk. There is also a huge spectrum between "we cannot guarantee that there is 0 risk" (which seems to be what the above sentence is saying), and "there exists a risk that all of your funds disappears in 24 hours".
It seems like there is some serious rewriting of history going on here.
Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
https://news.ycombinator.com/item?id=31431915
-"15% interest. No surprises."
Will be interesting to hear the argument "Well technically there were no surprises here, because customers should not be surprised when they lose all their money investing in risky assets. Therefore, technically, we did not lie."
All the high yield is in algoponzis or new protocols that carry massive protocol risk
(No need to list the differences between stocks and cryptocurrencies.)
I’m honestly not surprised about how things turned out.
I can show you links where even the Wayback machine has removed content, most people will know how Google Cache has removed content, so print all copies and have hard copies safely stored away where they cant be destroyed. Houses will be broken into in order to destroy evidence, I know I've had it done to me!
This may be your only chance to out the criminals that run the world!
>This may be your only chance to out the criminals that run the world!
Given that the screenshot is an (instagram?) ad, there's probably such a huge papertrail that can be subpoenaed that you don't have to worry about the founder breaking into your house to destroy the only copy of the marketing materials.
While they're not exactly forthcoming with the risks, their marketing pages[1] were also careful to not make any explicit claims of safety (eg. "your principal is protected", or "you won't lose money"). The most that they claimed were "stable" returns. For good measure there's also a disclaimer mentioning the risks.
>There is a range of safeguards in place to help secure your deposits, however holding and depositing stablecoins with Stablegains and third party lending platforms still carries significant risk. Please carefully read our Terms of Use and Risk disclosures in our Learning Center before making a deposit. Any deposit with Stablegains and third party lending platforms is entirely your responsibility. You understand that your principal is at risk.
[1] https://web.archive.org/web/20220108232821/https://www.stabl...
These are both explicit examples of explicit claims of safety that are still up on their documentation (at least as of 5 minutes ago)
- "You will not lose your funds because all loans are 100% asset-backed." (https://stablegains.zendesk.com/hc/en-us/articles/4402680425...)
- "Regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable." (https://stablegains.zendesk.com/hc/en-us/articles/4402687671...)
Edit: Updating link to fix truncated urls
These people need to be in jail. Deleting evidence isn't going to look good in front of the judge.
Everyone pour one out for u/ushakov, hero of the hour: https://news.ycombinator.com/item?id=31462674
https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
https://stablegains.zendesk.com/hc/en-us/articles/4402687671...
I updated the the parent comment with the correct urls
- "You will not lose your funds because all loans are 100% asset-backed." (https://stablegains.zendesk.com/hc/en-us/articles/4402680425...)
- "Regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable." (https://stablegains.zendesk.com/hc/en-us/articles/4402687671...)
It's kind of shocking really that these statements are still up give how many of their other docs have been editted in the last 10 days.
---
Edit: u/ushakov is the hero of the hour for archiving those pages (https://archive.ph/O2lZV, https://archive.ph/ItERp)
>The basis for Stablegains' rate is Anchor Protocol's yield. At the time of writing, Anchor yield is set at 18% - 20% APY and expected to remain so for a long time.
>We expect the rates of open finance protocols to beat those of traditional finance for a very long time.
https://stablegains.zendesk.com/hc/en-us/articles/4402680471...
The statement is kind of true if you want to be very disingenuous to what people actually care about.
Also, As far as I know, no one deposited UST with stablegains. Stablegains took funds in other formats and converted it themselves.
"We all thought UST and Anchor were a source of stable >10%/yr gains that you could trust for your corporate treasury. That the yield instead turned out to be -99% is quite disappointing, and makes this a natural time for us to bring our service to an end. It's been a pleasure to serve you."
You know the scene in Office Space when Peter says, “I have eight bosses, Bob.” And then Tall Bob (Dr Cox) leans forward with a surprised look on his face?
I don’t think I’ve ever empathized with Bob in that scene. Until just now.
How did these guys raise funding? They literally just built a fiat onramp
either the investors didn’t do enough research or they were on it
https://davidgerard.co.uk/blockchain/2022/04/11/web3-a-vc-fu...
Don't you need a board resolution to be able to open any financial accounts, yet alone to invest into risky or leveraged assets?
Unless they were targeting crypto projects/companies that usually don't care about legal stuff.
They seemed to have a third kind of token, that you could get as a reward for taking a loan (or depositing UST). But I don't think that by juggling three related tokens around one can generate any value. The only source of money was from people buying any of these tokens.
The support page at Stablegains site says [1]:
> They [Digital finance protocols] are more efficient than traditional finance
I can't see how 30% interest rate overcollateralized loans are "more efficient" than traditional bank loans with rates below 10% per year.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
This would be a coin that is backed by stocks. When you buy my investcoin, you can choose any kind of stock from a preapproved list and I will buy them for your money. If you decide to cash out, I will sell stocks of my choice to repay you. The stocks are managed in a public account, so anyone can ensure that the amount of stocks matches the amount of coins. You are guaranteed a share of stocks proportional to amount of coins that you own.
Of course, hard work of thinking out a hypothetical cryptocurrency must be rewarded, so I will take a reasonable fee from every transaction involving buying or selling stocks.
To make things more interesting, we could manage those stocks by voting of coin holders.
Why this is much better than stablecoins:
- first, in contrast to existing stablecoins, anyone can easily check that I hold the amount of stocks matching the amount of coins
- second, unlike existing stablecoins, the value of my investcoin is going to grow as on average stock markets grow over time
- third, the money that you have invested is improving world economy instead of just burning electricity
- fourth, you can use this investcoin as a mean of payment
- fifth, there will be no promises of ridiculous yield. The stocks are meant to back the value of coin, not to be a source of a significant profit.
Looks like a perfect business plan, or am I missing something?
Would it be regulated like an ETF or mutual fund? There might even be regulations that make exchanges like Coinbase unwilling to deal with it.
- I have to put centralized trust in you that you don’t take my money and run.
- Regulation risk. The SEC will happily shut you down any day. Other centralized attempts of e-currency where shut down in the past.
> the average person
So I'm riding the subway in NYC and there are these adds for yet another one of these crypto related "businesses" and copy iirc goes something like 'stop boring us at parties trying to explain crypto. just invest with us blah blah'. Pretty sure the irony is lost on the target demographic.
YC has some blood on its hands here - their investment lent legitimacy to this scam.
So, 95% of the value is gone.
Can anyone explain how the fork, airdrop, and other gyrations the Terra/USD promoter is proposing will work, and where any actual money comes from?
Problem is, best they can do is reboot with a Bitcoin-collateralized coin. The whole Terra/Luna/Anchor "algorithmic stablecoin" had been exposed as a fraud or a fantasy, so such smaller fraction of suckers and scammers will buy in to that again, and everyone else might buy in to a Bitcoin backed stablecoin, but there's not much profit in that for Terraform, and the users have no reason to choose it over a more reliably backed coin like Tether or USDC or DAI.
This is not correct. They used those bitcoins to try to defend the peg. Here you can see the actual treasury: https://datastudio.google.com/u/0/reporting/b31cc9e5-c54c-44...
My understanding is that its more likely that they were allowing connected insiders to cash out at face value rather than "trying to defend the peg" at the prevailing market rates.
But yeah, I'll be surprised if Do Kwon doesn't end up sitting in front of a judge
Had. It's gone.
They transfered 52,189 BTC between May 7th (When UST dipped to $0.9978, indicating the algo peg was under stress) and the 10th, and another 33,206 when UST hit $0.75. After the insiders were paid off, Terra was free to go to zero.
Presumably we'll only find out what actually happened when Do Kwon is in jail and people start testifying against each other in return for lighter sentences.
Hype is lost, wave is over.
Yes, users should inform themselves, but exchanges (as well as companies like Stablegains) need to be held accountable.
Before then, Binance.US had several other "stable coins", the most popular being Binance USD and Tether. (Binance.US also has a dollar asset which is supposedly FDIC insured.)
Binance.US has trading rules that specify things like minimum and maximum price. The minimum price for Binance USD and Tether is something like $0.0001 (and the maximum price is something like $1000.0). IIRC, all of the other stable coins have similar "bounds".
UST when introduced was different. Its minimum price was $0.70 (and its maximum price was $1.30).
When things went to crap, that minimum price basically froze the market, or rather froze people into their positions. (There were people willing to buy at $0.45, for a while, then $0.17.)
FWIW, Binance.US eventually significantly reduced the minimum.
Oh well. We'll see, it might bounce back as these things do.
How about we leave the definition for pyramid scheme where it's already at?
> Pyramid scheme: making money based on recruiting an ever-increasing number of "investors."
> Oh well. We'll see, it might bounce back as these things do.
No, it won't. It won't regain the trust of the community and the project is dead in the water now, no way it'll recover from this.
While they might have some "physical and IP assets", there isn't nearly enough to "make investors whole" (ie. pay them back). If you invested $100 in apple earlier this year and AAPL somehow needed to be liquidated, you're only getting a fraction of $100 back.
In the end, AAPL is building a product, that is wildly popular. Makes a massive profit (and writes it all off, which is another discussion), and spreads its wealth to investors. The products they make produces value in and of themselves. Without the stock, the iPhone, iPad, Macs, cloud services, etc would still be valuable and used.
Crypto does not have anything to back itself. It doesn't produce value in and of itself. If suddenly people stop valuing crypto, there would be zero services it produces, unlike an iPhone. If suddenly the AAPL stock drops to 0, they can expose the code for enabling iphones to work and the tech can continue to be used one way or another for an existing an practical utility.
That's the difference people are missing. Even a company like Figma, who produces purely digital products, figma, without any investment, is a useful digital tool which serves a purpose to people who use it, without any need for others to invest into it. Theoretically it can be converted to a self-hosted service without any updates, an d still be a useful tool. The income model doesn't impact the utility of the digital tool. Not so with crypto.
This is what drives me nuts about crypto enthuseists... they forget the crypto has no value. And even saying "neither does money" but money does serve a practical purpose. It allows for one person selling chickens to convert those chickens to long-term value. And while money is only as valuable as people make it, money is backed by a country's production and reputation, so there is inherent anchoring of money to the world.
This is correct. While looking into this for a friend I came across: "for a full year, you'll earn 0.5% APY on what each person you refer deposits" [1]. Still not a pyramid scheme, since 0.5% is a small fraction of the total yield paid out, but pyramidesque.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4409440197...
Which is why one's illegal, while the other is publicly traded on the stock market.
I know this may be an unpopular opinion on this site in particular, but after seeing this I would never even consider raising money from YC. I would not be comfortable having the fate of my business in any way tied to a group of people that are so fucking dumb that they invested in the money version of a perpetual motion machine.
Seriously, this is the fucking stupidest thing I’ve seen in _YEARS_
C'mon, let's not forget about NFTs.
Or as PT Barnum put it...
Which would be weird. Attacks on blockchains usually have detailed analysis within days, the blockchains are public and any evidence would be right there for people to examine.
All evidence is that UST simply collapsed on under it's own weight because it's algorithmic nature was never stable. As soon as the price of LUNA started falling, it created a feedback loop which drove the price of LUNA to zero, destroying the very thing backing UST.
Ironically, some attacks on blockchains themselves (like 51% attacks) are actually harder to analyze, because part of the evidence lives in blocks that were deliberately orphined from the blockchain, and the p2p network doesn't have any incentive to share those blocks. I've analyzed such attacks and you actually have to examine the caches and logs of nodes that were running at the time to find evidence.
Governments tend to do things at their own pace.
If any blockchain was forbidden, there would be a huge PR stress and infinite arguments about their viabilities.
Just let morons fail.
Tether may also have been allowed to proceed as a sort of test bed for the CBDCs which seem to be on the agenda. Now the narrative can be "the public has already demonstrated strong demand for USD-type cryptocurrencies, we just need to supply an official version."
It just takes a shit-tonne of capital, and it helps to have a functioning internal economy and flexibility to be able to defend against malicious agents.
I suspect there are other legal issues with creating an alternative currency in the us though, which is why these aren't currencies but securities. Which is still fine! A tethered coin is conceptually _similar_ to a 0-yield bond.
Presenting it as being "safe" without it actually being so is the problem here.
Disaster strikes when someone sees the mountain of money and thinks ”If we invest this money, we get to keep the gains”
This can be mitigated by using many banks, but it's hard to find banks willing to deal with cryptocurrency. So in practice all the deposits are at 1-2 banks.
A stack of paper USD in a safe would work, but there's risk of theft/fire/etc.
Look.
Imagine an otherwise empty room with a table and a few chairs. A couple people come in with some money in their pockets and cards. They play a few round of a card game, some lose, some win. When they leave, the room as it was before so it is crystal clear the sum of their money couldn't change. Some won, some lost but overall the change is zero. This still doesn't change if, for convenience, during the game, they use plastic chips to count wins and losses and at the end they exchange it for money.
But if someone takes a small cut every time the plastic chips move then that person is guaranteed to win and everyone else together is guaranteed to lose. Now, a game where, without knowing anything about the game you can tell ahead of the time which group wins and which one loses is not a game, it's a scam.
Indeed, one of the best moves for players is not to play the game but to sell their chips -- and praise the game to increase the chance of a greater fool buying in. Those will sit on a greater loss than you did which might not materialize yet but it's certainly in the system.
So, any crypto"currency" with transaction fees is a scam. Those who collect transaction fees are guaranteed to win and the rest are guaranteed to lose.
And no, stocks aren't like this because they produce dividend. And no, gold is not like this either because there are uses of gold which transform your gold into higher value products than raw gold (integrated circuits, jewelry) which sell for real money. Neither can happen with crypto"currencies", there the only interfacing with real money is exchange.
Does this not describe CC fees/taxes/online marketplaces/etc? Or is your argument all those are scams as well?
I agree crypto projects are generally a scam but I fully disagree the reason for that is transaction fees (which I assume is what you're alluding to here as the "small cut").
No, because CCs exchange dollars and the dollars themselves are not worthless (or, rather are given worth via a nuclear arsenal).
The coins themselves are worthless, but accrue "fees" in fiat (ex. when you exchange USD for UST).
> The coins themselves are worthless, but accrue "fees" in fiat (ex. when you exchange USD for UST).
But why are the coins worthless? I'm sure your answer would be "because they're a scam" (probably more indirectly, but it would boil down to that point). But your reasoning for why the coins are a scam involves them being worthless.
Also, this isn't even true but the standard definition of worth of something like "what the market is willing to pay for something".
The coins are worthless because they have no function outside of speculation.
>But your reasoning for why the coins are a scam involves them being worthless.
The coins are a scam because they are worthless but the conmen in the room are telling you that if you just hodl they will be worth a billion dollars. Just like buying seeds for a money tree is a scam. In other words, the coins themselves have as much utility as seeds for a money tree. Sure the market might be willing to pay for seeds for a money tree; but you and I both know that money trees don't exist and the market participants are paying for something that will be worthless in 10 years.
You are now one of those market participants twisting language because you are 100% convinced that you will begin harvesting benjamins in 10 years once you plant your money tree seeds. Once the tree matures and bears no fruit, will money seeds be a scam, or will it just be that your tree was a "Failed project", but the ecosystem of money tree seeds is 100% legitimate?
So you agree with me the reason they are a scam has nothing to do with transaction fees??? Maybe you should re-read my initial comment.
> You are now one of those market participants twisting language because you are 100% convinced that you will begin harvesting benjamins in 10 years once you plant your money tree seeds.
I have never, am not currently, and do not plan to hold any cryptocurrency or invest in crypto-related projects. Thanks for projecting this onto me though!
> Once the tree matures and bears no fruit, will money seeds be a scam, or will it just be that your tree was a "Failed project", but the ecosystem of money tree seeds is 100% legitimate?
You really should go re-read my first comment - I never said anything close to this.
Is it often used for scam? Yes. But so is email.
Just like stocks can fall 99% in a day. It stock s cam? No.
The problem is that users dive into it without understanding the risks. Also, there should be (and will be) more regulations around it.
But it is as far from the scam as it gets.
Yes, the general public retail stockholder doesn’t have a whole lot of power. I was just making a point about ownership and securities. If you own enough stock in a company, your vote Carrie’s weight.
Downvoted I’m sure by the hodl gang.
Correct. Only a few cryptocurrency projects will survive and the several meme cryptocurrencies or non-compliant coins will wither away.
This is why some companies waited for regulatory clarity to enter back into the cryptocurrency markets. This is what the absolutist crypto-skeptics or absolutist crypto-maximalists won't tell you.
No, it is not.
Please try to set aside your hatred for all things crypto and understand that there is actual legitimate value in many of the crypto projects, and that the core proposition, that of decentralized peer to peer value transfer, is a legitimate and useful use case.
I would contest even this. People don't want to transfer "value" they want to transfer money, now to use, say, Bitcoin to transfer money you need to do the following steps:
1. Buy Bitcoin. Let's presume you are already set up with an exchange for this so all you need to do is transfer your money some way to the exchange.
2. Transfer Bitcoin and pay the transaction fee.
3. The receiver wants money. So let's again presume -- despite this is a much shakier presumption -- they are already set up with an exchange then they need to exchange Bitcoin to real money and transfer their money from the exchange to their bank account. I am not mentioning here if they tarry then the exchange rate in #1 and #3 differs -- that could be automated although as far as I am aware there's no service which currently does it.
Turns out the challenge is not #2 but the bank transfers in #1 and #3: integrating with every national banking system in the world. Wise (nee Transferwise) shows this can be done without Bitcoin, creating transparency and predictable fees.
This does not mention the criminal aspects of Bitcoin, I am focusing just on the transfer aspect.
Can you hire someone working in Venezuela and pay them with Wise?
"Oh, they are underdeveloped countries", you will say. Okay, question: If you were in Greece 5 years ago and you wanted to get your money out, could Wise help you in any way?
Unless someone with vast capital assets is willing to accept units of fantasy money in trade for those assets, it has no real value besides hucksters finding Greater Fools.
Worse than cryptocurrency being fantasy money, it literally wastes an Argentina worth of power (and growing) every year. I doubt the entire global financial industry, including all mainframes, office buildings, corporate jets, and commuting workers uses even one Argentina with of power in a year. And the global financial industry is doing billions upon billions of transactions for trillions upon trillions of dollars.
Notice how what I just described does not match the vast majority of these “crypto” projects. That is because they are not crypto. They do not adhere to the ethos of crypto. They are scams. It’s very simple really. If there’s a company behind it, if there’s an ICO, if there’s a single identifiable leader which can be attacked by governments to bring the project down, then it is a scam.
Unfortunately some time in the mid-2010’s the scammers and grifters of traditional finance moved in and started playing all the same games that got regulated out of existence in the legacy markets. They will likely get regulated out of existence again in the crypto world and people like you will gloat about how it’s the end for crypto. But the real crypto projects, Bitcoin, Monero, etc. will keep chugging along and there is absolutely nothing that can stop them.
“Gold has two major shortcomings in that it is neither of much use nor productive. While gold does have some industrial and decorative purpose, the demand for these purposes is limited and unable to absorb the amount of new gold being mined. And if you own an ounce of gold for eternity, you still end up owning an ounce.” - Buffet
https://www.statista.com/statistics/299609/gold-demand-by-in...
Stablegains, by their own admission, only invested in stablecoins: https://stablegains.zendesk.com/hc/en-us/articles/4402687671...
> We do not engage in speculation on the prices of volatile cryptocurrencies like Bitcoin or Ether. We only offer deposits in stablecoins whose value is pegged to one dollar.
> Regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable.
This is hypocritical on its face. You can't have any returns if the assets are stable!
Sure, YC can do whatever they want with its money, but we can all be very disappointed and sad that VC funds are engaging with any of this. YC has been slowly been losing their image for years now, along with the other VC firms, and this just cements it for me.
As a result of the ICO scams in 2017 for example the infamous Ethereum DAO hack, perhaps that is why at least in the US, the SEC banned unregistered ICOs [0]; more countries to follow.
They have done 'something' about it, but it is not going to 'completely' stop otherwise they would have 'totally' banned all of them, including even registering an ICO with the SEC.
I won't be surprised to see stable-coin regulations this year with only a few of them still surviving.
[0] https://www.whitecase.com/publications/alert/regulation-init...
find a VC who’d buy coins at low prices and then dump into public by placing on Coinbase/Binance
spend that VC cash on marketing
Return is directly correlated to risk, so when a black box corporation is promising 15% returns and marketing itself as a “simple and safe” way for its users to benefit from “advances in financial technology.” It's probably not safe, but it is very simple.
This is really what should be required as the boldface disclaimer on every investment product.
"10-15 % guaranteed return" has another name...fraud....even in the case of old-school imperial plunder, there is always the risk your target might fight back.
This is at least a weak EMH assumption. It's not a law. In crypto sometimes the opposite is true for short to medium periods of time because uninformed people are afraid of 'too high' returns. Best money is made on market inefficiencies like that.
Your comment makes you seem like a very easy mark for the scammers targeting you.
I requested an ACH withdrawal at 5pm pacific on 5.23 It was processed 13 hours later at 645am on 5.24 The conversion rate I received was 0.03850612745 If you view the UST value during that window, it was worth almost twice that rate on average: https://coinmarketcap.com/currencies/terrausd/
https://etherscan.io/tx/0x6ae021b3bd9848ade6863820092dcf2844...
Just a warning for anyone expecting to get out with even the value of your UST...
These guys discuss some details (that were known as of this publish date). It closely resembles the 'attack' on GBP in the 90's by a billionaire.
Users: OK, don't mind if I do.
Terra: help we're under attack.
It actually started on the 9th of May. So not only did they negligently invest 100% of funds in a single highly risky project while they marketed that they diversified risk, but they were also asleep at the wheel and missed the opportunity to salvage some of the terra before the depeg had gone too far
It boggles my mind that people don't see that the inability to block/reject payments is a fundamental flaw of cryptocurrency.
>Stablegains.com — 15% APY savings tool. Take control of your financial future. No hidden fees, no minimum balances, no commitment periods.
Source on Terra being a fraud?
Please provide sources for your ad-hominems.
I'm a maximalist and even I am not that disingenous.
A badly-designed stablecoin? Incompetence? Sure. But the accusation of fraud requires evidence of malice.
What exactly is fraud by your estimation?
It would be ludicrous to suggest that Stabelgains needed to "intend" the end result (ie, "catastrophically fail and lose all of their customers funds") for it to be fraud.
Their previous marketting said (or at least implied) that they were spread across different defi products to protect against this exact risk.
That is not the same thing as "we planned to get there eventually, but didn't in time". This is borderling to an institution saying "We're FDIC insured!" but actually meaning "We hope to be FDIC insured at some point in the future".
Lying to customers about what you're doing with their investment funds is 100% illegal and literally what Martin Shkreli was in prison for (and that case didn't even end with him losing all of his investors money)
Feb. 2, 2022 [1]: "Stablegains' 15% APY is earned using Anchor Protocol, a decentralized lending market."
This is in a giant blue block right above a "get started" link. There is no mention of anything other than Anchor being used to store investor funds.
It seems to me that you are trying to twist the post-crash retrospective into a marketing statement that didn't simply exist before the crash. Where, exactly, is the lie?
[1]: http://web.archive.org/web/20220203225905/https://stablegain...
> Our main stablecoin is USDC (USD Coin). For every 1 USDC in supply, $1 USD is kept in reserve.
> The other stablecoins we may use are, UST (Terra USD) and DAI.
That's a lot more indicative than a mere "s" at the end of a word.
The circular relationship between Terra and Luna is really fishy. It's probably not really a scam today, but similarly structured schemes should probably be classified as such and criminalized in the future.
Capital. Taking a 5% cut of billions of dollars is going to be worth a lot more than 20% of whatever tiny amount of capital you are able to muster yourself.
There are ways of getting capital that don't involve the public's money.
There's the old saying "If you own the bank $1m, that's your problem, but if you owe the bank $100M, that's the bank's problem".
This kind of stuff happens in other industries (like real estate) all the time. Even with bank financing, you'll need another source of funds (typically LPs) to meet loan requirements.
See [1]. If you sell a deposit-like product by saying "you will not lose your funds," and then lose the funds, you go to jail. (First you lose your money.)
https://twitter.com/stablegains/status/1523874916206059525
https://web.archive.org/web/20220510035811/https://twitter.c...