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Comment by perihelions | Hacker News Reader

It's a Ponzi scheme. He doesn't even seem to push back against the "Ponzi" phrasing.

Also -- this is merely a footnote -- his Ponzi scheme is currently the 3rd-largest political donation source in the USA.

https://www.opensecrets.org/outsidespending/summ.php?GoToPag...

https://www.nbcnews.com/politics/2022-election/-crypto-cash-...

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Regulatory capture by a Ponzi scheme was just added to my "list of things that could legitimately destroy the USA from within."

Did Bernie Madoff ever do this? I feel like he did, but maybe not so effectively or at such scale.

Madoff was different in that he successfully hid the fact that his was a ponzi scheme for 40 years.

This interview with SBF suggests crypto does not even try and hide it.

Albania did, and it led to a civil war.

This has happened a number of times in this country. One major example is MLM, which was fully legitimized in 70s and 80s, after spending some time in a legal gray area. Ever since, the industry has expanded, even though it largely functions as wealth transfer from late arrivals to early incumbents, with a sprinkling of sustainable external commerce.

Calling it a Ponzi scheme is uninteresting and not really the point here. Was GameStop a Ponzi scheme when the stock price soared?

I think the interesting part here is the relation to bitcoin and a new theory on how to price things. It’s traditionally been assumed that the price of an asset is related to the underlying value it has or the value it generates (eg cash flow). SBF is pointing out that’s not a complete method of pricing assets in today’s world. You also have to factor in “collective agreements”.

Bitcoin is the clearest example of an asset price that is driven by collective agreement. The collective agreement is enshrined in code and algorithms.

Whether it’s interesting or not, what the FTX CEO described is literally a Ponzi scheme.

> Calling it a Ponzi scheme is uninteresting and not really the point here. Was GameStop a Ponzi scheme when the stock price soared?

I’d argue that the intent of GameStop was not to provide a solid investment as it was just as a collective intent to make short sellers fail.

I have serious trouble seeing how “collective agreements” has any intrinsic value. To me, it’s effectively the same as saying “the value of coin X is that people believe in its value”.

It seems like at least this CEO recognizes it for what it’s worth.

> I have serious trouble seeing how “collective agreements” has any intrinsic value.

Then you probably don’t see value in any form of cryptocurrency. I do, because I think collective agreements are at the heart of how society functions. Fiat money is a collective agreement that works by the backing and enforcement of a central entity (government). It’s at least interesting to me to experiment with a collective agreement that does not have to be backed or enforced by a central entity (bitcoin).

I'm not arguing against crypto here. I do want to argue the semantics of fiat: they're issued by the civilian arms of militaries, called governments. They control land and resources and will defend or invade to sustain themselves.

How collective agreements compare against them is an interesting question of modern economics vs history.

> Then you probably don’t see value in any form of cryptocurrency. I do, because I think collective agreements are at the heart of how society functions. Fiat money is a collective agreement that works by the backing and enforcement of a central entity (government). It’s at least interesting to me to experiment with a collective agreement that does not have to be backed or enforced by a central entity (bitcoin).

The main problem with crypto is that it does not work like that. Society demands way more than mere vague "collective agreements" in order to function. Society relies on debt transfers that preserve value between transactions. It expects value to be stored and also stable and reliable enough in order to enable deferred payments.

Crypto provides none of that. Worse,crypto proponents explicitly praise crypto's inability to remain stable even in the short term, which manifests itself through an expectation of ever increasing price. You simply cannot portray something as being a kind of money and at the same time praise it for it's "get rich quick scheme" nature.

Coming to HN for an unbiased analysis of cryptoasset discussion was your first mistake. Acknowledging this fact was your second.

That's a lacking comparison. The Gamestop stock has not been specifically created for this kind of "investing", neither does it not have fundamentals behind the value.

Of course there's going to be speculation going on with any asset, but GME is not a purely speculative asset, and is not purely based on possible future application which isn't even known yet. There's a corporation behind it, which generates revenue, which provides services, all of this has real value, which then serves as a valuation.

A stock is a small share of a corporation. A token could be comparable, however, if the only purpose of trading this token is speculation, the value of the venture itself is speculative and the value of the token is based on the speculation itself, it's nothing but at best high-level gambling.

If you then factor in a deflationary nature of the asset, and the requirement for constant influx of new buyers to even hold the value with yield farming going on, it quickly becomes a Ponzi scheme.

(and if you then back a stablecoin with this Ponzi scheme it's called Luna/Terra)

> Of course there's going to be speculation going on with any asset, but GME is not a purely speculative asset, and is not purely based on possible future application which isn't even known yet. There's a corporation behind it, which generates revenue, which provides services, all of this has real value, which then serves as a valuation.

GME also benefits from a significant protest aspect, with people buying stocks without any expectation of profiting from it and with the sole motivation of participating in an event which, in the very least, causes an hedge fund suspected of ilegal practices to go bankrupt.

"Collectives agreements" are not an innovation. Underlying value is precisely, simply and only, a collective agreement (made by the market, instantaneously in real time billions of times a day) about how much something is worth.

Absolutely zero innovation there.

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