Hacker News Reader

Comment by pjc50 | Hacker News Reader

> absorbing customer funds for general operations runway, lawyers and payouts for secured creditors/owners.

If they're actually insolvent, they're obliged to do this. They have no more customers, and should discontinue all operations; they only have creditors of one form or another.

A "yield farm" seems to be just an unregulated shadow bank: "borrow short lend long", but lending into really risky assets like other cryptocurrency firms. It's not exactly Basel III.

View on HN

I don't know a thing about Vauld, so no accusations here, but surely people realize that anything offering +18% on what you can get from a bank will often be a ponzi scheme?

Many of the individual entities are honest as far as it goes (but often the one paying you 18% is just taking your funds and "investing" them in the one paying 19%, hence the current contagion). The crypto ecosystem as a whole is the ponzi scheme, and it's only going to collapse when people lose faith in all of it, bitcoin proper included.

The price will go lower and blocks will still be produced and function just as well

The system will keep working on the way down (at least until the mining world gets small enough that someone can do a 51% attack), but once the expectation of future growth disappears, the price will crater and never come back and the whole thing will be fairly harmless. I guess the network will still work for people buying drugs, but do people even still do that?

Its a data store where you pay once for people to store thousands of copies of anything in perpetuity. Retrieval is free. The people storing copies don't listen to each other, and so have incentives not to delete content.

Network will be there. Cheaper the better. Just an option that has some value, not a killer app, doesn’t need to be. Funny system since you can put any junk there.

> Its a data store where you pay once for people to store thousands of copies of anything in perpetuity. Retrieval is free. The people storing copies don't listen to each other, and so have incentives not to delete content.

Only as long as they can make enough money off it. At some point miners will start compacting the history they keep or just straight up turn off their systems.

yeah, the same as any other cloud storage. I'm content with the much greater redundancy for some copies to persist and be recovered, not a guarantee, more guarantees than every other option.

the unique issue is how a 51% attack could rewrite history, but that's also mitigated by how often people branch bitcoin from various states in history to their own new chains that have their own miners, inheriting and persevering all the stored stuff.

Often? What conceivable (legal) system could consistently generate such returns and not manage to capture all capital on earth eventually? The best financial vehicle ever conceived has about 9% per year over the last 50 years or so.

We live in a world of wildcat brokerages and self-styled Warren Buffets on Tiktok. People who are in it largely all think they can time their exit before the Ponzi collapses.

It's both sad and just that they are (almost always) wrong.

There are ways to get that sort of return legally, but you need a lot of collateral and a strong stomach for risk. Basically leverage hard and invest in something risky - you multiply the return (which should be good already) but also multiply the risk.

If you know what you are doing and have luck you can make very high returns.

Mostly people don't know what they are doing though and get into big trouble.

> and a strong stomach for risk.

Well, obviously. You can gamble on red in the casino and get 100% return (with a 50%+ risk of losing everything).

The point is that these scammers presented the 18% APY gambles as virtually risk free "investments".

"Surely crypto fans will recognize that the math under this claim does not make mathematical sense?"

Is that something that you see them doing elsewhere?

They rather say it's a "high yield investment program"

>surely people realize that anything offering +18% on what you can get from a bank will often be a ponzi scheme?

except in this case it's not really a ponzi scheme, more of high risk investment (think junk bonds) gone bad.

even after so many examples it baffles me how people keep falling for this. people just refuse to think about the cashflows.

no its not a high risk investment. no actual business goes to these crypto firms asking them for a such a ridiculous loan. so where does the money come from then? a steady stream of investment from idiots of course. they pay the early investors using the later depositors money. eventually you run out of fools and then this happens

A lot of crypto products use interest rate style benefits because that’s what people recognize and understand

Behind the scenes many of them are making money from volume capture and tiny but lucrative transaction fees, no different than Robinhood or Citadel, the perpetual nature just isn’t guaranteed and longer dated payment promises are perilous.

Lets say an organization is really making 100% ROI but doesnt want shareholders, they offer a competitive 18% return in a bond and thats that. Many more people believe the same you do if you told them a higher and truer number. “35%? Obvious scam”.

There are many market inefficiencies that scale up to hundreds of millions and billions of dollars

People don't understand “senior convertible debt” they understand “18%”

Many yield bearing products in the crypto space offered floating interest rates that adjust to market realities, these fixed interest rates ones are the ones unable to adjust.

They aren't a bank

Laws don't function on what you think is equivalent

Banks are a lot more than "I will hold your money"

Your mattress is also not a bank

Broadly any organisation which most of its business is taking deposits on a short term basis and lending them out on longer, fixed terms can be deemed a "bank" and analysed as such, including the vulnerability to bank runs which has taken out this and other crypto firms. It's not a regulated bank, and it may be illegal for it to call itself a bank, hence it's a wildcat or shadow bank. But the business is definitely bank-shaped.

> Broadly any organisation which most of its business is taking deposits on a short term basis and lending them out on longer, fixed terms can be deemed a "bank" and analysed as such

uh. no, it really can't. you can't even do this with a credit union.

if you think the major purpose of a bank is to store deposits, you don't understand what banks are.

> But the business is definitely bank-shaped.

holding deposits is not "being bank shaped"

many, many things in our society hold desposits, from insurance companies to blue chips, to stocks and investments, from annuities to rollovers, from awards to grants, from credit accounts to coupons, and even the local layaway

none of them are even slightly banks

the purpose of a bank is to give certainty by being bound to specific laws

i know, when i put my money in a bank, that it won't be invested by the bank in specific dangerous ways. i do not know that with a credit union. i definitely do not know that with some coin dot com that you imagine to be bank shaped.

this post is about coin holders learning one of the many differences

many banks - more than half - don't take deposits at all

this is a deep failure to grasp what a bank is, and why this isn't a bank

the crypto community is about to start learning about bank bindings around leverage that emerged in the 1920s

afterwards they're going to learn about floor limits that were set on actual banks in the 1930s, and why

after that, they're going to learn about the fdic, and that it doesn't apply to things that fans believe are "bank shaped"

But a real bank is FDIC insured, so the "value" of deposits never goes to 0, unlike "wildcat banks". Unless the central bank can't print more money, and that will never happen by definition.

Correct. My mattress does not surveil my financial activity to the Government, or operate as an extension of law enforcement. Nor does it act as a form of power projection by being something to which access to it is centrally controlled for the sake of sanctions.

Your mattress is also a better investment than practically anything in crypto.

Reply on news.ycombinator.com