It's like a lawyer getting into crypto, they do contracts for the companies, they're not buying tokens for themselves.
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[1] https://videocardz.com/newz/nvidia-reportedly-wants-to-cut-t...
The thought process for VCs investing in crypto is simple: they get a huge discount on the tokens in the raise that they can turn around and dump on retail a few months later for huge returns. Instead of waiting 10+ years for a traditional exit, they can get liquidity in a few months.
As Chamath admitted on the podcast, even when they're on a vesting schedule they can sell the claims to future vesting prior to actually receiving the tokens.
I'm despondent about the overall crypto situation, please forgive me for my cynicism, because I'm genuinely concerned about how many times people can exclaim the king is naked the cupboard is bare the promises aren't merely empty but never had meaning, and yet the socialized penny just won't drop.
This FT article [0] goes some way to describing how vulnerable young and low income people are to false investment scheming. What's needed (very rapidly) is to reveal the full extent of behavioural and technical engineering used in exploitation, instead of blaming the phenomenon on concocted reductio ad infortunium.
[0] Financial Times article "Generation Moonshot": https://archive.ph/3d4DW
Edit,: added for clarity, "...from which...the simulacra.."; corrected "onto" as "on" and thereafter revised with clearer unchanged meaning the rest of final sentence. (and Ed2 sp ip.); E3 people instead of folk ,(mobile sorry) E4 added, "scheming" after "false investment" for clarity.
It will collapse. It is simply masked to some extent by the fact that industrial civilization is a generational Ponzi scheme.
Just think about it, if these data point of selling claims get be bought to on-chain then I am sure people and next set of companies will not borrow some such investors.
because of this particular reason I feel DeFi will replace traditional finance first before any other form of crypto companies takes.
A recent IMF admitted that DeFi is 10x efficient than TradFi.I am sure once DeFi get a bit regulated and has better risk management principal embedded into code the system will become more efficient
I also see the recent housing crackdown and loss of money for common people playing an important role of smart contract lead world for the financial safety of the larger population. People are losing trust way faster than they are able to change systems
Do you have the source for this?
For the efficiency part. To be fair, traditional finance as an industry operates as a super inefficient, regulatory-captured pyramid scheme. Shouldn’t be too hard to beat.
They're dense. They don't get it at all.
The "super inefficient, regulatory-captured" part is a feature, not a bug. We want transactions to be reasonably slow and checked by a human somewhere along the way. We want a myriad legal protections.
"pyramid scheme", that's rich, coming from cryptocurrency companies.
With all the large firms (crashing daily) that provided impossible ~19% returns still trying to attract new investors, there's just no defense of the 'industry'.
For example you need to have locked $400 of some token for a "loan" of $100. How is this efficient?
if just making them on-chain improves the provability that an asset is not getting leverage multiple time in an ecosystem
Oh, yeah? Here's the document: https://www.imf.org/en/Publications/fintech-notes/Issues/202...
Where does it say that?
It doesn't say that, because it isn't true.
You continue to reinforce the idea that cryptocurrency advocates deliberately make up false statements.
Lots of smaller projects are priced below VC prices. For example, CowSwap is at like 12c when private rounds were at 15c.
VC buying - aka VC selling to greater fool LPs, with purported guarantees trails a wake of retail that fuels their vig.
I know nothing concrete about crypto n.b. but I think I can recognize the structured avarice. If my precis is all that's happening I'd convict this kind of VC instantly.
How do you know what the VCs paid? These are private transactions. Sometimes they invest in equity in the business at the published round price, but get tokens for almost free on the side.
The multiple investment rounds followed by eventual IPO is typically just a legal ponzi scheme.
Businesses make money from customers. Ponzis shuffle around capital from late investors to early investors
This is not the same as a cryptocurrency which relies solely on later investors to create returns for earlier investors. There are no non-investor participants from which profits can be derived, period. Cryptocurrencies are in aggregate either zero-sum (best case, PoS) or massively negative-sum (worst case, PoW, especially Bitcoin).
This represents a pretty fundamental misunderstanding of, well, investing.
I'd hazard a guess that it's something along the lines of "throw shit against the wall and see if anything sticks," or less cynically "run it up the flagpole and see if anyone salutes."
Isn't that pretty much the modus operandi of VCs? Invest in a bunch of speculative ventures and hopefully make all of it (and much, much more) back if/when one or more becomes profitable?
Some VCs, some even with legendary reputations, are going to ruin said reputations from the scams they're pushing. In 10 years much of the sheen of Silicon Valley will have worn off. Tech will be as beloved as banking.
Crypto projects are tough to value. Their sheer global scale means that they can ramp up revenue and even profits extremely fast. StepN, a move-to-earn app reportedly made $120M in profit in its first year of operation. That might not be sustainable, but what business wouldn't give an arm and a leg to make $120M profits in just one year of operation?
Imo, crypto projects should be valued on 2-3x multiples at max.
Shady securities in the past offered that kind of short-term unsustainable returns too. That’s why it was heavily regulated. This iteration of the same concept should be as well. It’s good news that SEC is now inspecting all of Coinbase’s listings as potential security offerings — better late than never.
Nobody wants to use these move-to-earn, play-to-earn and whatever-else token flywheels if there isn’t a market attached where you can dump the tokens. And those markets aren’t attractive unless the tokens are essentially securities.
$120M in profit-profit? Or $120M in revenues dumping tokens on retail booked as profit?
Not bad. But nothing compared to the $1T in threeseed dollars I earned last year.
Did they actually, or did they make a bunch of Solana, which is now worth about 20% of what it was when they launched?
StepN is literally a classic ponzi scheme. You buy in by paying out earlier investors in the hope that a greater fool will in turn buy you out.
The FitnessFi space has so much potential but StepN has new competition in the space which they are already starting with better ponzinomics and in web3 projects are community driven and StepN community will ape to the next one.
Agreed, web3 was a joke... but the same thing can be said about most of disruptive tech like ride-sharing or food delivery, and even FAANGS are experiencing immense markdowns after the immense amount of liquidity poured into the stock market these 2 years.
Being critical of the nature of this system also requires self-awareness; otherwise it's just projecting.
When I say 'fraud' I don't mean juicing the numbers or asking forgiveness instead or permission. I'm not talking about things that will receive a slap on the wrist or a fine from a regulator. There is a great deal of organized crime that is the backbone of the industry. A lot of people will deserve to go to prison when the music stops.
- Greed. Its absurdly easy to make a ton of money very fast in crypto. As long as that's possible, money will keep pouring into the system.
- Gambling. The global gambling industry is half a trillion every year. Even if you think crypto has no fundamentals and is akin to gambling, it still represents a massive market. Opening a 50x long on a random shitcoin might be the same as yoloing in $10,000 at the roulette table. If the latter can happen sustainably, the former can as well.
- Principles. Crypto/web3/blockchain - whatever you might call it - will continue to attract people at the edge cases simply because of the principles and narratives behind it. Self-sovreignity, privacy, ownership - these are ideas worth pursuing.
If "web2" hadn't shut off its own users from any semblance of ownership in the platforms, or had done more for privacy, web3 would have died in 2017. But because they didn't, web3 will continue to find users simply because of the "privacy + self-ownership" narrative.
More than anything else, I see the massive amounts of money flowing into web3 as a failure of the web2 platforms. If Facebook wasn't such a scummy company, and if Google wasn't tracking everything I do so maliciously, I would have completely ignored web3 as an idea.
This was an easy-money phenomenon. We have another rates announcement today. I expect crypto to respond like the clockwork leveraged risk asset it models.
> global gambling industry is half a trillion every year
This is a good analogy. It’s one I hear in legislative and regulatory halls in the U.S. and Europe, the money centres crypto depends on for its legal demand.
The VCs largely have downside protection. Retail with get screwed but it’s a risk asset; they always get screwed late cycle and we have resolution mechanisms for that. Crypto company employees, however, stand to be boned.
It’s unclear where the legal risk winds up. My bet is the first layer that has not been talking to lawyers so far. That includes dumb executives and naïve employees working for savvy ones.
“Announcement effects appear somewhat ambiguous for the [British] stock market” [1].
For the last year, it’s largely been high P/E tech stocks that have reacted viciously to rates announcements. The rest of the market is less sensitive to small changes in rates (jargon: duration). And/or it’s better at pricing it in ex ante.
[1] https://www.sciencedirect.com/science/article/abs/pii/S10575...
I'm not going to be crying any tears for them. If you got into this from a business perspective you have zero excuse for pretending that you are not also partially to blame for the outcome. They'll be lucky if they avoid jail time in some cases.
Honestly nobody cares about these things. This is just a narrative that was grafted onto Web3 after the fact.
In fact most of the devs I know that started pre-2017 deeply care about these things. Many were around in the OWS groups back in the day, they transformed via bitcoin and now mostly work on eth projects. The cool thing is most of those people who were in it for political reason (rather than the newer investors looking to make quick money, and new devs looking for decent paid job) have made enough money to spend the rest of their lives working on this stuff regardless of it making them any richer.
I think we can outwork and outlast the cynics and keep building the things we think are cool. they hype will come and go, the fraudsters will sweep in during mania and con people regardless of our warnings, the authoritarians will try get the state to make it illegal, the google employees will keep complaining that its not innovative. we'll keep on working towards what we think is right.
What were you involved in? And you missed a giant price run.
Thank you Captain Hindsight.
It's been 13 years and 0 use cases better solved by crypto than any classical system.
But by all means, I'm sure OP will deliver - let's just wait.
Sure it is probably not even 1% of projects by number and there are plenty of frauds/scams (which are oviously illegal without any new laws) and even more just really terrible ideas (whatever happened to caveat emptor?), but there absolutely is a sizeable core of projects, founders, devs, and researchers that cares deeply about privacy, freedom from coprorate/government surveillance and control, open source and open protocols, and building a very different online, digital future than the one we are currently headed for.
I think that's worth the effort. Even if that might fail, and even with the collateral damage from scams and fraud (which, again, are already illegal). We accepted cars despite the deaths and injuries and pollution (which we also deal with legally and try to minimise without destroying the benefits of having cars), and they reshaped our society. I expect crypto and privacy tech. to do the same in time. It may even take as long.
The builders do
If you’re in the tech field and aren’t worried about privacy, the. I don’t even know what to tell you.
The problem is that as you said, when the rubber meets the road, the customers don't value privacy - and at the end of the day they're the ones paying.
All the major platforms were built without ownership and without privacy, and this didn't hurt them in the slightest from being some of the most valuable companies in human history. I'm not saying I like it either, btw.
At least right now mainly be doing something illegal e.g. scamming, rug pulling, insider trading.
SEC and other regulators may be late to the party but are starting to put people in jail for this fast and easy money.
You need to fight your biases.
Its a casino, but one with extremely good odds for players if you time it right.
(Unless you are making a fortune on Wall Street)
More competition.
Wall St "smart money" is still, comparatively speaking, clueless in cryptocurrency world.
The trick is knowing when to get out. And for that, simply managing your greed is enough.
You make it sound like the market is two participants - me and the guy I took 300k from.
In reality, the market is broad as well as deep. You can lose $10 on one project, make $20 on another, and come out with $10 profit overall. Someone else can reverse that trade and come out with $10 profit as well.
Your argument is wildly wrong because you cannot add negative numbers and make a positive. You simply invent random transactions to come up with a desired outcome, and refuse to look at the big picture.
The whole cryptomarket is a negative sum game, because of the costs of electricity, bandwidth and personnel. For every dollar that goes into the whole cryptocurrency market to buy a coin, less than a dollar comes out, because some of that money is buying mining rigs and generator plants.
This is certain because there is a law of conservation of money in this case. Cryptocurrency neither creates nor destroys fiat currency, so the inputs and outputs have to net equal less than zero.
Why don't you try to come up with some sequence of actual transactions in a "toy" market with a small enough number of participants that you can work through it by hand, not forgetting to take out money from the pot for electricity, network, and personnel? You'll soon see that this network net destroys money - it doesn't create it.
If you don't believe it, I'll write you a math proof, but TBH if you don't understand the explanation above, you'll understand the math proof even less.
A market of one token that was initially worth nothing 1 year ago but the market now sees has value - let's say $100 - because it has some genuine utility - various companies have said they will accept it as payment for a variety of different products.
If you add all the cashflows for trading on this token over the year, $100 has been made. In fact the only way for these cashflows to sum to zero is for the token to be worth zero.
Where did that value come from? It came from the increased utility of the token.
If I bought a bitcoin at $100 and sold it at $1,000 - who lost money trading with me? The person I bought it from because they could have kept it and made the money I made? No - they were happy to realise their own returns. The person I sold it to? Assuming they still have it, they hold something valued substantially above $1,000 and are quite happy.
The only way for this to be zero sum is if bitcoin has zero value. But bitcoin has at least some utility so now the market is just arguing over how much - and that value changes as bitcoin becomes more accepted / useful.
The only way the current crop of investors can make money is by getting even more newer investors (ie greater fools). Eventually such a scheme will fail because of the same reason that ponzi schemes fail.
Compare this to something like apple which has an additional cash in (ie the company's profits). So the apple investors can make money without needing more investors.
What are you talking about?
You're describing DRM. It doesn't exist for blockchain either - famously I can copy/paste NFTs all day long. And it's not clear whether most NFTs even provide any copyrights for the content they link to so you still don't even "own" the content in the legal sense.
The blockchain design makes it even easier to mine peoples’ activity and prevents retroactive privacy improvements but, more importantly, the underlying problem is that people like not spending money. Various people have tried micropayments on the web but ads have less friction and don’t bother a sufficiently large group of people enough to pay more than advertisers, not to mention the precedent suggesting that sites will display ads to even paying customers.
Similarly, content hosting has the same failed promise. Blockchains are too inefficient to store the content, which is why all of the “web3” services are so commonly dependent on normal web companies. NFT pirates trying to steal artists’ work are routinely halted by takedown requests to Google, AWS, etc. There are services like IPFS which try to provide less centralized hosting but they’re expensive and have the same issues with most of the actual hosting being on ISPs who are legally required to honor things like DMCA or other illegal content requests.
Not at all. It's easy for one person to make a lot of money _at the expense of another_. It's a less than zero sum game, though, so each net transaction _cost_ people money todal.
> Self-sovreignity, privacy, ownership - these are ideas worth pursuing.
The ability to evade government regulations and scrutiny is crime.
The underlying idea is that you don't like the laws on financial disclosure, so you want to "get around" them.
As an honest citizen, I see the desire to evade the securities laws as literally criminal intent, which it legally is.
How would you build a decentralized, cross-chain asset exchange without a blockchain?
I agree there are far too many superfluous tokens. But there are plenty of real projects that are based on blockchain.
There are plenty of real projects based on blockchain, where if you take the blockchain out or just replace it with tech we've had for 40+ years, nothing of value is lost.
That's the real blockchain problem.
Sure, and all web2.0 tech can be built without AWS or docker. But in many cases, they give you a powerful advantage.
Same with blockchain. What now is happening in web3.0 is not that different from the dot com bubble. But it busted, and then a ton of new profitable companies appeared.
Blockchain tech will for sure have many legit use cases, same with tokens and tokenomics.
Will most of the current crypto companies go bust? Probably.
Does this mean that blockchain and tokens are crap? No.
What is the advantage? Apart from evading securities regulation that is. In 99.99% of cases the only advantage is pointless hype
When?
What's that you say? Those technologies have legit cases from almost day 1, it just took the technology a bit to catch up?
That's just like crypto tech.
Ah, it isn't, you say? Blockchain has the tech but the list of legit and popular use cases only it can solve is almost 0 and we haven't really found new ones in almost 14 years?
The Blockchain does have problems it can solve, they just got solved by Web2 first. Sorry.
I think you're overestimating how hard this is to fix, and the utility that the Blockchain is providing in something like Uniswap.
For example, when designing a google docs clone with collaboration, the naïve way to implement that would be to have all the users' computers be sending messages like "insert character 'a' at position 43", etc. The problem with this approach is that it makes the order of events very relevant - you'll get a different result depending on the order you process the messages. The trick is to give each character a unique ID, and then send a messages like "add a character `a` after the character with id 29239810", and then the order is irrelevant.
It happens that not every problem can be expressed in this order-independent way. In general, the ones that can are those that can be expressed in monotonic logic. For some problems, there's no way not to care about the order of events.
If you're unlucky enough to have one of those problems where you have to care about the order of events, you need some degree of coordination between all the nodes in your network to make sure they agree on the order of events. For a high-security project like uniswap, you also want the additional guarantee that the order of old events that the network agrees on is unlikely to change - it's bad if an event that happened yesterday gets reordered or dropped.
Additionally, we're talking about something decentralized here, so we don't want to assume that everyone on the network is honest. If there's a way that a dishonest person can easily stop the network, or cause honest nodes to get out of sync, or cause the order of old events to change, that's really bad.
It turns out that all the good ways to do that look a lot like a blockchain. I'd be eager for you to prove me wrong here.