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Comment by hn_throwaway_99 | Hacker News Reader

The thing that this piece really got me thinking about is how many other crypto companies are the same ponzi scheme because they are counting made-up things as assets on their balance sheet.

In other words, suppose I create token SCAMMER, and I say its supply will be capped at 1 million tokens (or 10 million, or 100 million - that's the "nice" thing about crypto, I can kinda choose whatever number I want), and then I'm able to sell 10 of those tokens for $100 each. According to FTX math, I now have $99,999,000 of assets on my balance sheet, but of course if I actually tried to sell a lot of my "kept" tokens I would tank the SCAMMER price.

Even better, and I think what is probably more common in the crypto industry: suppose I get my buddy to create a SUX2BEU token. I tell my buddy I'll by 10 SUX2BEU tokens for $100 each if he buys 10 of my SCAMMER tokens for $100 each. Now suddenly we can both say we have huge assets on our balance sheets! Until, of course, someone decides to pull aside the curtain covering the wizard.

So many ponzi schemes on top of ponzi schemes...

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Paul Graham wrote an essay years ago in which he described the moment when he realized that most of the dot-com companies in the late 90's were selling their ads mostly to other dot-com companies, who were buying their ads in turn. It looked like growing revenue for everyone, but once it came time to show a profit, all of it came crashing down...

The lesson drawn, and a good one as an investor, was the YC advice that start-ups should build stuff for other start-ups.

It worked like a charm for AWS.

In what world is AWS a startup?

When AWS was starting?

You mean when they separated internal infrastructure of the largest ecommerce in the world to the point when it was possible to sell it in commodified pieces to other businesses?

That is not what happened and is a fake myth origin story. AWS was started from scratch with a small team in south africa. The best description of all the myths and the real thing I've heard is here: https://www.acquired.fm/episodes/amazon-web-services

It sounds good to perpetuate the "but Amazon.com had extra capacity they could sell" but it's not true.

Unfortunately if the only source is this 3 hour podcast, you are going to have trouble convincing anyone.

There are sources, I didn't go through them yet, but they are there. It's pages of unorganized links, but it's something.

I mean... a little disingenuous. AMZN was a $10-20B publicly traded company at that time. When is it a startup vs a product offering of an established company?

I think it's a bit unfair to characterize every company that is "starting" as a "startup", particularly when the "startup" in question is/was backed by one of the largest companies on the planet. I don't think people think of such companies' endeavors as startups, even when they are starting.

There is an exact answer to your question, and it has nothing to do with the size of the company: a startup is a company designed to grow fast. Everything we associate with the success of a startup is a byproduct of growth.

With that definition, AWS is a startup. So was the iPhone. Both invented their respective markets, and had to grow quickly to do it. If either of them had needed to raise money from VCs, smart VCs would’ve invested. But they didn’t need to raise capital, since they were already a successful company.

The shovel-seller isn't necessarily also a prospector. They do, however, make a lot of money off of prospectors, whether any gold gets ultimately found or not.

But, when the gold rush is over, the shovel-seller may have to do big layoffs.

Sell shovels in a gold rush?

Which is a solid plan. Unless, of course, you buy the shovels with futures on potential gold finds and expect the resulting shovel rush to go on forever.

But aren't startups doing the same thing as PG said nowadays? That is, portfolio companies use each other's products to boost their revenue and user base.

Still, in B2B you typically want to show you have some megacorp logos (in particular due to larger deal size and up-sell potential), are attractive to different industries, et cetera. So this may be a known issue, but it's also considered when assessing startups.

SpaceX just bought a bunch of ads on Twitter.

https://www.cnbc.com/2022/11/14/spacex-just-bought-a-big-ad-...

> According to internal documents viewed by CNBC, SpaceX has spent more than $160,000 on the Twitter ad campaign for Starlink in Australia and Spain so far.

Your definition for "a bunch" is a bit questionable, but good on you for posting the source.

All this without your own definition of a "bunch"!

You got me. I wonder if we did a poll, how much money is "a bunch of money" and how much money is "a bunch of money on ads" for people.

I think if it had been $500k or $1M I would've called it a bunch, but $160k seems low.

The statement was actually "a bunch of ads"

I think that's a US English thing. How much is 'a lot of money'? How much is 'a heap of money'?

A bunch fits in a styrofoam beer cooler. A heap fits in the bed of a pickup truck. Anything more than that qualifies as a lot.

For a serious ad campaign 160k is definitely not that big. Especially for a company with a revenue in billions.

You can get a lot of impressions for 160K. You buy them in batches of 1000 using a term called CPM, which is cost per thousand [1]. CPM can be around 10 dollars for a really good segment. I'm sure there there are some adops folks that have a better knowledge than me. So, if CPM is $10, then that gives you around 1.6 million impressions.

[1] That's right M is for a thousand, because M is a thousand using Roman Numerals. You thought you would never have to remember that.

You are correct, though 160k is maybe a couple weeks of paid social budget for a company like starlink.

I'm no fan of Elon's recent antics but a $160k advertising spend doesn't strike me as a "bunch" for a major corporation.

How much do you think each ad costs that this wouldn't be a bunch?

The main article has this quote:

The ad campaign SpaceX is buying to promote Starlink is called a Twitter “takeover.” When a company buys one of these packages, they typically spend upwards of $250,000 to put their brand on top of the main Twitter timeline for a full day, according to one current and one former Twitter employee who asked to remain unnamed because they were not authorized to speak on behalf of the company.

Which means 160k spent is actually well below typical deal and these deals are pretty normal for Twitter. So one may actually be worried that maybe SpaceX got a deep discount or something.

Okay but how is that still not a bunch of ads? Do you think it's one ad for $160k? Or maybe like many ads? Perhaps it's so many ads we can call it a 'bunch'?

I have no idea how many ads is that. Could be just one ad on the top of the timeline (which obviously would be shown to many people). The point though 160k spend is not a huge deal - actually below what usually happens with ad campaigns on twitter.

Typically 3-6 that are connected together in any stage of ripeness. The Brady one is a notable exception.

In a way, that that is _notable_ today is evidence that the dot-com advertising problem _isn't_ notable today. In 1999 that would be just What You Did, and not really worthy of comment.

Yes. Nothing has changed. It's not quite the blind leading the blind but some variety of that idea.

A uses B uses C

C uses A but not B

B uses C

"Ooooo, A uses B I should use them for C!"

It’s a very different scenario.

Just selling to other early-stage startups doesn’t generate much growth/revenue or make you look like a solid business to a sophisticated investor. SaaS/B2B companies that make it big do so because they get huge numbers of small-medium businesses using their platform, not just startups - E.g., Slack, Stripe, Square, Shopify, Canva, Zendesk, Zapier, Segment.

Having other startups using your product is a good early source of product feedback and a strong signal to very early-stage investors, but that alone doesn’t give you the huge growth you need for bigger funding rounds.

It’s very different to the scenario PG was describing in the late 90s; in those days, a startup would be founded, quickly IPO to raise several $million from unsophisticated retail investors, then spend much of it on advertising on Yahoo to drive traffic and artificially push the share price up. Hence when the music stopped in 2000 all that ad spend dried up and Yahoo’s share price crashed.

All those companies I mentioned above are going fine; slowed growth, sure, but they have real businesses with broad customer bases well beyond the startup ecosystem, so they’re all able to continue operating and keep doing OK.

If, at bottom, they are all also accomplishing something, then it's ok that they are using each other's product. If the whole web of startups selling to other startups is not actually accomplishing anything much except burning VC cash, then it is in fact a problem (one which will be resolved soon, I expect).

I do think of this a bit when I see startups being the main customers of other startup’s products. For e.g. I’ve never in my career at big orgs and small orgs alike had authority to just go and purchase $50/dev/month on productivity tooling for my teams, so I’ve never quite worked out who is paying for these

Ad-supported mobile games seem to work like this too, all their ads are for other free ad-supported mobile games. Also I downloaded a QR code scanning app and every time I tried to scan a QR code it showed me an ad for another QR code scanning app lol.

The whales foot the final bills though. Unlike the vc's money which goes through economical cycles, there will always be suckers for those gacha gambling games

Those whales are something else. That's all I'm going to say.

I will _never_ understand sinking money into a mobile game like that. Blows my mind. Couldn't even be worth the effort.

There are two types of whales. Those who plow an objectively large but relatively (to them) small sum into the game are fine. Those who fell victim to psychological programming to feed every dollar in are not.

Yeah, sure. Let's go with this. Wanna buy a 250 dollar cash card for Arbys?

Even if it cost a few dollars to me (to equal their $10,000 for example) I just wouldn't do it. Just feels like I'm being taken for a ride... which doesn't feel good haha.

Same way with games I enjoy. I never tend to buy the "skins" or "cosmetics" unless one _really_ clicks with me.

The trick is that you have a big chunk of your social graph in the game

You aren't spending $25 on video game shit, you're spending $25 on a fun skin to show your pals, or upgrades to help your friends beat some boss, or whatever

Once you get on that path, it can lead pretty normal people to some very dark places indeed

At least those people are getting something out of game. Completionists/collectors having their OCD taken advantage of are going to an even darker place.

Ah... I think you've given me the missing puzzle. I will say I don't get sucked into those "one up" wars (I really hate spending money on things I feel are gimmicks) _but_ this makes a lot more sense.

That's because the easiest to get new customers for a mobile game are the ones who play similar games but not yet this one. The customers then play the game and buy more in-game currency than was paid for the ads.

> Also I downloaded a QR code scanning app and every time I tried to scan a QR code it showed me an ad for another QR code scanning app lol.

Maybe you've already found a decent app (or realised that your camera has a built-in scanner), but the confusingly-named Barcode Scanner (https://play.google.com/store/apps/details?id=com.google.zxi...) scans QR codes without fuss.

I should have been clearer, it’s more for debugging - so I need to read the content of the code rather than actually opening it. Eg if there’s an app configured for it then scanning with the built in camera just opens that app and never displays the content.

I’m on iOS, tried a few but they all wanted a subscription and were a terrible experience without it. So I wrote simplescan.vercel.app / https://github.com/mcintyre94/simplescan which does the job for me! Though Apple have broken using the camera when you save it to your Home Screen and open it as an app which is annoying.

> I’m on iOS, tried a few but they all wanted a subscription and were a terrible experience without it. So I wrote simplescan.vercel.app / https://github.com/mcintyre94/simplescan which does the job for me! Though Apple have broken using the camera when you save it to your Home Screen and open it as an app which is annoying.

Ah, that explains it! Your usecase explains it, but I'm reasonably assuming Android because recent iOS versions have it built-in.

> recent iOS versions have it built-in

As does Android, just open the Camera app and point to the code.

The housing market was the same way in 2008… in fact the entire global financial system is built that way. It’s what they mean when they say there are $60 trillion (or whatever) in derivatives out there, a long chain of the same assets rehypothecated over and over. It works though, mostly

I somewhat disagree with this on the surface. 2008 was a byproduct of banks holding ratings companies (Moody's and Standard and Poor's) hostage. The banks gave completely fraudulent ratings to loans, the ratings companies falsified ratings on packages, and eventually the house of cards came tumbling down when enough people tried to pull their money out.

There is a way to rate and classify derivatives appropriately, you just can't hold the ratings people hostage. I don't think there's a way to do that with crypto.

This.

The banks weren’t to blame for 2008 any more than were the hoardes of FOMO buyers - in that they were both pretty culpable but neither of them were the real problem.

Lax regulation of the rating agencies was the real smoking gun. I’m not even sure it was ever addressed given all the banker witch hunts that ensued, and will next time too.

Dave Chappelle was on Saturday Night Live this past week and did a bit in the monologue about why we can’t have good regulations. Worth checking out:

https://m.youtube.com/watch?v=_m-gO0HSCYk

(Starts at 8:50)

A lot of those "FOMO Buyers" lied on their mortgage applications and suffered no repercussions. In fact, many of them ended up doing quite well despite crying "Boo Hoo! I lost my house."

The spent their HELOC and never had to pay it back, they took the "first time homebuyers tax credit", and many of them lived in the house they "bought" for a year or two without paying any mortgage payment until the bank finally took it back. They never paid income tax on any forgiven debt, and they never paid income tax on the imputed income from living in a nice house for a couple of years rent-free until the bank finally was able to take possession of it.

It was also a function of banks bundling and rebundling junk debt into “synthetic products”; hence the good observation on banks repackaging the same assets in different ways. The same as happened in crypto, in an even more sophisticated way that few people (at least retail investors) can’t really grasp.

IOW reference counting cannot detect circular garbage.

This is a rich observation, since (anecdotally) it seems like all the initial customers/traction for YC companies is from other YC companies.

Nothing wrong at all, it's good to bootstrap an initial customer base and get some user-feedback, but until the chasm is crossed to "real" customers, one could argue that this is the same case nowadays. So the dotcom time was no better nor worse than right now in terms of startup viability.

You're not describing a Ponzi scheme, you're describing wash trading and fraudulent accounting.

people pay in, and that money is spent on (making the project look good|delivering a yield|paying execs|propping up a trading company|whatever) and then the money is not there anymore for withdrawals. That's the essence of a Ponzi scheme and this meets that criterion.

Sure, there's fraudlent accounting, and wash trading, and other bullshit, but that's all just the some and mirrors that allows the ponzi scheme to work.

thats not what a ponzi scheme is.

a ponzi scheme reports a profit, and pays out that profit to early investors. (the payout is actually later investors inflow.)

the only one of the ones you mentioned that is actually a ponzi scheme is the "delivering a yield." its the yield delivery, aka dividend, that makes it a ponzi scheme, not just fraudulently running away with the money. the scheme works because people get paid out regularly, and have no reason to believe their money isnt working for them.

You are wrong. In a ponzi people are often encouraged to reinvest their gains. You only take the money of new investors to pay out early investors if really necessary (that is to maintain the illusion that the money is still there) otherwise you use the money for something else or yourself.

exactly how crypto works.

Just because that is a common feature of ponzi schemes, that alone doesn't make it a ponzi scheme. A ponzi scheme takes some sort of initial investment from new investors and gives that back to old investors in form of "return". Meaning, the system itself doesn't rely on any sort of growth in order to return, only the sign up of new people into the scheme, which is why they can seemingly deliver such reliable returns to early investors. Eventually you run out of new people to sign up, and the entire house of cards falls apart very quickly.

Every self printed clown bucks scheme is a standalone Ponzi by definition. Early gamblers buy first batch of clown bucks, then hype the price, then next group of gambles buy slightly more expensive clown bucks, then hype, then then buy, in a loop, and each new buyer funnels his money onto enriching early gamblers. The only difference is that FTX has at least 3 Ponzis running - FTT, SRM, MAPS. We can call it a Ponzi CDO of sorts :) but it's still a Ponzi. Sure, they did some exchanging on the side, some investing or donating, but the main business was printing and selling clown bucks.

>Early gamblers buy first batch of clown bucks, then hype the price, then next group of gambles buy slightly more expensive clown bucks, then hype, then then buy, in a loop

That is not a ponzi scheme. The selling of the asset to the next sucker, and the price going up, and each person in line getting to shave some profit off the next person is not a ponzi scheme. (It's also exactly how non dividend end paying stocks work. The stock is only worth what the next person is willing to pay.) Youve described a pump and dump.

A ponzi scheme has a mechanism to give a fraudulent "RETURN" to investors that HOLD. That is the definition.

None of the clow bucks are claiming that the underlying product is producing its own profit, the only value is the holding of the asset itself.

Everyone is now using ponzi to mean any sort of scheme including ponzi, pump and dump, etc. But thats not what the word ponzi actually means. And when you say things like "by definition" we need to stick to the actual definition.

https://www.vanguardngr.com/2022/11/ftx-offers-up-to-8-apy-o...

""" You can now earn yield on your crypto purchases and deposits, as well as your fiat balances, in your FTX app! By opting in and participating in staking your supported assets in your FTX account, you’ll be eligible to earn up to 8% APY on your assets. """

How does one provide 8% yield on BTC I have no idea.

To me, FTX is a classic Ponzi scheme according to the most uncontroversial definitions of "Ponzi scheme".

It is surprising that so far there haven’t been any legislation in Europe that prohibits CO2 emissions and energy consumption for crypto mining. Feels like a slum dunk to get it passed and get some nice political credit for it.

Europe doesn't have a large scale crypto mining industry. Energy prices aren't competitive enough there for it to be viable.

Europe's hashrate could disappear overnight and barely anyone would notice.

It would be a good statement and might set off a chain reaction for other countries. At any rate, a country that isn't very dependent on crypto mining would be a good place to start the bans.

> At any rate, a country that isn't very dependent on crypto mining would be a good place to start the bans.

Is there any country that's dependent on crypto mining? I think you may have meant the inverse--a country that crypto mining isn't dependent on (like it was on China... until China banned it a few years ago).

The chain reaction is that other miners get more profitable when EU bans it in their jurisdiction. Then some small countries with cheap energy will invite new miners to come in and tax them.

And an easy solution will be to prohibit exchange of proof-of-work coins, first in Europe and then, maybe ecologically-minded California would join.

Do they need to? At typical EU energy rates, is there a token in the world worth mining?

Yeah, seems like the carbon tax + high energy prices are already working as intended (ie. forcing non-productive energy consumers offline).

Too many loopholes.

I'm not mining, I'm heating my winter swimming pool with this ASIC based heating elements!

Tax any externalities and let the problem solve itself. Yes, you might end up with some heated sidewalks or other conspicuous consumption, but at least you end up with resources that can counter the problem.

Manufacturing these rigs and building infrastructure also results in CO2 emissions.

Why not simply prohibit proof-of-work coins and be done with it? There are so many disadvantages and no benefits, it seems.

Is this relevant? AFAIK, all these crypto tokens run on Ethereum blockchain, which recently switched to proof-of-stake.

That’s a common problem when dealing with illiquid assets and not a characteristic of just crypto. For example a VC firm buys 10% shares of a company valued $1B at their latest round. Then the market tanks but no one really knows what these shares are worth because they are not trading anywhere so you don’t have a price to mark them. As a result you mark them in your books with the latest round price at $100m even though they might be worth much much less.

Company have valuation would be based on recorded revenue, profit or at least growth rate. When buying a stake in a company, there is a whole legal framework and due diligence. Crypto token just have the bunch of wash trades to support theirs valuation and no transparency.

Although, according to Matt Levine who writes Money Matters, that can sometimes be a feature instead of a bug whereby private firms are better able to ride bad market conditions than public firms are.

In some cases you could see it being positive not having your stock price drop everytime the Fed announces a new rate increase or jump everytime they don't (or etc etc with other events) if your primary goal is to continue at a steady pace to achieve some goal.

Small note: it’s Cliff Asness from AQR who came up with the illiquidity “premium,” though Levine does report it a lot. This matters a bit bc AQR is a large hedge fund that trades in liquids and therefore is marked frequently… there’s a bit of self-serving bias here (although may still be true).

> …and not a characteristic of just crypto

That’s a rather fine and unimportant distinction.

It is characteristic of crypto, just not only crypto.

And, in the case of crypto, the asset never represents anything but itself.

Oh yes.

> in the case of crypto, the asset never represents anything but itself.

This is the foul taste of all crypto "assets". They are not assets because they have no intrinsic value for anything.

The nearest real economy analogy is the art market, which is hopelessly inflated, utterly riddled with fraud, and with very little intrinsic value.

But you can hang a painting on a wall and look at it. Even if it is a fake it still looks good on the wall.

Crypto has none of that. All it has is the scam, the fake, the hope of a bigger fool.

Shame on us for letting this happen. It gives a bad name to geeks in general and cryptography specifically.

The art market has value because the illiquid-but-existing market lets you do tax evasion through fractional gifts.

Crypto doesn't have the same properties, but if a crypto token isn't a security then you can get some other tax benefits via wash sales.

Well I mean there are asset-backed cryptocurrencies too, also ones backed by fiat currency.

Classic illiquid asset problem.

Don't know the "real" price because it's infrequently (or never) traded.

But are we really talking about "assets" here?

Good luck finding a solid definition of that term that excludes them without excluding a whole class of other, more traditionally recognized stuff.

Tokens, etc. are easiest to think of as securities (aka stock) generally, albeit securities in a more abstract thing than a company.

It feels like you're stretching here. If I cut squares of paper and call them Ponzi Coins and then mark them in my books as 100 Million in assets, well, I'm stretching that definition. I've also created more "assets" than the average crypto coin. Maybe it's as simple as adding a word, fake. The coins are fake assets. Otherwise, the words lose all meaning in the context of finance (assets and liabilities).

Except many are tradable on a market, just like securities and other assets.

Also; stock in private companies is often not tradeable at all, but no accountant is going to call those fake.

There are multiple ways of plausibly pricing assets.

None are generally accepted that would let someone just make up a ridiculous valuation and stand up to any scrutiny, but people can always do what they want until the auditors show up anyway.

At the very least, a bank can look at stock in a private company, and before accepting it as collateral, demand to see cash flow and income statements, and perform its own valuations based on revenue, earnings (if they exist), debt to equity ratios, and things of that nature. With a token, pretty sure the analysis on that level becomes "so you just made these up?"

Now, whether or not this is how banks act in practice is another question. It is, perhaps, how they should act if they're being conservative, but it is likely that others will swoop in and often enough grab that interest for themselves. And in the rate environment we've been in until very recently, those are likely the banks that have managed to survive in many cases.

How about various forms of IP? They're just intangible rights. They give you a certain monopoly, which is one (admittedly odd perhaps) way of describing a cryptocurrency (or anything encrypted when only you have the key).

The fundamentals for your ponzi coins are so bad they might as well be worth zero, so why would that insignificant value difference matter anyway?

IP is valued on it's ability to generate revenue. This is why the patent on swinging sideways in a playground is worthless, but the patent on the telephone was extremely valuable.

Crypto tokens are unable to generate revenue.

No. You can’t just make up the book value of your assets. You need some sort of justification, and these are, for public companies, strictly regulated.

This is different. In the case of the VC who bought shares in the startup, they at least have the price they paid for the shares.

In the case of crypto companies who create their own tokens and then use them as collateral, they never actually paid anything for the tokens they own. There's not even a cost basis. It's entirely made up.

Not only is what the crypto companies doing much worse, but it is rare for VCs to leverage their investments in companies. It's not like their fund is levering up 2:1 and buying companies, like a PE fund does, because in the case of VCs their investments are usually not producing cash flow. But in the case of some of these crypto companies, they were levering up using collateral of tokens they made up that they never paid anything for.

It's much, much worse than anything recently seen in finance. CDOs were bad in 2008, but at least the mortgages were a secured claim on a physical asset that someone actually paid something for.

It boggles my mind that lenders aren't all wise to this nonsense, and severely mark down these assets, if not completely refuse to allow them as collateral. I suppose that at least many banks got very hard up over the last 10 years of next to zero interest (next to on one side or other of it depending on where in the world they operate), so they were probably more willing than usual to lend money for the chance at getting a return on it. Curious to see which banks are getting hit hardest for exposure to FTX loans -- that hasn't been something I've been hearing much about yet.

One thing to note is that this is distinctly the differentiator of AMMs (automated market makers), Uniswap for example.

Here are the docs for V1 (V3 is different, but the core pieces remain) https://docs.uniswap.org/protocol/V1/introduction.

V2 docs have fun diagrams if that is useful for you https://docs.uniswap.org/protocol/V2/concepts/protocol-overv...

It's quite interesting, and essentially what happens is that a pairing pool is created, ETH <> Shtcoin for example. So now for that shtcoin to have "value" it needs to be liquid within the pool, ie can go into ETH. The cost of the coin is determined mathematically based on the ratio each side of the pool.

See also: Basecamp valuation tops $100,000,000,000 after bold VC investment (2015), https://archive.is/A0Wb1

> In other words, suppose I create token SCAMMER, and I say its supply will be capped at 1 million tokens (or 10 million, or 100 million - that's the "nice" thing about crypto, I can kinda choose whatever number I want), and then I'm able to sell 10 of those tokens for $100 each. According to FTX math, I now have $99,999,000 of assets on my balance sheet, but of course if I actually tried to sell a lot of my "kept" tokens I would tank the SCAMMER price.

Anybody can do that, true. What you also need is credibility and willingness to destroy that. Look at Fried Bankman, he had had tons of pedigree and knew what ears to wisper too. He apparently wasn't saying anything smart and yet people believed him. He was even rude and playing videgames during meetings and yet people believed him. It's easy and yet it isn't. I think scammers have qualities normal people don't have and when all those line up we get a super bankrun like what happened in this case.

I think artwork also works this way. I have 10 piece of art drawn by Mr. Artist. My friend buys a piece for 1 million dollars, I now have ~9 million dollars of "assets".

These shenanigans have been going on for a long time in wealthy groups.

That's why you see all kinds of fintechs trying to push art investment into the masses nowdays. They want the stupid money.

And then you donate the art to a foundation or charity and pocket a fat tax credit, thus avoiding the problem of having to actually find a sucker to pay $1 million. Some jurisdictions have cracked down on this, but for a long time it was a popular way to game the system.

If you made a coin that was actually called ScamCoin people would buy it, because they would believe they could sell it to someone else for a profit.

Empirically true. See: PonziCoin https://techweez.com/2018/01/26/ponzicoin-crypto-scheme/

DogeCoin was supposed to be a parody and people actually bought it.

Also my phone does not flag DogeCoin as a misspelled word.

Anyone who invests in this stuff is either really dumb, or morally impaired yet smart enough to exploit people who are really dumb.

As someone who has made a bit of money in crypto, there's no reason I can't be really dumb and morally impaired, but lucky. I will note that moral impairment and intelligence are not highly correlated as far as I know.

This isn't a ponzi scheme as others have pointed out.

This is well understood and goes on all the time in NFTs, it's usually called wash trading.

People in crypto know this is happening. The reason they still speculate is because it's hard to predict when it will collapse, and some people think they have an edge predicting that sort of thing.

>> So many ponzi schemes on top of ponzi schemes...

Isn't this what happened with Quadriga exchange?

The regulator said Thursday that Vancouver-based Quadriga's late founder Gerald Cotten committed fraud by opening accounts under aliases and crediting himself with fictitious currency and crypto asset balances, which he traded with unsuspecting clients.

On Thursday, the OSC attributed about $115 million of the $169 million clients lost to Cotten's "fraudulent" trading.

Another $28 million was lost when Cotten used client assets on three external crypto asset trading platforms without authorization or disclosure.

The OSC said he also misappropriated millions in client assets to fund his "lavish" lifestyle and because he was in sole control of the company ever since 2016, he "ran the business as he saw fit, with no proper system of internal oversight or controls or proper books and records."

https://www.cbc.ca/news/business/osc-quadriga-gerald-cotten-...

That's just regular theft/embezzlement, not a ponzi.

You don't even need a buddy for that. Just make another anonymous address to buy your token from yourself. Or a dozen, it doesn't matter.

It's shitcoins all the way down.

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