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Comment by Lendal | Hacker News Reader

I think we need to look at this from the perspective of a society and ask ourselves what else we could have done. Obviously there are a whole lot of people in society completely lacking in common sense and critical thinking skills, while at the same time mass rudeness seems normalized too. Is this a failure of education, or parenting? Or has it always been this way, and the only difference is the way we communicate with each other now naturally results in mass failures of common sense? It's a complex topic, but these rude people are also victims so we need to analyze it and at least learn something from it.

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There’s obviously a super complex web of things involved, but I personally think that the nature of the post-2008 economic recovery (in the US) has had an impact on this at a societal level.

I think people perceive that the opportunity to have a comfortable life doing a “regular job” is slipping away in favor of an upper middle class of professionals who enjoy stability, and an enlarged sub-middle class who are finding the traditional trappings of middle class stability hard to come by.

This widening class gap leaves many realizing that lifestyle improvements will require a significant step change, not just a bit more effort. So we see people gambling. Someone might be working hard and saving all they can and still only have $5k in savings. They look at the price of houses doubling and realize they’d need to save for another 50 years at this rate just for a down payment, so they say fuck it and buy some call options and NFTs instead.

But people were gambling and making bad financial decisions before the 2008 crisis too.

The crypto schemes are very often rehashing of old scams and mistakes, they are not qualitatively different from penny stocks pump and dumps, pyramids and MLM schemes, ponzi schemes, tulip/cabbage patch/whatever mania, etc.

The crypto thing has always been about front running regulation and overall awareness of the grift. Whereas most people understood that traditional ponzis and gambling often end with criminal charges and/or financial losses, in 2021 crypto could still tout "line go up" since the other shoe hadn't dropped yet. The layers of obfuscation involved in crypto schemes meant that normal users had essentially no way to comprehend the real risks, other than to rely on a more general truism (like "there ain't no such thing as a free lunch").

GP post is suggesting that demand for this kind of speculation was up, and if that's the case, many of these people in the "market" for scams and gambling might have been more attracted to crypto because it still had some veneer of safety/legitimacy about it.

Nobody could plausibly claim that now that the failures are finally coming to light, of course.

Edit: I would suggest this is largely a failure of the media, which had long treated crypto as legitimate by default despite having the resources to pay real experts to actually cover it critically. Of course, even had traditional media outlets been sounding the alarm, who knows if it would have mattered much - faith in media is very low right now (exactly because they so often get this sort of thing wrong).

There is also, particularly post 2008, an exaggerated sense of criminality in our financial system that made people who otherwise would have moral qualms about what they’re doing embrace or even work in crypto/web3 because, in their minds, everyone else is scamming anyway.

That would still have been appropriate for... I think the previous bubble was in 2017 ?

This time, as the FTX mess shows, the blame is on """regulators""" and """sophisticated""" investors completely failing to do their job.

They're not saying it's different, but that people are more desperate to latch onto get rich quick schemes now than they would've been pre-2008. Which is why crypto was huge. If this movement happened in 2005, maybe there wouldn't have been enough desperation for it to hit critical mass and blow up in popularity.

Well, the thing is that bitcoin happened as a reaction to 2008...

> in favor of an upper middle class of professionals who enjoy stability, and an enlarged sub-middle class

I cannot remember where I read it but the gist essentially was that you are either mastering the software or the software is mastering you. It jives with what you are saying.

I mean, the historical solution to this type of stuff is just hardline regulation right? There isn't a general solution against bad decision making. Your toddler will drink that liquid under the sink -> you put that liquid in a really high place and now everybody will complain and have to find that stepladder every time they want to clean the drains.

The best non-regulatory fix I can think of would be socially enforcing that people stop profitting from convincing others into doing bad decision making.

It's not very easy though, since fraudsters only need to convince people once to make off with their profits, unlike a tradesman or manufacturer who needs to stay in business long-term.

Well, the "get rich fast" things should be regulated as you say. The problem begins when such schemes become "get rich at all", with nothing in terms of viable alternative. The best way to deal with it is not to make people that desperate in the first place...

Certainly, if we lived in a world with a very robust financial safety net, then people would be less inclined to make risky financial decisions. The main question is how do we get there?

It's not obvious to me that the currently popular web3/crypto approach of widely promoting these risky gambles gets us there.

What happened is that crypto is very cool. There's a not unwarranted perception amongst people in the United States at least that banking regulators are conspiring (or prospiring) to create the financial meltdowns we see, and give people with the right connections privileged seats at the table when it comes to markers.

This is, to some degree, true - Quant traders in finance work with data that is literally unavailable to regular traders or amateurs but when it comes to crypto sophisticated quants and Joe Bogsly are operating on a level playing field when it comes to access.

Additionally, countries that are not the United States have chronic bank instability problems that make the current crypto collapse look like a joke. Large percentages of bitcoin transactions are conducted in Vietnam.

When a new cool thing is happening, the next step to maturity and adoption is gift.

How many rent a bike startups have you seen in your city?

Same deal, not a terrible idea, pretty cool, people flock in but there will very likely only be one to three of those companies left standing.

> but when it comes to crypto sophisticated quants and Joe Bogsly are operating on a level playing field

Pretty sure Tether isn’t operating on a level field with Joe Schmoe.

You misunderstood what I am saying. I am suggesting that quants and financiers have no special, privileged access to information. You can make spooky suppositions about Tether fraud, but if millions of documents disclosed didn't reveal a fraud after the whole community pored over them - it's at least as good as any other financial product.

> if millions of documents disclosed didn't reveal a fraud after the whole community pored over them - it's at least as good as any other financial product

Every time Tether has disclosed anything, it’s been caught lying [1]. That anyone thinks Tether has anything close to standard financial disclosure, or is anything but a fraud, is a testament to the ongoing problem of mainstream American financial illiteracy.

[1] https://ag.ny.gov/press-release/2021/attorney-general-james-...

That is not what I wrote. I wrote that the NY State courts made literal millions of these internal documents public. The community as a whole has had collectively more than a year to pore over them, with billions of dollars of risk including from major real hedge funds.

I did not say that these are "standard financial disclosures". I said that they were forced by the courts to reveal all this documentation and that so far, Tether has for the most part maintained its peg.

This should indicate to you that everyone from Wall St to Main St thinks that Tether is doing things "well enough".

Tether has issued multiple audit reports by independent accountants, and sure- they may be suspect but the way in which they are suspect is the same way every other company's financial are suspect - which, last I checked, didn't stop Lehman Bros.

> Or has it always been this way, and the only difference is the way we communicate with each other now naturally results in mass failures of common sense?

I don't think we're living in a particularly unique time this way. The book Extraordinary Popular Delusions and the Madness of Crowds was written in 1841 and was already then packed full of stories not dissimilar to the current crypto bubble.

I don't mean to sound defeatist, though. We could do more to financially educate people in general, which would provide a better defense against such manias.

> The book Extraordinary Popular Delusions and the Madness of Crowds was written in 1841

It feels worth noting that this book, as well as the wider idea of an abstract idea of crowd-induced mania in general it reinforces, is pseudoscientific with little credible evidence to support it.

It's origins lie much more in the political motivations and historical context of the authors: It is no coincidence that this book was written by a wealthy scotsman against the backdrop of the idea was first floated by an aristocrat during the upheavals and riots surrounding the introduction of capitalism, and that the idea was initially proposed by an aristocrat during the french revolution. They were both times where it was extraordinarily convenient to be able to dismiss engaging with the things the crowd was being driven by.

I'd urge against making the same mistake today. To me, it is impossible to separate the web3 mania from the historical context it happened in: Like 2008, it is a time of job insecurity, financial anxiety and distrust in systems with governments doing little to help. They are prime times for wishful thinking and people who want to take advantage of it.

Well, let's also not ignore the immense greed involved and its power to overcome run-of-the-mill common sense.

Doesn't take much to spot the bullshit in: "Risk-free 7% APY in a time when every single noteworthy financial institution is offering less than 0.5%!"

Only 7%? At the height of the bubble, there were a number of major crypto schemes offering interest rates of 20% or more. Sometimes even much more; some of the shadier "investments" offered >100% APY.

Unsurprisingly, most of those schemes have since collapsed.

It’s easy to give 100% APR in a token you’ve created, it’s very hard to keep the market value increasing at a similar rate to offset coin price dropping. Initial hype will support you for a few months but it’s all tears in the end :)

I’m still sort of sad the focus hasn’t been on decent remittance systems, the true useful tool of crypto IMO.

Or even simpler: if you put barriers in the way of users cashing out their "earnings", you can keep a naked pyramid scheme running for quite a while. Some schemes have done this by making it difficult for users to cash out their earnings, e.g. by enforcing a lockup period, or requiring users to sell their tokens to another new investor, or even by simply declaring that withdrawals are a feature "under development".

One notable example of such a scheme was OneCoin (https://en.wikipedia.org/wiki/OneCoin), which wasn't even based on a blockchain.

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