When I first learned about crypto currency on HN back in 2012 I was excited. It sounded like a fun technical project that could do good in the world. I bought some along the way, followed projects. Along the way it changed. Yesterday I saw a spam post on Reddit about joining a "pump and dump group", which I had to research. It's groups of people who coordinate a buy of a specific currency, spread false news about this currency to create a mania, drive up the price, sell it at a profit. Not only is this probably illegal, it's immoral. Maybe this is how people who were in the internet in 1992 felt in 2000?
On the bright side, the idiots who join these groups hoping to scam others tend to lose their shirts as well. The person orchestrating the pump-and-dump scheme bought the currency at $X per coin in question long before, and he's using the people in the group as patsies. "Buy the coins at $X + $Y, and the rise in price will make it so that you can sell the coins to some other idiot for $Y + $Z!"
If there aren't enough "outsider" idiots to buy the coins for $Y + $Z before the correction happens, the "insider" idiots lose their shirts. The original person, of course, makes a tidy profit.
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I learned this the hard way playing Runescape as a 16-year-old. 2007 was an interesting time for that game.
I was one of those assholes that ran a bot farm to devalue your labour. RS was a great place to learn about the race to the bottom, economies of scale, and other random economic topics as well.
The most interesting part of RS was that the more raw the product, the more it was worth - you could get more XP out of it.
And before the Grand Exchange, buying in bulk cost more than buying small amounts, because buying large amounts of materials required you to sit on World 1 spamming "buying iron ore whatever each" for hours.
I'm not sure the historical data still exists but would this be around the time of organised market manipulation? The spiking gold rings 500% then dumping just before you told everyone else to springs to mind.
Keeping track of crypto amidst all the hype recently, it's abundantly clear to me that the recent explosion of speculation based trading is a signifier that cryptocurrency is a bubble just waiting to burst.
I don't think this is bad in any right. It looks (and I grew up in the bay area through turn of the century) just like the dot com bubble. The promising part of this is that the underlying technologies being developed, a way to distribute information and business logic in a way where there is an indisputable fully traceable truth, is huge. I think of blockchain-like platforms like Ethereum as the ARPANET to our internet. The opportunities to supplant existing fully centralized systems such as stock exchanges, escrow systems, supply chain/provenance tracking, etc. with a fully decentralized or hybrid approach is huge.
In the end though, I think it will come down to where governments draw the line in the sand. The sad but true reality is that the regulators with the guns will always have ultimate power.
Every crypto is trying to position themselves as the survivor (by way of real world 'utility') for when the bubble bursts. They all want to be Amazon, rising from the ashes of a crashed market.
Ripple's underdog challenger, Stellar XLM, is trying to claim the same mantle. So are thousands of other 'utility coins', of course, including ETH, XRB, VEN, ICX, and even the "privacy" coins, like Monero.
The fact is this is uncharted territory. We don't know for sure whether we're at the leading or trailing edge of a bubble, and we don't know for sure that any, some, or most crypto will still be around in 5-10 years.
Yeah, heard this 100 times already. But why does it have to be like the dot com? What if it just stays a niche market for 50 years? What you say implies that crypto is as full of potential as the internet was to make it possible for businesses to grow as big as Google, Amazon. Not mentioning of course a lot of other factors that made Google, Amazon big like political influence, globalisation, lack of competition/regulation in certain areas etc.
Not trying to be pessimistic but genuinely curious why so many people make the analogy to the dot com period.
> What if it just stays a niche market for 50 years?
That would still be a collapse, just a silent one. Niche market means that everybody has on some subconscious level accepted that a large stack cannot be liquidated and plays along by "hodling" so that they can continue feeling rich. This is what is eventually happening to most collector's items: trading volume drops faster than the price and before you know it, there isn't enough trading going on to regularly call out an updated market price. The last occasional buyers will happily buy at close to the price from the last time there was an active market, but potential sellers are not even trying to sell in bulk, knowing how little money they could expect. It's less frustrating to just forget about it than selling for a dime.
And it's such a fascinating term! Holding is what Warren Buffett does, after having applied his unique evaluation skills before buying, hodling is what a True Believer does. "If you are not a True Believer and cash out early, you are not deserving of eventually entering the paradise of a bitcoin bet retirement."
And to people who self-identify with the term, I think it might also be a kind of rhetorical last line of defense for when someone criticises their trust and belief: "those may be fine arguments or not, see I don't care, I HODL which means I just don't take it as serious as you. Mind your own business and let me dream my dream". Could also be motivated as a psychological hedge for the day after, "sure, it was expensive, but look at fun we had!"
As a self-identified HODLer - I like to think it's because holding isn't nearly as easy as it sounds. Ignoring what 'Mr Market' is offering you for your property on any given day and overruling your herd-following instincts is not easy, else Warren Buffet wouldn't be such an outlier.
And yes, the HODL mantra is a way of reminding myself that I shouldn't make emotional decisions in the heat of the moment.
The dot-com period was just the latest example of what happens when a new technology is widely adopted. Automobiles famously went through a similar period early last century. Many new entrants crowd into the field, there's a free-for-all as everyone tries to make the killer app, then through a weird alchemy of vision, execution, and luck a few brands eventually buy up or force into bankruptcy enough competitors to dominate the field. In recent history at least, explosion and consolidation of new players is the norm when a new technology is introduced.
As to your second question - which I would rephrase as 'why would this technology be widely adopted?' I would say, if the role of a trusted third party can be automated, it will be because nature abhors inefficiency. And trusted third parties aren't a niche field - not just banks but also a large part of any civil service can now replace humans with algorithms. That's a lot of disruption.
> Not trying to be pessimistic but genuinely curious why so many people make the analogy to the dot com period.
Because most people are not creative nor critical thinkers and the extent of their brilliance is superficial pattern matching. To most people the dot-com bubble seems to fit all the patterns so by their logic it must have the same outcome. If you think critically about the differences of the crypto craze and the dot-com era, you’ll see how irrational it is to make a strong comparison.
Sorry, I don't believe being able to transfer large amounts of money around without having to trust or be limited by banks or governments is much concern to 'millions'.
There really aren't all that many people that have problems with that, who are that distrustful of existing infrastructure.
There are millions of millionaires in China alone that are very concerned about the future security and mobility of their money. Now consider India, Russia, Iran. This isn’t fiction.
This has been thrown around for years on the BTC scene, and it's just not a killer app. Nor do I believe that such people are willing to use cryptocurrencies for such transfers, in their millions.
And that's before we get on to whether it is moral to facilitate such anyway...
Or there may not be any long term winners in this arena as people realise just how bad most if this stuff is for actual transactions and consumer protection.
Agreed, I think that's my favorite lesson from the crypto experiment. Sure there are people who use regulation as a gatekeeping function, or as a way to magnify their power, but regulations really do exist for the good of the people.
"Hedge fund schemes, among others, are a good example of why regulated does not necessarily mean good."
One extreme negative, or extreme positive, derivative of a view does not condemn nor justify it. You need to consider the merits as a whole, not with piecemeal bias confirmation or condemnation.
I guess. I mean the regulated stock market has dark pools and super fast algorithms jumping in front of people's trades stealing from them.
I actually feel like the playing field is more uneven between individuals and firms in the regulated stock market vs the btc exchanges.
I also think the bitcoin exchanges are backroom dealing and insider trading, but I feel like they are less sophisticated vs the "legal" theft that is taking place on wall street.
I mean bitcoin exchanges are certainly the wild west, but I honestly don't care if people want to run pump and dumps on unsophisticated investors. That is something you can pretty easily defend against by doing your own research. There are far more nefarious things going on on both bitcoin exchanges and the real stock market.
> I actually feel like the playing field is more uneven between individuals and firms in the regulated stock market vs the btc exchanges.
This is definitely true. I first got into bitcoin as a way to do algotrading on an exchange without having to navigate whatever processes are required in order to be allowed to do so in "real" markets.
I'd argue that there is no Bitcoin community to speak of anymore (just like there isn't an "internet community"). The technology evolved a bit but it is still essentially the same.
We got our first 0.01 bitcoin in 2011. Libertarian conference, wife gave her email, got crypto. I literally was stealing Gary Johnson's nametag during this time.
Bought my first whole bitcoin in 2015.
Until the end of last year, I had a good feeling about crypto.
The alt-coin madness has me scared for family and friends. They arent listening when I tell them Bitcoin and diversify. They go all-in on pump and dump new coins like TRON and IOTA.
I see it too, I even have family asking for spare accounts on exchanges! All exchanges are overloaded, not allowing for new accounts, it's crazy.. I just keep telling them: treat it like a casino, don't put money in you can't live without, say goodbye to your money at day 1.
That said, IOTA is actually pretty interesting from a technical standpoint, you should read about the Tangle ;)
IOTA would be fine, but how many other coins have 0 transaction fees now?
While I dont own any Raiblocks, they are using like 7 severs to confirm. Supposedly fixes all fee/speed problems.
I worry most about the ownership of non-mined coins. The founders nearly always pre-mine or grant themselves significant amounts of coins. The faucet that is crypto mining is all based on work/energy.
Pump and dumps as well as these groups were definitely around in 2012. I agree that cryptocurrencies have drastically changed (IMO for the worse) but pump and dumps on shitcoins are nothing new.
How did it change? People have been scamming with bitcoins forever. Mt. Gox was a scam exchange. There were a bunch of people scamming even before that.
I see it as different. Mt Gox was a legitimate business, with honest employees who were poor at implementing security. Someone saw an opportunity and stole. That exists even with regulation. My issue is with the rise of people who's intent from the beginning is to decieve. Similar to the scam coins that will never deliver a working product.
Mt Gox was insolvent long before it officially was. Mark tried to trade using money that didn't exist in order to bring it into the black, but he never managed. Look up wizsec's analysis.
Oh wow, I didn't know the scamming went back that far. On the other hand... With Ponzi schemes, isn't it obvious from the start what they are? Maybe I give humanity too much credit.
I think the what a lot of people don't realize about ponzi schemes or pyramid schemes, or scams in general, is they don't rely purely or necessarily on fooling the 'victim'. Very often greed is enough of a motivator.
I've experienced at least one really big country-spanning pyramid scheme where lots of people participated, completely aware that it was a pyramid scheme. They just figured they'd be able to 'get out' before the thing would collapse. Obviously that often didn't work out...
Not always; I can imagine with MtGox they slowly became one, after becoming insolvent and figuring out they could pay their customers by getting more money in.
> Not only is this probably illegal, it's immoral.
But it's decentralized~. Bitcoin was initially hyped by "crypto-anarchists", to be free of government regulation, transfer costs, etc - well that's what you get. Something something cake and eating.
The only cryptocurrencies that will prevail within the next five years are the regulated ones. The rest will be used for shady purposes like tax evasion and paying for ransomware, and they'll get hit hard regularly by hacked or dodgy exchanges. I'm fairly sure the current crypto exchanges operate as a ponzi scheme right now, they won't be able to convert back to fiat with enough volume.
Because I can no longer edit this post, I just wanted to say that I tried doing research and I'm less sure than I was initially. But I will add that just because the SEC currently does very little regulation of crypto, that doesn't mean that federal laws don't apply to it. It just means you're more likely to get away with it and there's more uncertainty about what's allowed and how crypto is thought of legally.
Lack of regulations doesn't matter, they could be still charged under generic fraud & deception laws, it is just harder. It was the same with MLM - new laws or explicit bans were introduced as it was too hard to prosecute with existing legal framework.
The interesting thing to consider about bitcoins is its value isn't all hype, The cost of electricity use to produce them adds a value to it. Strengthens that emotional bond for the owners. Provides a feedback loop for users etc.
It's just sad this tech will end up being used mostly for black money.
Can you provide a summary of Satoshi’s argument here? I’m failing to see how the usage of electricity, which is an entropy-losing process, leads to added value through bitcoin
I think I understand Bitcoin well enough to detect that you don't know what you're talking about.
One could argue that a higher current difficulty increases trust in very recent transactions, thereby raising the unitility of Bitcoin as a medium of exchange (ha!) and thus affecting the price.
But that effect is small and we're talking about the difficulty during the last 10 blocks, at most.
I don't understand how this is immoral. Everybody knows that everybody is just in it because they hope someone else will come along later and pay more for a coin than they did. Who cares about pump and dump and pyramid schemes? Someone dumb enough to put money she/he can't miss into the system is probably also dumb enough to put said money into a gambling machine or any other scheme (prince from Sudan?). Meanwhile people have fun and true innovations may come out (the crypto of monero/zcash combined with the master-node structure of DASH or a Tangle based system like IOTA). Why all the emotion? Literally everywhere on the internet and classic media people say: Don't do it, it's a bubble. If people can't listen, they need to feel, if you don't allow people to feel they become unhappy anyway, they may even be driven to TOR based decentralized exchanges where they are even more likely to get schemed.
