What's funny about this is that I can recall discussions here and elsewhere from only a few months ago questioning the "guaranteed" super-high returns. I forget who said this but someone awhile ago said in finance said that if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk.
And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance".
Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I'm just sitting on the sidelines watching people relearn all the lessons of finance the hard way, some because they think they understand finance because because they understand merkle trees and consensus protocols but really most just want to get rich quick.
What most people don't understand about finance is that there are fundamental rules that you really cannot break without consequences.
Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).
> Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Your comment makes no sense. Just because there's modeling involved that does not make it a hard science. A hard science requires stuff like the ability to perform controlled experiments and replicability, in order to arrive at a high degree of accuracy in predictions.
Throwing around partial differential equations does not turn something into a hard science. You need to meet way more requirements before you're in a position to claim that.
Physics is a science. Math is. Or Biology. Finance is not. Because it deals with the madness of crowds.
> Recipe for Disaster: The Formula That Killed Wall Street
> And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.
> Nassim Nicholas Taleb is particularly harsh when it comes to the copula. "People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked," he says. "Co-association between securities is not measurable using correlation," because past history can never prepare you for that one day when everything goes south. "Anything that relies on correlation is charlatanism."
> Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Just because quantitative analysis has solid grounding doesn't mean that its use is unrelated to ethics. The finance establishment is an organized power structure whose decisions are political.
If you want an analogy, I'm pretty sure that you'll find plenty of people who used ballistics to achieve goals that you would find pretty unethical.
Using math does not make something scientific. Math is a language based on logic, physics is a science using that language. Economics is Scholasticism that uses math as a language.
This comment is why the humanities should be a prerequisite for all academical endeavors...
The maths used in economics is widely known to be wrong.
When informed the maths in economics is wrong, the economists don't go and fix their maths either.
Economics is more like sociology with some random incorrect formulas written on the black board as set dressing.
Economics might in self loathing claim they are the "dismal science", but the cold hard truth is they simply speaking are not doing their jobs properly. It's a broken research field.
> social media ... organized political power structure
It's not just social media and it is somewhat disingenuous to dismiss the idea that finance, specially specially international finance, does not have (some form of) power [that actually trumps and transcends political power].
This is a somewhat interesting film that I was watching the other day. It's mere existence addresses the first bit -- that perception is certainly not limited to "social media". And of course the film itself is about a super secret gathering of G8 ministers where they struggle with the decision to put in place some (undisclosed) policy change that they all know will have very drastic consequences for the global average joe.
As a single actor you can bend, but never break the rules. So you can achieve way better returns than the market as a whole does. Over time 10 - 200 x returns is achievable, don't think it comes cheap though, you need to dedicate large chunks of your life to it, and nothing is a guarantee.
However, the math approach to finance works because in its essence it is quantifying human reactions and or emotions, which in large crowds turns out to be more predictable. In the short run, still, software holds its edge with its probability approach but its not smart so that it is basically a rent seeker.
It's really striking how in recent years the Godwin point has been replaced from "everybody who disagrees is Hitler" to "everybody who disagrees is a anti-climate flat-vax earth-denier".
It's really not helping getting any point across. In a way it is self-realizing polarization: because you are casting any criticism of "modern finance" into this "bundle of badness" this is likely to reinforce their position.
The 20% APY provided by Anchor was way above the average yields for safe DeFi lending. Which indicated that even among crypto users, this was considered a degen play!
The whole Terra saga was a typical example of speculative bubble. Everyone knew it was risky, but its sheer size and the caliber of people endorsing it (https://twitter.com/novogratz/status/1478535972560195585) was providing an aura of safety. Too big to fail.
It's also similar to the stock market as a whole before it started correcting. Everyone knew valuations were detached from every fundamental except liquidity, yet everyone went along thinking the music just had to keep going.
Every fundamental except liquidity - nice phrasing. It would be illuminating to see more analysis of liquidity in crypto markets and less purely technical analysis.
I'm not surprised the attack narrative is so popular and rarely challenged. Whether there was an actual attack or not, the attack narrative gives everyone a convenient out. The creator can disavow responsibility for creating a stablecoin that doesn't work and the investors get to feel like they weren't taken in by a con but we're instead attacked by an outside entity.
I invested money with Stablegains rather than in UST/Anchor more directly because of the YCombinator branding.
I figured that if the system collapsed, I would be able to notice it early and withdraw, and that YC-affiliated investor money would help compensate me with more luck than if I had to liquidate out of the system myself.
I withdrew after seeing a friend on Cryptography Twitter send a message showing the destabilization; this turned out to be many hours before Stablegains announced "we will honor withdrawals before this announcement at 1:1", and I got all my money back out.
Congratulations? You weren't one of those who lost all of their money to this YC supported scam. Scams and get-rich-quick or get-more-rich off of the backs of others: that's the YC brand here and increasingly elsewhere. Paul Graham started this accelerator to make himself and his wife rich. YC exists to enrich its owners not as your litmus test for trustworthiness. Money over morality is the motto here. Libertarian values, limited government, startups as silver bullets, founding workers working themselves to death to enrich venture capitalists, and Dunning-Kruger for days in the form of Paul Graham. Are you poor? 'Have you tried making a startup?' is Paul Graham's solution to poverty as with everything else. You might as well ask 'Have you tried not being poor?'
Never forget, its always "different this time", even though as you've said its reached the place its in over thousands of years. The mistakes made and mania's are in all the text books and histories so really people should know better, but its seems that nothing is more influential on a person than greed.
> I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I think that this is the "innovator mentality" insofar that, as a group, we tend to idolize/cargo cult innovation as if it was always a good thing. As the pile of things that I miss grows much faster than the things that I feel that I've gained I have come to think of "innovation" as a force for destruction, rent-seeking, and greed, just as much as it can be a force for improvement.
As you say, in many cases things are the way they are because reasons. And some snot-nosed wanterpreneur is just as likely to degrade the situation as they are to improve it.
Here's a funny little anecdote. In the early life of bitfinex, you could lend money to levered traders at ~1000% interest. I did so personally, but only fairly small sums, and I did not sleep easy at night lol. It was pretty obvious it could blow up at any time, but somehow it didn't. Times were different then of course, ecosystem so much smaller - more room to grow.
What I find upsetting about these developments is that over a year ago I shopped around an offer to borrow at higher rates with an early repayment option, backed by an actual arbitrage opportunity, and raised way less than these scammers.
Usually there is an answer, I’m not familiar with the stablegains service but usually there is enough information for you to tell objectively why to use or avoid a service according to your risk profile.
There was enough in the terra ecosystem to come to a conclusion of avoiding completely
> Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I feel like the only benefit of all this is being able to see posttrade services rewritten with some sane API instead of crazy legacy garbage riddled with CSVs.
And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance".
If you believe the statement "if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk" it might be true that you don't understand DeFi to some degree. DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API.
So when you have millions of markets with different returns that can be traded in every imaginable way (and some you probably haven't imagined), throw in an insane amount of dumb money, people willing to borrow at high interest rates (relative to the real world), and a laundry list of factors that introduce inefficiencies into the market, it's quite easy to find pockets of above-average returns if you're smart. I have no idea if Stablegains was actually smart, but it's more than possible to achieve above-market gains in DeFi without exposing yourself to outsized risks.
> it's more than possible to achieve above-market gains in DeFi without overexposing yourself to insane risks
"Insane" is subjective. The point is nothing safe yields ten or 20%. Someone saying "you will not lose your funds" [1] when paying above-market yields is lying.
> DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API.
Millions of micro markets that produce what, exactly? Last time I checked there has to be at least something on the other side of the calculation what a coin is worth.
You think crypto coins magically make people work harder, better, faster, stronger?
That's not how the constraints of the physical world work.
> it's quite easy to find pockets of above-average returns if you're smart…
Right, but even then how deep are those pockets (what amount of investment can they absorb without being tapped out), how big a time window will they exist for, how will you know if those limits are being reached, and are you really sure you can quantify all the risks?
By definition if it’s a pocket of opportunity, it’s very constrained opportunity. As soon as those constraints are breached it will suddenly stop being low risk and might collapse completely. A lot of people have lost a lot of money on sure fire pockets of opportunity that were great when they lasted.
A market where, with work, you can "find pockets of above-average returns if you're smart" is MILES away from one where companies are "promising you consistent above-market returns"
I'm looking forward to your followup post where you lost all your money and can't figure out where you went wrong.
It always happens with people who think they are smarter than the "dumb money" they're taking advantage of. "Sure it's a scam, but I'm smart enough to not be the one getting scammed!"
If you are in the U.S. and lost money, please write to your state's Attorney General [1].
The company is Stablegains, Inc. and the people to name are Kamil Ryszkowski and Emil Rasmessen, co-founders and, I think, Board members. Copy Ken Paxton, Office of the Attorney General, P. O. Box 12548, Austin, Texas as well as his challenger George P. Bush at P. O. Box 26677, also in Austin. (Stablegains and its founders are in Texas. They are spearheading the criminal complaint.)
Take it from someone who lost his father’s money (all $11,000 of it) in 2014: it’s easier to just get over it as quickly as possible.
None of this will amount to anything, and you’ll feel awful until you give up. Then the healing can begin.
On the other hand, I’m not sure if I was mentally capable of hearing this advice back then, so…
But it’s true. It’s 2022 now. That’s almost a decade ago. In fact I forget when exactly Gox collapsed, which is how little it matters to me now. But back then, it felt like the end of the world.
> it’s easier to just get over it as quickly as possible. None of this will amount to anything, and you’ll feel awful until you give up
You don't write to your A. G. to get your money back. (You won't.) You do as an act of civic service.
These people will defraud again. Their investors will back people who will defraud again. Putting people in jail doesn't get anyone's money back. But it deters the next fraud.
Write the letter, send the evidence, write off the loss and then move on.
The way the rehabilitation proceedings are going you will either be able to recover ~20% of the cash, or ~20% of the BTC which would be a considerable gain at this point.
Creating a public permanent record of having fallen for the latest crypto shitcoin will likely be too embarrassing for some. But then again I'm having trouble relating.
Successful "crypto startups" hardly exist, and most of those are selling shovels to suckers. What was the expectation here?
> For what it's worth, they are also a YC backed company
Severely disappointing. I respect PG too much to believe he would knowingly condone this. The partner who did this didn't understand what they were investing in or should be decoupled with haste.
At the very least, the Alaska RMB, U of M Endowment, Bloomberg's family office and SMC should be asking why their capital is backing what should have been clear as day ex ante a fraud. Anyone living in Alaska, going to or an alumni of U of M or Stanford, or working for Bloomberg should be asking the same question.
VCs promoting this sort of blatant and obvious Ponzi - and there are many VCs getting into ponzinomic crypto enterprises - is a good reason to start making some of the investors more liable.
Copies of marketing you saw, statements showing what you invested and what you were paid, e-mails and other communication from the company and a statement of loss. There are links in this thread where promises were made that turned out to be lies; I would include those as well if you saw them ex ante.
> While we have informed users that there are no absolute guarantees against risks
I'm... uh.... fairly certain this was not the crux of their marketing which severly downplayed the underlying risk. There is also a huge spectrum between "we cannot guarantee that there is 0 risk" (which seems to be what the above sentence is saying), and "there exists a risk that all of your funds disappears in 24 hours".
It seems like there is some serious rewriting of history going on here.
Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
>How long do you expect users can earn such high yields?
>The basis for Stablegains' rate is Anchor Protocol's yield. At the time of writing, Anchor yield is set at 18% - 20% APY and expected to remain so for a long time.
>We expect the rates of open finance protocols to beat those of traditional finance for a very long time.
Thank you! I was looking for that image (which I'd seen before) but couldn't find it.
Will be interesting to hear the argument "Well technically there were no surprises here, because customers should not be surprised when they lose all their money investing in risky assets. Therefore, technically, we did not lie."
Dont rely on any websites & webpages existing like this link.
I can show you links where even the Wayback machine has removed content, most people will know how Google Cache has removed content, so print all copies and have hard copies safely stored away where they cant be destroyed. Houses will be broken into in order to destroy evidence, I know I've had it done to me!
This may be your only chance to out the criminals that run the world!
>Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
While they're not exactly forthcoming with the risks, their marketing pages[1] were also careful to not make any explicit claims of safety (eg. "your principal is protected", or "you won't lose money"). The most that they claimed were "stable" returns. For good measure there's also a disclaimer mentioning the risks.
>There is a range of safeguards in place to help secure your deposits, however holding and depositing stablecoins with Stablegains and third party lending platforms still carries significant risk. Please carefully read our Terms of Use and Risk disclosures in our Learning Center before making a deposit. Any deposit with Stablegains and third party lending platforms is entirely your responsibility. You understand that your principal is at risk.
Written as if no mistakes were made on their end. Paraphrasing:
"We all thought UST and Anchor were a source of stable >10%/yr gains that you could trust for your corporate treasury. That the yield instead turned out to be -99% is quite disappointing, and makes this a natural time for us to bring our service to an end. It's been a pleasure to serve you."
Anybody who believes that kind of logic deserves to lose their stake. Crypto has spent most of it's formative years riding an historic bull market and claiming it's immune to market forces. Now we have pretty clear evidence that crypto is just a multiple of the Nasdaq.
There's also the part of "by the way, if you want any of the crappy UST we bought into using your money, make sure you claim it before the fork on May 27th or before the end of June! Peace out!"
You know the scene in Office Space when Peter says, “I have eight bosses, Bob.” And then Tall Bob (Dr Cox) leans forward with a surprised look on his face?
I don’t think I’ve ever empathized with Bob in that scene. Until just now.
After I read about this Terra ecosystem, it looks very suspicious: first, you buy UST tokens, investing real money. You are promised a yield up to 20% (suspicious point 1). Then, you deposit your UST so that other people can lend it. But the terms look weird to me (suspicious point 2): first, the loans are "overcollateralized", so, for example, you need to put down equivalent of $100 to get a loan of $70. Second, the interest rate on the loan is ridiculously high - in the range of 30%. Who would take such a loan?
They seemed to have a third kind of token, that you could get as a reward for taking a loan (or depositing UST). But I don't think that by juggling three related tokens around one can generate any value. The only source of money was from people buying any of these tokens.
The support page at Stablegains site says [1]:
> They [Digital finance protocols] are more efficient than traditional finance
I can't see how 30% interest rate overcollateralized loans are "more efficient" than traditional bank loans with rates below 10% per year.
By the way, here is an idea about new type of coin, that I would call "investcoin". Do you see any potential problems with it?
This would be a coin that is backed by stocks. When you buy my investcoin, you can choose any kind of stock from a preapproved list and I will buy them for your money. If you decide to cash out, I will sell stocks of my choice to repay you. The stocks are managed in a public account, so anyone can ensure that the amount of stocks matches the amount of coins. You are guaranteed a share of stocks proportional to amount of coins that you own.
Of course, hard work of thinking out a hypothetical cryptocurrency must be rewarded, so I will take a reasonable fee from every transaction involving buying or selling stocks.
To make things more interesting, we could manage those stocks by voting of coin holders.
Why this is much better than stablecoins:
- first, in contrast to existing stablecoins, anyone can easily check that I hold the amount of stocks matching the amount of coins
- second, unlike existing stablecoins, the value of my investcoin is going to grow as on average stock markets grow over time
- third, the money that you have invested is improving world economy instead of just burning electricity
- fourth, you can use this investcoin as a mean of payment
- fifth, there will be no promises of ridiculous yield. The stocks are meant to back the value of coin, not to be a source of a significant profit.
Looks like a perfect business plan, or am I missing something?
lol. Even beanie babies were a longer-term investment vehicle than this. I just hope these recent very public and very embarrassing failures are enough to discourage the average person from wasting their money on these scams. I also hope the people behind this get investigated for fraud.
So I'm riding the subway in NYC and there are these adds for yet another one of these crypto related "businesses" and copy iirc goes something like 'stop boring us at parties trying to explain crypto. just invest with us blah blah'. Pretty sure the irony is lost on the target demographic.
If Ty had come out with a Beanie Baby NFT project this whole thing would’ve come full circle. Do you think they’d have taken off or tanked at the height of the NFT Bubble?
It won't work.
What they are trying to sell, is - community was stronger then only relying on UST.
In one in a million chance, there could be a inflow of money and while users from snapshot wouldn't sell their tokens in an instant. So, basically, an utopia.
The money comes from incredibly low IQ and poor people thinking they’ll win the lottery. It’s the same thing over and over. Luna2 is just a scam. Do Kwon is a sociopath.
Terraform has $3B (ish, stores as Bitcoin) that they could use to try to buy back faith in their coin.
Problem is, best they can do is reboot with a Bitcoin-collateralized coin. The whole Terra/Luna/Anchor "algorithmic stablecoin" had been exposed as a fraud or a fantasy, so such smaller fraction of suckers and scammers will buy in to that again, and everyone else might buy in to a Bitcoin backed stablecoin, but there's not much profit in that for Terraform, and the users have no reason to choose it over a more reliably backed coin like Tether or USDC or DAI.
I recommend skimming over the list of blog posts shared over the course of a year about the rise and decline of a crypto startup. It's a great post-mortem: https://medium.com/@kamil.ryszkowski
IMO, every single exchange is at least partially responsible for misleading users. Binance.US and OKCoin specifically marketed UST as a stablecoin that you could earn 20%. Marketing it as a stablecoin is a very clear signal that it has less risk.
Yes, users should inform themselves, but exchanges (as well as companies like Stablegains) need to be held accountable.
Before then, Binance.US had several other "stable coins", the most popular being Binance USD and Tether. (Binance.US also has a dollar asset which is supposedly FDIC insured.)
Binance.US has trading rules that specify things like minimum and maximum price. The minimum price for Binance USD and Tether is something like $0.0001 (and the maximum price is something like $1000.0). IIRC, all of the other stable coins have similar "bounds".
UST when introduced was different. Its minimum price was $0.70 (and its maximum price was $1.30).
When things went to crap, that minimum price basically froze the market, or rather froze people into their positions. (There were people willing to buy at $0.45, for a while, then $0.17.)
FWIW, Binance.US eventually significantly reduced the minimum.
> Pyramid scheme: making money based on recruiting an ever-increasing number of "investors."
This is correct. While looking into this for a friend I came across: "for a full year, you'll earn 0.5% APY on what each person you refer deposits" [1]. Still not a pyramid scheme, since 0.5% is a small fraction of the total yield paid out, but pyramidesque.
AAPL has physical and IP assets which could be sold to make investors whole. While I have big issues with them, they're not in the same ballpark as this 'stable' coin company or pyramid schemes.
So here's the thing, the difference between a pyramid scheme and a business is that in the pyramid scheme, all the wealth gets generated by selling shares to other 'investors', while in a business, all the wealth is generated by selling to customers.
Which is why one's illegal, while the other is publicly traded on the stock market.
So the options are to withdraw to USD at 5% value, or transfer the ust to another wallet to qualify for a "potential airdrop" but probably lose the 5% as ust goes to 0?
True, however at this point it’s not really up to StableGains - they are doing the right thing here (regardless of their initial - potentially false - advertising) of allowing you to withdraw your holdings and then be at the mercy of the market directly.
I know this may be an unpopular opinion on this site in particular, but after seeing this I would never even consider raising money from YC. I would not be comfortable having the fate of my business in any way tied to a group of people that are so fucking dumb that they invested in the money version of a perpetual motion machine.
Seriously, this is the fucking stupidest thing I’ve seen in _YEARS_
UST, a stable coin not even pretending to be backed by the very thing it was pegged to fails. Unlike USDT, USDC or GUSD, there was a documented plan of attack to take UST down 6 months ago, someone just raised enough capitol to execute it.
While there was a proposed attack, there is no evidence it (or any other attack) was executed.
Which would be weird. Attacks on blockchains usually have detailed analysis within days, the blockchains are public and any evidence would be right there for people to examine.
All evidence is that UST simply collapsed on under it's own weight because it's algorithmic nature was never stable. As soon as the price of LUNA started falling, it created a feedback loop which drove the price of LUNA to zero, destroying the very thing backing UST.
It's pathetic that the U.S. Federal Reserve and Treasury allowed anyone but the U.S. Government to mint a coin 'tethered' to USD, and named anything remotely similar. It's bizarre and a complete reversal from prior practice.
Plenty of countries have currencies which have a fixed exchange with USD, including my own (1 KYD = 1.2 USD).
It just takes a shit-tonne of capital, and it helps to have a functioning internal economy and flexibility to be able to defend against malicious agents.
I suspect there are other legal issues with creating an alternative currency in the us though, which is why these aren't currencies but securities. Which is still fine! A tethered coin is conceptually _similar_ to a 0-yield bond.
Presenting it as being "safe" without it actually being so is the problem here.
As long as someone pays for cryptocurrency somewhere in the world, you will be able to algorithmically mint a coin tethered to USD or any other asset, and there is absolutely nothing the US Government or anyone else can do to stop it. The Pandora's Box is open.
That’s … what banks and credit card companies do all the time. The only true dollars are physical cash and accounts at the Federal reserve. Everything else is a derivative pegged to those.
Yawn, brand new account, take this virtue signaling back to reddit and give me a break: YC can invest in whatever they want to, it's their money. Stablecoin farming may not be sustainable, but it's not a Ponzi scheme, unless you have no idea how a Ponzi actually works.
> It's pathetic that regulators haven't stopped this nonsense.
As a result of the ICO scams in 2017 for example the infamous Ethereum DAO hack, perhaps that is why at least in the US, the SEC banned unregistered ICOs [0]; more countries to follow.
They have done 'something' about it, but it is not going to 'completely' stop otherwise they would have 'totally' banned all of them, including even registering an ICO with the SEC.
I won't be surprised to see stable-coin regulations this year with only a few of them still surviving.
All crypto is a scam and it's so simple to see, it's astonishing anyone fell for this.
Look.
Imagine an otherwise empty room with a table and a few chairs. A couple people come in with some money in their pockets and cards. They play a few round of a card game, some lose, some win. When they leave, the room as it was before so it is crystal clear the sum of their money couldn't change. Some won, some lost but overall the change is zero. This still doesn't change if, for convenience, during the game, they use plastic chips to count wins and losses and at the end they exchange it for money.
But if someone takes a small cut every time the plastic chips move then that person is guaranteed to win and everyone else together is guaranteed to lose. Now, a game where, without knowing anything about the game you can tell ahead of the time which group wins and which one loses is not a game, it's a scam.
Indeed, one of the best moves for players is not to play the game but to sell their chips -- and praise the game to increase the chance of a greater fool buying in. Those will sit on a greater loss than you did which might not materialize yet but it's certainly in the system.
So, any crypto"currency" with transaction fees is a scam. Those who collect transaction fees are guaranteed to win and the rest are guaranteed to lose.
And no, stocks aren't like this because they produce dividend. And no, gold is not like this either because there are uses of gold which transform your gold into higher value products than raw gold (integrated circuits, jewelry) which sell for real money. Neither can happen with crypto"currencies", there the only interfacing with real money is exchange.
> Imagine an otherwise empty room with a table and a few chairs. A couple people come in with some money in their pockets and cards. They play a few round of a card game, some lose, some win. When they leave, the room as it was before so it is crystal clear the sum of their money couldn't change. Some won, some lost but overall the change is zero. This still doesn't change if, for convenience, during the game, they use plastic chips to count wins and losses and at the end they exchange it for money.
Does this not describe CC fees/taxes/online marketplaces/etc? Or is your argument all those are scams as well?
I agree crypto projects are generally a scam but I fully disagree the reason for that is transaction fees (which I assume is what you're alluding to here as the "small cut").
If you don’t think there is fundamental value in permissionless, uncensorable, peer-to-peer online money transfer that is not controlled by any government or any single entity at all then nothing anyone can say will be able to convince you otherwise.
Notice how what I just described does not match the vast majority of these “crypto” projects. That is because they are not crypto. They do not adhere to the ethos of crypto. They are scams. It’s very simple really. If there’s a company behind it, if there’s an ICO, if there’s a single identifiable leader which can be attacked by governments to bring the project down, then it is a scam.
Unfortunately some time in the mid-2010’s the scammers and grifters of traditional finance moved in and started playing all the same games that got regulated out of existence in the legacy markets. They will likely get regulated out of existence again in the crypto world and people like you will gloat about how it’s the end for crypto. But the real crypto projects, Bitcoin, Monero, etc. will keep chugging along and there is absolutely nothing that can stop them.
My imaginary investcoin [1] is not a scam though. It is backed by stocks and its value comes from the growth of stock market and from being usable as a decentralized mean of payment.
Only about 8% of the gold demand is from technology. The rest is used a speculation and for luxury goods which are only valuable because you expect someone to pay an equal amount of money or more than you did.
“Gold has two major shortcomings in that it is neither of much use nor productive. While gold does have some industrial and decorative purpose, the demand for these purposes is limited and unable to absorb the amount of new gold being mined. And if you own an ounce of gold for eternity, you still end up owning an ounce.” - Buffet
Sounds like you're describing the Visa/Mastercard duopoly that charges high interchange fees to merchants so they can bankroll their own rewards programs.
But what about crypto completely revolutionizing transactions, decentralizing the economy and providing a stable universally accessible data exchange medium? What about tracking the food you buy on the blockchain? What about web3? What about muh NFT monkeys?
> All crypto is a scam and it's so simple to see, it's astonishing anyone fell for this.
No, it is not.
Please try to set aside your hatred for all things crypto and understand that there is actual legitimate value in many of the crypto projects, and that the core proposition, that of decentralized peer to peer value transfer, is a legitimate and useful use case.
Return is directly correlated to risk, so when a black box corporation is promising 15% returns and marketing itself as a “simple and safe” way for its users to benefit from “advances in financial technology.” It's probably not safe, but it is very simple.
This is really what should be required as the boldface disclaimer on every investment product.
"10-15 % guaranteed return" has another name...fraud....even in the case of old-school imperial plunder, there is always the risk your target might fight back.
This is at least a weak EMH assumption. It's not a law. In crypto sometimes the opposite is true for short to medium periods of time because uninformed people are afraid of 'too high' returns. Best money is made on market inefficiencies like that.
When I want bright well read people to invest in my scam, I flatter them that they have much better insight than most people and are destined to be ahead of the curve as a result. /s
I requested an ACH withdrawal at 5pm pacific on 5.23
It was processed 13 hours later at 645am on 5.24
The conversion rate I received was 0.03850612745
If you view the UST value during that window, it was worth almost twice that rate on average: https://coinmarketcap.com/currencies/terrausd/
The thoughts are that someone borrowed lots of BTC and UST, started selling UST to depeg, then started selling BTC as they tried to regain the peg, the joint selling of BTC lowered the price making it harder, actually impossible,to regain the peg.
It's very telling that they say they learned of the depeg event on the 10th of May
It actually started on the 9th of May. So not only did they negligently invest 100% of funds in a single highly risky project while they marketed that they diversified risk, but they were also asleep at the wheel and missed the opportunity to salvage some of the terra before the depeg had gone too far
> Stablegains is not accepting any new users or any new deposits on our platform. At this time, please DO NOT use your deposit addresses as any funds sent might not be recoverable.
It boggles my mind that people don't see that the inability to block/reject payments is a fundamental flaw of cryptocurrency.
Why would there be a "fundamental" reason for an inability to block/reject payments in cryptocurrencies? Ethereum smart contract can already do that. Just exit with an error while processing an incoming payment.
In related news, tether’s market cap dropped another $1B today. Seems like it has been happening in chunks like this every day. At least according to coinmarketcap.com. Down $10B since the Luna collapse, over 10%. Slowly, slowly, then all at once?
Fwiw a lot of YC companies have had large collapses. For example Homejoy which is a lot bigger than this company. It happens. Startups are risky. Not huge news.
Meh YC backs a lot of scams masquerading as businesses. This period of easy money and wealth concentration has fostered much in the way of misallocation of capital. Y-Combinator exists to make its owners money. Their primary concern is bloody Benjamins, not morality and the public interest.
What's funny about this is that I can recall discussions here and elsewhere from only a few months ago questioning the "guaranteed" super-high returns. I forget who said this but someone awhile ago said in finance said that if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk.
And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance".
Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I'm just sitting on the sidelines watching people relearn all the lessons of finance the hard way, some because they think they understand finance because because they understand merkle trees and consensus protocols but really most just want to get rich quick.
What most people don't understand about finance is that there are fundamental rules that you really cannot break without consequences.
Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).
> Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Your comment makes no sense. Just because there's modeling involved that does not make it a hard science. A hard science requires stuff like the ability to perform controlled experiments and replicability, in order to arrive at a high degree of accuracy in predictions.
Throwing around partial differential equations does not turn something into a hard science. You need to meet way more requirements before you're in a position to claim that.
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> It really is a science.
Physics is a science. Math is. Or Biology. Finance is not. Because it deals with the madness of crowds.
> Recipe for Disaster: The Formula That Killed Wall Street
> And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.
> Nassim Nicholas Taleb is particularly harsh when it comes to the copula. "People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked," he says. "Co-association between securities is not measurable using correlation," because past history can never prepare you for that one day when everything goes south. "Anything that relies on correlation is charlatanism."
https://www.wired.com/2009/02/wp-quant/
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> Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Just because quantitative analysis has solid grounding doesn't mean that its use is unrelated to ethics. The finance establishment is an organized power structure whose decisions are political.
If you want an analogy, I'm pretty sure that you'll find plenty of people who used ballistics to achieve goals that you would find pretty unethical.
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Using math does not make something scientific. Math is a language based on logic, physics is a science using that language. Economics is Scholasticism that uses math as a language.
This comment is why the humanities should be a prerequisite for all academical endeavors...
The maths used in economics is widely known to be wrong.
When informed the maths in economics is wrong, the economists don't go and fix their maths either.
Economics is more like sociology with some random incorrect formulas written on the black board as set dressing.
Economics might in self loathing claim they are the "dismal science", but the cold hard truth is they simply speaking are not doing their jobs properly. It's a broken research field.
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> There was no politics, no opinions, no ethics involved. It really is a science.
Except that there are humans involved. How do you boil arbitrary human action down to a HARD science?
> social media ... organized political power structure
It's not just social media and it is somewhat disingenuous to dismiss the idea that finance, specially specially international finance, does not have (some form of) power [that actually trumps and transcends political power].
This is a somewhat interesting film that I was watching the other day. It's mere existence addresses the first bit -- that perception is certainly not limited to "social media". And of course the film itself is about a super secret gathering of G8 ministers where they struggle with the decision to put in place some (undisclosed) policy change that they all know will have very drastic consequences for the global average joe.
The Confessions (2016): https://www.imdb.com/title/tt4647784
As a single actor you can bend, but never break the rules. So you can achieve way better returns than the market as a whole does. Over time 10 - 200 x returns is achievable, don't think it comes cheap though, you need to dedicate large chunks of your life to it, and nothing is a guarantee.
However, the math approach to finance works because in its essence it is quantifying human reactions and or emotions, which in large crowds turns out to be more predictable. In the short run, still, software holds its edge with its probability approach but its not smart so that it is basically a rent seeker.
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If finance is a HARD science, where are replicated experiments? How did they account for alternative hypothesis?
Will understanding the math make me rich? :)
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It's really striking how in recent years the Godwin point has been replaced from "everybody who disagrees is Hitler" to "everybody who disagrees is a anti-climate flat-vax earth-denier". It's really not helping getting any point across. In a way it is self-realizing polarization: because you are casting any criticism of "modern finance" into this "bundle of badness" this is likely to reinforce their position.
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its the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, not a Nobel Prize.
Is the math meaningful though?
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The 20% APY provided by Anchor was way above the average yields for safe DeFi lending. Which indicated that even among crypto users, this was considered a degen play!
The whole Terra saga was a typical example of speculative bubble. Everyone knew it was risky, but its sheer size and the caliber of people endorsing it (https://twitter.com/novogratz/status/1478535972560195585) was providing an aura of safety. Too big to fail.
It's also similar to the stock market as a whole before it started correcting. Everyone knew valuations were detached from every fundamental except liquidity, yet everyone went along thinking the music just had to keep going.
Every fundamental except liquidity - nice phrasing. It would be illuminating to see more analysis of liquidity in crypto markets and less purely technical analysis.
In the linked Terra Revival post there's this gem of a term:
> Pre-attack Luna
I love how we went straight from "what happened" to "it was an attack."
I'm not surprised the attack narrative is so popular and rarely challenged. Whether there was an actual attack or not, the attack narrative gives everyone a convenient out. The creator can disavow responsibility for creating a stablecoin that doesn't work and the investors get to feel like they weren't taken in by a con but we're instead attacked by an outside entity.
Also the straight up call to start shilling the new network immediately or you won't get a cut:
> Essential app developers looking to join for emergency allocation should signal public support for the net network on Twitter and social channels.
The fact that people are putting their money on the line without realising this extremely basic fact of finance is concerning to say the least.
And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering.
> And the fact that YC actually invested in this company which claimed to contravene that basic rule is staggering.
StableGains was skimming off the top so they weren’t directly exposed to the risk of the underlying asset.
> without realising this extremely basic fact of finance
More like claiming they didn’t know when they lose it all. Admitting “I gambled and I lost” isn’t a recipe for sympathy and possible compensation.
I invested money with Stablegains rather than in UST/Anchor more directly because of the YCombinator branding.
I figured that if the system collapsed, I would be able to notice it early and withdraw, and that YC-affiliated investor money would help compensate me with more luck than if I had to liquidate out of the system myself.
I withdrew after seeing a friend on Cryptography Twitter send a message showing the destabilization; this turned out to be many hours before Stablegains announced "we will honor withdrawals before this announcement at 1:1", and I got all my money back out.
The YC brand worked here, I think.
> The YC brand worked here, I think.
Congratulations? You weren't one of those who lost all of their money to this YC supported scam. Scams and get-rich-quick or get-more-rich off of the backs of others: that's the YC brand here and increasingly elsewhere. Paul Graham started this accelerator to make himself and his wife rich. YC exists to enrich its owners not as your litmus test for trustworthiness. Money over morality is the motto here. Libertarian values, limited government, startups as silver bullets, founding workers working themselves to death to enrich venture capitalists, and Dunning-Kruger for days in the form of Paul Graham. Are you poor? 'Have you tried making a startup?' is Paul Graham's solution to poverty as with everything else. You might as well ask 'Have you tried not being poor?'
> YC-affiliated investor money would help compensate me
Not sure why you believe a mere investor is liable for any compensation if the 15% APY gambling scheme goes under.
It seems like what worked for you was having a source who was paying close attention, not the branding at all.
Never forget, its always "different this time", even though as you've said its reached the place its in over thousands of years. The mistakes made and mania's are in all the text books and histories so really people should know better, but its seems that nothing is more influential on a person than greed.
> I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I think that this is the "innovator mentality" insofar that, as a group, we tend to idolize/cargo cult innovation as if it was always a good thing. As the pile of things that I miss grows much faster than the things that I feel that I've gained I have come to think of "innovation" as a force for destruction, rent-seeking, and greed, just as much as it can be a force for improvement.
As you say, in many cases things are the way they are because reasons. And some snot-nosed wanterpreneur is just as likely to degrade the situation as they are to improve it.
Here's a funny little anecdote. In the early life of bitfinex, you could lend money to levered traders at ~1000% interest. I did so personally, but only fairly small sums, and I did not sleep easy at night lol. It was pretty obvious it could blow up at any time, but somehow it didn't. Times were different then of course, ecosystem so much smaller - more room to grow.
https://web.archive.org/web/20130411113418/https://www.bitfi...
What I find upsetting about these developments is that over a year ago I shopped around an offer to borrow at higher rates with an early repayment option, backed by an actual arbitrage opportunity, and raised way less than these scammers.
Usually there is an answer, I’m not familiar with the stablegains service but usually there is enough information for you to tell objectively why to use or avoid a service according to your risk profile.
There was enough in the terra ecosystem to come to a conclusion of avoiding completely
> There was enough in the terra ecosystem to come to a conclusion of avoiding completely
There is enough information in a ten or 20% yield to come to a conclusion. That doesn't stop unsophisticated investors from getting screwed.
When they do so because they bought magic beans, I have no sympathy. When are lied to and sold deposit-like products [1], it's infuriating.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
Consider what we see if there isn't enough information: https://en.wikipedia.org/wiki/The_Market_for_Lemons And on a totally separate note, consider what we see in DeFi.
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> Finance is the way it is for many reasons. There are thousands of years of lessons that have made the system the way it is. I get the innovator mentality of sweeping away the old but there seems to be a fine line between innovation and ignorance.
I feel like the only benefit of all this is being able to see posttrade services rewritten with some sane API instead of crazy legacy garbage riddled with CSVs.
And the Crypto Andys were all like "you just don't understand DeFi!" to which the retort is "No, you just don't understand finance".
If you believe the statement "if someone is promising you consistent above-market returns it's either a scam or there is unknown or undisclosed risk" it might be true that you don't understand DeFi to some degree. DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API.
So when you have millions of markets with different returns that can be traded in every imaginable way (and some you probably haven't imagined), throw in an insane amount of dumb money, people willing to borrow at high interest rates (relative to the real world), and a laundry list of factors that introduce inefficiencies into the market, it's quite easy to find pockets of above-average returns if you're smart. I have no idea if Stablegains was actually smart, but it's more than possible to achieve above-market gains in DeFi without exposing yourself to outsized risks.
> it's more than possible to achieve above-market gains in DeFi without overexposing yourself to insane risks
"Insane" is subjective. The point is nothing safe yields ten or 20%. Someone saying "you will not lose your funds" [1] when paying above-market yields is lying.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680425...
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> DeFi isn't a single market, it's millions of micro markets that are accessible through what amounts to a single API.
Millions of micro markets that produce what, exactly? Last time I checked there has to be at least something on the other side of the calculation what a coin is worth.
You think crypto coins magically make people work harder, better, faster, stronger?
That's not how the constraints of the physical world work.
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> it's quite easy to find pockets of above-average returns if you're smart…
Right, but even then how deep are those pockets (what amount of investment can they absorb without being tapped out), how big a time window will they exist for, how will you know if those limits are being reached, and are you really sure you can quantify all the risks?
By definition if it’s a pocket of opportunity, it’s very constrained opportunity. As soon as those constraints are breached it will suddenly stop being low risk and might collapse completely. A lot of people have lost a lot of money on sure fire pockets of opportunity that were great when they lasted.
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A market where, with work, you can "find pockets of above-average returns if you're smart" is MILES away from one where companies are "promising you consistent above-market returns"
You’ve kind of just demonstrated the OP’s point. What do you think modern finance looks like?
I'm looking forward to your followup post where you lost all your money and can't figure out where you went wrong.
It always happens with people who think they are smarter than the "dumb money" they're taking advantage of. "Sure it's a scam, but I'm smart enough to not be the one getting scammed!"
[[This is what DeFI people actually believe]]
Whoever thinks "millions of markets trading in every way" is a guarantee of making money is in for an awful surprise
If you are in the U.S. and lost money, please write to your state's Attorney General [1].
The company is Stablegains, Inc. and the people to name are Kamil Ryszkowski and Emil Rasmessen, co-founders and, I think, Board members. Copy Ken Paxton, Office of the Attorney General, P. O. Box 12548, Austin, Texas as well as his challenger George P. Bush at P. O. Box 26677, also in Austin. (Stablegains and its founders are in Texas. They are spearheading the criminal complaint.)
[1] https://www.usa.gov/state-attorney-general
Hopefully the A.G. will recuse himself. He's under indictment for the same crime.
https://en.wikipedia.org/wiki/Ken_Paxton#State_securities_fr...
He didn't recuse himself when he investigated his friend/donor and fired whistleblowers. Why would he now?
yeah, Ken Paxton is … let’s go with “not clear and free of scandal”.
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Take it from someone who lost his father’s money (all $11,000 of it) in 2014: it’s easier to just get over it as quickly as possible.
None of this will amount to anything, and you’ll feel awful until you give up. Then the healing can begin.
On the other hand, I’m not sure if I was mentally capable of hearing this advice back then, so…
But it’s true. It’s 2022 now. That’s almost a decade ago. In fact I forget when exactly Gox collapsed, which is how little it matters to me now. But back then, it felt like the end of the world.
> it’s easier to just get over it as quickly as possible. None of this will amount to anything, and you’ll feel awful until you give up
You don't write to your A. G. to get your money back. (You won't.) You do as an act of civic service.
These people will defraud again. Their investors will back people who will defraud again. Putting people in jail doesn't get anyone's money back. But it deters the next fraud.
Write the letter, send the evidence, write off the loss and then move on.
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Did you have $11k in BTC or in cash?
The way the rehabilitation proceedings are going you will either be able to recover ~20% of the cash, or ~20% of the BTC which would be a considerable gain at this point.
Creating a public permanent record of having fallen for the latest crypto shitcoin will likely be too embarrassing for some. But then again I'm having trouble relating.
Successful "crypto startups" hardly exist, and most of those are selling shovels to suckers. What was the expectation here?
Isn't it already "a public permanent record" because it's already in the news?
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For what it's worth, they are also a YC backed company.
> For what it's worth, they are also a YC backed company
Severely disappointing. I respect PG too much to believe he would knowingly condone this. The partner who did this didn't understand what they were investing in or should be decoupled with haste.
At the very least, the Alaska RMB, U of M Endowment, Bloomberg's family office and SMC should be asking why their capital is backing what should have been clear as day ex ante a fraud. Anyone living in Alaska, going to or an alumni of U of M or Stanford, or working for Bloomberg should be asking the same question.
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VCs promoting this sort of blatant and obvious Ponzi - and there are many VCs getting into ponzinomic crypto enterprises - is a good reason to start making some of the investors more liable.
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What should you write exactly?
> What should you write exactly?
The facts.
Copies of marketing you saw, statements showing what you invested and what you were paid, e-mails and other communication from the company and a statement of loss. There are links in this thread where promises were made that turned out to be lies; I would include those as well if you saw them ex ante.
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> While we have informed users that there are no absolute guarantees against risks
I'm... uh.... fairly certain this was not the crux of their marketing which severly downplayed the underlying risk. There is also a huge spectrum between "we cannot guarantee that there is 0 risk" (which seems to be what the above sentence is saying), and "there exists a risk that all of your funds disappears in 24 hours".
It seems like there is some serious rewriting of history going on here.
Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
Further little notes from their documentation that, lets just say, "downplay the risk":
- "You will not lose your funds because all loans are 100% asset-backed." (https://stablegains.zendesk.com/hc/en-us/articles/4402680425...)
- "Regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable." (https://stablegains.zendesk.com/hc/en-us/articles/4402687671...)
It's kind of shocking really that these statements are still up give how many of their other docs have been editted in the last 10 days.
---
Edit: u/ushakov is the hero of the hour for archiving those pages (https://archive.ph/O2lZV, https://archive.ph/ItERp)
>How long do you expect users can earn such high yields?
>The basis for Stablegains' rate is Anchor Protocol's yield. At the time of writing, Anchor yield is set at 18% - 20% APY and expected to remain so for a long time.
>We expect the rates of open finance protocols to beat those of traditional finance for a very long time.
https://stablegains.zendesk.com/hc/en-us/articles/4402680471...
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archived for future reference
https://archive.ph/O2lZV
https://archive.ph/ItERp
The statements are kind of true if treat funds as the UST in your account. While the UST has remained safe, the value of UST hasn't.
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Wow they need to see prison time for losing investors money saying their main coin was USDC
This was their old marketing:
https://news.ycombinator.com/item?id=31431915
-"15% interest. No surprises."
To be fair, the collapse of an algorithmic stablecoin is no surprise ;)
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Thank you! I was looking for that image (which I'd seen before) but couldn't find it.
Will be interesting to hear the argument "Well technically there were no surprises here, because customers should not be surprised when they lose all their money investing in risky assets. Therefore, technically, we did not lie."
> "15% interest. No surprises."
I’m honestly not surprised about how things turned out.
Was it 15% monthly or 15% annual?
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Dont rely on any websites & webpages existing like this link.
I can show you links where even the Wayback machine has removed content, most people will know how Google Cache has removed content, so print all copies and have hard copies safely stored away where they cant be destroyed. Houses will be broken into in order to destroy evidence, I know I've had it done to me!
This may be your only chance to out the criminals that run the world!
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>Question though, do the founders here have any potential criminal liability from this whole situation (including apparently lying about what they were doing with their customers funds)?
While they're not exactly forthcoming with the risks, their marketing pages[1] were also careful to not make any explicit claims of safety (eg. "your principal is protected", or "you won't lose money"). The most that they claimed were "stable" returns. For good measure there's also a disclaimer mentioning the risks.
>There is a range of safeguards in place to help secure your deposits, however holding and depositing stablecoins with Stablegains and third party lending platforms still carries significant risk. Please carefully read our Terms of Use and Risk disclosures in our Learning Center before making a deposit. Any deposit with Stablegains and third party lending platforms is entirely your responsibility. You understand that your principal is at risk.
[1] https://web.archive.org/web/20220108232821/https://www.stabl...
> careful to not make any explicit claims of safety (eg. "your principal is protected", or "you won't lose money").
These are both explicit examples of explicit claims of safety that are still up on their documentation (at least as of 5 minutes ago)
- "You will not lose your funds because all loans are 100% asset-backed." (https://stablegains.zendesk.com/hc/en-us/articles/4402680425...)
- "Regardless if crypto markets are soaring or crashing, the value of assets under our management remains stable." (https://stablegains.zendesk.com/hc/en-us/articles/4402687671...)
Edit: Updating link to fix truncated urls
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Written as if no mistakes were made on their end. Paraphrasing:
"We all thought UST and Anchor were a source of stable >10%/yr gains that you could trust for your corporate treasury. That the yield instead turned out to be -99% is quite disappointing, and makes this a natural time for us to bring our service to an end. It's been a pleasure to serve you."
Anybody who believes that kind of logic deserves to lose their stake. Crypto has spent most of it's formative years riding an historic bull market and claiming it's immune to market forces. Now we have pretty clear evidence that crypto is just a multiple of the Nasdaq.
In a yield-chasing world, there's always a fair amount of correlation between liquid "assets".
There's also the part of "by the way, if you want any of the crappy UST we bought into using your money, make sure you claim it before the fork on May 27th or before the end of June! Peace out!"
>-99%
You know the scene in Office Space when Peter says, “I have eight bosses, Bob.” And then Tall Bob (Dr Cox) leans forward with a surprised look on his face?
I don’t think I’ve ever empathized with Bob in that scene. Until just now.
May I suggest another Office Space clip for this situation: https://twitter.com/liron/status/1527376821045473304
Even serious crypto people knew that UST was highly unstable lol
How did these guys raise funding? They literally just built a fiat onramp
> How did these guys raise funding?
either the investors didn’t do enough research or they were on it
https://davidgerard.co.uk/blockchain/2022/04/11/web3-a-vc-fu...
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Wow!
Don't you need a board resolution to be able to open any financial accounts, yet alone to invest into risky or leveraged assets?
Unless they were targeting crypto projects/companies that usually don't care about legal stuff.
Previous discussion: YC W22 Stablegains is being sued for losing $42m in funds from 4878 customers https://news.ycombinator.com/item?id=31431224
After I read about this Terra ecosystem, it looks very suspicious: first, you buy UST tokens, investing real money. You are promised a yield up to 20% (suspicious point 1). Then, you deposit your UST so that other people can lend it. But the terms look weird to me (suspicious point 2): first, the loans are "overcollateralized", so, for example, you need to put down equivalent of $100 to get a loan of $70. Second, the interest rate on the loan is ridiculously high - in the range of 30%. Who would take such a loan?
They seemed to have a third kind of token, that you could get as a reward for taking a loan (or depositing UST). But I don't think that by juggling three related tokens around one can generate any value. The only source of money was from people buying any of these tokens.
The support page at Stablegains site says [1]:
> They [Digital finance protocols] are more efficient than traditional finance
I can't see how 30% interest rate overcollateralized loans are "more efficient" than traditional bank loans with rates below 10% per year.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4402680375...
By the way, here is an idea about new type of coin, that I would call "investcoin". Do you see any potential problems with it?
This would be a coin that is backed by stocks. When you buy my investcoin, you can choose any kind of stock from a preapproved list and I will buy them for your money. If you decide to cash out, I will sell stocks of my choice to repay you. The stocks are managed in a public account, so anyone can ensure that the amount of stocks matches the amount of coins. You are guaranteed a share of stocks proportional to amount of coins that you own.
Of course, hard work of thinking out a hypothetical cryptocurrency must be rewarded, so I will take a reasonable fee from every transaction involving buying or selling stocks.
To make things more interesting, we could manage those stocks by voting of coin holders.
Why this is much better than stablecoins:
- first, in contrast to existing stablecoins, anyone can easily check that I hold the amount of stocks matching the amount of coins
- second, unlike existing stablecoins, the value of my investcoin is going to grow as on average stock markets grow over time
- third, the money that you have invested is improving world economy instead of just burning electricity
- fourth, you can use this investcoin as a mean of payment
- fifth, there will be no promises of ridiculous yield. The stocks are meant to back the value of coin, not to be a source of a significant profit.
Looks like a perfect business plan, or am I missing something?
Sounds like an ETF traded on cryptocurrency markets instead of the stock exchange, perhaps you could call it a "CTF" (crypto-traded fund).
Would it be regulated like an ETF or mutual fund? There might even be regulations that make exchanges like Coinbase unwilling to deal with it.
Two problems stand out to me:
- I have to put centralized trust in you that you don’t take my money and run.
- Regulation risk. The SEC will happily shut you down any day. Other centralized attempts of e-currency where shut down in the past.
lol. Even beanie babies were a longer-term investment vehicle than this. I just hope these recent very public and very embarrassing failures are enough to discourage the average person from wasting their money on these scams. I also hope the people behind this get investigated for fraud.
That was funny!
> the average person
So I'm riding the subway in NYC and there are these adds for yet another one of these crypto related "businesses" and copy iirc goes something like 'stop boring us at parties trying to explain crypto. just invest with us blah blah'. Pretty sure the irony is lost on the target demographic.
If Ty had come out with a Beanie Baby NFT project this whole thing would’ve come full circle. Do you think they’d have taken off or tanked at the height of the NFT Bubble?
How on god’s earth did YC invest in this without seeing through the obvious bullshit?
YC has some blood on its hands here - their investment lent legitimacy to this scam.
Because obvious bullshit is the investment genre du jour. Why shouldn’t YC, a prominent player, take part in the hot obvious bullshit market?
TerraUSD Price (UST) $0.05468
So, 95% of the value is gone.
Can anyone explain how the fork, airdrop, and other gyrations the Terra/USD promoter is proposing will work, and where any actual money comes from?
It won't work. What they are trying to sell, is - community was stronger then only relying on UST. In one in a million chance, there could be a inflow of money and while users from snapshot wouldn't sell their tokens in an instant. So, basically, an utopia.
Hype is lost, wave is over.
The money comes from incredibly low IQ and poor people thinking they’ll win the lottery. It’s the same thing over and over. Luna2 is just a scam. Do Kwon is a sociopath.
Much the same way as this scam.
Terraform has $3B (ish, stores as Bitcoin) that they could use to try to buy back faith in their coin.
Problem is, best they can do is reboot with a Bitcoin-collateralized coin. The whole Terra/Luna/Anchor "algorithmic stablecoin" had been exposed as a fraud or a fantasy, so such smaller fraction of suckers and scammers will buy in to that again, and everyone else might buy in to a Bitcoin backed stablecoin, but there's not much profit in that for Terraform, and the users have no reason to choose it over a more reliably backed coin like Tether or USDC or DAI.
>Terraform has $3B (ish, stores as Bitcoin) that they could use to try to buy back faith in their coin.
This is not correct. They used those bitcoins to try to defend the peg. Here you can see the actual treasury: https://datastudio.google.com/u/0/reporting/b31cc9e5-c54c-44...
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> Terraform has $3B (ish, stores as Bitcoin) that they could use to try to buy back faith in their coin.
Had. It's gone.
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I recommend skimming over the list of blog posts shared over the course of a year about the rise and decline of a crypto startup. It's a great post-mortem: https://medium.com/@kamil.ryszkowski
Maybe the real StableGains were the friends we made along the way?
IMO, every single exchange is at least partially responsible for misleading users. Binance.US and OKCoin specifically marketed UST as a stablecoin that you could earn 20%. Marketing it as a stablecoin is a very clear signal that it has less risk.
Yes, users should inform themselves, but exchanges (as well as companies like Stablegains) need to be held accountable.
Binance.US didn't list UST until fairly recently.
Before then, Binance.US had several other "stable coins", the most popular being Binance USD and Tether. (Binance.US also has a dollar asset which is supposedly FDIC insured.)
Binance.US has trading rules that specify things like minimum and maximum price. The minimum price for Binance USD and Tether is something like $0.0001 (and the maximum price is something like $1000.0). IIRC, all of the other stable coins have similar "bounds".
UST when introduced was different. Its minimum price was $0.70 (and its maximum price was $1.30).
When things went to crap, that minimum price basically froze the market, or rather froze people into their positions. (There were people willing to buy at $0.45, for a while, then $0.17.)
FWIW, Binance.US eventually significantly reduced the minimum.
people who bet early, made big money. people who came in on the hype lost everything. the definition of pyramid schemes.
Oh well. We'll see, it might bounce back as these things do.
Oh, by that definition, even AAPL is a pyramid schema.
How about we leave the definition for pyramid scheme where it's already at?
> Pyramid scheme: making money based on recruiting an ever-increasing number of "investors."
> Oh well. We'll see, it might bounce back as these things do.
No, it won't. It won't regain the trust of the community and the project is dead in the water now, no way it'll recover from this.
> Pyramid scheme: making money based on recruiting an ever-increasing number of "investors."
This is correct. While looking into this for a friend I came across: "for a full year, you'll earn 0.5% APY on what each person you refer deposits" [1]. Still not a pyramid scheme, since 0.5% is a small fraction of the total yield paid out, but pyramidesque.
[1] https://stablegains.zendesk.com/hc/en-us/articles/4409440197...
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AAPL has physical and IP assets which could be sold to make investors whole. While I have big issues with them, they're not in the same ballpark as this 'stable' coin company or pyramid schemes.
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So here's the thing, the difference between a pyramid scheme and a business is that in the pyramid scheme, all the wealth gets generated by selling shares to other 'investors', while in a business, all the wealth is generated by selling to customers.
Which is why one's illegal, while the other is publicly traded on the stock market.
So the options are to withdraw to USD at 5% value, or transfer the ust to another wallet to qualify for a "potential airdrop" but probably lose the 5% as ust goes to 0?
True, however at this point it’s not really up to StableGains - they are doing the right thing here (regardless of their initial - potentially false - advertising) of allowing you to withdraw your holdings and then be at the mercy of the market directly.
I guess they didn't get the memo about going default alive.
Hey these days we're going default ponzi :)
Seriously!
I know this may be an unpopular opinion on this site in particular, but after seeing this I would never even consider raising money from YC. I would not be comfortable having the fate of my business in any way tied to a group of people that are so fucking dumb that they invested in the money version of a perpetual motion machine.
Seriously, this is the fucking stupidest thing I’ve seen in _YEARS_
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UST, a stable coin not even pretending to be backed by the very thing it was pegged to fails. Unlike USDT, USDC or GUSD, there was a documented plan of attack to take UST down 6 months ago, someone just raised enough capitol to execute it.
While there was a proposed attack, there is no evidence it (or any other attack) was executed.
Which would be weird. Attacks on blockchains usually have detailed analysis within days, the blockchains are public and any evidence would be right there for people to examine.
All evidence is that UST simply collapsed on under it's own weight because it's algorithmic nature was never stable. As soon as the price of LUNA started falling, it created a feedback loop which drove the price of LUNA to zero, destroying the very thing backing UST.
Yes the attack was a loophole in the algorithm not the blockchain itself.
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Can you point to the docs? That seems an interesting read.
Might be referring to https://twitter.com/freddieraynolds/status/14639606234029137...
What's interesting is that Do Kwon(the founder) blatantly insulted the researcher at the time.. don't have the link but google it, it's on twitter
It's pathetic that regulators haven't stopped this nonsense. These scams don't even last 6 months anymore, it's a joke
It's pathetic that the U.S. Federal Reserve and Treasury allowed anyone but the U.S. Government to mint a coin 'tethered' to USD, and named anything remotely similar. It's bizarre and a complete reversal from prior practice.
IMO letting crypto die by itself is the best way to prove it sucks.
If any blockchain was forbidden, there would be a huge PR stress and infinite arguments about their viabilities.
Just let morons fail.
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Plenty of countries have currencies which have a fixed exchange with USD, including my own (1 KYD = 1.2 USD).
It just takes a shit-tonne of capital, and it helps to have a functioning internal economy and flexibility to be able to defend against malicious agents.
I suspect there are other legal issues with creating an alternative currency in the us though, which is why these aren't currencies but securities. Which is still fine! A tethered coin is conceptually _similar_ to a 0-yield bond.
Presenting it as being "safe" without it actually being so is the problem here.
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As long as someone pays for cryptocurrency somewhere in the world, you will be able to algorithmically mint a coin tethered to USD or any other asset, and there is absolutely nothing the US Government or anyone else can do to stop it. The Pandora's Box is open.
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That’s … what banks and credit card companies do all the time. The only true dollars are physical cash and accounts at the Federal reserve. Everything else is a derivative pegged to those.
You mean like Disney Dollars?
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Let's be clear: YC needs to quit financing ponzi scams. Or better yet, be punished for it.
Yawn, brand new account, take this virtue signaling back to reddit and give me a break: YC can invest in whatever they want to, it's their money. Stablecoin farming may not be sustainable, but it's not a Ponzi scheme, unless you have no idea how a Ponzi actually works.
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The shorter the term the harder I would imagine it to be for regulators to act.
Governments tend to do things at their own pace.
> It's pathetic that regulators haven't stopped this nonsense.
As a result of the ICO scams in 2017 for example the infamous Ethereum DAO hack, perhaps that is why at least in the US, the SEC banned unregistered ICOs [0]; more countries to follow.
They have done 'something' about it, but it is not going to 'completely' stop otherwise they would have 'totally' banned all of them, including even registering an ICO with the SEC.
I won't be surprised to see stable-coin regulations this year with only a few of them still surviving.
[0] https://www.whitecase.com/publications/alert/regulation-init...
nowadays they don’t even do ICOs
find a VC who’d buy coins at low prices and then dump into public by placing on Coinbase/Binance
spend that VC cash on marketing
All crypto is a scam and it's so simple to see, it's astonishing anyone fell for this.
Look.
Imagine an otherwise empty room with a table and a few chairs. A couple people come in with some money in their pockets and cards. They play a few round of a card game, some lose, some win. When they leave, the room as it was before so it is crystal clear the sum of their money couldn't change. Some won, some lost but overall the change is zero. This still doesn't change if, for convenience, during the game, they use plastic chips to count wins and losses and at the end they exchange it for money.
But if someone takes a small cut every time the plastic chips move then that person is guaranteed to win and everyone else together is guaranteed to lose. Now, a game where, without knowing anything about the game you can tell ahead of the time which group wins and which one loses is not a game, it's a scam.
Indeed, one of the best moves for players is not to play the game but to sell their chips -- and praise the game to increase the chance of a greater fool buying in. Those will sit on a greater loss than you did which might not materialize yet but it's certainly in the system.
So, any crypto"currency" with transaction fees is a scam. Those who collect transaction fees are guaranteed to win and the rest are guaranteed to lose.
And no, stocks aren't like this because they produce dividend. And no, gold is not like this either because there are uses of gold which transform your gold into higher value products than raw gold (integrated circuits, jewelry) which sell for real money. Neither can happen with crypto"currencies", there the only interfacing with real money is exchange.
> Imagine an otherwise empty room with a table and a few chairs. A couple people come in with some money in their pockets and cards. They play a few round of a card game, some lose, some win. When they leave, the room as it was before so it is crystal clear the sum of their money couldn't change. Some won, some lost but overall the change is zero. This still doesn't change if, for convenience, during the game, they use plastic chips to count wins and losses and at the end they exchange it for money.
Does this not describe CC fees/taxes/online marketplaces/etc? Or is your argument all those are scams as well?
I agree crypto projects are generally a scam but I fully disagree the reason for that is transaction fees (which I assume is what you're alluding to here as the "small cut").
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If you don’t think there is fundamental value in permissionless, uncensorable, peer-to-peer online money transfer that is not controlled by any government or any single entity at all then nothing anyone can say will be able to convince you otherwise.
Notice how what I just described does not match the vast majority of these “crypto” projects. That is because they are not crypto. They do not adhere to the ethos of crypto. They are scams. It’s very simple really. If there’s a company behind it, if there’s an ICO, if there’s a single identifiable leader which can be attacked by governments to bring the project down, then it is a scam.
Unfortunately some time in the mid-2010’s the scammers and grifters of traditional finance moved in and started playing all the same games that got regulated out of existence in the legacy markets. They will likely get regulated out of existence again in the crypto world and people like you will gloat about how it’s the end for crypto. But the real crypto projects, Bitcoin, Monero, etc. will keep chugging along and there is absolutely nothing that can stop them.
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My imaginary investcoin [1] is not a scam though. It is backed by stocks and its value comes from the growth of stock market and from being usable as a decentralized mean of payment.
[1] https://news.ycombinator.com/item?id=31463825
Only about 8% of the gold demand is from technology. The rest is used a speculation and for luxury goods which are only valuable because you expect someone to pay an equal amount of money or more than you did.
“Gold has two major shortcomings in that it is neither of much use nor productive. While gold does have some industrial and decorative purpose, the demand for these purposes is limited and unable to absorb the amount of new gold being mined. And if you own an ounce of gold for eternity, you still end up owning an ounce.” - Buffet
https://www.statista.com/statistics/299609/gold-demand-by-in...
Sounds like you're describing the Visa/Mastercard duopoly that charges high interchange fees to merchants so they can bankroll their own rewards programs.
But what about crypto completely revolutionizing transactions, decentralizing the economy and providing a stable universally accessible data exchange medium? What about tracking the food you buy on the blockchain? What about web3? What about muh NFT monkeys?
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Some cryptos do have real-world benefits - https://investmentu.com/santos-crypto/
Crypto is a tool.
Is it often used for scam? Yes. But so is email.
Just like stocks can fall 99% in a day. It stock s cam? No.
The problem is that users dive into it without understanding the risks. Also, there should be (and will be) more regulations around it.
But it is as far from the scam as it gets.
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> All crypto is a scam and it's so simple to see, it's astonishing anyone fell for this.
No, it is not.
Please try to set aside your hatred for all things crypto and understand that there is actual legitimate value in many of the crypto projects, and that the core proposition, that of decentralized peer to peer value transfer, is a legitimate and useful use case.
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Least corrupt crypto company.
Return is directly correlated to risk, so when a black box corporation is promising 15% returns and marketing itself as a “simple and safe” way for its users to benefit from “advances in financial technology.” It's probably not safe, but it is very simple.
Any crypto or web3 startup contains an ad hoc, informally-specified, bug-ridden, slow implementation of "receive_funds.sh > /dev/null".
Thought you were about to say 'a Ponzi scheme'.
>Return is directly correlated to risk
This is really what should be required as the boldface disclaimer on every investment product.
"10-15 % guaranteed return" has another name...fraud....even in the case of old-school imperial plunder, there is always the risk your target might fight back.
>Return is directly correlated to risk
This is at least a weak EMH assumption. It's not a law. In crypto sometimes the opposite is true for short to medium periods of time because uninformed people are afraid of 'too high' returns. Best money is made on market inefficiencies like that.
When I want bright well read people to invest in my scam, I flatter them that they have much better insight than most people and are destined to be ahead of the curve as a result. /s
Return is directly correlated to risk.
Your comment makes you seem like a very easy mark for the scammers targeting you.
Stablehains sounds like something from a 2am infomercial. I have no idea why people would fall for this garbage.
Why did YC fund this fairly obvious fraud?
FYI, for anyone else withdrawing funds:
I requested an ACH withdrawal at 5pm pacific on 5.23 It was processed 13 hours later at 645am on 5.24 The conversion rate I received was 0.03850612745 If you view the UST value during that window, it was worth almost twice that rate on average: https://coinmarketcap.com/currencies/terrausd/
https://etherscan.io/tx/0x6ae021b3bd9848ade6863820092dcf2844...
Just a warning for anyone expecting to get out with even the value of your UST...
Obviously I'm a little out of the loop, but what is the "attack" they talk about in the new plan? I thought the coin just death spiraled.
Terra: you can always exchange 1 UST for $1 worth of Luna via this smart contract if you'd like to cash out.
Users: OK, don't mind if I do.
Terra: help we're under attack.
http://podcast.banklesshq.com/ust-luna-the-biggest-collapse-...
These guys discuss some details (that were known as of this publish date). It closely resembles the 'attack' on GBP in the 90's by a billionaire.
The thoughts are that someone borrowed lots of BTC and UST, started selling UST to depeg, then started selling BTC as they tried to regain the peg, the joint selling of BTC lowered the price making it harder, actually impossible,to regain the peg.
But wouldn’t that just be mr market, not a particular someone?
A great related article from last year about the "Inherent fragility of algorithmic stablecoins" it also mentions Terra: http://www.wakeforestlawreview.com/2021/10/built-to-fail-the...
It's very telling that they say they learned of the depeg event on the 10th of May
It actually started on the 9th of May. So not only did they negligently invest 100% of funds in a single highly risky project while they marketed that they diversified risk, but they were also asleep at the wheel and missed the opportunity to salvage some of the terra before the depeg had gone too far
> Stablegains is not accepting any new users or any new deposits on our platform. At this time, please DO NOT use your deposit addresses as any funds sent might not be recoverable.
It boggles my mind that people don't see that the inability to block/reject payments is a fundamental flaw of cryptocurrency.
Why would there be a "fundamental" reason for an inability to block/reject payments in cryptocurrencies? Ethereum smart contract can already do that. Just exit with an error while processing an incoming payment.
Are you saying that someone can't deposit money into random bank account?
I'm saying people can close their bank accounts.
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You can do that with a smart contract if you plan ahead for the possibility that you want to do so.
Very beautifully, because they have used medium dot com to write their web log, the following text continues to appear at the bottom of the article:
>Stablegains.com — 15% APY savings tool. Take control of your financial future. No hidden fees, no minimum balances, no commitment periods.
In related news, tether’s market cap dropped another $1B today. Seems like it has been happening in chunks like this every day. At least according to coinmarketcap.com. Down $10B since the Luna collapse, over 10%. Slowly, slowly, then all at once?
We should normalise signing with the names instead of "Team Stablegain".
Hope there is jail time for investing people’s money into your Anchor protocol ponzi and not telling investors clearly.
I thought there was already a big announcement back towards the middle of the week. (Checks mail spool) OK, Thursday.
"Now, as it becomes apparent that UST is not what we all had hoped it would be..."
But it’s only string…
before they become unstable losses?
not that stable...
This is huge news, isnt it? A YC startup going bankrupt because of the Terra collapse?
Fwiw a lot of YC companies have had large collapses. For example Homejoy which is a lot bigger than this company. It happens. Startups are risky. Not huge news.
Meh YC backs a lot of scams masquerading as businesses. This period of easy money and wealth concentration has fostered much in the way of misallocation of capital. Y-Combinator exists to make its owners money. Their primary concern is bloody Benjamins, not morality and the public interest.
As I've said elsewhere, having dealt with them and seen who they invest in, morality does not seem to be an important aspect of YC investments.
Interestingly, they removed their prominent YC branding very recently after the collapse. Compare:
https://twitter.com/stablegains/status/1523874916206059525
https://web.archive.org/web/20220510035811/https://twitter.c...
A fraudulent company going bankrupt because the fraud collapsed.
Source on the company being fraudulent?
Source on Terra being a fraud?
Please provide sources for your ad-hominems.
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