Ponzi scheme debates #154
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Sorry for the late response, I have been working through your question about Ponzi schemes and will post my thoughts in a subsequent reply. General ThoughtsCrypto narratives and propaganda have planted many false assumptions in the general public's mind. The Bloomberg piece uncritically uses many of these presuppositions as facts, however, there is a more serious issue here. The person who wrote this article is a true believer. The article is a puff piece written by someone who is heavily indoctrinated, and likely has a vested interest in the crypto industry. Adherence to the ideology of crypto prevents both author and reader from evaluating claims from any other viewpoint aside from those that are officially sanctioned. Working through a cogent definition of a Ponzi and its characteristics is worthwhile. It will help us form better arguments, and be clearer when we communicate with the public about the fundamental problems with crypto. However, even the most perfect definition of a Ponzi scheme, combined with brilliant arguments will not help in this specific case. Combating the Bloomberg article, and the many others like it, requires the use of a different strategy. For the sake of brevity, I won't go through the entire article here but there are over a dozen sections that exemplify the lack of ethics in crypto journalism. The most egregious is perhaps this one:
This is truly stunning. Yes the emperor has no clothes, but have you seen how well he's dressed! I am not sure if this is done intentionally, or if it's just been internalized by true believers, but they literally describe a Ponzi, and then imply it's not a Ponzi because the Ponzi is 'going strong'. Crypto believers are inoculated against reason, the definition of a Ponzi scheme is redefined as normal, it's just how things are, this logical inconsistency does not need to be explained or scrutinized. Crypto Market Cap is a lie, its not 800B of value, its 800B of numbers on a screen, nowhere near that amount of liquidity could ever be realized because tokens were purchased at many different prices, but they calculate market cap by taking the latest price and multiplying it by the number of tokens. A system that doesn’t generate revenue will be unable to fill the gap (close the delta) between the supposed liquidity available inside a cryptocurrency (or even the real total amount that has been invested), and the actual liquidity that can be withdrawn. Fighting Propaganda and DisinformationThe author of the article is https://twitter.com/MuyaoShen, who appears to be very pro-crypto, and who was formerly @coindesk (Michael P. Regan likely served in an editorial capacity and reviewed the article). The author was always going to portray the Crypto industry in a favourable light and dismiss concerns relating to its Ponzi like nature. Although the tide may be turning, as the stablecoin UST has crashed, more needs to be done to challenge crypto narratives in the mass media.
Unfortunately the game that is being played here is not one of presenting ideas, and have honest, rational debates. Crypto is in the propaganda game, so the best strategies that we can use are the ones that combat disinformation in other arenas. |
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I note that ponzi scheme point comes up again and again and also gets dismissed again and again. E.g. here is Bloomberg piece on Terra https://www.bloomberg.com/news/features/2022-04-19/terraform-s-do-kwon-s-huge-bitcoin-buys-catch-crypto-billionaires-attention
It would be worth really working through this point. What do we mean exactly by Ponzi scheme. How do we evaluate if X is a ponzi scheme, and if X is a ponzi scheme when will it unwind?
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