Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The biggest crypto lending company is a ponzi scheme

rorodi.substack.com

Post reply on HN
Print view View original

251–260 of 429 posts

Re: The biggest crypto lending company is a ponzi scheme

#251

Post by stickfigure »

estro0182 wrote: post #115

Given what this expose says about institutional lending not being able to account for high ROI, how is Gemini Earn[0] able to offer up to 8% on GUSD and slightly less on other coins? Gemini is audited and says all GUSD Earn backing funds are FDIC insured up to 250k. Definitely concerning. [0]: https://www.gemini.com/earn

From that page: For GUSD in Earn, while the U.S. dollar reserves backing the GUSD tokens are eligible for FDIC insurance, the GUSD tokens themselves are not insured, whether or not in Earn.

I'm not sure how to parse that, but it doesn't sound reassuring?

Re: The biggest crypto lending company is a ponzi scheme

#252

Post by adam_arthur »

roywiggins wrote: post #240
adam_arthur wrote: post #222

Earlier quoted context omitted.

That's essentially exactly what a Ponzi scheme is. You have an asset with 0 intrinsic value that only goes up in value due to new investors buying in. You will only ever make more money if somebody buys in after you. Unlike stocks where owning a share entitles you to profit stream of the company (intrinsic value)

If they are actually lending the money out to people who aren't investors, earning interest on it and returning that to investors, then Celcius is not a Ponzi scheme, it's probably speculating on weird, opaque and shitty assets, but it's not a Ponzi. Like, if I set up a business "investing" in worthless penny stocks and somehow manage to generate returns, I'm not running a Ponzi. Maybe I'm pumping and dumping those p…

Pump and dumping penny stocks works exactly like a Ponzi scheme. It's a layer removed perhaps, but the early buyers win and the later buyers lose, by definition.

I'm not an expert in Celsius, perhaps it's structured a bit differently. But any system that relies on new investors paying out the old is structured akin to a Ponzi scheme, if there's no intrinsic value element to the speculation.

If AAPL pays a 10% dividend, huge numbers of people would buy it for the yield. The yield comes from their underlying business, not from investor money. This puts a floor on the price.

When your yield only comes from newer investors, that's not intrinsic value or sustainable

Re: The biggest crypto lending company is a ponzi scheme

#253

Post by nradov »

_xnmw wrote: post #202

For those who believe "crypto is too big to fail", or the genie is out of the bottle, or that crypto concepts have become so engrained and popular that it's not possible to stop, I'd like to point out that Bernie Madoff's Ponzi scam lasted for 30+ years. People built entire lives on his very professional-seeming "business". Scams can go on for a very long time, and very large numbers of people can build their whole l…

China banned cryptocurrency not because it's a scam (which it mostly is) but because it provides a way for wealthy Chinese to evade currency controls. The Chinese renmimbi currency isn't freely convertible to foreign hard currency. But Chinese residents found a loophole. They could purchase cryptocurrency mining hardware and electricity with renmimbi, then use online exchanges to sell the resulting tokens for foreign currency. The Chinese Communist Party couldn't tolerate this challenge to their authority.

Re: The biggest crypto lending company is a ponzi scheme

#254

Post by AnIdiotOnTheNet »

selestify wrote: post #245
AnIdiotOnTheNet wrote: post #211

Earlier quoted context omitted.

> In terms of high-quality art, the Picasso is artificially scarce in the sense that there are reproductions so high-quality that only experts can tell the original apart from the reproduction. Except that those are also scarce because they take the labor of expert hands to make too. People actually would pay money for known forgeries because of it. Absent copyright law and a desire to fund the artist, no one would p…

Sure, but we were talking about spending money on NFTs versus spend it on (original) Picassos. Now you're talking about spending money copying a Picasso versus (not) spending money copying the digital artwork that an NFT was minted for, which is distinct from the NFT itself and worth approximately zero, as you say.

That's a distinction without a difference. I'm saying the forged art is valuable because there is a cost to produce it, and the JPG isn't because there effectively isn't a cost to produce it.

The NFT took work to produce, sure, but it's just a number with some mathematical relationship to other numbers and means absolutely nothing without other systems agreeing that it means something. It creates work to be done where none needs to be done solely for the purpose of trying to fit a square peg (post-scarcity information) into a round hole (scarcity-based markets).

Re: The biggest crypto lending company is a ponzi scheme

#255

Post by roywiggins »

adam_arthur wrote: post #252
roywiggins wrote: post #240

Earlier quoted context omitted.

If they are actually lending the money out to people who aren't investors, earning interest on it and returning that to investors, then Celcius is not a Ponzi scheme, it's probably speculating on weird, opaque and shitty assets, but it's not a Ponzi. Like, if I set up a business "investing" in worthless penny stocks and somehow manage to generate returns, I'm not running a Ponzi. Maybe I'm pumping and dumping those p…

Pump and dumping penny stocks works exactly like a Ponzi scheme. It's a layer removed perhaps, but the early buyers win and the later buyers lose, by definition. I'm not an expert in Celsius, perhaps it's structured a bit differently. But any system that relies on new investors paying out the old is structured akin to a Ponzi scheme, if there's no intrinsic value element to the speculation. If AAPL pays a 10% dividen…

Not every financial fraud is a Ponzi scheme, and it's silly to call everything a Ponzi. It sounds like Celsius probably is one, though.

Re: The biggest crypto lending company is a ponzi scheme

#256

Post by yellow_postit »

marcinjachymiak wrote: post #131
marcinjachymiak wrote: post #117

Earlier quoted context omitted.

I don't know what happens behind the scenes at Celsius. I do know there are many ways to get those high ROIs in DeFi. With zero evidence suggesting they are lying about returns, the charitable guess I can make is that they are getting high DeFi returns and giving their customers slightly lower ones after taking a cut.

There are also other ways to get these returns outside of DeFi, like by staking ETH, selling covered calls, or various other strategies on centralized services

And these are also mostly speculation.

The crux of the OP’s argument to me is that The company and others in this space position the yields as being “in kind” to savings account yields despite it very much being a different risk ballgame. See the frequent hacks on https://rekt.news/ for example.

Do sites like Celsius explicitly claim to be as safe as insured savings banks? No of course not but they play a similar linguistic game of association to Tesla’s “autopilot” nomenclature.

As with most things do your own research and don’t risk what you can’t lose.

Re: The biggest crypto lending company is a ponzi scheme

#257

Post by nprz »

_xnmw wrote: post #202

For those who believe "crypto is too big to fail", or the genie is out of the bottle, or that crypto concepts have become so engrained and popular that it's not possible to stop, I'd like to point out that Bernie Madoff's Ponzi scam lasted for 30+ years. People built entire lives on his very professional-seeming "business". Scams can go on for a very long time, and very large numbers of people can build their whole l…

Eric Schmidt just joined ChainLink as a Strategic Advisor[0]. If crypto is such an obvious scam like so many hn readers believe to be the case, why would someone like Schmidt ruin his reputation by joining a crypto company?

[0] https://www.prnewswire.com/news-releases/former-google-ceo-e...

Re: The biggest crypto lending company is a ponzi scheme

#258

Post by adam_arthur »

roywiggins wrote: post #255
adam_arthur wrote: post #252

Earlier quoted context omitted.

Pump and dumping penny stocks works exactly like a Ponzi scheme. It's a layer removed perhaps, but the early buyers win and the later buyers lose, by definition. I'm not an expert in Celsius, perhaps it's structured a bit differently. But any system that relies on new investors paying out the old is structured akin to a Ponzi scheme, if there's no intrinsic value element to the speculation. If AAPL pays a 10% dividen…

Not every financial fraud is a Ponzi scheme, and it's silly to call everything a Ponzi. It sounds like Celsius probably is one, though.

"A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors"

Explain how pump and dumping penny stocks doesn't apply? I agree that it's a bit different in nature than most Ponzi Schemes due to lack of central entity orchestrating it, but the net effect is the same in the end.

You get in early, you win, you get in late, you lose.

Even if we call it something else, it's clear the underlying mechanism and unsustainability of returns is the same.

Re: The biggest crypto lending company is a ponzi scheme

#259

Post by moron4hire »

selestify wrote: post #204
moron4hire wrote: post #174

Earlier quoted context omitted.

So what I hear you saying is that NFT concept only works if everything becomes an NFT, immediately upon creation. Any hold-outs or delays gives room for fraudulent minting, which means you don't have a trustless system. You can't say that NFTs are a trustless system when the origin of the NFT requires trust. You might as well assume the "+ C" term in all integrals equals zero. It's just factually incorrect.

> So what I hear you saying is that NFT concept only works if everything becomes an NFT, immediately upon creation. Any hold-outs or delays gives room for fraudulent minting, which means you don't have a trustless system. No, as long as it's known that the address that created the NFT is owned by whichever public figure created the artwork, you're good to go. > You can't say that NFTs are a trustless system when the…

Yes, PGP is not a trustless encryption scheme. What does that have to do with anything? I say, "2 + 2 does not equal 5" and you say, "yeah, well 3 + 3 does not equal 7, but that doesn't prove anything about what's in my pocket".

Nobody--who is informed--has given me any coherent description of what value add NFTs provide, period. These ever shifting sands of never-enumerated benefits.

What, exactly, did you mean when you said "the value-add of NFTs... is namely that there's a trustless, verifiable record of transfer"? You responded to my assertion that NFT ownership is not trustless by saying that wasn't the value-add, the value-add was that they were trustless.

Re: The biggest crypto lending company is a ponzi scheme

#260

Post by berberous »

dustintrex wrote: post #175
marcinjachymiak wrote: post #77

I'm not a fan or user of Celsius, but this is an incredibly inflammatory title with very little evidence to back it up. Claims like that demand greater proof. This is an incredibly lazy article The author pretty much failed to do any research on DeFi investments (point 3 in the OP). Compound and Aave are just 2 of many places investors place their assets, and are definitely near the lower end of APYs. Badger, which C…

> Well a lot of it is coming from incentives of these protocols I keep seeing this for DeFi. - So you put 1 fiat into the magic box, and 2 fiat comes out. Where did the 1 fiat profit come from? - DeFi collateralized staking algorithms hash protocol incentives! - Yeah whatever but no really, it's a closed system so all inputs and outputs need to sum up, where did the new fiat come from? - YoU dOnT uNdErStAnD cRYpTo!!1…

I’m not really knowledgeable about DeFi, but here’s a simplistic model (would love to be corrected by someone with deep DeFi knowledge):

1. You put $1 of ETH into a new protocol, let’s say a new Decentralized Exchange on Ethereum that is paying a high amount of interest in order to attract liquidity to their protocol. The high interest is perhaps paid in ETH or maybe in a new token for the protocol.

2. Users flock to this new DEX, and actually use it, generating trading fees for the DEX, which drains activity from CEXs like Coinbase. If in step 1, the payment was made with a new token, perhaps that new token either earns a cut of trading fees, or gets governance rights over the DEX.

3. You either earned another $1 of ETH, or of the new token.

In the above example, it’s not a closed system anymore than the US economy is. A new company was created, which created real value by creating a better exchange which attracted users over CEXs. The company has value now it can payout because it generates trading fees and the equity/governance of the company is valuable. It bootstrapped that with protocol incentives.

Post reply on HN