Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls” • Hacker News Board

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#201

Post by JohnJamesRambo » Thu, Dec 16, 2021, 5:30 PM UTC

Animats wrote: post #195

Scams that will collapse in 2022: * Axie Infinity. That's a Ponzi in the collapse phase. Their Smooth Love Potion token is down 90% and in a screaming dive, and their Axie token is down 37% from peak. That one is going to hurt a lot of poor people in the Philippines. Many quit their jobs to play Axie's play-to-earn game. All the money comes from later entrants, so it's a Ponzi by definition. * OpenSea. The NFT market…

How could Smooth Love Potion have failed us?

Which brings up my other point, that people know the risks they are taking. Casinos are still legal. Someone that yolos their life savings into Smooth Love Potion was going to lose it some other way. If you don’t know your 100% apy isn’t sustainable in a DeFi ponzi, that’s on you.

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#202

Post by DennisP » Thu, Dec 16, 2021, 5:30 PM UTC

Animats wrote: post #165

vmception wrote: post #74

I think "rug pulls" is not defined well. One example of a "rug pull" is that the team provided liquidity to the AMM liquidity pool, and then removed it, leaving people with no where to trade the token. Its honestly hard for me to call that a scam, although I understand the community expectation being undermined. First: the SEC exacerbates this reality. Tokens that don't want to be considered a security have to consid…

(OK, who went and made Hacker News text uncopyable?) I think "rug pulls" is not defined well. It's a standard type of investment scam, "take the money and run". The SEC even has a video for the clueless.[1] And a web site on ICOs.[2] This scam long predates cryptocurrency, or the Internet. Newspapers made mass-marketing a scam possible. That started about two centuries ago. Most scam types, like this one, are old. Th…

I just copied text out of your comment and pasted it here:

> It's a standard type of investment scam

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#203

Post by astoor » Thu, Dec 16, 2021, 5:30 PM UTC

pjc50 wrote: post #98

ajross wrote: post #96

Earlier quoted context omitted.

That's a bit circular though. I mean, to be clear I don't agree with the upthread point that we should deemphasize crypto crimes. But that said... the trust in the DeFi economy is being eroded right now , and for some very rational reasons. It's certainly not the government's job to jump in and prop up financial systems in which it's not involved. Its interest is in protecting its own citizens from criminality, not i…

> trust in the DeFi economy I thought the whole point was to be trustless?

> I thought the whole point was to be trustless?

No, it is not trustless, it simply shifts trust from central authorities to more nebulous entities such as anonymous developers, shady mining cartels, unregulated exchanges, and even yourself to not lose your private keys. Which you consider to be better is essentially a political decision.

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#204

Post by duplicited » Thu, Dec 16, 2021, 5:32 PM UTC

Crypto is ridden with rugpulls. It’s extremely hard to find a diamond in the rough and you’re going to lose money doing it. Look for projects that focus on building community rather than pumping and dumping. I’ve been dabbling in DogeBonk and it’s funny how other “bonk” coins keep getting rug pulled around it while DogeBonk keeps on going

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#205

Post by pjkundert » Thu, Dec 16, 2021, 5:33 PM UTC

Like that crazy scam where everyone who held the currency had its value reduced by 10% in one year, after the total units in circulation was increased by 100% the year prior?

Oh, wait...

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#206

Post by darkwizard42 » Thu, Dec 16, 2021, 5:33 PM UTC

Animats wrote: post #195

Scams that will collapse in 2022: * Axie Infinity. That's a Ponzi in the collapse phase. Their Smooth Love Potion token is down 90% and in a screaming dive, and their Axie token is down 37% from peak. That one is going to hurt a lot of poor people in the Philippines. Many quit their jobs to play Axie's play-to-earn game. All the money comes from later entrants, so it's a Ponzi by definition. * OpenSea. The NFT market…

Agreed on Axie. Disagree on NFT.

NFT is art (VERY LOOSE COMPARISON). If you believe that then of course there is TONS of art that not only has zero bids but also never gets sold. I think NFTs are overhyped now but there is clearly a market for them. Speculating on them is similar to art collecting, all speculative. So I don’t see anything inherently wrong with it (something being puffed up isn’t illegal)

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#207

Post by arcticbull » Thu, Dec 16, 2021, 5:34 PM UTC

JumpCrisscross wrote: post #53

The “I have no sympathy for the victims” comments are crass. But there is a legitimate question of how much law enforcement these crimes deserve. Arizona has a stupid motorists law [1]. If a car “becomes stranded after driving around barricades to enter a flooded stretch of roadway,” the driver “may be charged for the cost of their rescue.” A similar concept for crypto may be necessary. Law enforcement will pursue. B…

It’s easy not to have sympathy because these folks are the ones railing against the banks and the government and the establishment and police - confident they don’t need them because they’re all in on a system the vast majority doesn’t understand the first thing about. But they’ll demean and criticize anyone who suggests their magic free money machine might not be all it’s cracked up to be. They’ve been warned so many times. Like the anti-vaxxers turning to ivermectin. It’s honestly just an episode of r/WinStupidPrizes.

Even now they’re rationalizing - US banks offer 0% interest and took $12B in overdraft! See how much worse that is? Well except the $12B is out of $18T in assets so DeFi hacks cost 1400X as much per user.

In fact 10% of all TVL in DeFi was stolen this year. That means if you’re not making a 7% return for inflation and a 10% return for risk loss, you’re losing money in real risk adjusted dollar terms invested in DeFi. 17% APR in DeFi is equal to 0% in real dollar terms.

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#208

Post by thinkmassive » Thu, Dec 16, 2021, 5:34 PM UTC

TacticalCoder wrote: post #107

mbesto wrote: post #77

Earlier quoted context omitted.

This is my favorite story about crypto fraud protection: The Winklevosses came up with an elaborate system to store and secure their own private keys. They cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country, so if one envelope were stolen the thief would not have the entire key. https://www.nytimes.com/2017/12/19/technology/bitcoin-winkle…

It's quite crazy to think that these guys not only were basically behind FB (they won the lawsuits, with an 's', proving it) but also saw Bitcoin early on. They bought at less than ten and were billionaires when it hit $10 K. So these dudes both "saw" FB and cryptocurrencies. Hate as much as you want on FB and cryptocurrencies, it's still quite a feat to have foreseen both. Regarding storing parts of the secret here…

> Regarding storing parts of the secret here and there: it's basically and "m out of n" scheme AFAICT. There are many variations of this but the overall idea is that you can afford to lose (n - m) parts and yet you'll be able to recover the secret. And if a thief were to steal parts, he'd need m parts to be able to recover the secret.

The difference between a Shamir scheme and a true multi-signature scheme is that the former requires combining the m-of-n pieces to reveal the single private key to sign a transaction, which is a huge vulnerability and single point of failure.

Bitcoin script allows the m-of-n signatures to remain geographically dispersed, each signing the transaction with only their own key, so no single party ever needs to possess the full private key.

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#209

Post by PeterisP » Thu, Dec 16, 2021, 5:35 PM UTC

wsc981 wrote: post #34

BoppreH wrote: post #24

This is my biggest complaint against cryptocurrencies in general. I'm happy with my bank's fraud protection. How can crypto users protect themselves without recreating traditional banking? Bitcoin was released ~13 years ago, and wallet/transaction security has been one of the most important requirements since then (along with scalability, but let's not go there). If trillion dollar market caps and god-knows-how-many…

Well, in Germany perhaps soon some banks will hold cryptos for their clients [0]. I would imagine these banks would offer some kind of fraud protection for the crypto assets they will hold, likely at some cost. I believe in the USA there was already some legislation passed some time ago that would allow banks to be custodians of crypto-currencies? --- [0]: https://bitcoinethereumnews.com/crypto/two-german-banks-comm.…

This probably is the solution - as cryptocurrency advocates like to say, "not your keys, not your coins", but for certain people an IOU from a bank saying that the bank owes them some coins is preferable to having the actual coins and the benefits+risks associated with that.

It's similar to stocks and bonds - you could own them yourself, but for not-huge private investment it's often simpler to have a financial institution hold them on your behalf.

Re: Cryptocurrency scams cost owners $7.7B in 2021, driven by DeFi-based “rug pulls”

#210

Post by ajross » Thu, Dec 16, 2021, 5:35 PM UTC

pjc50 wrote: post #98

ajross wrote: post #96

Earlier quoted context omitted.

That's a bit circular though. I mean, to be clear I don't agree with the upthread point that we should deemphasize crypto crimes. But that said... the trust in the DeFi economy is being eroded right now , and for some very rational reasons. It's certainly not the government's job to jump in and prop up financial systems in which it's not involved. Its interest is in protecting its own citizens from criminality, not i…

> trust in the DeFi economy I thought the whole point was to be trustless?

That's the core semantic confusion at the heart of this issue. Cryptocurrency protocols eliminated the need for trust for cryptocurrency transactions. So you can exchange BTC or ETH all day and night and always know who you're paying and no one can get in the middle and mess that up.

But it does nothing for transactions outside of that world. The core idea behind the "DeFi economy" is making things happen in the real world (by financing business ideas, buying 230 year old documents, etc...). And that part requires that the crypto resources be given to some kind of real actor in the real world who's going to do something real with them.

And those actors are people, and they cheat. Hence the new term of art "rugging". You can cheat people in the crypto world, in some sense, more easily than you can regular consumers precisely because they got fooled into thinking they didn't need to trust you.