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The collapse of the IRON stable coin

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Re: The collapse of the IRON stable coin

#151

Post by shkkmo »

bombcar wrote: post #55

> Non-collateralized stablecoins require continual growth to be successful. In the event of a price crash, there is no collateral to liquidate the coin back into, and the holder’s money would be lost, as seen with many past projects trying to utilize such design [sic]. Isn’t that just a Ponzi scheme?

It depends on how the coins are stabilized. If they are stabilized by generating new coins and those coins ate given away to current holders (as opposed to sold to establish more collateral), then this is precisely a ponzi scheme.

Re: The collapse of the IRON stable coin

#152

Post by rank0 »

sva_ wrote: post #101
meowface wrote: post #13

Probably a dumb question, but is there any possibility of temporarily getting the price to slightly above 0 in order to let people get their money out? For example, could some group with a lot of money offer to buy/sell a bit until the oracle considers it above 0, in exchange for some sort of compensation from the investors or devs?

Their docs state that there should be a max supply of 1 billion iron titan tokens[0]. But according to coingecko, there are over 27 trillion in circulation[1]. I think that's probably where the trouble started, and at that amount, I doubt they'll be able to get the price up. I may be totally wrong though, I heard about this project for the first time today. [0] https://docs.iron.finance/iron-finance-on-polygon/titan-…

> Their docs state that there should be a max supply of 1 billion iron titan tokens[0]. But according to coingecko, there are over 27 trillion in circulation[1].

How on earth does something like this happen?

Re: The collapse of the IRON stable coin

#153

Post by exdsq »

dragonwriter wrote: post #129
exdsq wrote: post #81

Earlier quoted context omitted.

I've worked in the space for a few years and can say it's been the opposite experience for me. Had the chance of working on a Haskell project with the original creators of Haskell, being taught QuickCheck by the creator of QuickCheck, testing economic ideas created by professors of Economics at top universities, and sponsored entire compilers and languages to help ensure the software was as solid as possible. One of…

The existence of some “absolutely insane” highly-skilled, well-trained, well-funded teams in the field doesn’t mean that there aren’t also lots of poorly-qualified teams without the up-front funding for development trying to cash in on all the money sloshing around the field.

True, I'm just saying as someone who's been in the space for several years I've not come across too many of these. I think it's a stereotype that doesn't match with reality - at least from my experience.

Re: The collapse of the IRON stable coin

#154

Post by xqk8 »

saalweachter wrote: post #100
xqk8 wrote: post #82

Earlier quoted context omitted.

A Ponzi scheme requires a central actor like Charles Ponzi, you're quoting a description of a "purely algorithmic stablecoin" which implies no central actor to channel new investors' money to old, no central actor to defraud the new investors and by telling them they've gained money when they haven't. I guess they are comparable in the way that they both require a inflow of capital, is that what you're saying? That w…

Technically it has to be run from the Ponzi region of France.

He was Italian, C− for effort

Re: The collapse of the IRON stable coin

#155

Post by RaketenStadt »

EDEdDNEdDYFaN wrote: post #150
RaketenStadt wrote: post #136

Earlier quoted context omitted.

No, much different, in a Ponzi scheme you're fraudulently claiming that the high returns you're delivering your old investors are real, and result from your investing acumen, when in fact they aren't real, they're just money from new investors that was never invested in the first place. This is more like if you bought a lot of dollar bills that were 75% backed by gold and %25 backed by Dogecoin. They are comparable i…

"They are comparable in that both keep working as long as no one tries to cash out, and money keeps coming in." So...a Ponzi scheme?

No, much different, in a Ponzi scheme you're fraudulently claiming that the high returns you're delivering your old investors are real, and result from your investing acumen, when in fact they aren't real, they're just money from new investors that was never invested in the first place.

They are comparable in one way however.

Re: The collapse of the IRON stable coin

#156

Post by dh5 »

bombcar wrote: post #55

> Non-collateralized stablecoins require continual growth to be successful. In the event of a price crash, there is no collateral to liquidate the coin back into, and the holder’s money would be lost, as seen with many past projects trying to utilize such design [sic]. Isn’t that just a Ponzi scheme?

Matt Levine had a great writeup about this:

> If the price of IRON goes down from $1 (good) to $0.95 (bad), you just issue some TITAN (worth $65) to buy some IRON until it’s worth $1 again. And if IRON keeps going down, you just issue some more TITAN (worth $60) and buy more. And if IRON keeps going down … [you can fill in some more iterations here] … you just keep issuing TITAN (worth $0.000000035) and at that point you’re not accomplishing much. If you could sell 286 trillion TITAN at $0.000000035 each you’d raise $10 million. That’s probably hard. There are 285 million IRON (formerly worth $1) outstanding.

So probably not a Ponzi scheme but also not a scheme that was created by someone who can think two steps ahead.

Re: The collapse of the IRON stable coin

#157

Post by shkkmo »

xqk8 wrote: post #125
jonfw wrote: post #98

Earlier quoted context omitted.

A ponzi scheme largely refers to a scheme where you invest capital to get access to the future inflow of capital, where that future inflow of capital comes from other investors who are hoping to access future inflows of capital, etc. The difference between this and a startup is obvious- a startup intends to become financially independent at some point

It certainly doesn't largely refer to that. It requires a central actor to defraud new investors, promise investors returns that haven't actually been realized, channel their money to pay off the old ones. If you read up on why it's named a Ponzi scheme you can understand how they work.

> It requires a central actor

I see exactly zero existing definitions of ”ponzi scheme” that mentions any "central actor" so you seem to be creating an entirely new definition purely to avoid the "ponzi scheme" label.

Re: The collapse of the IRON stable coin

#158

Post by rank0 »

hungryforcodes wrote: post #26
sashimi-houdini wrote: post #10

Earlier quoted context omitted.

"They are doing it too" is a favorite argument of crypto-enthousiasts. I'd argue the answer here is not more madness (crypto), but a serious attempt to fix the traditional financial system.

Why bother -- it's so broken. We can just again, it makes way more sense.

I think the point is that starting over will just create a new equally broken system. So then we'll have two broken systems. Humanity could've instead used all that time/effort/capital to continue improving on traditional finance as we have been doing over the past century.

The current financial system becomes more robust every time a black swan event like 2008 occurs.

Re: The collapse of the IRON stable coin

#159

Post by [deleted] »

meowface wrote: post #13

Probably a dumb question, but is there any possibility of temporarily getting the price to slightly above 0 in order to let people get their money out? For example, could some group with a lot of money offer to buy/sell a bit until the oracle considers it above 0, in exchange for some sort of compensation from the investors or devs?

[deleted]

Re: The collapse of the IRON stable coin

#160

Post by shkkmo »

xqk8 wrote: post #121
raziel2701 wrote: post #103

Earlier quoted context omitted.

I think we're splitting hairs with the definition, it's not a ponzi but it acts like a ponzi. It's a weird distinction I suppose, I personally have no qualms calling it a ponzi scheme because new money is needed to pay old money.

A Ponzi scheme without anyone running it isn't a Ponzi scheme. > new money is needed to pay old money WOW that's a broad definition. Turns out my 401k is a Ponzi! Do you know the difference between, say, a pyramid scheme and a Ponzi scheme? Or is "new money is needed to pay old money" the most nuanced understanding you have?

> A Ponzi scheme without anyone running it isn't a Ponzi scheme.

Citation please.

> Do you know the difference between, say, a pyramid scheme and a Ponzi scheme?

A pyramid scheme can make money for all participants but makes much more money for people high on the pyramid. Rising up the pyramid depends more on recruiting skill than time of entry.

A ponzi scheme doesn't actually make any money but merely redistrubtes money from later investors to earlier investors.

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