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

blog.chainalysis.com

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

#301

Post by AnthonyMouse »

astoor wrote: post #203
pjc50 wrote: post #98

Earlier quoted context omitted.

> 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.

The obvious solution is to have both and then make sure that people understand what they're getting into.

Traditional banks should exist and be regulated and insured etc. People with a low risk tolerance should be encouraged to use them.

People with a higher risk tolerance or who are trying to do something innovative or disruptive should have a system that works for them too. People with a low risk tolerance are not required to use it. People with a high risk tolerance will be exposed to a high risk, as requested.

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

#302

Post by gitfan86 »

dsco wrote: post #287
gitfan86 wrote: post #133

Earlier quoted context omitted.

Issuing stablecoins isn't a scam by itself. The whole crypto ecosystem cashflow is the real scam. There is no liquidity. All it takes is a few people that panic and the whole thing falls apart, UNLESS there is someone ready to print money and prop up the market when panic sets in. That is why people need to understand what is going on with Tether. Bernie Madoff got shutdown because a whistle blower got the SEC to loo…

China has banned Bitcoin several times, there’s been hacks, there’s been central banks going after crypto - yet it’s still here. Why do you believe the whole thing might fall apart? What you’re missing is that whenever there’s panic selling there’s always someone on the other side finding a great discount.

That is what they said about housing in 2007. I'm not saying that crypto is going to go away and never exist. I'm saying it could go down by 80% during a liquidity crisis induced panic.

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

#303

Post by erulabs »

spinny wrote: post #300
NationalPark wrote: post #289

Earlier quoted context omitted.

Seems super unlikely that somebody with a HN account is unfamiliar with search engines, doesn't it?

Seems super unlikely that somebody with a HN account can't find docs for defi projects that in most cases have github accounts with available contracts and api docs, doesn't it? Maybe it's just deceptive

And not to mention that by definition, those DeFi contracts are readable. The actual code, itself. Sure, there might be (and probably are) bugs, and we need auditing tools, the list goes on, but at least it's not a black box.

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

#304

Post by AnthonyMouse »

chipotle_coyote wrote: post #199
pjc50 wrote: post #98

Earlier quoted context omitted.

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

It is, and I've had a nagging suspicion for a while now that this is the flaw at the heart of cryptocurrency and related phenomena. It's all built on the premise that the answer to "we can't trust existing institutions" is to try and design systems that don't require us to have trust in any actor, but as Sharlin noted, it's difficult to impossible to do anything transactional that doesn't require some level of trust.…

The real problem is that if you don't trust the existing system, the normal solution is to patronize a different one. Go trust a bank in Japan or Switzerland or India or Brazil, which has a decent enough reputation but does things differently.

But the existing system latches onto any point of centralization in any kind of alternative and uses it to impose the same problematic constraints of the existing system that the alternative was intended to redress. Hence the desire for decentralization. The lack of those pressure points.

It would work well enough if we would just have multiple banking systems and let them compete with each other without international pressure to conform to a uniform set of defects, but that isn't what we have. So how do we fix that, if not with this?

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

#305

Post by wizzwizz4 »

spinny wrote: post #282
wizzwizz4 wrote: post #278

Earlier quoted context omitted.

> It could be a meaningful technological shift if a lot of the financial infrastructure goes decentralized It's important to note that “DeFi” is more centralised than our existing financial infrastructure. (Also, our existing infrastructure mostly uses open, public, well-known standards with many implementations; most DeFi stuff… documents how it currently works, I guess? Though it's hard to find that documentation.)

have you tried google?

If you know where the documentation for the most popular DeFi system, Bitcoin, is, then by all means share it.

• What does the peer-to-peer network protocol look like?

• How do I make a transaction / mine a block?

I know how to do this using end-user wallet applications, but the open protocols are so very well documented that I'm sure you can find this information easily.

The pages that show up in search results[0][1] don't really have this information. It gives me a high-level overview, tells me that it uses TCP and which port it uses, and gives the structure of the TCP packets (with some examples), but there's a whole load of stuff that's just never defined. To actually understand what's going on, I then have to read the source code.

And… making a transaction?[3] Mining a block?[2] No chance. I know it's “double SHA256” and that's about it. (I can look at the source code to find out, sure… but an open standard? Open secret, more like. The flaming whitepaper[4] is more useful than these docs.)

This is Bitcoin, the best-known, most-popular, (presumably) best-documented DeFi system on the 'net. Ethereum has… a blog post, an onlinelibrary.wiley.com book and an academic article. I don't even want to know what other stuff has. Most DeFi garbage barely has a whitepaper.

[0]: https://developer.bitcoin.org/devguide/p2p_network.html

[1]: https://developer.bitcoin.org/reference/p2p_networking.html

[2]: https://developer.bitcoin.org/reference/block_chain.html#ser...

[3]: https://developer.bitcoin.org/reference/transactions.html

[4]: https://bitcoin.org/bitcoin.pdf (which has apparently been taken down…?) https://web.archive.org/web/20140320135003if_/https://bitcoi...

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

#306

Post by pjc50 »

vmception wrote: post #114
PragmaticPulp wrote: post #106

Earlier quoted context omitted.

> 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 If the team went through all of these steps with the intention of pumping the value of the coin, hyping others into buying it, and then extracting as much money from them as possible with no intentions of helping…

And you think thats what I just did here? Describing why the categorization is wrong to you is a symptom of victim blaming? My point stands that the community can do what the team did but fail to take further risk or organize. They disperse just like the issuer did, when in fact they do all have agency and can fill the vacuum. unless the token was backdoored, then we can call it a scam.

If the original team made promises with no intention of fulfilling them, and didn't, it's a scam. If on the other hand the community could do the same thing .. why did they need to pay the organizers (and their premine) in the first place?

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

#307

Post by theogravity »

amitkgupta84 wrote: post #258

> The most important takeaway is to avoid new tokens that haven’t undergone a code audit. Code audits are a process by which a third-party firm analyzes the code of the smart contract behind a new token or other DeFi project, and publicly confirms that the contract’s governance rules are iron clad and contain no mechanisms that would allow for the developers to make off with investors’ funds. But how do you know whic…

A lot of DeFi scams claim that an auditing company has audited their code. There's also scam auditing companies too that work with these DeFi scams to add to the false legitimacy.

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

#308

Post by somewhereoutth »

Arguably, all crypto currencies are a scam. The only difference is the timescale - even Bitcoin will 'rug-pull' eventually.

The do not have value in any sense - even sending money overseas is cheaper, more convenient, and more secure by traditional methods.

Money going out + money spent on mining = money coming in.

Crypto evangelists are always keen for punters to put in regular amounts - presumably because then someone can take out regular amounts, and so avoid actually having to work for their living.

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

#309

Post by BlueTemplar »

gitfan86 wrote: post #302
dsco wrote: post #287

Earlier quoted context omitted.

China has banned Bitcoin several times, there’s been hacks, there’s been central banks going after crypto - yet it’s still here. Why do you believe the whole thing might fall apart? What you’re missing is that whenever there’s panic selling there’s always someone on the other side finding a great discount.

That is what they said about housing in 2007. I'm not saying that crypto is going to go away and never exist. I'm saying it could go down by 80% during a liquidity crisis induced panic.

Yeah, also bitcoin isn't a stablecoin, there were never any guarantees.

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

#310

Post by vmception »

pjc50 wrote: post #306
vmception wrote: post #114

Earlier quoted context omitted.

And you think thats what I just did here? Describing why the categorization is wrong to you is a symptom of victim blaming? My point stands that the community can do what the team did but fail to take further risk or organize. They disperse just like the issuer did, when in fact they do all have agency and can fill the vacuum. unless the token was backdoored, then we can call it a scam.

If the original team made promises with no intention of fulfilling them, and didn't, it's a scam. If on the other hand the community could do the same thing .. why did they need to pay the organizers (and their premine) in the first place?

team allocations aren't always the case. if chainanalysis is looking at the rug pulls that I'm talking about, then much of the time there was no upfront capital to the team with a separate premined allocation. many issuers are currently putting all the tokens created directly into a liquidity pool paired against capital they already had, bots and individuals buy into the liquidity pool and receive the new token, pushing up the price in the process, and then the issuer unbundles the liquidity pool, leaving no pool, (while acquiring the liquid capital added to the pool by purchases. AMMs function by then having less of the issuer's tokens and more of the tokens that were used to purchase the issuer's token)

these are colloquially called rug pulls, because the liquidity pool was the rug. these happen so fast these days. These things can play out completely within 20 minutes, as bots and individuals are scanning the blockchain mempool for erc20 token creation transactions and liquidity pool creation transactions, just to get into a potential big project before anyone else.

here, the traders are at no disadvantage to the issuer, from a community perspective, to continue the project and attempt making their investment valuable, specifically by adding to a liquidity pool themselves.

again, my main point is that things that are very common are not being distinguished from whatever you or others want to argue about. its an article about this year, not 2017, not 2018, or some other year dominated by an antiquated style of ICOs.

there is something to debate, but the vocabulary itself doesn't allow it, perpetuated by an organization that gets no benefit from distinguishing as all they want is technology contracts from governments.

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