Crypto Shenanigans™️: A New Framework for Analyzing Scams
Below is a tweetstorm summary, but please check out the post and let me know what you think!
In politics, it's "Fake News"
In Crypto, it's "Scam"
Let's look at why words matter, what "scam" even means, & a new framework to analyze these acts.
Reputation 🗣️ and Asymmetry 📈📉.
A "scam" gets perpetrated by a "scammer"
When someone is associated with a scam, they suffer reputational harm.
In the Internet age, reputation may be our most valuable resource
Reputational attacks are easy to commit & difficult to defend.
It's easy to tweet charges that get seen by millions. And the accuser rarely suffers harm for false accusations (no skin in the game)
But attacks take massive amounts of ⏳ & 💸 to debunk
Oh wait, they don't! 🤦♂️
The closest unlawful acts are 'fraud' or 'misrepresentation.' These usually require intent and are fact-specific. This is close to the original meaning of a scam.
But the state defines laws — not morals. And often the link between the two is tenuous.
After all, there are plenty of things that are lawful but unethical and ethical yet unlawful.
When most people talk about a scams, they mean 1 of 3 things:
Category 1: Deliberate fraud
Category 2: Crypto Shenanigans™
Category 3: Literally everything
These are "scams" in the original meaning of the term. The perps knowingly deceived others for their own enrichment. Examples:
🔴 Pump & Dump
🔴 Exit Scam
🔴 Ponzi & Pyramid Schemes
🔴 Dishonest Exchanges
These acts put people in jail. 🚨👮♂️
These aren't necessarily illegal or even unethical.
It's shady behavior that makes your skin crawl -- moral hazards and gray areas.
They're more “bad looks” than “bad acts.”
Here are some examples and their *very* uncharitable real-world analogs.
I'll purposely strawman for dramatic effect.
The facts in each case matter.
🔴 🍆💦Casual Ex(change listings) = AMZN selling products with asbestos
🔴 Fractional Reserve = Banks 🏦 pre-FDIC
🔴 Allowing 2FA via SMS = Selling a 🔫 without a safety
🔴 Not batching transactions = Polluting the commons
🔴 Surveilling customers
🔴 Premines = A BigCo CEO serving as the only member of the compensation committee
🔴 Nonsensical valuations with limited or 0 “investor” rights = The Tulip Bubble 🥀
🔴 Founder cashing out = Selling a house 🏡 w/ a rotting foundation & skipping town
Because we’re all Sovereign Individuals who know that adults with sufficient info may enter consensual agreements.
Sunlight is the best disinfectant.
But let's return to Category 2 for a moment.