Thread by @smdiehl

Let's talk about the phenomenon of "mathcoins" and how fancy tech and academic obscurantism is used to defraud the public into buying scam crypto investments. (1/) 🧵

Cryptocurrencies are nothing but a form of investment fraud that enriches a small group of people by directing funds from new investors to pay out old investors. They're a variant of the classic Ponzi scheme, but where the cashflows are obscured with internet technology. (2/)

Now Ponzis schemes can indeed make people very rich. Madoff got rich, and made plenty of his early investors rich. But at some point there is an inflection point in which cash outflows exceed inflows and the scheme inevitably collapses. (3/)

Any conman will tell you, swindling a mark requires more than just deceit, and you have to mix lies with truth. You need a story with a germ of an idea crystallised around a narrative that is seemingly plausible and that someone already feels an emotional attachment to. (4/)

Bitcoin's narrative is crystallized around alt-right populism, a strange variant of Austrian economics, goldbuggery, distrust of institutions and resentment about the 2008 financial crisis.

While Dogecoin is basically built around pure nihilism. (5/)

With this germ of the narrative in place, the next step is to buy yourself some credibility to play the long con and convince people that your token somehow isn't like the thousands of other scams. That it will stand the test of time and be "real". (6/)

It's a straightforward arrangement, you ask respected people in their field to trade their reputation for cash to promote your token investment. And because having someone at arm's length who does the illicit toting of the investment keeps your hands clean. (7/)

The essence of the whole crypto scam: offering unregulated investments acting like Ponzi schemes, but promoted by proxy through influencers and social media as "the next thing" or "a path to wealth". (8/)

Keep in mind that all cryptocurrencies are designed to be investments that divert massive amounts of funds to insiders who create them. This creates an inherent moral hazard to engaging in this sort of deal. (9/)

For most tokens these people are rappers, Hollywood actors, influencers, or other notable celebrities or public figures.

The narrative is simple: Rapper X is collaborating so it's a winner.

Go watch the Netflix Fyre festival documentary if you want to see how this ends. (10/)

But there's a more insidious variant, token scams that pretend to like Pied Piper from HBO's Silicon Valley. A new internet or a new financial system. (11/)

It's a simple narrative:

The internet was big.
It changed the world.
So this is just like that.

Just don't ask too many questions.
(12/)

This is the essence of the mathcoin scam. The pretense that there's some secret sauce equation that imbues this one investment opportunity with massive upside for early investors. (13/)

Most mathcoins were started during the ICO bubble of 2017 and are nothing but a fork of bitcoin code attached to a rambling whitepaper for what amounts to an economic perpetual motion machine but rendered in the LaTeX typesetting system to appear credible. (14/)

They'll use some combination of crackpot tokenomics, cryptography, proof of stake, zero-knowledge proofs, smart contracts, and "artificial scarcity" to make a rambling argument that makes sense until you look at the details. But most people can't understand the details. (15/)

These papers all look seemingly plausible, are full of equations, economic notation, game theory and tons of seemingly plausible content ... except for one notable exception:

They can't tell you what problem they're trying to solve.

(16/)

It's not secret that grants money in academia is hard to come by these days, so a lot of universities have turned to a back room deals with crypto companies to make ends meet.

This kind of low-level corruption is widespread across the US and Europe.
(17/)

Imperial College London got in hot water when the press exposed that researchers were using their academic credentials to write marketing material for promoting token investments on the shady crypto broker eToro. (18/)
ft.com/content/f9b248…

To this day the University of Edinburgh has an entire blockchain lab that does nothing but whitewash crypto and print marketing material about very questionable crypto investments. (19/)
ed.ac.uk/informatics/bl…

Algorand is a crypto claiming to be some hand-wavy "decentralized revolution" with no lack of big ideas, but a big lack of any real application.

The marketing slathers the eminent 'Massachusetts Institute of Technology' brand all over the digital penny-stock prospectus. (20/)

Despite all this "innovative" research, crypto can't escape the simple fact that it's not used for anything but get-rich-quick schemes.

MIT's cryptocurrency is massively outperformed by a coin whose 'research' is a talking shiba that Elon Musk tweets about while stoned.
(21/)

Academics cosying up to crypto is a very bad look. But why does this happen?

Economic determinism. People turn a blind eye to the hand that feeds them or funds their research, the public finally saw behind the veil when Epstein's dealings with MIT were exposed. (22/)

During the Nuremberg trials one of the Reich scientists gave the best testimony for how to manipulate academics and engineers. Clever people are often very stunted outside their expertise, lose sight of the forest for the trees, and don't ask hard questions. (23/)

"Basically, I exploited the phenomenon of the technician's often blind devotion to his task. Because of what appeared to be the moral neutrality of technology, these people were without any scruples about their activities."
-Albert Speer

(24/)

Indeed, there is a pervasive meme in software circles, that all software is value-neutral.

However outside of software circles, nobody believes that. (25/)

Slot machines are purposely designed to feed on a person’s gambling addiction and to take their money.

Dirty bombs are designed as weapons of mass death.

Cryptocurrencies are designed as mass investment frauds.
(26/)

The days in which technology, especially those with vast reach, can be considered in an intellectual vacuum are long gone.

And the tragic human cost of crypto research being used to proliferate financial scams is very real.
(27/)

One tech blogger summed up crypto research very succinctly in his post 'Cryptocurrency is an abject disaster'. (28/)

> But look: you’re in really poor company. When you’re the only honest person in the room, maybe you should be in a different room.

drewdevault.com/2021/04/26/Cry…

The only real token in crypto is that of reputation, and the public should beware those who sell mathcoin investments and hide their graft behind equations and technical obscurantism.

In crypto nothing is real except the people who want to take your money.

/fin