Thread by @smdiehl

People often ask me if there's anything related to blockchain that isn't tied to grift. Possibly, but the only way you can tell is by examining the business model. (1/) 🧵

Anything that self-identifies itself as a cryptocurrency is clearly a scam (see my vast number of other threads for the reasons), so let's get that out of the way first. (2/)

I wouldn't go so far as to say that everything that self-identifies as a blockchain project is a scam. For instance Microsoft had a Azure Blockchain Service that recently got shut down. (3/)
zdnet.com/article/micros…

Now this is almost certainly a rubbish piece of software that the market didn't need or want. But there's no token here, no financial games, no skinning retail investors, and likely just a very very slow database sold to big legacy companies. There's no issue here really. (4/)

So-called Central Bank Digital Currency (CBDC) projects. These are digitisation projects for managing the balance sheets of central banks. There are political arguments for and against these projects but are experiments for now and can't hurt anyone. (5/)
ft.com/content/b39d66…

Any business model that is to first approximation equivalent to Starbucks gift cards, digital rewards points or miles isn't a problem because of the restriction that they forbid cash redemption. The points are only redeemed for goods or services, not as an investment. (6/)

In-game currencies like Robux or ISK might be a tiny bit problematic in that they encourage gambling, but at face value there isn't any financial scam going on here. Nobody is expecting to get rich buying Candy Crush coins. (7/)

Digitisation of shares of private equity, which companies like Carta and Capshare do, is clearly not problematic at all and actually a very useful product. The sale of these securities using these tools is still regulated the same way as if it was done on paper. (8/)

Really, the answer to whether one of these digital financial projects is fraudulent can be measured by two heuristics:

a) How does the company make money?
b) What is the intent of their customers when buying?

(9/)

For (a) if the company has no goods or services and only offers a speculative investment as their product, the company can't be anything but a scam.

There's no way an entity like that can ever return anything to investors because they *don't do anything* to make money.
(10/)

For (b) if all customer discussion of the product is purely about "price action", thats an enormous red flag. If a product has no intrinsic value or is an investment with no exposure to external market, then it's a greater fool investment and you're being taken for a ride.
(11/)

That's it really. Just common sense.

If something sounds like a way to make money for nothing without doing any economic activity or taking on the risk of investing in other's economic activity then beware. Nothing good will come from that.

/fin