If you're curious about the mechanism by which crypto exchanges act like Ponzi schemes, it's quite simple:

They take your real money and give you money on paper. You trade their paper money and put it in negative-sum lotteries run by their mates.

You think you're winning but..
... when you go to cash out your paper wins, your account is frozen, the wins evaporate, or you can never withdraw any real money.

In reality these exchanges have a massive liquidity problem where they comingle a very small pool of real money they have to prop up the illusion.
None of these token products the exchanges offer actually generate any real income because they're non-econmic, they just shift money around. The only way they continue to exist is they pay out early investors from later ones by recruiting more greater fools into the scheme.
In reality most of the customer money is flowing directly into the pockets of the people running the exchanges and their mates running the token scams they offer.

And just like with Madoff's fund, at some point the inflows dry up, theres a liquidity crund and it unwinds rapidly.
And even worse than Madoff's fund these entities are all set up in the Bahamas or the Caymans where their customers have no standing to bring suit or recover losses.

Customers can complain to the FTC or local regulators but jurisdictionally there's nothing these agencies can do.

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More from @smdiehl

8 Jul
If I were to recommend four books to help deprogram friends and family who get sucked into crypto vortex it would be the following:
1. Attack of the 50 Foot Blockchain by David Gerard (@davidgerard) - A now classic book that humorously explains the history of and deconstructs the crypto phenomenon to show how stupid these ideas really are at their core.
2. Lying for Money by Dan Davies - A detailed dive into the various types of financial crime, their mechanisms, and what gives rise the motivations of criminals.
Read 5 tweets
3 Jul
People say I don't criticise regulated businesses enough, so let me talk about Robinhood is planning an IPO soon and which I think is an absolute menace to society.
This app is rewiring an entire generation's investing habits to engage in out-right gambling by pushing users into crazy risky products that 20 somethings have no rational business buying.
Encouraging intraday trading by pushing constant notifications at them about short-term price movements is a cash cow for them because they profit per transaction, but not in the interest of their users.

Frequency of trades is almost always inversely correlated with returns.
Read 7 tweets
1 Jul
Ok, trying out this Copilot beta now and it's doing some reasonably impressive things ... more thoughts forthcoming.
First impressions, it's quite clever for boilerplate and like CS 101 kind of exam question-like problems. Probably not that surprising considering it's cribbing from Stackoverflow.

Anything beyond that seems to produce hilariously wrong answers.
Some experiments on variants of FizzBuzz or simple arithmetic expressions on nth prime numbers seem to confuse it quite a bit.
Read 4 tweets
1 Jul
This "but the blockchain" or #NotAllBlockhains is a silly petty argument that I don't have time for anymore.

So let's talk about the Tesco Blockchain. (1/)
A while back Tescos (i.e the British supermarket) did some misguided blockchain project involving tracking the provenance of vegetables from the EU. Was a terribly silly project that could have been done better other ways, but alas that's software. ¯\_(ツ)_/¯ (2/)
It consisted of a bunch of internal permissioned servers that would pointlessly replicate a bunch of data for no purpose other than to say "on the blockchain". It didn't really work, but neither did the project it replaced. (3/)
Read 7 tweets
29 Jun
When crypto skeptics talk about bitcoin as either a Ponzi scheme, a Pyramid scheme, or Multi-level marketing scheme we're using these words as a stand-in for a type of fraud for which there isn't a precise term of art for yet. (1/) 🧵
Most crypto coins are a speculative investment that shares some properties of the three types of classic financial scams:

1) The Ponzi schemes
2) Pyramid schemes
3) Multi-level marketing schemes


However it depends on subset of cashflows, market makers, and products you look at. Most cryptocoins are some combination of the above three, but diverge from the classic scams in subtle and legally important ways and may involve software in novel ways to obscure the fraud. (3/)
Read 10 tweets
28 Jun
After 12 months of crypto troll abuse, the upside is that I now have quite a large text corpus for my model. Trying to troll me at this point is just training my classifier to be more efficient at blocking.
Highest correlates for abusive Tweets are interesting and probably not surprising.

"#bitcoin" in bio
".eth" in handle
"🚀" in handle
"cardano" in bio
I don't have an image classifier on profile photo yet, but probably wouldn't be that hard to detect laser eye trolls. That would probably reduce confusion quite a bit.
Read 4 tweets

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