China's blockchain boosters slam crypto as Ponzi scheme
- Reference: 1656403340
- News link: https://www.theregister.co.uk/2022/06/28/execs_of_chinesestate_sponsored_blockchain/
- Source link:
"The author of this article believes that virtual currency is becoming the largest Ponzi scheme in human history, and in order to maintain this scam, the currency circle has tried to put on various cloaks for it," wrote Shan Zhiguang and He Yifan in the [1]People's Daily .
He Yifan is the CEO of startup Red Date Technology – a founding member and architect behind BSN – where he serves as executive director. Co-author Zhiguang Shan is chair of the BSN Development Alliance.
[2]
Launched in 2020, BSN provides a Beijing-backed infrastructure for blockchain developers in the Middle Kingdom – sans cryptocurrency, as it is illegal in the country. The framework is intended to be interoperable globally, but has separate international and domestic versions to comply with rules in China.
[3]
[4]
He and Zhiguang reasoned that cryptocurrency is a Ponzi scheme because it requires a continuous stream of new investors in order to remain stable, with early investors profiting the most.
"However, this state is actually based on an extremely fragile balance," wrote the duo. "Once there is malicious short-selling, no successor, tight funds, or regulatory policy changes that affect the confidence of participants or the determination of latecomers, it will cause this seemingly exquisite cycle to collapse instantaneously and the value will be zero."
[5]
The authors also railed against the move-to-earn and play-to-earn models often employed in Web3 applications, likening them to phishing schemes. In these models, participants performing an activity – for example walking – can "earn" blockchain-based assets.
[6]Thailand bans use of crypto for payments
[7]Infusion of $3.5bn not enough to revive Terra's 'stablecoin'
[8]Bill Gates says NFTs '100% based on greater fool theory' amid crypto cataclysm
[9]Don't hate on cryptomining, hate the power stations, say Bitcoin super-fans
Within the commentary, He and Zhiguang bolstered their anti-crypto comments with similar remarks from [10]Bill Gates , Warren Buffet and Charles Munger. They also quoted Karl Marx and cited Elon Musk's ability to manipulate Dogecoin with a tweet as reasons why the alterna-cash is deeply flawed.
Cryptocurrency is currently going through an unprecedented crash. Investors have even started [11]betting against it with short-trade products.
The decline was triggered in part by the [12]meltdown of TerraUSD's "stablecoin" – a cryptocurrency allegedly tied to the US dollar. Its associated token, Luna, wiped $40 billion off the system when it crashed. With global economic conditions perilous, investors have turned to more conventional instruments for comfort.
"There are many insights into why LUNA and UST collapsed in an instant, but one thing that few people mention is that they combine two Ponzi schemes, cash and equity, and are interrelated," offered He and Zhiguang.
[13]
Although the hot take from the BSN execs reflects Beijing's overall disapproval of cryptocurrency, China is not the only Asian country to take such an attitude.
Last week Singapore Monetary Authority (MAS) chief fintech officer Sopnendu Mohanty [14]said the city-state would be "brutal and unrelentingly hard" on dodgy crypto players.
In late May, the country's deputy prime minister Heng Swee Keat [15]told conference attendees retail investors should not buy cryptocurrency.
Thailand has [16]limited the use of cryptocurrency this year by banning it as a means of making payments.
By contrast, El Salvador took a completely different approach by becoming the first country in the world to adopt Bitcoin as legal tender last September – a move that sparked criticism from the World Bank. ®
Get our [17]Tech Resources
[1] http://finance.people.com.cn/n1/2022/0626/c1004-32456864.html
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YrrRQ9GaRhs8wbzC8eTxUQAAAAA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrrRQ9GaRhs8wbzC8eTxUQAAAAA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YrrRQ9GaRhs8wbzC8eTxUQAAAAA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrrRQ9GaRhs8wbzC8eTxUQAAAAA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2022/03/24/thailand_bans_cryptocurrency_payments/
[7] https://www.theregister.com/2022/05/17/terrausd_luna_crash/
[8] https://www.theregister.com/2022/06/16/bill_gates_nfts/
[9] https://www.theregister.com/2022/05/03/crypto_mining_environment/
[10] https://www.theregister.com/2022/06/16/bill_gates_nfts/
[11] https://www.theregister.com/2022/06/21/us_markets_see_shorttrade_products/
[12] https://www.theregister.com/2022/05/17/terrausd_luna_crash/
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YrrRQ9GaRhs8wbzC8eTxUQAAAAA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.theregister.com/2022/06/27/singapore_cbdc_crypto_policy/
[15] https://www.theregister.com/2022/05/31/retail_investors_should_not_engage/
[16] https://www.theregister.com/2022/03/24/thailand_bans_cryptocurrency_payments/
[17] https://whitepapers.theregister.com/
Re: Interesting
But it will not allow them to come down harder on the miners. How hard, time will tell.
Ponzi scheme?
For all their volatility and other potential hazards, I fail to see how crypto currencies are in principle Ponzi schemes. A [1]Ponzi scheme pays dividends to existing subscribers out of the revenue from new subscriptions - the issue being that there's no real growth, the only revenue being those subscriptions.
Crypto currencies on the other hand are valued by a market (of sorts) and exhibit growth (whether positive or negative) on the basis of the confidence of that market. So they're unstable investments, but nevertheless real ones in market terms.
[1] https://en.wikipedia.org/wiki/Ponzi_scheme
Re: Ponzi scheme?
Re-read the article.
A cryptocurrency has no value until people flock to it. The more people flock to it, the more value it gets, until there aren't any newcomers, some start selling short or somesuch, and the funny money crashes like the dead bird it is.
" Luna, wiped $40 billion off the system when it crashed "
How many more billions lost will you need to understand ?
Re: Ponzi scheme?
Not forgetting that they're not currencies either.
Nothing in a normal life is priced in them and you can't buy things directly with them, only cash out of whatever tokens you hold to dirty fiat or have an exchange do that on your behalf.
As they flail around for a real world use it's currently settled on speculative trading based on the Greater Fool theory.
Currency is meant to be spent not hoarded
Re: Ponzi scheme?
" speculative trading based on the Greater Fool theoryspeculative trading based on the Greater Fool theory "
Just like 'sub prime mortgages'? Given the way investment markets work, I'm not convinced that crypto currencies are in a special class of their own.
Re: Ponzi scheme?
-> Currency is meant to be spent not hoarded
Billy Nosavings?
Re: Ponzi scheme?
" The more people flock to it, the more value it gets, until there aren't any newcomers, some start selling short or somesuch, and the funny money crashes
Sounds a bit like any other volatile stock really. Very few don't behave like this to at least some extent.
Re: Ponzi scheme?
A ponzi scheme operates in secret. The organisers lie to investors about how their returns are generated.
You can't say that of crypto, it's right out in the open.
If crypto is a ponzi scheme because it relies on new investors valuing the asset, what does that make gold?
Re: Ponzi scheme?
" If crypto is a ponzi scheme because it relies on new investors valuing the asset, what does that make gold? " Well said @veti.
The essence of a Ponzi scheme is that dividend is paid directly out of new investment income (not growth). This is not the case for crypto currencies (not least as there are no dividends).
Pension funds
I thought the biggest Ponzi scheme are pension funds.
You are unlikely going to see the money you put in and they constantly need new sheep to stay afloat.
It's probably the only Ponzi scheme that is legal.
Another detrimental effect of Pension funds is that they tend to compete with people on the residential property market driving the prices up and making it more difficult for people to afford their own place.
People often end up paying good chunk of their salary for their pension and then additionally pay rent to the company operated by a pension fund.
Interesting
They're saying exactly what I thought as soon as I heard about it. Then again I expect world + dog did too. Just that some thought they could use it to scam everyone else.