I assume they might need some more.
https://blog.stablegains.com/we-raised-3-million-and-are-hir...
Alice (alice.co / @alice_finance) is another prominent one that may have lost customer funds, which was also using the Anchor protocol. It’s unclear how much they lost, but it’s interesting that Do Kwon’s name is still an actual logo listed on their home page.
And Vertex Protocol (vertexprotocol.com / @vertex_protocol) recently raised $8.5m to launch a trading platform based on the Anchor protocol, but because their Phase 1 beta had just closed and the open launch was not planned until this summer, it looks like they may have just barely dodged the bullet?
What I’m really curious about are the new and (of course) unregulated “insurance” products meant to cover catastrophic crypto depegs, as happened to Terra/Luna. Unslashed (https://app.unslashed.finance/cover) is supposed to kick in after fourteen days, I believe. We’re not quite there yet, it’s barely a week so far. But I’m sure with this kind of implied loss reserves, it’ll be fine…
https://mobile.twitter.com/CurveFinance/status/1416392630754...
https://m.youtube.com/watch?v=zXmQW_aqBks
Works every time.
A company that couldn't get financing any other way could get financing by issuing fixed price convertible bonds. "Fixed price convertible" means the bond can be converted into shares (of the company), but at a fixed price - aka, regardless of the value of each individual share, you are promised fixed a dollar amount of them.
This means if the share price drops, you will be "made whole" by getting issued enough shares to match the fixed price.
It's called death spiral bond, because if/when the price of such a company drops, these convertible bonds will trigger, causing the amount of shares to increase (as they issue new shares), which in turn causes the price of the existing shares to drop, ad-infinitum. Often the owners of the shares would end up with nothing as the shares' value drops to zero (or the company recovers, and they do make some money).
Swap bonds with UST, and shares with Luna, and you get the above scenario.
"15% interest. No surprises."
Article is from July 2021 (according to Google), updated 7 days ago
https://www.investor.gov/protect-your-investments/fraud/type...
2. Algorithmic "stablecoins" don't work, in the same way as perpetuum mobile doesn't work. You think you're inventing a perpetuum mobile, but you're building a Rube Goldberg's machine instead ;)
3. Every algorithmic "stablecoin" can be traced to 2 papers published in 2014: Hayek Money and Robert Sams' Seigniorage Shares
Vegan condoms and sex toys are made without casein or other animal-based byproducts.
Fun fact: a lot [2] of consumer goods use animal-based byproducts either as technical agents (e.g. beer that's being filtered through fish bladders) or as outright ingredients (shampoo, perfume, ...).
[1] https://www.greencondom.club/vegan
[2] https://www.onegreenplanet.org/animalsandnature/products-you...
That being said, calling these platforms "ponzis" isn't correct, the most you can say is that they were front ends for a ponzi. It would be like setting up a front-end to receive investments, and then depositing the money with Madoff. I'm not saying that it is a legitimate business, just not a ponzi.
And I'm not defending these companies either, a very light DD [2] made it obvious that the LUNA-UST mechanism was broken and the collapse was inevitable. It's really messed up that they put clients' money at risk, and that they lost it. I also think that YC is somewhat responsible for this.
What makes the situation even worse is that the collapse didn't happen from one day to the next, they actually had time to pull the money out at a 0.5%-5% loss, but they still decided to wait and see if it would repeg.
[0] https://twitter.com/josusanmartin/status/1478185473499615233
[1] https://twitter.com/josusanmartin/status/1478188494463848448
[2] This DD took me less than 1 hour: https://twitter.com/josusanmartin/status/1524323026942242818
Umm, once it's not a legitimate business, it's fraudulent. Exactly what type of fraudulent is a somewhat secondary issue.
[of Boiler Room scams of old] "... often rely on high-pressure sales tactics, such as aggressive cold-calling, misinformation, and extravagant promises to assure buyers that they are buying "a sure thing." [..] The SEC requires brokers to adhere to strict standards when selling securities. Brokers may not misinform or omit material facts when selling securities; nor can they exaggerate their own track records. They are also required to have a “reasonable basis to believe that a recommended transaction or investment strategy is suitable for a customer.”"[0]
Ring any bells?
Do we think customers are really giving informed consent before putting their savings into these platforms?
This was absolutely a thing; most large Ponzi schemes have feeder funds.
https://www.reuters.com/article/us-pwc-madoff-settlement-idU...
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors.
https://www.investor.gov/introduction-investing/investing-ba...
https://www.hbs.edu/faculty/Pages/profile.aspx?facId=697248
https://medium.com/terra-money/have-you-met-marco-216ca2a8b9...
https://assets.website-files.com/611153e7af981472d8da199c/61...
https://cdck-file-uploads-global.s3.dualstack.us-west-2.amaz...
Why did you decide to join Terra?
I thought Terra provided the perfect environment to apply what I learned in my research. Ensuring the stability of a digital currency closely resembled the issues faced by central banks in deciding monetary policy measures, while the lessons learned in studying trading in the equity and bond markets are crucial in guarding against potential manipulation by malicious market participants.
What do you think are Terra’s strengths compared to other blockchain projects or potential competitors?
There are several, but I will mention just three. First, there is no improvisation. In fact, our strong research team stays grounded and informed by the latest research in economics and finance, devoting a lot of attention in making sure that Terra’s ecosystem remains stable. Second, top eCommerce companies in Asia are pushing for Terra’s adoption, ensuring that Terra will be widely used from the start. Finally, the team is composed by a diverse and uniquely qualified set of people that are excited to collaborate in solving one of the most exciting challenges of our time.
27 March 2022 > There are no lock-up periods. Withdraw your funds any time and keep the interest you earned.
18 May 2022 > There are no long-term lock-up periods.
These guys are going under.
[1] https://web.archive.org/web/20220308041252/https://www.stabl...
first a cryptic puzzle as a recruiting tool for analysts: https://twitter.com/Galois_Capital/status/148693793605468979...
followed by months of warnings like this: https://twitter.com/Galois_Capital/status/151217543903232819...
and threads pushing the systemic risk angle: https://twitter.com/Galois_Capital/status/150461116699529216...
> Here is how an algorithmic stablecoin works. You invent two tokens, call them Dollarcoin and Sharecoin. ... The process is sometimes compared to algorithmic central banking, where the central bank maintains the value of the currency (Dollarcoin) by adjusting its supply.
> On first principles this is insane.
I’m guessing they don’t have enough users and can make people whole using their seed fund.
That’s disingenuous. When you put money into a high yield savings account, or even into a fiat backed 1:1 stablecoin you’re doing something. You’re providing liquidity. A high yield savings account (2-4%) or yield on a fiat backed 1:1 stablecoin (5-8%) is risky in the sense that you need to trust a bank (or exchange), but that’s eased by FDIC (which some exchanges like Gemini have [1]).
the industry keeps chasing undercollateralized algo stablecoins because of capital efficiency. jon wu explains to laura shin, worth a watch: https://twitter.com/laurashin/status/1525505300219961344
Thanks, some great stuff. This[0] jumped out at me:
"But there is no magic here. There is no algorithm to guarantee that Luna is always worth some amount of money. The algorithm just lets people exchange Terra for Luna. Luna is valuable if people think it’s valuable and believe in the long-term value of the system that you are building, and not if they don’t.
The danger here is that Point 7 never goes away. Any morning, people could wake up and say “wait a minute, you just made up this all up, it’s worthless,” and decide to dump their Lunas and Terras."
https://techcrunch.com/2014/08/13/backpack-connects-you-with...
https://techcrunch.com/2016/01/28/shypmate-pays-travelers-to...
https://www.cnbc.com/2018/05/10/early-theranos-investor-tim-...
> But is this any more likely to happen than, say, the global thermonuclear war that is held at bay by the principle of MAD? I feel like we are surrounded by doomsday scenarios; economic and existential. Who would pull the pin on this one? Or is the problem blind faith in an algo? - https://twitter.com/thestephoflife/status/151220218743844864...
From their site:
> ¹ FDIC insurance applies only to the USD reserve funds. GUSD exist as ERC-20 tokens on the Ethereum blockchain; tokens are under the user’s self-custody, and are not insured through Gemini.
So if you send them USD, they'll hold your USD in an FDIC insured account. If you hold GUSD, and it turns out GUSD is a fraud or is otherwise insolvent, your SOL.
I don’t know anything about stablegains but this reads like they just take money and put it into UST, so users lost 80% of their funds with the depeg. “This is something all users signed up for” -‘stable’gains
I don’t blame you for getting that impression, though. The Gemini dollar marketing page talks about earning high yields, and it talks about FDIC protection. It doesn’t explicitly mention whether you can get the yields and the insurance as the same time, but the answer is no.
https://twitter.com/galois_capital/status/148693794923729715...
I didn't said that. Once they're listed on "exchanges" or traded on DEX, their price isn't under control of the protocol, and in theory can be anything.
>they promise to be able to repeg in times of severe distress. even some money markets broke the dollar. they had to be bailed out by the government.
MMFs are funds with the NAV which supposed to be around $1.00 (that in addition to earning an interest). In case the NAV goes under $0.95, the fund has to be liquidated. See "Breaking the Buck":
https://www.investopedia.com/terms/b/breaking-the-buck.asp
https://www.investopedia.com/articles/mutualfund/08/money-ma...
>what about makerdao makes it reliant on dao goodwill? the incentive to restore the peg is the expectation of profits from liquidating the overextended.
Why people kept locking ETH in MakerDAO CDPs over and over during the "crypto" bear market, when ETH was in the free fall? It doesn't make sense from the economic PoV. It only makes sense if your ETH is cheap and you want to prove that MakerDAO works.
Different agents optimize for different things. Some (most?) optimize for size of their wallet/bank account, others want to save their project/ecosystem. Both types are rational.
Your comment makes me think you might be under a misimpression of how HN moderation works, so here's a refresher.
We moderate HN less, not more, when YC or a YC startup is the story. That doesn't mean we don't moderate at all (though in the case of this particular thread, we literally did not moderate it at all—any perception that made it seem that we did was completely mistaken). This is literally the #1 rule of HN moderation. It's the first thing that PG drilled into me when he trained me to do this job years ago. I hadn't even had a chance to grab a chair yet.
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
The reason we have this rule is that the good will of the community is literally the only value HN has, and that is not worth risking.
[…]
> They won't require any subscription, existing data is never at risk of being wiped out, and hopefully we will […] get back to apps that just work, without the cruft or bad incentives. We're here to make that happen!
I fail to see what the advantages are of having a calendar app/service implemented as a DAO.
I can see the advantages of federation (ala email or the fediverse), and I can see the advantages of a "local first" approach, but what does a web3/DAO bring to the party?
The trustless use-cases I can imagine are quite sociopathic, like selling appointment slots with price discrimination, or reserving a slot for a smaller fee, or allowing resale of appointments or reservations, or remaking any and all of the above transactions into auctions.
Turning every little thing into a multi-sided market sounds exhausting and pathological.
You can apply this sort of thinking to other existing app/site categories, like wikis. No longer do you have to endure edit wars, you can just bid to finalize your preferred version! Unless 50% of the editors veto your edit, in which case you forfeit your bid. Oh joy, now a bad faith actor can't just pay one wiki editor under the table to slant the content your way, you have to bribe a whole bunch to prevail. Yes, that would be a huge improvement.
I don't know, perhaps I am lacking in imagination, but the negative social consequences of monetizing relationships and social transactions are pretty well known and I'm not really seeing a commensurate benefit:
https://rady.ucsd.edu/faculty/directory/gneezy/pub/docs/fine...
