zlacker

There were funds that did due diligence and built out models of the Luna/Terra/Anchor ecosystem and realized it was unstable.

You can talk to the people who built their models and they have lots of fun things to say about the ordeal.

>>photon+(OP)
Do you have any links / references regarding that? I'd like to read more

>>hcks+v
Not that I can share publicly unfortunately.

>>hcks+v
We considered putting some of our treasury in Anchor. I didn't build a model, just one hour of DD was enough to see the risks. Here is the message I shared with my team on Slack with the findings from a very brief DD: https://twitter.com/josusanmartin/status/1524323026942242818

>>photon+(OP)
That raises an interesting ethical problem, really; should there be a duty to report this sort of thing, or is "scheme X is fundamentally flawed/a scam and investors will lose everything" legitimate proprietary information? As I understand it, various analysts were pretty sure at the time that Madoff's scheme was a Ponzi, but in general they didn't tell anyone (in fairness, one attempted to and had trouble getting listened to).

>>rsynno+r3
A model has assumptions, but the space is new enough to where there's going to be uncertainty in any model due to unknown unknowns. So it seems like defining a standard of mandatory reporting of assumptions would be hard.

>>josu+q3
About 5 seconds thought would be enough to see the risks, and the same goes for the rest of the crypto ecosystem. Even the name of UST is clearly meant to con people who confuse it with USDT. It's scams upon scams all the way down.

Even if your figures seem out of date, your argument against UST also holds for USDT (which underpins much of the crypto price bubble):

There is 7B USD in circulation and the market cap of US(D)T is 74 BILLION USD

All this perceived wealth is going to melt into air soon, and yes a bear market has already arrived.

>>rsynno+r3
There were many people that reported on the flawed stability mechanism of Terra/Luna/UST. But still, there were many other people that placed their trust in it and cheered the price appreciation.

>>rsynno+r3
for context for others following along, Galois Capital went public with their criticism months before they started shorting. most people didn't listen.

https://twitter.com/galois_capital

>>rsynno+r3
The SEC will pay you money if you report fraud, the problem is that it's not clear how illegal these schemes are, and for the ones that are illegal, whether or not the SEC will be able to build, and win a case.

Bitfinex, for example is being prosecuted. The SEC have cases against a few of the mid-level people, but the founder is hiding out somewhere in Asia, and will never see the inside of a US courtroom.

Also, it's very easy to con someone, but it's almost impossible to convince someone who has been conned that they've been cheated. If you do your due diligence, and disclose your findings, the marks will ignore you, the con artists will smear you in the press, start lawsuits against you, and everyone uninvolved will shrug their shoulders and 'both sides' your feud.

>>rsynno+r3
Unfortunately, you can shout "this is a scam" from the hilltops and people won't listen.

>>dropne+T5
Was there a specific tweet you meant to link? That just goes to Galois’s profile page.

>>SilasX+ug
its months and months worth of tweets, and that's all they talked about during this year.

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...

>>hcks+v
https://www.bloomberg.com/opinion/articles/2022-04-19/the-st...

> 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.

>>pjc50+za
There’s a great recent Bloomberg Podcast episode (Odd Lots?) where the CEO of FTX interactive is describing yield farming, and it dawns on everybody (Matt Levine states it explicitly) that what he is describing is a Ponzi scheme.

And then the CEO guy basically says that their old school finance may consider it a Ponzi but it’s the future of finance and they’re just gonna end up suffering from FOMO.

>>dropne+Zj
That chain in the first tweet should be enough to frighten anyone.

>>bombca+fv
imagine moving your savings to stablegains. you're definitely not reading galois tweets.

why the founders didn't flinch... who knows? maybe they decided that 3ac being invested is their security.

>>bombca+fv
Until about 2/3 of the way through, I was convinced it was a parody.

>>dropne+Zj
Some of the replies to that second tweet thread are hilarious in retrospect:

> 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...

>>grey-a+35
You say this, possibly as someone who knows a lot about this stuff but there are plenty of people (including engineers) who don't know enough to refute the bold claims made by the crypto-evangelists and who be convinced that "obviously X is bad, but our product is completely different".

I personally have lots of misgivings about various crypto but I really don't have enough expertise to argue against someone telling me that I just don't understand and everything is fine.

>>rsynno+r3
If they are unregulated then it isn't a crime until it is a crime, and in this case, by then far too late to sort out.

Even when it does go wrong, there still might not be a crime any more serious than being an idiot, obviously would be different if the company misrepresents itself for gain, which would be fraud.

I suspect that many of these people genuinely believe their own hype, which is how they convince others to buy into it.

>>rsynno+r3
I don't know if it should be illegal to be a fool.

Where is the line between an outright scam and just people believing their own bullshit.

>>dropne+Zj
Thanks for the more detailed links!

I'm curious why you call the first one cryptic though? It seems the opposite to me: it refers to all the elements by their actual, real-cryptocurrency-world names. To me, "cryptic" would mean that it abstracted away from all the actual terminology used, and just describes it in terms of pure mathematical finance, which would be cryptic since you'd be left wondering, "uh, what is this referring to? Is this an actual thing?"

I also don't see how it works as a recruiting tool. This is a space that involves exploiting domain knowledge, and it's trying to bring in expert outsiders who just haven't yet used their analytical expertise in this domain. But tweets heavily depend on you already knowing how all these protocols work (e.g. what staking/minting/gauge weight mean). Such a person, if an expert analyst as well, would already be working in the field or exploiting that knowledge themselves, and you wouldn't be plucking such diamonds out of the Twitter rough.

>>lbrine+j11
If sold to people in USA and if SEC deems it should have been registered as a security, then get ready for a well-deserved enforcement action. Would not want to be an American and on board of directors or a senior contributor or part owner.

>>SilasX+KJ1
they hid the answer to find junior analysts instead of stating the solution outright

https://twitter.com/galois_capital/status/148693794923729715...

>>dropne+NP1
Well, yeah, of course they hid the answer. My point was that making it cryptic would be removing the real names of the referents.

>>mhh__+Hc1
Isn't that ultimately one of the purposes of financial regulations? Like you're not allowed to start a pyramid scheme even if you don't know that phrase or concept, don't realize that it's fundamentally unsound, and don't intend to take advantage of people.

>>lbrine+L01
So why is your default position that they are right and this is a new paradigm?

Surely the onus is on those promoting such schemes to convincingly explain their workings; if you can get 20% a year the explanation had better be good...

This is just the last resort of a scoundrel who knows they can’t explain their scam.

>>thaway+Op
Here you go: https://news.ycombinator.com/item?id=31447159