[HN Gopher] The collapse of the IRON stable coin
___________________________________________________________________
The collapse of the IRON stable coin
Author : parsimoniousplb
Score : 281 points
Date : 2021-06-17 13:31 UTC (9 hours ago)
(HTM) web link (irony-97882.medium.com)
(TXT) w3m dump (irony-97882.medium.com)
| gerikson wrote:
| > The developers seem to have been earnest in their attempt to
| create a new kind of stablecoin , one that was only partially
| collateralized by a "real" stablecoin.
|
| This space is a giant house of cards.
| JohnWhigham wrote:
| Seriously. I posit that many of the programmers in the field
| have no financial background whatsoever, on top of whatever
| shaky software background they may also have (especially if
| they went to a bootcamp). Just hilarious to watch.
| exdsq wrote:
| I've worked in the space for a few years and can say it's
| been the opposite experience for me. Had the chance of
| working on a Haskell project with the original creators of
| Haskell, being taught QuickCheck by the creator of
| QuickCheck, testing economic ideas created by professors of
| Economics at top universities, and sponsored entire compilers
| and languages to help ensure the software was as solid as
| possible. One of my favourite tutorials was when we had
| Leslie Lamport come in to give us a talk on TLA+. There is so
| much money in the space you can have absolutely insane teams.
| AlexCoventry wrote:
| Wow, sounds great. Where have you been working / which
| cryptocurrencies/services have you been working on?
| exdsq wrote:
| This was with IOHK (iohk.io) on Cardano however due to
| relocating and work visas etc I'm currently working on my
| own projects in the Eth/Cardano ecosystems
| dragonwriter wrote:
| The existence of some "absolutely insane" highly-skilled,
| well-trained, well-funded teams in the field doesn't mean
| that there aren't also lots of poorly-qualified teams
| without the up-front funding for development trying to cash
| in on all the money sloshing around the field.
| exdsq wrote:
| True, I'm just saying as someone who's been in the space
| for several years I've not come across too many of these.
| I think it's a stereotype that doesn't match with reality
| - at least from my experience.
| bombcar wrote:
| Developers used to "we can fix it in production, ship it"
| develop system where fixes can't be shipped with expected
| results.
| meowface wrote:
| Even worse: unless you use a proxy contract, production
| code can't be updated period. Smart contracts are
| immutable, besides being able to self-destruct themselves.
|
| And the unexpected results may be billions of dollars worth
| of assets lost. Like most of SV, most of the cryptocurrency
| space is "move fast and break things", but breaking things
| entails a little more than an app being down for a few
| hours.
| bhaak wrote:
| The financial crisis of 2008 showed us that you can say the
| same about the traditional finance system.
|
| Crypto is reinventing the same system as traditional finance
| and hitting all the same problems that we encountered in the
| last 100 years.
|
| At least here everybody who opens their eyes can see that it's
| a house of cards.
| sashimi-houdini wrote:
| "They are doing it too" is a favorite argument of crypto-
| enthousiasts. I'd argue the answer here is not more madness
| (crypto), but a serious attempt to fix the traditional
| financial system.
| hungryforcodes wrote:
| Why bother -- it's so broken. We can just again, it makes
| way more sense.
| rank0 wrote:
| I think the point is that starting over will just create
| a new equally broken system. So then we'll have two
| broken systems. Humanity could've instead used all that
| time/effort/capital to continue improving on traditional
| finance as we have been doing over the past century.
|
| The current financial system becomes more robust every
| time a black swan event like 2008 occurs.
| sashimi-houdini wrote:
| But cryptocurrency's answer is usually not "how can we do
| better" but "how can we repeat the same mistakes in a
| shorter time span?"
| bena wrote:
| A computer lets you make more mistakes faster than any
| other invention with the possible exceptions of handguns
| and Tequila. - Mitch Ratcliffe, 1992
|
| 1992.
|
| The internet was the domain of colleges and government
| institutions. The Eternal September would begin one year
| later.
|
| 1992.
|
| The Super Nintendo Entertainment System just came out to
| most of the world, with North America getting it the year
| before and Japan two years prior.
|
| 1992.
|
| One whole year before Doom would come out.
|
| 1992.
|
| Windows 3.1 when it was still a DOS shell was released.
|
| We were beating our heads against 386 processors praying
| for 486s, hopefully with the math coprocessor so we could
| actually get something done.
|
| Even then, we knew. And now it's nearly 30 years later
| and it's just as true then as it is today.
| hungryforcodes wrote:
| Cryptocurrency is incrediably diverse at this point, so
| you would have to be more specific.
| sashimi-houdini wrote:
| Is TFA specific enough for you? It appears to be about
| the inevitable outcome of imitating banks in an
| unregulated context. A top level comment here is about
| the outcry for regulation that this then produces.
| imtringued wrote:
| We basically have low inflation and a savings craze as a
| driver of a housing bubble in 2008 as people were looking
| for perfect, risk free bonds (no such thing can exist
| outside government bonds and even those are just best
| effort).
|
| The people behind Bitcoin were basically thinking: Ok,
| our banking system failed because of low inflation and a
| savings craze. Let's make both of those worse so that it
| will never become possible to run an economy on top of
| Bitcoin.
|
| Fiat banking failed because an aging population has a
| strong saving preference to the point that it chokes out
| businesses. The idea behind saving is that you release
| production capacity in the economy so it can be used on
| something else. The population isn't going to stop aging.
| The problem is going to get worse over time. There won't
| be a something else unless the government artificially
| uses the savings on that something else.
| munificent wrote:
| It's like Ponzi schemes but everyone is Ponzi. Scammers trying
| to scam scammers. Like Vegas without the tourists, only
| hustlers.
| Animats wrote:
| TTN is not at 0. It's at $0.00206950, which ought to pass what
| the poster claims is a bad > 0 error test. So what's really going
| on?
| [deleted]
| tornato7 wrote:
| I think Circle is the real winner here. If there are 200 million
| USDC locked up permanently in some contract, then Circle can
| safely spend $200m of it's collateral knowing it will never be
| withdrawn. Or, if they were generous, they could return it to the
| community that invested in IRON (seems unlikely)
| ac29 wrote:
| Given that Circle is based in the US and subject to US court
| rulings, more likely they would need to freeze and hold those
| assets pending any potential lawsuits to recover funds.
| timdaub wrote:
| brilliant comment :D
| ethbr0 wrote:
| So, as a thought experiment, because of the nature of the bug
| that $272M is locked until such time as TITAN becomes worth >
| 0.
|
| And TITAN is printed by the system itself, whenever IRON is <
| $1?
|
| Outside of abusing the oracle, that seems like a pretty pickle.
| meowface wrote:
| Probably a dumb question, but is there any possibility of
| temporarily getting the price to slightly above 0 in order to let
| people get their money out? For example, could some group with a
| lot of money offer to buy/sell a bit until the oracle considers
| it above 0, in exchange for some sort of compensation from the
| investors or devs?
| [deleted]
| sva_ wrote:
| Their docs state that there should be a max supply of 1 billion
| iron titan tokens[0]. But according to coingecko, there are
| over 27 trillion in circulation[1]. I think that's probably
| where the trouble started, and at that amount, I doubt they'll
| be able to get the price up. I may be totally wrong though, I
| heard about this project for the first time today.
|
| [0] https://docs.iron.finance/iron-finance-on-polygon/titan-
| dist...
|
| [1] https://www.coingecko.com/en/coins/iron-titanium-token
|
| edit:
|
| On further inspection, it seems like they'd just need to get
| the price up to the 6th digit[3]. I'm not sure it's feasible
| though.
|
| [3] https://github.com/IronFinance/iron-polygon-
| contracts/blob/m...
| rank0 wrote:
| > Their docs state that there should be a max supply of 1
| billion iron titan tokens[0]. But according to coingecko,
| there are over 27 trillion in circulation[1].
|
| How on earth does something like this happen?
| crooked-v wrote:
| Well, we can already see they screwed up a basic piece of
| code in the IRON smart contract, so is that really so
| surprising?
| rank0 wrote:
| I suppose yes and no.
|
| Screwing up the maximum supply seems like an enormous
| blunder while I kinda understand the assumption that
| "price > 0" if they're supposed to be backed by 75% usdc.
| Paradigma11 wrote:
| From the article:
|
| "[EDIT: I've since learned that the developer(s?) behind
| this are already the laughing stock of the DeFi community,
| having wrecked each of their 3 previous projects (now 4) --
| though this might be their biggest hit yet]"
| Udik wrote:
| Yep, and btw, how can the price of _anything_ be exactly 0?
| This doesn 't sound right either.
| aodin wrote:
| Well, a price can go negative [1], so I wouldn't consider
| zero to be surprising.
|
| [1] https://www.cnbc.com/2020/04/26/why-oil-prices-went-
| negative...
| dehrmann wrote:
| Oil went negative in the same way the price of my trash is
| negative: more of it was being produced than people wanted
| to buy, but the producer had to get rid of it because they
| couldn't stop production. As another commenter said, you
| can just walk away from a digital asset, so this isn't a
| problem. I can't walk away from my trash.
| jefftk wrote:
| A price can go negative for a physical thing which requires
| upkeep, but I don't see how a coin which imposes no
| obligations on an owner who just chooses to walk away, can
| have a negative price?
| bombcar wrote:
| Price can be a number of things - current best offer from a
| seller, best offer from a buyer, mid between them, etc.
| (Stocks often report either the mid or "last trade" but the
| bid-ask spread can get wide for rarely traded securities,
| especially Lon-dated options).
|
| I don't know what the Oracle is using but it would be amusing
| if something else means the price is "stuck" at zero once it
| hits zero.
| meowface wrote:
| According to the graph in the post (https://miro.medium.com/m
| ax/6088/1*tzpAFvuxVeumWO8ENz_SZg.pn...), it's somewhere
| around 0.0961 as of that time, and I suppose the price oracle
| they're using rounds that down to zero, perhaps? Or maybe the
| contract is rounding it down? Either way, I agree it's odd
| that exactly zero would be reported even if it's very close
| to zero.
|
| edit: Nevermind, I misread. It's -0.0961, apparently.
| sva_ wrote:
| The price is actually something like $0.000000033869.
|
| https://www.coingecko.com/en/coins/iron-titanium-token
| exporectomy wrote:
| Negative 0.0961
| meowface wrote:
| Oops, you're right. I misread.
| bena wrote:
| Here's a better question: Why?
|
| This is exactly what crypto-enthusiasts claim is going to
| happen to the US Dollar and I've never heard mention of crypto
| taking pity on fiat by offering to give them crypto when the
| bottom finally falls out of fiat.
|
| So why should anyone else be responsible for people who took a
| calculated risk that blew up in their face?
|
| Yes, this sucks for them. But this shit happens. Don't throw
| good money after bad.
| meowface wrote:
| >Here's a better question: Why?
|
| A calculated risk is that you put money into something which
| may end up losing all of its value; not that your collateral
| becomes locked in a safe with an accidentally lost key. They
| had a reasonable expectation that even if the value was
| totally lost, they wouldn't have their collateral locked
| forever. Their investment, yes, but not their collateral.
|
| Sure, one always has to account for extreme scenarios when
| doing anything, like the risk of a critical flaw in the code.
| But to give another extreme gambling scenario:
|
| Let's say you put your car up as collateral for a huge
| gambling bet. You of course take a calculated risk that if
| you lose the bet, you lose your car. Then let's say you back
| out of the bet after putting up the collateral, or you even
| win the bet, but there was a mixup at the casino and they
| thought you lost the bet and they took your car without you
| realizing it and it's on another continent now.
|
| In both scenarios, you hope that you can at least get some
| kind of compensation from the people you entrusted the
| collateral to, since it was just a complete fuckup on their
| part. You know you're not guaranteed to get anything, but I
| think it's reasonable to try to ask for compensation. If you
| just took a bet and the value plummeted, then you know it's
| tough luck for you and just a standard high-risk high-reward
| scenario that you ended up on the losing side of, but this is
| something else.
|
| (At least if I'm understanding this properly and the
| collateral really was purely collateral. Seems to be a bit
| complicated because they were attempting to make a...
| stablecoin... pegged to an intentionally volatile asset,
| somehow.)
|
| >This is exactly what crypto-enthusiasts claim is going to
| happen to the US Dollar
|
| It's mostly just Bitcoin maximalists who think that, and
| they're a small subset of people who own Bitcoin. This is
| Binance Smart Chain (basically a copy of Ethereum), and I'm
| sure some BSC/Ethereum users believe something similar, but
| it's a much smaller percentage than even Bitcoin's small
| percentage.
|
| Also, I don't think they think every dollar is secretly
| embedded with nanobots that'll encase the bill in titanium
| after someone at the Fed trips and falls on a big red button,
| which is what would be analogous to this. I think they think
| the dollar will lose most or all of its value due to
| hyperinflation. I think that's a completely unfounded belief
| based on an unfounded philosophy, but it's a different and
| entirely unrelated thing.
| lottin wrote:
| > They had a reasonable expectation that even if the value
| was totally lost, they wouldn't have their collateral
| locked forever. Their investment, yes, but not their
| collateral.
|
| They literally handed their money to a computer program
| that works outside of human control and cannot be
| interfered with... which means if something goes wrong no
| one can intervene and sort it out. This is a risk they took
| willingly. It's not the first time a computer program
| malfunctions, and won't be the last.
| meowface wrote:
| >which means if something goes wrong no one can intervene
| and sort it out
|
| That's true in general, but in this rare case anyone's
| USDC can actually theoretically be recovered in full if
| the price ever manages to get just barely above 0 for a
| period of time and they pull it out during such a period.
|
| If nothing can be done, you have to just take the loss.
| But here something can actually be done, and it's not
| like it's infeasible. Just hard.
| dkokelley wrote:
| I'm wondering the same. I don't know how the mechanics of
| blockchain oracles work, but it seems feasible that the oracle
| operators could report a price high enough for the contract to
| believe it's `> 0`.
|
| Reasons why this might NOT work:
|
| 1. The oracle "broadcasts" the price to the network, which
| other services may rely on. Broadcasting a false price could
| hurt those services, and the oracle would lose credibility.
|
| 2. The oracle's price is somehow tied into other blockchain
| mechanics (i.e. it can only report a price that the network
| consensus agrees is true)
|
| I'm not sure how #2 could be true, since the purpose of an
| oracle is to provide information that the blockchain can't
| determine on its own.
|
| EDIT: More info on the price oracle in use here:
| https://docs.iron.finance/mechanism/pricing-oracle
|
| Still not sure the exact mechanism, but #1 seems to be the
| concern. Chainlink can't readily tamper with the price feed
| that may be in use by others.
| treis wrote:
| The article laughs at the developers but then gets things
| fundamentally wrong. The error isn't an off by one error, to
| begin with. Then, as you note, it doesn't make any sense for
| the coins to be locked. The oracle should always report a price
| above 0 and if for some reason it's not it should be relatively
| trivial to get it to
| occamrazor wrote:
| Now everyone with USDC locked in the contract has a strong
| incentive to push the TITAN price above 0, in order to unlock
| their coins. OTOH everybody wants to dump TITAN at any price, but
| again only at a price >0. There should be an equilibrium where
| TITAN is valued exactly 1 tick above 0, if there is a concept of
| "tick" in TITAN.
| sanderjd wrote:
| So, Dai is a stablecoin that by my understanding is
| collateralized similarly to this one, except that it requires
| ether (and I believe USDC is also an option). However, its peg
| held up very well during the recent precipitous drop in the price
| of ether. I'm curious if anyone here knows whether that was an
| algorithmic success in comparison to this, or perhaps just an
| artifact of people having more confidence in ether.
| RaketenStadt wrote:
| According to paragraph 3 of TFA it's not collateralized
| similarly
|
| > Other on-chain stablecoins like DAI are over-collateralised.
| For every $1 of DAI, there's ~$1.75 worth of crypto assets in
| the DAI system.
| zionic wrote:
| DAI kept its peg while ETH went all the way up to 1440 and back
| down to $70. It's also kept it up from $70 to $4400 and back to
| $2300, so we're well within norms.
| api wrote:
| I thought of a new framing of cryptocurrency reading this: it's a
| MMORPG for math nerds.
| ikeboy wrote:
| Fwiw the bug was fixed by submitting a transaction to change the
| oracle to a new contract that just had a fixed nonzero price for
| titan. Everyone was able to redeem at roughly 74.6 cents.
| oneshoe wrote:
| Quite honestly, that's quite scary. The ability to just change
| an oracle sounds like a backdoor (and not De-centralized). I'm
| not exactly familiar with Poly - but, I thought that was the
| sell of Link, was the idea that you are dealing with Oracle
| pools rather than a specific, single, Oracle?
| ikeboy wrote:
| There's a timelock where any such changes are delayed by 12
| hours. So if they were to submit a transaction that people
| didn't like, they could exit - this significantly reduces the
| expected value of trying to steal funds since most of it will
| vanish. But it's useful to be able to tweak some parameters
| in case of bugs such as this.
| pavel_lishin wrote:
| 12 hours is not a lot of time.
|
| And what does it mean that they could exit, when the
| contract itself was completely broken in the meanwhile?
| ikeboy wrote:
| It's enough time for most people to exit during normal
| circumstances. Sometimes longer periods are used.
| Definitely better than nothing.
|
| In this case people wouldn't have been able to exit due
| to the bug, correct.
| PragmaticPulp wrote:
| > It's enough time for most people to exit during normal
| circumstances.
|
| Most people don't monitor the finer details of their
| investments 24/7.
|
| 12 hours is better than nothing, but it's unrealistic to
| expect everyone to stay tapped into news feeds about
| their crypto at minimum twice a day.
| ikeboy wrote:
| The main benefit is reducing the incentive for the
| developers to steal. If you know 90%+ of the funds will
| disappear before you can do anything then it's much less
| attractive (where the alternative is making money by fees
| over time if the protocol is successful).
|
| The risk needs to be balanced with the risk of funds lost
| because of a smart contract bug that can't be fixed.
| Different projects make different choices here.
| seoaeu wrote:
| Yeah, 12 hours means you can't even count on watching
| during business hours, you need to constantly be checking
| evenings and weekends too.
| TigeriusKirk wrote:
| People doing esoteric DeFi are tapped in much more often
| than that. I'd agree in a broad general use case it's not
| enough time, but for DeFi as it is today, it's plenty.
| senjin wrote:
| But we're not watching contract changes. We're relying on
| that from 2nd and 3rd hand sources that might not be
| available in a 12 hour window.
| lupire wrote:
| Why don't the IRON holders bid TITAN up to 0.000001 to unlock the
| IRON $0.75?
| cabalamat wrote:
| Unstable coin?
| spamizbad wrote:
| Is "unthought" some trendy positive-vibes-only newspeak for
| "didn't think"? Or just an artifact of non-native english?
| ipsin wrote:
| I found this article interesting, but the HN title ("Off-by-one
| error...") doesn't match the article's, or its conclusion?
|
| The article mentions a boundary condition ("_share_price > 0"),
| not an off-by-one error.
| Dylan16807 wrote:
| "An off-by-one error or off-by-one bug (known by acronyms OBOE,
| OBO, OB1 and OBOB) is a logic error involving the discrete
| equivalent of a boundary condition."
|
| And these are discrete numbers, so I don't see the problem.
|
| A huge fraction of off by one errors are > vs >= or < vs <= in
| a for loop.
| karatinversion wrote:
| The off by one error is that the condition should have been >=
| 0
| bombcar wrote:
| > Non-collateralized stablecoins require continual growth to be
| successful. In the event of a price crash, there is no collateral
| to liquidate the coin back into, and the holder's money would be
| lost, as seen with many past projects trying to utilize such
| design [sic].
|
| Isn't that just a Ponzi scheme?
| RaketenStadt wrote:
| No, much different, in a Ponzi scheme you're fraudulently
| claiming that the high returns you're delivering your old
| investors are real, and result from your investing acumen, when
| in fact they aren't real, they're just money from new investors
| that was never invested in the first place.
|
| This is more like if you bought a lot of dollar bills that were
| 75% backed by gold and %25 backed by Dogecoin. They are
| comparable in that both keep working as long as no one tries to
| cash out, and money keeps coming in.
| EDEdDNEdDYFaN wrote:
| "They are comparable in that both keep working as long as no
| one tries to cash out, and money keeps coming in."
|
| So...a Ponzi scheme?
| RaketenStadt wrote:
| No, much different, in a Ponzi scheme you're fraudulently
| claiming that the high returns you're delivering your old
| investors are real, and result from your investing acumen,
| when in fact they aren't real, they're just money from new
| investors that was never invested in the first place.
|
| They are comparable in one way however.
| random023987 wrote:
| So it's an honest Ponzi scheme?
| RaketenStadt wrote:
| Bernie Madoff went to prison for fraud, what would "an
| honest Ponzi scheme" even mean?
|
| I think a lot of people saw _The Wizard of Lies_ and
| "Ponzi scheme" is the only financial scheme they're
| familiar with, so it gets thrown around a LOT.
| raziel2701 wrote:
| So what you're describing is that this is a next-
| generation Ponzi scheme where nobody goes to jail but a
| bunch of people still lose money.
|
| But yeah let's keep arguing over semantic definitions.
| RaketenStadt wrote:
| No, this isn't a Ponzi scheme. That's the only thing I've
| said. I think you believe "Ponzi scheme" and "scheme" are
| interchangeable.
|
| Usually the go-to lazy catchphrase is "we're just arguing
| semantics!" but "semantic definitions" is new.
| hluska wrote:
| To be charitable, I think it's more likely that this is
| an entire area where regulation hasn't caught up so we
| don't have any common names available.
|
| These coins are ponzi-like in that only the earliest of
| adopters have any chance and only if they know enough to
| get currency out without hitting an inflection point that
| brings down the whole thing. But that's where the
| similarity ends - the mechanism is different, they don't
| operate like a Bernie Madoff and they're honest about the
| whole process.
|
| This is something else and while it's Ponzi-like, it's a
| different beast. I don't think there's anything
| particularly wrong with expanding the definition of Ponzi
| scheme for now, just so we have something to educate some
| irrationally exuberant retail investors...
| ezoe wrote:
| It sounds exactly the case to me.
| shkkmo wrote:
| It depends on how the coins are stabilized. If they are
| stabilized by generating new coins and those coins ate given
| away to current holders (as opposed to sold to establish more
| collateral), then this is precisely a ponzi scheme.
| dh5 wrote:
| Matt Levine had a great writeup about this:
|
| > If the price of IRON goes down from $1 (good) to $0.95 (bad),
| you just issue some TITAN (worth $65) to buy some IRON until
| it's worth $1 again. And if IRON keeps going down, you just
| issue some more TITAN (worth $60) and buy more. And if IRON
| keeps going down ... [you can fill in some more iterations
| here] ... you just keep issuing TITAN (worth $0.000000035) and
| at that point you're not accomplishing much. If you could sell
| 286 trillion TITAN at $0.000000035 each you'd raise $10
| million. That's probably hard. There are 285 million IRON
| (formerly worth $1) outstanding.
|
| So probably not a Ponzi scheme but also not a scheme that was
| created by someone who can think two steps ahead.
| Symmetry wrote:
| Link to article: https://www.bloomberg.com/opinion/articles/2
| 021-06-17/titani...
| raziel2701 wrote:
| It sure sounds like it, new money needed to pay the old money.
| RaketenStadt wrote:
| A definition so broad it's meaningless. There was no Bernie
| Madoff here, no fraudulent scheme, just very poor design and
| outright mistakes.
|
| What you're describing is what they tried (and failed) to
| avoid. How can you make it to the "I'm wondering if this can
| last mathematically?" part of this article and still think
| there's a mastermind behind all of this?
| [deleted]
| juliansimioni wrote:
| No, much different:
|
| In a ponzi scheme, the perpetrators will not willingly directly
| reveal that it's a ponzi scheme.
|
| In cryptocurrency, the perpetrators are honest and transparent
| about it being a ponzi scheme, but surround it in so much
| techno-babble that they make it sound like a ponzi schme is
| what you WANT.
| meowface wrote:
| >In cryptocurrency, the perpetrators are honest and
| transparent about it being a ponzi scheme, but surround it in
| so much techno-babble that they make it sound like a ponzi
| schme is what you WANT.
|
| I think this isn't quite right in all cases. I think some
| people know it's a Ponzi scheme and genuinely _do_ want a
| Ponzi scheme. They just want to get in and out quickly. It 's
| gambling. Sometimes you're a victim and you lose money, and
| sometimes it works out and you make money.
| rchaud wrote:
| This is happening right now with the hilariously titled
| "SafeMoon" cryptocurrency. You can find posts on the
| subreddit openly asking people to buy a few million for $25
| and 'gift' it to their friends and family.
| tornato7 wrote:
| The hot new Ponzi scheme is EMAX, which even has celebrity
| endorsement! What could possibly go wrong. If you want to
| see an endless number of other Ponzi coins, check out
| /r/cryptomoonshots
| redisman wrote:
| These are not Ponzi schemes. In a ponzi you have a mechanism
| to distribute money to early adopters in the tree. These are
| just pump and dumps but you create and pre-mine the asset
| before pumping it.
|
| There were ponzis some years back like OneCoin and
| BitConnect.
| hluska wrote:
| So basically a Ponzi scheme where only the earliest
| adopters get paid and everyone is remarkably open about
| that?? :)
| ArkanExplorer wrote:
| Its like the Uber of Ponzi Schemes.
|
| The main innovation is that there's no one to sue. The founders
| can just print themselves a bunch of coins and remain basically
| anonymous.
|
| They also bypass regulation, because its on the web?
|
| Regulators are asleep at the wheel. This entire category of
| 'technology' should have been snuffed out years ago for the
| good of us all. Now, look around us as GPUs and other chips are
| out of stock, cities face blackouts due to coin mining, and the
| major use of these coins is to fuel ransomware attacks that
| take down critical infrastructure.
|
| All entirely pointless - or even outright negative - activity.
| frgtpsswrdlame wrote:
| Interestingly Mark Cuban got taken for a small amount of money by
| this and is already calling for regulation around stablecoins:
|
| https://www.bloomberg.com/news/articles/2021-06-17/mark-cuba...
|
| _I read about it. Decided to try it. Got out. Then got back in
| when the TVL start to rise back up As a percentage of my crypto
| portfolio it was small. But it was enough that I wasn 't happy
| about it.
|
| But in a larger context it is no different than the risks I take
| [in] angel investing. In any new industry, there are risks I take
| on with the goal of not just trying to make money but also to
| learn. Even though I got rugged on this, it's really on me for
| being lazy. The thing about de fi plays like this is that its all
| about revenue and math and I was too lazy to do the math to
| determine what the key metrics were.
|
| The investment wasn't so big that I felt the need to have to dot
| every I and cross every T. I took a flyer and lost. But if you
| are looking for a lesson learned , the real question is the
| regulatory one. There will be a lot of players trying to
| establish stable coins on every new l1 and L2. It can be a very
| lucrative fee and arb business for the winners.
|
| There should be regulation to define what a stable coin is and
| what collateralization is acceptable. Should we require $1 in us
| currency for every dollar or define acceptable collateralization
| options, like us treasuries or?
|
| To be able to call itself a stable coin? Where collateralization
| is not 1 to 1, should the math of the risks have to be clearly
| defined for all users and approved before release? Probably given
| stable coins most likely need to get to hundreds of millions or
| more in value in order to be useful, they should have to
| register._
| shadowgovt wrote:
| Hypothetically, what he's suggesting may not even need to be
| government-backed.
|
| An independent auditor, with reputation on the line, could, for
| a fee, offer independent coin analysis and risk assessment.
| Perhaps something similar to the Underwriters Laboratories
| model... knowing a coin was "Coincheck-certified" or something
| could give similar confidence to knowing the UL sticker on a
| lamp means it's a bit less likely to burn your house down.
| Nasrudith wrote:
| That whole concept doesn't make any sense really. You don't
| have a lamp which can quietly turn itself into a plasma torch
| from a perfectly safe prior configuration. Yet any stable
| coin is an attractive nuisance basically - it involves
| keeping sizable money around doing nothing. As seen by
| pension raids that is a huge "steal me" sign. Even if you
| could keep it secure such an arrangement is fundamentally
| very entropic without it being a real currency with backing.
| It is still entropic but that is being used to sustain a
| nation state instead of bad finance which actively tries to
| avoid useful investments.
| raziel2701 wrote:
| Wow, billionaire gets rug pulled after promoting it just last
| week, and now he's calling for government regulation.
| runbathtime wrote:
| Does this contract have a money transmission license? Selling an
| IRON or a TRON for USDC is money transmission. BSA requires money
| transmitters to be licensed in states where they operate, as well
| as register with FICEN, etc. How can we enforce them to comply at
| the state level? Can an individual sue the states to enforce
| compliance on the people behind this smart contract? Those that
| have lost money might have an incentive to start wanting money
| transmission rules actually enforced.
| bruce343434 wrote:
| Were the devs even American? From reading the article and their
| bad grammar, it seems not. If so these US regulations don't
| really apply/have any consequences.
| runbathtime wrote:
| If a code error that was made that was supposedly 'dumb' wasn't
| caught that tells me the people behind this acted recklessly.
| This code error being described wasn't just dumb, it was
| catastrophic- locking up all the collateral. Is this collateral
| locked up forever, what would make Titan trade above 0? The code
| wasn't even audited, suggesting no care by the devs before
| release. Doing money transmission without a license is criminal
| offense- jail and fines in this case are on the table- all it
| takes is actual enforcement from regulators.
| tluyben2 wrote:
| > Doing money transmission without a license is criminal
| offense
|
| Who did the transaction though? These people? The eth network?
| Was it considered money? And where? Do these people live there
| who did the transaction? I am not saying you are wrong but this
| 'war on X' attitude never was a great idea, it also does not
| work as it is not a singular entity that is to blame. It is a
| vast network spanning countries.
| runbathtime wrote:
| Ignorance or not understanding the money transmitter rules is
| not a defense.
|
| Focus directly on the entity doing the money transmission in
| this case- the smart contract IRON. They take in USDC and
| give out IRON and TITAN. IRON and TITAN are money
| substitutes. Money transmission includes anyone by any means
| conducting exchange of one type of money for another.
| Functionally that is what this contract is doing. The code
| didn't write itself, there are people behind it that released
| it, and they wrote it to conduct money transmission (a
| specific purpose). You don't even need to bring ethereum into
| the conversation to prove they are in violation.
|
| I'm not sure I understand your comment about 'war on X' but I
| think it is a problem when there is an arbitrary application
| of these laws and unfair dealing that we see by regulators
| within the crypto industry. Maybe this is natural (self
| interest), and maybe it isn't entirely their fault (limited
| resources).
|
| I saw a twitter thread from a lawyer saying the SEC doesn't
| determine if something is a security, the courts and congress
| do. Then why are we obsessed with the SEC's opinion? I
| speculate that we just need court cases and we do not need
| the regulatory authority to bring the court case. Maybe that
| is the problem to solve.
| georgyo wrote:
| This has always been the problem with smart contracts. They are
| infact dumb contacts.
|
| To program one you need to think about all the edge cases. The
| programmers here likely did want >0 here. The possibility that
| the thing feeding price data return zero incorrectly was higher
| than the price legitimately being zero in their minds.
|
| There is no court or lawyer who can interpret the spirit of the
| contract.
| jcpham2 wrote:
| I've been saying for a very long time now to anyone who chooses
| to listen that a contract itself is a human construct - it is
| both temporal and physical and has location to be relevant and
| useful. Without all of those properties a contract ceases to
| useful to a human being under all edge cases.
|
| So it is, in fact, a dumb contract. Humans want contracts that
| make them whole at the end of the day, that's the point of the
| contract: jurisdiction over the human realm.
| exporectomy wrote:
| How is that thing you've been saying relevant here or how
| does it lead to your 2nd paragraph? Smart contracts meet all
| your requirements for a contract just as PDF contracts do.
| shkkmo wrote:
| I believe the point the poster was making is that "smart
| contract" is a misnomer and contracts comprised of code
| should be more realistically called "dumb contracts" since
| they lack the intelligence to understand and compensate for
| context and intent.
| missblit wrote:
| They really shouldn't be called contracts at all, since
| intent ("meeting of the minds") is a fundamental part of
| contract law.
|
| Imagine for example if a mortgage contract contained some
| bizarre inscrutable loophole that as-written would give
| the first 3rd party to notice it total control over over
| the house.
|
| This would of course be laughed out of court because that
| part of the contract wouldn't be enforcable under
| contract law.
|
| "Code is law" is more accurately written as "code is not
| law at all".
| shkkmo wrote:
| > They really shouldn't be called contracts at all, since
| intent ("meeting of the minds") is a fundamental part of
| contract law.
|
| That's a really good point. They are arguably neither
| "smart" nor "contracts". Maybe a better term is
| "automated blockchain agents" or something similar?
| motioncuty wrote:
| Do you see no value in throwing these "dumb contracts" out
| there and seeing what happens? An expensive experiment for the
| speculators, but we got to the moon on a roman candle iterated
| a billion times, so I'm personally just curious about these
| programmable organizations of digitalized willpower.
| meowface wrote:
| I agree. It's software. Lots of software sucks and is buggy
| and vulnerable. Sometimes mission-critical software sucks and
| is buggy and vulnerable and causes catastrophes when it
| fails. A lot of it's malware. A lot of it's inefficient
| and/or useless.
|
| But a lot of it's good, and more good things will come out
| over time. It's currently the equivalent of like 1998 in the
| smart contract space right now.
| xur17 wrote:
| That's both a downside and an upside though - they do exactly
| what they say they will do. The issues occur when people don't
| realize exactly that they say they will do. To me it's just a
| different set of trade offs.
|
| Also, it's worth noting that this contract wasn't audited, a
| baseline practice in the industry. Most larger contracts go
| through multiple waves of audits, while this was apparently
| released with exactly 0 (so hard for me to be shocked when
| there are issues).
|
| > A code audit likely would have caught this (this type of bug
| is so common in software development, I've probably made it
| hundreds of times myself), but of course this smart contract
| was not audited. Only its sister-contract on the Binance Smart
| Chain, written in a different language, was.
| tornato7 wrote:
| Any experienced crypto investor knows that putting money into
| an unaudited contract that's less than a few months old is
| basically throwing that money away. There is another side to
| this, though, which is that protocols than have been around
| for a year or more without problems are quite trustworthy and
| become important building blocks for DeFi.
| tfang17 wrote:
| That's the whole point. Code is law.
|
| The alternative is our current, arcane legal system - only
| interpretable by lawyers who charge $600/hr.
| jnwatson wrote:
| $272 million dollars could buy a _lot_ of lawyer hours.
| Retric wrote:
| Smart contracts don't protect you from being sued. So, now
| you need both lawyers and programmers while still risking
| losing everything.
| disruptalot wrote:
| Not exactly. There are plenty of anonymous projects,
| developers and users.
| meowface wrote:
| Plus, even if they lose their anonymity, many are in
| places like Eastern Europe where suing them won't be so
| easy.
| enlyth wrote:
| What about the crowbar attack? A couple of thugs show up at
| your house and tell you to hand over your private keys, or
| they'll beat you until you will. Code can't account for all
| the nuances of real life or being human
| w4 wrote:
| > _Code is law._
|
| Law is law, code is code. They're two very different things.
| Code can't prevent someone from using violence to force you
| to overturn a smart contract's decision. The law can because
| it's enforced by the state. You could certainly choose to
| build a system of law that uses code, but code by itself
| cannot substitute for law.
|
| > _only interpretable by lawyers who charge $600 /hr._
|
| What do you think the going hourly rate would be for software
| engineers capable of writing bug-free smart contracts? If
| adoption takes off I'd bet that it will look a lot like the
| hourly rate of a good lawyer, or even exceed a lawyer's
| hourly rate given the impossibility of an appeal if the smart
| contract is poorly coded.
|
| Also lawyers don't interpret contracts. They draft them and
| advocate on behalf of their clients in disputes. Judges
| interpret contracts, and are available as a public service
| paid for by taxes.
| cabalamat wrote:
| Programs have bugs in. This is something programmers should be
| aware of!
| oneshoe wrote:
| This is precisely why Cardano is using Haskell for their
| language.
| msgilligan wrote:
| Smart contracts is a horrible name. The better analogy (which
| has been around for years) is that they are the digital
| equivalent of (snack and beverage) vending machines.
|
| As with vending machines, they have their use cases, but they
| aren't lawyer "smart" and they certainly aren't legal
| contracts. I'm not sure how much trouble a better name would
| have saved everyone, but it might have done a better job of
| setting expectations.
| femto113 wrote:
| So is this event the digital equivalent of the bag of chips
| getting stuck on the row below it or the frustrated customer
| shaking the machine until it falls over and squashes them?
| msgilligan wrote:
| Looks like some very expensive chips got stuck in the
| machine.
| tigger0jk wrote:
| Also, if the price of TITAN is 0, then you really can't pay out
| 25 cents worth of it... It does seem correct that the contract
| should handle such a case differently than just trying to pay
| you out UNDEFINED DIVIDE BY ZERO ERROR count of TITAN
| georgyo wrote:
| You just hit the nail on the head. I did not think about
| that.
|
| This is the true reason they needed to special case <=0.
| dheera wrote:
| Not only that, but all the hashes will probably be broken at
| some point in the future. We thought MD5 was the be-all end-all
| of hashes back then, but here we are at SHA-512 thinking it's
| our masterpiece. Two decades from now it will probably be
| obsolete.
| runbathtime wrote:
| That is what courts are for- to interpret the spirit of a
| contract. There is a point where hiding deliberate pump and
| dumps/ fraud/ ponzi schemes through complicated tokenomics or
| incompetence (we couldn't predict all the edge cases) no longer
| is an excuse. At this point, there is really no difference
| between the approach to launching these half baked algo/backed
| stablecoins and deliberate fraud. It could be easy for a court
| to make the decision that the contract was designed to be
| complicated on purpose to hide deliberate fraud, or at least
| could determine the devs were recklessly incompetent and still
| responsible.
| jayd16 wrote:
| Hmm. I don't think this is the first legal contract of
| ambiguous intent. Surely any court would decide what the proper
| reading is and rule in some direction.
| SamBam wrote:
| While it's certainly true that there are plenty of legal
| cases that hinge on the inclusion or omission of a single
| comma, or a single word, or something like that, _by and
| large_ the courts (and the whole system) try and sort such
| things out through principles such as intent and least-harm.
|
| This is particularly the case with ownership of money. If
| you've put money in a bank, and the bank says "sorry, due to
| a programming error you can't get your money back," that's on
| the bank. They are legally required to try and get you your
| money back.
|
| Similarly, legal contracts (as opposed to defi smart
| contracts) must contain certain elements to make them legally
| enforceable. These include such elements as capacity (the
| capacity of the signer to enter into a contract, which can
| take into account whether they can fully-understand the
| contract) and adequate consideration (whether the contract is
| blatantly unfair to one party). So a contract that seems
| reasonable but might have some complex edge-case that
| requires extreme fine-grain parsing or auditing to see how
| you might end up with no money may not be legally-enforceable
| at all.
|
| In the defi world, it seems like you're entering into a
| contract that's written in code, but there's no requirement
| to be able to actually parse and _have the capacity to
| understand_ all the code that is written in the contract (or
| omitted, in the case of edge-cases the programers didn 't
| think about). This seems like it wouldn't fly in any legal
| contract.
| thebean11 wrote:
| > There is no court or lawyer who can interpret the spirit of
| the contract.
|
| That's obviously the point, though. You are trading one set of
| risks for a completely different set of risks that might suit
| your use case much better; your counterparty being able to
| contest a contract in court could very well be a "bad" thing
| for you.
| toomuchtodo wrote:
| > your counterparty being able to contest a contract in court
| could very well be a "bad" thing for you.
|
| Evading the law (whether the court or a regulatory body such
| as the SEC [civil] or DOJ [criminal]) is typically a "bad
| thing" for the person or people intending to or successfully
| doing so.
|
| https://www.sec.gov/spotlight/cybersecurity-enforcement-
| acti... (SEC Cyber Enforcement Actions, control-f
| "blockchain" | "crypto")
|
| https://www.ropesgray.com/en/newsroom/alerts/2021/March/The-.
| .. (The CFTC Signals New Era in Enforcement of Cryptocurrency
| Trading with Action Against Antivirus Software Pioneer John
| McAfee)
|
| https://www.jdsupra.com/legalnews/doj-activity-on-
| cryptocurr... (DOJ Activity on Cryptocurrency: A Six-Month
| Review)
|
| https://www.reuters.com/world/us/us-court-authorizes-irs-
| see... (U.S. court authorizes IRS to seek identities of
| taxpayers who have used cryptocurrency)
| thebean11 wrote:
| Are you saying the only time a contract is disputed is when
| the other party is evading the law? Nobody abuses the legal
| system to screw over people without enough resources to
| fight in court?
| toomuchtodo wrote:
| I'm saying the legal system takes authority. A smart
| contract doesn't avoid or override that authority.
|
| https://digitalchamber.org/wp-
| content/uploads/2018/02/Smart-...
|
| > Is A Smart Contract Always A Legal Contract?
|
| > No. Because a smart contract is computer code, a smart
| contract may represent all, part, or none of a valid
| legal contract under U.S. law. Smart contracts function -
| in whole or in part - to give effect to legal contracts.
| Thus, smart contracts are the programmatic means by which
| some or all of the terms of the legal contract are
| performed. It is the underlying contractual terms that
| are given legal effect.
|
| That legal contract and the contractual terms is what is
| evaluated and governed by the legal system. Smart
| contracts are fancy business logic snake oil salespeople
| are attempting to sell as the law of the land.
| jessriedel wrote:
| It's common for people to take mechanical/technological
| steps to make sure agreements will be respected when they
| know that if they just wrote a contract they could not
| rely on the legal system to enforce it in a reliable or
| economical manner. This is not necessarily bad.
|
| When I get my car fixed at the mechanic, I am paying for
| the service but at no time do I transfer ownership to
| him. One procure we could follow is for him to do the
| repair, give me my car back, ask for payment, and then
| pursue me in court if I refuse to pay. But instead, the
| procedure is that he just keeps the car in his garage
| until I pay. (If I want to call the police to get my car
| back, I can, but now I have to explain to them why I'm
| not paying, and enforcement is much easier.) This forces
| me to respect the agreement we made - repairs in exchange
| for money - in a more robust way than any contract ever
| could.
| jcrawfordor wrote:
| Most places recognize something called a "mechanics lien"
| that means the police won't get your car back either.
| Workmen usually have a legal claim to property that they
| worked on and have not been paid for. Sometimes it
| requires specific paperwork (more often with real
| property, e.g. a contractor can place a lien on your
| house but usually needs you to agree to it before they
| start work) but often it's implicit. I guess my point
| here is that this is a scenario with specific legal
| backing that goes way back into history, which smart
| contracts don't really have.
| jessriedel wrote:
| Yes, of course the reality and usefulness of this
| particular mechanism has _now_ been legally acknowledged
| and incorporated into the law in some (but not all)
| places. But mechanisms like this arise organically and
| are put to use long before they are officially
| recognized. I expect similar things to happen with smart
| contracts.
|
| In other words: things you might call "evading the law"
| in fact can be useful and then shape the law. If we were
| to adopt a principle like "anything that looks like it's
| trying to evade the law must be dismantled", we'd be
| worse off.
| jboy55 wrote:
| Strange emphasis on 'now'. From wiki, "Mechanic's liens
| in their modern form were first conceived by Thomas
| Jefferson, to encourage construction in the new capital
| city of Washington. They were established by the Maryland
| General Assembly, of which the city of Washington was
| then a part.[1] However, it is not likely that Jefferson
| single-handedly dreamed up the idea.
|
| At the time Jefferson promoted the law, a lien-like
| privilege already existed in civil law countries like
| France, the Dutch Republic and Spain, with some laws even
| tracing their roots to the _Roman Empire_. And since
| control of Louisiana had passed between the French and
| Spaniards, and had largely adopted the French Napoleonic
| Code, there was a similar privilege concept in that
| territory. "
| jessriedel wrote:
| It's not strange at all because "now" does not assert "in
| the past few years" or something. It's just in contrast
| to when the technique was first developed.
|
| Like, do you think there was a long-standing issue with
| people not paying their bills because the liens weren't
| enshrined in law, and a bunch of clever legislators got
| the brilliant idea to introduce it? No! It's been
| happening since before laws were written down, and the
| formal laws were crafted to fit this existing custom.
| thebean11 wrote:
| Not quite sure what you're saying, that you expect the
| DOJ to somehow overturn the judgements of smart
| contracts, with possibly anonymous participants or
| participants outside of the DOJ's jurisdiction?
| ceejayoz wrote:
| I think the point is more that if you owe $200M to
| someone, a court is unlikely to accept "it's irreversibly
| stuck in a smart contract" as an out.
| tluyben2 wrote:
| I am against smart contracts because we do not know how
| to write software in that way. I like how they sparked a
| formal verification Renaissance of sorts but that did not
| help much either unfortunately (if the premise is wrong,
| no amount of proof will save you anyway).
|
| However, if you let all parties review the smart contract
| (the source is on the chain, you can check it) and agree
| with it's workings and sign a 'human' contract saying you
| do agree and then it goes wrong, I think it should be an
| out. We do not have proper ways to sue for misbehaving
| software (it happens all the time but MSFT is climbing
| higher and higher): this is easier to verify but we are
| adults here: if you agree to put money in smart
| contracts, you should have verified the code. And if you
| think the code is flawed, do not put money: otherwise do
| not complain afterwards. It is not that hard.
| Daishiman wrote:
| > but we are adults here: if you agree to put money in
| smart contracts, you should have verified the code. And
| if you think the code is flawed, do not put money:
| otherwise do not complain afterwards. It is not that
| hard.
|
| That's not how it works. Courts generally operate by
| ambiguous standard of what reasonable people and
| reasonable experts can actually do given the state of
| technology.
|
| No reasonable software engineer can tell you that a piece
| of code is flawless. I don't think courts will agree on a
| system that has been shown through evidence to be highly
| flawed.
| thebean11 wrote:
| Sure, I don't disagree with that. For example, defrauding
| someone with a smart contract obviously doesn't offer the
| scammer legal protections.
| toomuchtodo wrote:
| Who defines fraud if the contract is contested?
| thebean11 wrote:
| Depends on which jurisdiction alleged fraud happens in.
| If the parties are anonymous or in "difficult"
| jurisdictions, it will be pretty difficult.
|
| Fraudulent or not, though, you have a pretty heavy layer
| of protection as the money has already been transferred,
| and that money is not easy (close to impossible) to
| freeze.
|
| Any reversal that happens will be necessarily by a threat
| outside the blockchain, as the governing body can't
| _actually_ reverse the transaction. It 's a second
| transaction.
| [deleted]
| vkou wrote:
| The courts.
| kevincox wrote:
| Sure, but if you both sign a legal contract to obey the
| outcome of the smart contract then no one owes anything,
| because the smart contract says that the $200M is gone.
|
| Obviously this doesn't allow you get around laws such as
| warranties but I don't see why it can't be used if
| everyone agrees to it.
| nradov wrote:
| That's not how US civil courts work. If a contract is
| flawed then a judgment can be rendered based on intent,
| equity, and other factors. There are centuries of common
| law precedent for this. The existence of blockchains and
| "smart" contracts changes nothing.
| ceejayoz wrote:
| In some cases, perhaps, but not all.
|
| Fraud, for example, isn't legal even if you have a
| cleverly crafted contract that uses wording tricks to
| _technically_ be true.
|
| I would expect a court to take a dim view of a smart
| contract that has an obfuscated, non-obvious mechanism
| for someone to siphon off all the money in an undisclosed
| fashion. "Code is law", but so's "you can't defraud
| people".
| SiliconAlley wrote:
| Where's the part where anybody defrauded anybody? This
| was clearly incompetence that benefited nobody (certainly
| the developers would rather not have TITAN implode and
| all of this USDC locked in a contract...). Embarrassing
| yes. Fraud? Pretty clearly no
| ceejayoz wrote:
| It's an _example_ of a scenario where you can 't sign
| certain rights away. Not specific to TITAN.
| lupire wrote:
| How can it be "locked"? Can't they deploy a protocol
| update to the members of the compute pool?
| only_as_i_fall wrote:
| A valid contract requires a meeting of minds such that
| inserting something designed to trick the other party
| inside a contract is pretty much always invalid.
|
| If you sign a contract to abide by a smart contract that
| was designed in bad faith or misrepresented I fail to see
| how that's any different.
|
| Even valid contracts are bound by the law. E.G. you can't
| sell yourself into slavery. Similarly, a smart contract
| can be a tool to execute the terms of a legal contract,
| but if it behaves in a way that would be illegal under a
| traditional contract I doubt any court in the US or
| Europe is going to recognize that as legal.
|
| I admit enforcement is another issue entirely though.
| shkkmo wrote:
| > Sure, but if you both sign a legal contract to obey the
| outcome of the smart contract then no one owes anything,
|
| You are begging the question by presupposing that for
| every smart contract there could be a possible _legal_
| contract that can bind the people who sign it to the
| results of the smart contract.
|
| If a smart contract is illegal, then any written contract
| that binds people to the results of that contract would
| be similarly illegal.
| crooked-v wrote:
| A very obvious example: in most jurisdictions, a contract
| signed by a minor can be rendered null and void by that
| minor (or their legal guardian) at any time.
| jcrawfordor wrote:
| Contracts can be unenforceable for reasons that might not
| be obvious to people who don't do contract law, as well.
| For example, the concept of consideration is not
| especially obvious, that contracts are often not
| enforceable if both parties do not receive consideration,
| which leads to things like peppercorn payments. I know
| about that as a layman but a contract attorney would know
| of many more non-obvious things that must be checked out
| to avoid having problems actually enforcing the contract.
| It seems like it would be very, very easy to produce a
| smart contract which a court would later determine was
| not enforceable in the first place, and perhaps order
| reversal of payments or other things.
|
| For one, as a general concept the parties to the contract
| need to actually understand the terms and courts will
| somewhat regularly throw a contract out if they think
| there were implications that were not apparent to one of
| the parties. Smart contracts seem like absolute
| minefields for this kind of problem.
| shkkmo wrote:
| Yeah, consulting a lawyer before drawing up an important
| contract is usually a very good idea for precisely these
| reasons. You can probably make small adjustments to a
| boilerplate without doing so, but that always adds
| atleast a little risk.
| unyttigfjelltol wrote:
| ... and a small band of programmers quietly sneak out of
| the room ...
|
| If your mechanic installs the tires in the passenger
| cabin, no one cares about the mechanics' lien. Depending
| on the judge they might not even care about the fine
| print on the back of the invoice, because installing
| tires in the passenger compartment is _that_ dumb.
| [deleted]
| hef19898 wrote:
| Contracts, at least in my jurisdiction, can come in all
| forms and colours. Even purely verbal contracts are
| valid, in fact. Those are hard to enforce, with nothing
| written it is always he-said-she-said when it comes to
| disputes. So I would be surprised if "smart-contracts"
| couldn't be litigated if push comes to shove. No way
| avoid the legal system. And that is a good thing.
| mcguire wrote:
| Depends on how strong the cryptography is, no?
| brazzy wrote:
| Depends a lot more on how much you're able to leave no
| unencrypted evidence.
| biztos wrote:
| > Smart contracts function - in whole or in part - to
| give effect to legal contracts.
|
| Except when they don't, which is... most of the time?
|
| It's true (and I would hope obvious) that a smart
| contract doesn't play like a legal contract, but aren't
| the vast majority of them intentionally doing things that
| are orthogonal to contract law?
|
| Or irrelevant to it? You can buy Beeples all day but you
| still don't own a copyright, and this doesn't seem to be
| a problem for anyone.
| jMyles wrote:
| > I'm saying the legal system takes authority. A smart
| contract doesn't avoid or override that authority.
|
| On a blockchain, this is absolutely false. The nodes
| interpret smart contracts. The "legal system" needs to be
| applied by some kind of oracle or by force to a node
| operator.
|
| Smart contracts are authoritative in their native
| environment.
| toomuchtodo wrote:
| > The "legal system" needs to be applied by some kind of
| oracle or by force to a node operator.
|
| Yes, this is usually how it's done. Business logic is not
| a legal authority.
| criddell wrote:
| They said "typically", so they aren't saying it's true in
| all cases, but generally when a person is trying to evade
| some legal authority, it's probably not for reasons good
| for society.
| thebean11 wrote:
| They are trading one legal authority for another, and
| this is agreed upon up front. Both parties agree that the
| code is the legal authority before entering into a
| contract, which is much different from evading authority
| after the fact.
|
| > but generally when a person is trying to evade some
| legal authority, it's probably not for reasons good for
| society
|
| Reminds me of the "nothing to hide" argument, that only
| someone trying to commit a crime would need or want
| protection from the legal system. History paints a
| different picture.
| cool_dude85 wrote:
| >They are trading one legal authority for another, and
| this is agreed upon up front. Both parties agree that the
| code is the legal authority before entering into a
| contract, which is much different from evading authority
| after the fact.
|
| The parties might "agree", but who cares? If they are in
| the US, for example, and the two parties have a smart
| contract that breaks US contract law, one of the parties
| can file a lawsuit and attempt to get their money back.
| You can't go to the judge and say "sorry, the code is the
| legal authority here".
| thebean11 wrote:
| Yeah I agree with that. Once the contract has executed,
| enforcement actions can certainly happen in meatspace.
| But do you not see the difference between:
|
| 1. A normal contract (legal or illegal) that requires
| outside enforcement _in the first place_ to force parties
| to comply.
|
| 2. A smart contract (legal or illegal) that executes
| itself _without outside enforcement_ and can be
| overturned later (not literally overturned, but a
| subsequent transaction can be forced) by meatspace
| mechanisms
| RandomLensman wrote:
| The vast majority of contracts in (1) does not need
| enforcing, because it is in both parties interest (at
| least long-term) to perform. Yes, there is implicit
| enforcement to some extent, but then "non-society" which
| don't even have that are not pretty places to be.
|
| On (2), sure we can find ways to have the execution fail.
| In fact, anything where there is not fully escrowed
| payment/collateral/etc. can fail to execute properly if
| the other side does have not what it needs to deliver/or
| does not make it available on chain.
| thebean11 wrote:
| > The vast majority of contracts in (1) does not need
| enforcing
|
| Of course, people are very careful prior to entering
| those contracts, because they know how big of a headache
| it will be if enforcement is needed!
|
| > In fact, anything where there is not fully escrowed
| payment/collateral/etc. can fail to execute properly if
| the other side does have not what it needs to deliver/or
| does not make it available on chain.
|
| Well, sure, if you write a contract that makes it
| possible for one side not to pay up, then that might
| happen. Having software run escrow is basically the whole
| point..
| RandomLensman wrote:
| Most contracts are so basic as to be invisible, so no,
| people are not very careful when they buy a chocolate
| bar, for example
|
| If you want smart contracts to be only applicable to very
| narrow sets of problems so be it, but otherwise you need
| to be able to allow, for example, unsecured lending and
| highly uncertain payoffs at T0 (staying in the finance
| domain)
| thebean11 wrote:
| > people are not very careful when they buy a chocolate
| bar
|
| Ok..sure, but I think it's sort of pedantic to bring up a
| class of contract that, obviously, nobody in this thread
| is talking about. It's a bad example anyway; even if you
| _are_ being pretty careful it 's simply not a risky
| transaction and therefor out of scope for complicated
| enforcement mechanisms like smart contracts.
|
| I don't think smart contracts are very well suited to
| unsecured lending, at least not with available software.
| There would be no incentive to pay it back without some
| mechanism to force collections. Collateralized loans,
| however, is a great use case that exists already.
|
| This is early stage tech, the scope is pretty small. I
| don't think anybody is arguing the contrary.
| RandomLensman wrote:
| Courts remain the legal authority, you cannot trade on
| for other unless provided by law (as in statute), and
| then it is back again to the courts to interpret. What
| did both parties really agree to? IANAL, but intentions
| and assumptions of the parties can matter - for example,
| quite a few things you cannot waive in some places,
| irrespective of what you agree or not.
| gknoy wrote:
| I don't know. I'm not a lawyer, but I recall that when it
| comes to contracts, they often allow you to waive
| protections that the law would normally give you (e.g.,
| specifying that conflict is resolved with arbitration) if
| both parties agree to it.
|
| In the case of smart contracts, where both parties (if I
| understand it right?) agree that the code defines the
| contract itself, it seems like saying "... but I made a
| mistake" (or it has an error) would be very hard to
| prove. It would be like if you had written in a 3 year
| no-questions-asked return period into a car contract,
| rather than a 3 day one, and then tried to litigate when
| someone actually used that.
| ska wrote:
| > hey often allow you to waive protections ... if both
| parties agree to it.
|
| This is not really generalizable. Arbitration clauses for
| example waive one method of recourse in favor of another
| method of recourse, both already accepted by the courts.
| I expect you couldn't replace that with trial by combat
| and expect it to hold in court, but you might be able to
| argue that a different resolution process with historical
| precedent would hold - at least you could test it in
| court.
| shkkmo wrote:
| You can amend some legal requirements, but certainly not
| all. There are many, many restrictions on the types of
| contracts that are legally enforceable.
|
| > but I made a mistake" (or it has an error) would be
| very hard to prove
|
| I don't think it would be that hard to prove that the
| implementation of a smart contract doesn't match the
| clear intent. The bigger issue isn't the disputability of
| the contract, but the difficulty of identifing who you
| would take to court.
| RandomLensman wrote:
| That is somewhat a US/Common Law perspective, in places
| with codified civil law might be tougher/different (but
| again, IANAL - just from experience doing complex
| contracts)
| [deleted]
| andrepd wrote:
| > Evading the law (whether the court or a regulatory body
| such as the SEC [civil] or DOJ [criminal]) is typically a
| "bad thing" for the person or people intending to or
| successfully doing so.
|
| Oh wow. If only this were true. If only they were so
| diligent in punishing other kinds of things.
|
| Here's something I read recently, from the aftermath of the
| Libor scandal: https://www.sec.gov/news/statement/stein-
| waivers-granted-dis... . Really highlights how crazy this
| whole thing is and how there are really two qualitatively
| different classes with two different sets of rules in our
| society.
| joe_the_user wrote:
| I think the gp just meant that when a person comes to the
| attention of courts and regulatory bodies, that the
| person had the intention of evading these authorities
| will taken badly by them and likely result in more
| sanctions than just what would happen for breaking the
| various rules.
|
| All the different ways people evade authorities is a
| large topic. But, you're right, friends in high places
| help.
| [deleted]
| RcouF1uZ4gsC wrote:
| > You are trading one set of risks for a completely different
| set of risks that might suit your use case much better; your
| counterparty being able to contest a contract in court could
| very well be a "bad" thing for you.
|
| There is no trade of risks. The judicial system is still
| going to assert their authority over contracts. Your
| counterparty will still be able to contest a contract in
| court. The guys with guns the court sends out to enforce
| their verdict are not going to be impressed with "code is the
| contract" and "blockchain". They will lead you to a (jail
| cell) block in chains (handcuffs) if you try to defy the
| court order.
|
| Instead you are trading specification of contracts in a legal
| language where there has been centuries of experience in
| writing and interpreting those contracts, for specifying the
| contract in a new language that is still evolving and where
| there is not a whole lot of legal precedent on how to
| interpret them and how to resolve bugs.
|
| These "smart contracts" are not decreasing your risk, but
| rather increasing it.
| xyzzy123 wrote:
| Some chains/coins are backed and developed by fairly well
| defined "legal entities" (presumably for reasons related to
| securities law). I am waiting with popcorn in hand for the
| day someone loses money via smart contract and then takes the
| entity behind the chain to court to overturn it.
|
| (We've seen disastrous bugs overturned by community-consensus
| hard fork but not to my knowledge by court order). Not yet,
| but it seems inevitable.
| toomuchtodo wrote:
| > Some chains/coins are backed and developed by fairly well
| defined "legal entities" (presumably for reaso). I am
| waiting with popcorn in hand for the day someone loses
| money via smart contract and then takes the entity behind
| the chain to court to overturn it.
|
| I would very much like to see regulators purposely engage
| in these activities, and then directly pursue those within
| their reach. There's no reason to wait for more citizen
| victims when the model is proven and the government has the
| resources to set the stage to demonstrate the failure
| scenario. This is simply a more elaborate sting versus
| putting a car on the street to be boosted.
| lmilcin wrote:
| > That's obviously the point, though. You are trading one set
| of risks for a completely different set of risks.
|
| But that's exactly _the_ point.
|
| People are not able to interpret "smart" contracts. For
| normal contracts most people can understand the contract and
| if there is a dispute you have laws and courts who can
| interpret in every case.
|
| In case of "smart" contracts even the contract developers
| more often than not seem to not be able to understand all
| consequences.
|
| So if we are trading one set of risks for another it kinda
| seems to me to be a a really shitty tradeoff.
| lupire wrote:
| eh, for a regular financial contract you need lawyers and
| judges. There is plenty of counterintuitive law that burns
| people.
|
| For this one you need programmers and computers.
|
| On both cases, if you go in blind or wing it you might get
| burned.
| bob33212 wrote:
| This is how ALL of Crypto works. A decentralized ledger
| means that you cannot call the CEO or CFO of the ledger and
| have a clearly fraudulent transfer revoked. That is the
| tradeoff.
| worik wrote:
| Yes. Trading off hundreds of years of experience and
| judicial tradition and precedent for a brand new shiny
| (just trust us programmers) system.
|
| If the former system were to be irretrievably corrupt,
| teetering on the edge of collapse, and the proposed
| replacement were capable of replacing it then it would be
| worthwhile.
|
| The existing international financial system is corrupt,
| the judiciary in most of our world is complicit, but it
| is not on the edge of collapse (look how brilliantly it
| sailed through the 2008 crises. It used its political
| power to get the middle classes to bail out the super
| rich). The proposed replacement (cryptro currencies) has
| no support from cryptographers (I am not one) nor finance
| geeks (that I have been). It is even worse that that
| which it proposes to replace.
|
| Additionally in most of the Western World we have the
| democratic institutions that can be put to use to fix the
| system. Economists are slowly coming around to
| recognising the catastrophic mess that the current system
| is, how it is sapping our vitality as a community,
| enriching the few (hi Unicorn founders - fly to Mars
| please) and impoverishing the middle classes.
|
| We can fix this. But we have to give up on single fixes
| (like crypto). This requires modern system thinking....
| xyzzy123 wrote:
| What I think a lot of people don't appreciate yet is that
| computationally decentralised systems can still have
| _legal_ single points of failure.
|
| Lots of chains have holding entities or foundations
| (nominally for governance, really to justify their
| premine or "reserves") and seem rather vulnerable,
| especially if they pay the core developers.
|
| The CEO of that entity won't take your calls but they are
| absolutely exposed to the whims of the legal system in
| their founding jurisdiction.
| marcosdumay wrote:
| Well, to be fair, people write legal contracts without
| fully understanding what they are writing all the time too.
| I do disagree that people understand them on most cases.
|
| Things are better on consumer law because it assumes from
| the start that people are stupid and have no idea what they
| are doing. But other kinds of contracts have quite large
| security risks.
| cortesoft wrote:
| Bad news for you, then... your counterparty can't still bring
| you to court.
| skybrian wrote:
| This is less about actually going to court and more about
| counterparties being able to give each other a bit of slack
| based on customs in the profession and what was "really" meant
| because they may need to work with each other again someday.
| The courts are for when negotiations fail.
| canadianfella wrote:
| Infact
| freewilly1040 wrote:
| > I've since learned that the developer(s?) behind this are
| already the laughing stock of the DeFi community, having wrecked
| each of their 3 previous projects (now 4) -- though this might be
| their biggest hit yet
|
| What's the best DeFi project? One where the value proposition is
| actually clear, there are actually people using it and it's
| actually at parity or better than a traditional financial system
| offering?
| wallacoloo wrote:
| Uniswap, the decentralized exchange. Is it decentralized
| _finance_?... up for debate (but at the very least, it's a
| critical component of the DeFi ecosystem). But I can plop $x of
| Ethereum and $y of tokenized BTC onto it, providing a valuable
| service to anyone who wants to exchange the two for any reason
| (e.g. tuning their price exposure to those assets), forget
| about it for a couple months, and come back to see that it's
| earned me a few % in fees. In many cases it's easier to use
| than the traditional equivalents because there's no
| registration system and it's instant. It falls short in some
| comparisons because of Ethereum transaction fees, but there's a
| lot of work happening to address that.
|
| Runner ups are Compound and Aave -- two large
| overcollateralized lending platforms. And the Maker: the USD-
| pegged "stablecoin" which gives anyone who doesn't want ETH
| price exposure access to these DeFi tools. That's the area
| where a lot of people think there's room for improvement, hence
| all the experiments like the project this article is about.
| meowface wrote:
| I think a better question is what are some valuable "non-
| ouroboros" projects?
|
| Most of the stuff people use essentially seems to be one form
| or another of shuffling the unit(s) of account around, like
| the ones you listed.
|
| You have a cryptocurrency. What are the uses for the
| cryptocurrency? Well, you can swap the cryptocurrency for
| another cryptocurrency or let someone else borrow the
| cryptocurrency in exchange for some more of the
| cryptocurrency or use the cryptocurrency to obtain a
| cryptocurrency that's a derivative of another cryptocurrency
| so you can make more of a different cryptocurrency. And what
| can you do with that cryptocurrency? Well, you can swap that
| cryptocurrency for another cryptocurrency or...
|
| There's a bit of a "pull yourself up by your bootstraps"
| thing going on (in the initial sense of the term).
|
| Despite the cynical question, I'm genuinely fairly optimistic
| about the future of smart contracts and Ethereum. I think
| there are some interesting non-ouroboros ideas in the space,
| like Kleros, but none of the ones I've seen seem too popular,
| valuable, or useful yet. But I could be missing some, and I
| know it's still the very early days.
| neutrinoq wrote:
| The one I actively use and have benefited a lot from is
| PlanetFinance.io
|
| You can easily get 50%+ APY a year on various stablecoins and
| crypto.
| xtracto wrote:
| That looks so shady... It has a very 2017 ICO feeling. A lot
| of buzzwords, a stupid name "AQUA" "BluePlanet" "RedPlanet",
| a bunch of extraordinary and unfounded claims, etc. Reminds
| me of a "Amfeix" scam that was all the rage in the crypto
| circles a couple of years ago. It was even advertised in
| "reputable" crypto pages.
| ppeetteerr wrote:
| I have never read so much about nothing as I have when reading
| about some new coin. It's worse than a pyramid scheme. At least
| there, you end up with a decade-worth of skin cream.
| dragontamer wrote:
| You're talking about multi-level marketing. Which isn't quite a
| pyramid scheme (even though it is pyramid-ish).
|
| Pyramid Schemes have the originators (the "top" of the pyramid)
| win lots of money, while the base (the "bottom" of the pyramid,
| where most people are) losers. And the top barely did any work
| to get there: they just took the money from people below them.
| aidenn0 wrote:
| Many MLM companies fit the legal definition of a Pyramid
| scheme (and have faced consequences from the FTC in some
| cases).
|
| The general rule is that if the majority of money does not
| come from selling to retail customers (either directly or
| downstream), but rather from recruiting new members, then
| it's a pyramid scheme.
| ppeetteerr wrote:
| You are correct, good sir. As you point out, both are
| somewhat the same: your value increases as more people buy
| into the illusion of value.
| biztos wrote:
| I missed out on the unregulated ICO rush because I thought you
| had to, you know, develop a new blockchain technology for your
| new _cryptocurrency,_ which is really hard, and I was busy.
|
| Much later I learned all you had to do was copy and paste a
| Solidity program and then promote it.
|
| Guess I dodged an ethical bullet in my ignorance, but still...
| vincentmarle wrote:
| You can create a new coin in a couple hours, the "hard work"
| is in selling and promoting it...
| vmception wrote:
| 15 seconds for the transaction
| h2odragon wrote:
| 40 years ago, financial innovation involved finding new affinity
| groups to sell credit cards to (and others I'm sure but that was
| a scam I saw firsthand).
|
| It wasn't any more honest than this; it was just kept quieter
| with private meetings and less publicity for the collapsed scams.
|
| I'd be looking for the banker-adjacent people in these. The folks
| that don't work for the banks directly, but consult; somehow
| always seem to have some extra connection to someone at the bank,
| related, married, side projects...
| ww520 wrote:
| Here's an arbitrage opportunity. Since the price of TITAN is 0,
| it only takes a small amount of $ to buy a vast amount of TITAN
| coins. Buy the locked out IRONs at a discount. Keep buying TITAN
| at $0 until it moves beyond $0 to satisfy the greater than 0
| constraint on IRON. Cash out the IRONs.
| jefftk wrote:
| I think that's why IRON is trading only slightly below the
| value of the locked collateral, instead of going down to zero.
| AlexandrB wrote:
| I think it's foolish to assume that the price for any
| particular cryptocurrency is arrived at rationally.
| kemonocode wrote:
| I knew crypto detractors were going to have a field day with this
| one. ;)
|
| With DeFi, you're simply exchanging one type of risk for another.
| Without due diligence you're pissing your money away- as it is to
| be expected. And as it was brought up before, this was an
| unaudited contract that had been running for what, weeks? Months?
|
| Personally, I cannot say I understand DeFi deeply enough to get
| into the intricacies of "yield farming" and such, so I just avoid
| it altogether. Only have a relatively small amount of USDC and
| DAI accruing interest on Compound, which has at the very least
| been audited [0] a few times before, but even if it were to go
| tits up tomorrow for whatever reason, at least I understood there
| was that risk.
|
| [0] https://compound.finance/docs/security
| bombcar wrote:
| I mean you don't need to do much due diligence to know that a
| 30,000% APR is unsustainable - so you're just gambling that you
| can get in, get some, and get out before it levels off or
| explodes.
| ayngg wrote:
| The big thing that people get caught up on is the fact that the
| space is essentially permissionless and because of that there
| is no regulation meaning everyone is entirely responsible for
| themselves, a level of responsibility that is foreign to most
| people. Anyone can make anything they want, which will
| inevitably lead to projects that outright scams, or fail
| because of bugs or misaligned incentive structures. Of course
| these are the projects everyone here loves because it reaffirms
| their belief that the entire space is a scam.
|
| I think the real story is the insatiable appetite for get rich
| quick schemes in today's world, because without that many of
| these projects would simply not be used. IIRC they had some
| insane yields of like 50k% apy on their token, anyone with any
| sense would know to run away from anything promising that.
| kemonocode wrote:
| If I understand things correctly, it didn't start out with
| such insane yields- that merely happened once it lost its
| peg. Even with my skepticism when it comes to stablecoins in
| general, I'd first put money in something that's
| overcollaterized so it has greater chances to survive "black
| swan" events (Such as DAI) or that has been properly audited
| so there's a guarantee $1=1 token (None yet- USDC is far less
| dodgy than USDT, but it too has only been merely audited, not
| attested.)
| Dotnaught wrote:
| The line of source code cited in the post isn't immediately
| evident in the Iron Contracts repo:
|
| require(_share_price > 0, "Invalid share price");
|
| https://github.com/IronFinance/iron-contracts
|
| Is it in a different repo? Does it exist?
| tanzann wrote:
| Seems this line is in Polygon contract:
| https://github.com/IronFinance/iron-polygon-contracts/blob/m...
| sva_ wrote:
| I think it ultimately boils down to
|
| https://github.com/IronFinance/iron-polygon-
| contracts/blob/m...
|
| > uint256 private constant PRICE_PRECISION = 1e6;
|
| yikes :D
| [deleted]
| meowface wrote:
| Not unlike many package repositories (PyPI etc.) and GitHub,
| the actual code a smart contract is running doesn't necessarily
| have any connection to what's in some GitHub repo. The only way
| to know is to look at what's on the actual blockchain.
|
| (If verified source is published, you can see the actual code;
| else you'd have to decompile the EVM bytecode. But basically
| 100% of the time, if verified source isn't provided then it's a
| scam, so it's safe to just ignore things without source. And,
| of course, even if verified source is published, there's still
| a high chance any given contract picked out of a bucket will be
| a scam, but at least you can review the code and spot the
| backdoor.)
| wyager wrote:
| Stablecoins are stupid no matter how many layers of Rube Goldberg
| crap the developers slap on top.
|
| https://mises.org/wire/folly-economic-stabilization
| cannabis_sam wrote:
| Did these people also write their "smart contract" in anything
| resembling JS?
| sashimi-houdini wrote:
| I wrote Skepticoin as a serious parody of Bitcoin. Articles like
| these about the "state of the art" of cryptocurrency make me
| wonder: would a parody of a more "modern" cryptocurrency even be
| recognizable as such?
| jrickert wrote:
| This brings to mind Poe's Law (that on the Internet, any
| sufficiently advanced satire is indistinguishable from
| reality), so I would think not.
| scyclow wrote:
| I don't think people recognized it as parody, but no one took
| http://fastcashmoneyplus.biz seriously
| knownjorbist wrote:
| For what it's worth, this isn't "the state of the art" of
| cryptocurrency.
| bena wrote:
| Doge says no
| hbosch wrote:
| Dogecoin literally started as a parody.
| marcosdumay wrote:
| Are all the people saying "hold it, we will get rich!!!" on
| Reddit joking? I honestly can not tell, but I'm not sure it's
| not a parody up to this day.
|
| I mean, there are some people there basically saying "yeah, I
| brought $0.10 worth of it, now I just have to wait until I'm
| a millionaire", even those I can't decide if they are joking
| or not.
| meowface wrote:
| I can't imagine it'd be possible. There're a whole lot of Andy
| Kaufman-esque / kayfabe / "the most entertaining outcome is the
| most likely" things going on.
|
| Literally no conceivable parody could work as an actual parody,
| I think. There are coins people are getting rich off of with
| names and logos like "Pregnant Butt", "CumRocket", racial
| slurs, etc.
|
| There's absolutely no doubt in my mind that if it hasn't
| already happened, coins named "Scamcoin", "Rugcoin",
| "Ponzicoin", "This is a scam coin, please ignore", "If you
| invest in this you will lose all of your money and be the
| laughingstock of your friends, family, and communitycoin" could
| probably quickly reach million/billion-dollar market caps.
|
| You could make a token with a smart contract which self-
| destructs itself at a random time, and explicitly disclose this
| fact, and it'd still probably get a huge market cap and retain
| it up until the day it explodes. Or you could make one that
| does this, don't disclose the fact, have millions of dollars
| flow in without a single person ever looking at the code, and
| get the same result. (Doesn't matter if you do or don't publish
| the verified source code; if you do, no one will look at it,
| and if you don't, no one will notice/care that you didn't
| before investing their life savings in it.)
|
| Poe's law doesn't even quite describe it, because it's not that
| you can't distinguish between parody and sincere absurdity.
| There's just no difference between the two in terms of actual
| real-world outcome. Whether you make an intentionally or
| unintentionally terrible coin, and whether or not you're open
| about it and whether or not people are aware of it, it's still
| going to receive a ton of investment.
|
| And it pretty much makes sense why this is and will be the case
| (unless the US government starts cracking down). People are
| buying because they find it entertaining and think other people
| will find it entertaining and buy and that they'll think other
| people will find it entertaining and buy, etc. And then they
| just wait until their initial investment multiplies a bit and
| they try to get out before the inevitable collapse. It's a
| fast-paced psychological arcade game. In some sense it's a
| distillation of Wall Street to its purest essence, for better
| and worse.
| brigade wrote:
| Scamcoin hit a $70 million market cap within an hour, and
| PonziCoin absolutely would have hit a multi-million dollar
| market cap if the dev hadn't pulled the plug.
| meowface wrote:
| >Scamcoin hit a $70 million market cap within an hour, and
| PonziCoin absolutely would have hit a multi-million dollar
| market cap if the dev hadn't pulled the plug.
|
| Fantastic. I genuinely was just coming up with those on the
| fly and did no research to see if any existed, but added
| "if it hasn't already happened" because I was still
| confident enough that some very likely did exist and very
| likely were successful.
|
| My post with your reply feels a little like movie scene
| dialogue. (Perhaps Aaron Sorkin.) What a time to be alive.
| bruce343434 wrote:
| > Doesn't matter if you do or don't publish the verified
| source code; if you do, no one will look at it, and if you
| don't, no one will notice/care that you didn't before
| investing their life savings in it.
|
| As someone who doesn't know much at all about crypto, it
| seems insane that apparently coins can be closed source? But
| how? How does the chain know what code to execute?
| dlubarov wrote:
| Ethereum apps are typically written in Solidity before
| being compiled to EVM bytecode. The EVM bytecode must be
| public, but one could keep the (more readable) Solidity
| code private, like distributing an executable without the
| source. I think it would be unusual though.
| meowface wrote:
| The Ethereum interpreter bytecode is stored on the
| blockchain, but the source code isn't. (It'd be inefficient
| both for storage and CPU cycle reasons.) Basically like
| storing a Python .pyc or Java .class file.
|
| There's pretty much a rule of thumb that tokens should
| always be open source, in part because it's much easier to
| hide a backdoor if you don't publish the source, and also
| because cryptocurrency communities generally share the open
| source, high-transparency ethos. The #1 Ethereum blockchain
| explorer site has a system that lets you submit source code
| for a contract, and they verify that the source code
| compiles to the exact same bytecode.
|
| You can very safely assume that if there's no source, it's
| malware. For every single instance I've seen where a
| project doesn't publish the verified source code, it's
| always been because the code is backdoored.
|
| You can decompile bytecode, but scam projects will often
| add a ton of obfuscation or even specific things to confuse
| the decompiler and make it fail to decompile certain parts.
| Better decompilers will keep getting written, so you
| theoretically won't ever be able to truly hide what your
| code is doing even if you don't publish source, but it's
| sort of moot because verified source code is bare minimum
| "table stakes" for anyone (competent) to interact with your
| project.
|
| The caveat being that most investors are non-technical and
| don't have a clue what any of what I just wrote means and
| will just invest in whatever if it has a name and a logo.
| But in that case, they'll invest in a scam project whether
| or not they publish the source code. And for the percentage
| who do at least know that no source = scam, they'll still
| invest in every scam that does have source code, which is
| most of the scams.
| AlexCoventry wrote:
| Most chains have a low-level representation which higher-
| level smart contrast source code is compiled to. E.g.,have
| a look at the "contract creator creator code" section on
| this contract:
|
| https://etherscan.io/address/0x1a2a1c938ce3ec39b6d47113c795
| 5...
| hi5eyes wrote:
| bitcoin is a parody of itself
|
| completely unusable as a currency, even maximalists cant
| seriously tell people to use it as such. "cryptocurrency" at
| this point means less useful than any currency in any mmo
| meowface wrote:
| Bitcoin totally failed as a currency, but it's still
| something. I'm not necessarily arguing Bitcoin is useful or
| valuable period, but the issue you refer to is more with the
| "cryptocurrency" name and public conception that that's what
| all this technology is. The core idea is reliable, secure
| decentralization and the things it can enable.
|
| Coins that support smart contracts show that "cryptocurrency"
| isn't a great term. Even if you never try to use ether as a
| currency (and indeed, most people don't), Ethereum can and
| does still do lots of things completely unrelated to finance
| in any way, with ether just serving as computational fuel.
|
| The interesting part is fully trustless peer-to-peer
| networks, not e-currencies. E-currencies are just an example
| of one thing you can run atop such a network protocol.
| They've already existed to some extent for a long time via
| protocols like BitTorrent, and these just expand on those
| ideas.
| [deleted]
| imtringued wrote:
| Technically it's a way to keep governments in check but the
| point isn't that you use an emergency solution all the
| time.
|
| Homeless people buy a tent as a fallback for a house. That
| doesn't mean they want to live in a tent for the rest of
| their lives.
| meowface wrote:
| Some people see it that way. And it probably does serve
| that purpose to some extent in areas with very unstable
| governments, like some developing countries. But I'm
| doubtful that by the year 2121 Bitcoin or any other
| cryptocurrency will have kept the US government "in
| check" in any way. It's not impossible, but I'd heavily
| bet against it.
|
| They may very well make/adopt some cryptocurrency as the
| new primary fiat by then, but I kind of see the idea of
| Bitcoin keeping the US government in check similarly to
| the idea of gun ownership keeping the US government in
| check.
|
| Out of curiosity, can you describe an example of how it
| could potentially serve such a purpose, even in a
| hypothetical contrived scenario?
| tornato7 wrote:
| I'm quite skeptical of Bitcoin in general but I can't deny
| that Lightning Network has really started to take off as a
| means of payment, it's even a common sight in El Salvador to
| see Bitcoin accepted through LN, where transaction costs are
| in the fraction of a cent.
| chriswarbo wrote:
| PonziCoin comes to mind https://ponzicoin.co
|
| Here's a snapshot before it shut down:
| https://web.archive.org/web/20140312233243/http://ponzicoin....
| aidenn0 wrote:
| That reminds me of a discussion a while back on whether or not
| "Snow Crash" was a parody. The main character was named "Hiro
| Protaganist" who worked delivering pizza for the mafia and
| there was a character who could take on pretty much any number
| of people completely unarmed, plus had a nuclear bomb wired to
| a dead-man's switch which caused quasi-governmental
| organizations to leave him alone.
|
| That's two items, but there's more. However, cyberpunk in the
| early 90s was so gonzo that it was not an obvious parody to
| many readers.
| meowface wrote:
| I think it's one of those things that's more complex than
| being one or the other. It's simultaneously a parody and also
| a somewhat earnest prediction of a not-super-far-fetched
| potential future world.
| gruez wrote:
| This is good for USDC right? Because it's $262 million that they
| don't have to pay back?
|
| >EDIT: I've since learned that the developer(s?) behind this are
| already the laughing stock of the DeFi community, having wrecked
| each of their 3 previous projects (now 4) -- though this might be
| their biggest hit yet
|
| And people poured $262 million into this?
| tluyben2 wrote:
| As I get older, I do not understand how known scammers,
| especially the ones that raise millions over and over, get
| support time and time again. If not in jail, why do they still
| get jobs. I know some who just told me in my face that they
| were scammers of millions (or simply were happy screwing people
| even with viable ways out) and they raise money again, screw
| people again etc. People do use Google right? Due diligence?
| opsecweather wrote:
| Our IronBank (lending), IronSwap (pegged assets-focused swap)
| have been developed already and will be live for testing
| soon. Iron stablecoin v2 will come later.
|
| https://ironfinance.medium.com/iron-finance-post-
| mortem-17-j...
| api wrote:
| They have charisma. Charisma is mind control. I'm pretty
| convinced that charisma can literally override the rational
| mind.
|
| I've seen some pretty amazing examples of charismatic people
| spewing absolute nonsense with the audience hanging on every
| word like they are a genius. Put far more interesting ideas
| in the mouth of someone with no charisma and they are
| ignored.
|
| Humans are merely clever. We are not truly intelligent.
| krapp wrote:
| Do you consider yourself intelligent, or merely clever?
|
| Are you a slack-jawed puppet of the charismatics, or is it
| just everyone else?
| api wrote:
| Honestly? I think I'm occasionally intelligent but
| usually just clever.
|
| I was being a bit hyperbolic for effect.
| nazgulnarsil wrote:
| The basic way a con works isn't by presenting itself as not-
| a-con but by presenting you as being in-on-the-con. Lots of
| overlap there with semi-legit (though taking advantage of
| stupidity) companies.
| Semaphor wrote:
| I can recommend checking out Reddit's /r/cryptocurrency and
| branching out to smaller altcoint subreddits. Read the
| comments. There are thousands of people just looking for that
| one weird trick to get rich.
|
| As a sidenote, I almost always got out just before a crash by
| when I was playing with altcoins by waiting for people to get
| over the top enthusiastic in their subreddit and then selling
| everything. Might as well have been luck though, so don't try
| it ;)
| ramesh31 wrote:
| >There are thousands of people just looking for that one
| weird trick to get rich.
|
| Increasingly I think they're the smart ones. I'm sitting
| here working my butt off for a few thousand dollars a
| month, while these guys raised hundreds of millions of
| dollars without even being able to grammar check a
| sentence. Who's the real sucker?
| Semaphor wrote:
| I was talking about the users giving them money, not the
| scammers/con artists.
| kzrdude wrote:
| Don't compare yourself to just the ones that got lucky,
| that's the big fallacy of trading.
| tluyben2 wrote:
| Well, most these talks are marketcap for their coin or
| token. That is not actual value. Some of the biggest ICOs
| got only a fraction out of them or nothing at all.
|
| They still get a lot for free scamming others. Just do
| not think that a 100m$ ICO means they raised that. They
| cannot get anything close to that out.
| tluyben2 wrote:
| I was not even talking crypto but 'normal' CEOs. I mean a
| famous one was the guy (do not think he was the CEO but
| close to him?) from Groupon: he was a known scammer and
| yet, he gets bingo every time. And many many more.
|
| Edit: whoops I never knew what became of Groupon but I see
| it was a massive scam altogether. Seems the investors could
| have known that from the first time they met the founders
| by just typing some names into Google. How does that work?
| 52-6F-62 wrote:
| Reminds me of Kevin O'Leary. Buddy toppled a _software_
| industry at the height of the first internet boom. That
| 's either a special kind of incompetence or something
| worse.
|
| They almost always seem to get bingo; the companies and
| the people that rely on them take the hit.
|
| https://www.nationalobserver.com/2016/02/18/news/did-
| kevin-o...
| tluyben2 wrote:
| Ah yes, thank you, good one. It was a gold rush not
| unlike now with cryptocoins. Everyone shouted 'this time
| it is different' which I hear a lot now again. Things do
| not keep growing. Covid delayed the real crisis. I
| digress: yes people like this: how can you not do a basic
| amount of dd and at least ask some people about them?
| ramesh31 wrote:
| >As I get older, I do not understand how known scammers,
| especially the ones that raise millions over and over, get
| support time and time again.
|
| Con artists are good at what they do. People are a thousand
| times easier to hack than a database server. And there's no
| security patches for human emotion; we are full of 10,000
| year old zero days.
| tluyben2 wrote:
| Agreed, but if you are a VC you do basic DD right? And if
| there is a reddit group calling your new star CEO a
| scammer, you might check a bit? But yes, full agree.
| rchaud wrote:
| The basic DD that a crypto VC does is to figure out just
| how big the market for suckers is at this point in time.
| bombcar wrote:
| I suspect that many VCs don't do due diligence beyond
| "someone we trust is already in" and others assume they
| can get out before it collapses.
| ramesh31 wrote:
| It's also a calculated risk. Every ICO in existence has
| its' detractors. But with so much free funny money
| floating around, the calculation is heavily outweighed
| towards FOMO.
| neither_color wrote:
| Wait so USDC is linked to existing USD in a bank somewhere, so
| what's stopping coinbase from just nulling the locked usdc and
| minting 262MM new ones? Sorry if it's a dumb question Im not
| sure how stablecoins work.
| runbathtime wrote:
| USDC represents a claim on USD, but why would Circle want to
| help out this contract and lose 262 million?
|
| If a stablecoin issuer like USDC can make arbitrary decisions
| to null any USDC token and they use that power, that is a
| good argument for the point that they are not following
| aml/kyc on every hop or transaction of USDC, even though they
| are allowing the transfer of dollars behind it. USDC can be
| charged with violating money transmission / bsa / aml/ kyc
| requirements.
| ganzuul wrote:
| > but why would Circle want to help out this contract and
| lose 262 million?
|
| Probably a rhetorical question, but they might decide that
| it's a price they can pay for trust in their system.
|
| Not sure if I understood where the real value currently is
| though.
| runbathtime wrote:
| USDC's system didn't fail. The money transmitter (smart
| contract- IRON/TRON) failed, if the USDC is indeed
| 'locked' or not able to be transmitted. USDC can't be
| compelled by anyone to 'fix' this.
|
| If USDC can revoke any p2p transaction of USDC, that
| means that they can revoke the transmission of movement
| of dollars/reserves that USDC token represents. Implicit
| in that, means they have ultimate control or authority of
| all p2p transactions or transmissions, and they are not
| doing kyc/aml on all p2p transactions, thus in violation
| of money transmitter laws.
| tornato7 wrote:
| Circle can in fact ban addresses from transacting USDC
| and has done so working with law enforcement:
| https://www.coindesk.com/circle-confirms-
| freezing-100k-in-us...
| easrng wrote:
| I don't remember if there's a way to lock a specific
| token but I've read the contract and 1. It's behind an
| UpgradabilityProxy so it can be changed and 2. It
| includes functions to blacklist addresses and even
| temporarily pause all transactions.
| marton78 wrote:
| Why should they? Suddenly they're over-collateralized by 262
| millions, they might just as well spend that money.
| rawtxapp wrote:
| Because those tokens are fungible, they can "blacklist"
| certain addresses and refuse deposits from them coming to
| their exchange, but they can't "null" some random addresses
| holdings.
| gruez wrote:
| The smart contract itself has a "blacklist" function[1],
| which presumably can be used to prevent those tokens from
| being moved.
|
| [1] https://etherscan.io/token/0xa0b86991c6218b36c1d19d4a2e
| 9eb0c...
| gruez wrote:
| >Wait so USDC is linked to existing USD in a bank somewhere
|
| Yep, short of the fed issuing USD tokens directly that's
| always going to be how USD stablecoins work.
|
| >so what's stopping coinbase from just nulling the locked
| usdc and minting 262MM new ones
|
| Nothing, other than that they have zero incentive to do it. I
| doubt whatever goodwill they get will come close to the $262
| million that they don't have to pay back.
| onepointsixC wrote:
| They poured 1.33 X $262M at the very least as the stuck USDC
| was 75% of the collateral that still remains. But apparently a
| lot more than that even was poured in, in the first place.
| boomer_joe wrote:
| >Non-collateralized stablecoins
|
| read: "ponzi scheme". This is pretty funny.
| xqk8 wrote:
| A Ponzi scheme requires a central actor like Charles Ponzi,
| you're quoting a description of a "purely algorithmic
| stablecoin" which implies no central actor to channel new
| investors' money to old, no central actor to defraud the new
| investors and by telling them they've gained money when they
| haven't.
|
| I guess they are comparable in the way that they both require a
| inflow of capital, is that what you're saying? That would make
| them similar to pyramid schemes and startups too. "Ponzi
| scheme" is more specific than "scheme."
| jonfw wrote:
| A ponzi scheme largely refers to a scheme where you invest
| capital to get access to the future inflow of capital, where
| that future inflow of capital comes from other investors who
| are hoping to access future inflows of capital, etc.
|
| The difference between this and a startup is obvious- a
| startup intends to become financially independent at some
| point
| xqk8 wrote:
| It certainly doesn't largely refer to that. It requires a
| central actor to defraud new investors, promise investors
| returns that haven't actually been realized, channel their
| money to pay off the old ones. If you read up on why it's
| named a Ponzi scheme you can understand how they work.
| shkkmo wrote:
| > It requires a central actor
|
| I see exactly zero existing definitions of "ponzi scheme"
| that mentions any "central actor" so you seem to be
| creating an entirely new definition purely to avoid the
| "ponzi scheme" label.
| RaketenStadt wrote:
| Then you didn't look at wikipedia which mentions "the con
| artist" and "the operator of the scheme" several times.
|
| If you're having to google the definition of the term
| maybe there's still a little more you need to learn about
| it.
| shkkmo wrote:
| I don't see either of those as at all synonymous with
| "central actor".
|
| I would consider all the founders and early investors who
| knowingly promote the ponzi scheme as con artists.
|
| I google the definition to charitably give your argument
| the benefit of the doubt. I don't see how you think
| phrases like the following make for effective
| communication or a strong argument:
|
| > If you're having to google the definition of the term
| maybe there's still a little more you need to learn about
| it.
| RaketenStadt wrote:
| Why isn't "the operator of the scheme" synonymous with
| "the central actor?"
|
| Either: 1. I'm trying to dodge the
| label "Ponzi scheme" for a reason you haven't provided
| (maybe you think I have millions invested in this
| shitcoin?) 2. This isn't a Ponzi scheme, and you
| don't know what a Ponzi scheme is
|
| Which explanation is simpler?
| shkkmo wrote:
| > Why isn't "the operator of the scheme" synonymous with
| "the central actor?"
|
| There can be multiple operators.
|
| I see zero good reasons why decentralized schemes can't
| be ponzi schemes.
|
| Your argument is akin to claiming that a three legged dog
| is not a dog because dogs have four legs.
|
| I wouldn't be so uncharitable as to presume to know why
| you have chosen to make this argument.
|
| I think your argument would be clearer if you took a step
| back and explained why you think that "central actor" is
| such a critical part of the meaning of "ponzi scheme"
| rather than a incidental feature common to ponzi schemes.
| RaketenStadt wrote:
| So why isn't "the operator of the scheme" synonymous with
| "the central actor?"
|
| >I see zero good reasons why decentralized schemes can't
| be ponzi schemes.
|
| Do you know who Charles Ponzi was or why Ponzi schemes
| are named after him?
|
| Do you know what he did or what Bernie Madoff did? They
| _operated_ the Ponzi scheme. That 's why they were a
| critical part.
|
| This money really was going into the smart contract,
| wasn't directly given to old investors, wasn't being
| siphoned directly into the operator's pocket, all unlike
| a Ponzi.
|
| You don't know what a Ponzi is and you're trying to save
| face, I get it.
|
| > $272 million worth of USDC is still locked up in in the
| contract. Why hasn't everyone recovered their 74 cents?
|
| Why didn't the masterminds behind this scheme walk away
| with that cash? _Because it was a mistake._ Not a genius
| scheme being run in the shadows.
| saalweachter wrote:
| Technically it has to be run from the Ponzi region of France.
| xqk8 wrote:
| He was Italian, C- for effort
| raziel2701 wrote:
| I think we're splitting hairs with the definition, it's not a
| ponzi but it acts like a ponzi. It's a weird distinction I
| suppose, I personally have no qualms calling it a ponzi
| scheme because new money is needed to pay old money.
| xqk8 wrote:
| A Ponzi scheme without anyone _running_ it _isn 't_ a Ponzi
| scheme.
|
| > new money is needed to pay old money
|
| WOW that's a broad definition. Turns out my 401k is a
| Ponzi!
|
| Do you know the difference between, say, a pyramid scheme
| and a Ponzi scheme? Or is "new money is needed to pay old
| money" the most nuanced understanding you have?
| shkkmo wrote:
| > A Ponzi scheme without anyone running it isn't a Ponzi
| scheme.
|
| Citation please.
|
| > Do you know the difference between, say, a pyramid
| scheme and a Ponzi scheme?
|
| A pyramid scheme can make money for all participants but
| makes much more money for people high on the pyramid.
| Rising up the pyramid depends more on recruiting skill
| than time of entry.
|
| A ponzi scheme doesn't actually make any money but merely
| redistrubtes money from later investors to earlier
| investors.
| wombatpm wrote:
| Your pension, if you have one is a ponzi. Your 401k is
| your money subject to special tax rules.
| bena wrote:
| Forget "central actors" or whatever.
|
| A ponzi scheme is a description of a certain type of fraud.
| We can reduce it to it being the fraud of claiming new
| capital as investor dividends. It's a little more complex,
| but at its heart, that's what you got to do.
|
| If there is no lie about the source of the money, it's not
| technically not a ponzi scheme.
| bombcar wrote:
| You used to have to build your Ponzi scheme, now it builds
| itself and is fully automated. Such advances. Much technology.
| Wow.
| raziel2701 wrote:
| We truly are witnessing the next-generation of Ponzi schemes.
| daaang wrote:
| Is that related to IRON somehow?
|
| PlusToken was certainly a Ponzi, I don't see anything in
| this article that suggests IRON is/was one.
| grey-area wrote:
| Tether is also non-collateralised, they just pretend the money
| is in 'corporate paper'. All of these stable coins are a fraud.
| tornato7 wrote:
| FRAX has so far pretty successfully pulled off a partially
| collateralized stablecoin
| biztos wrote:
| This may be a stupid question but: is it actually possible to
| have a price _less than_ zero?
|
| TFA suggests that this line:
| require(_share_price > 0, "Invalid share price");
|
| ...should be "greater than or equal." But if the share price
| can't be negative then you'd want to just use an unsigned int and
| not pay for a require statement, right?
|
| Isn't everyone passing around uint256's these days?
| imtringued wrote:
| unsigned integers cause more problems than the additional range
| is worth.
|
| If you ever run into negative prices you want them to be
| negative, not positive in the trillions.
| runako wrote:
| I also enjoyed this writeup:
|
| https://www.bloomberg.com/opinion/articles/2021-06-17/titani...
| leephillips wrote:
| Since the price is not an integer, this is not an "off-by-one"
| error. No? It was the common mistake of writing `>` when `>=` was
| intended.
| rmetzler wrote:
| What do you think would be a better name?
|
| I kind of agree with you, but then, since it would fit for
| integers, I can't think of a better name and could live with
| some generalization of "off by one". I'm not a mathematician
| but maybe something like "off by n; n -> lim 0"
| Negitivefrags wrote:
| Amoung my friends when we used to do ACM programming
| competitions we called it "Off by equals error" since it was
| actually a fairly common issue in those types of programs and
| it was useful to have a name for it.
|
| "I think you are off by equals here"
| iterati wrote:
| It's a boundary condition error.
| leephillips wrote:
| I'm not sure. Since it is related to the distinction in
| mathematics between open and closed intervals (except on
| computers we have floats in instead of reals), maybe
| "interval error" or "endpoint error". But not "bounds error",
| of course.
|
| EDIT: Or maybe "comparison error". I like that the best. But
| calling it an off-by-one seems wrong, especially as what we
| usually mean by that is something more like not handling the
| last iteration of a loop correctly.
| aidenn0 wrote:
| Are prices really not integers? That alone seems a huge design
| flaw. BTC prices are integers (in units of Satoshis, which are
| smaller than BTC).
| leephillips wrote:
| Oh, I don't know. I was assuming they were some kind of fixed
| point number.
| cwilkes wrote:
| And this is why leetcode is important. Oh they use that in their
| interviews? They aren't a true leetcoder then.
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