And now it's… Springtime For Crypto

by @edent | , , , | Read ~160 times.

You've heard of the AI Winter, right? The period where funding for AI dried up due to products failing to meet their hype. I think we're now in Springtime For Crypto1 - named after the musical "Springtime for Hitler" from movie The Producers - where scams abound.

You should take a couple of hours to watch The Producers. Either the 1967 classic movie, or the 2005 remake will do. The pivotal moment in the film is when Leo Bloom has this stunning realisation:

"Amazing. It's absolutely amazing. That under the right circumstances, a Producer could make more money with a flop than he could with a hit. Hmm... Yes, it's quite possible! If he were certain that the show would fail, a man could make a fortune!"

The scheme is simple - if your venture is a success, all your financial backers want a share of the profits. If the venture is a failure, the backers accept their losses. You walk away with the unspent investment.

A related scam can be found in Lock, Stock, and Two Smoking Barrels (warning for homophobic language):

Nowadays, I suspect, most people wouldn't care that their bank knew about their sexual proclivities. But the essence of the scam remains - make claiming the refund too difficult or expensive to be worth it.

Which, of course, brings me to the latest "venture" from the Cryptocurrency pillocks.

‘Buy the Constitution’ Aftermath: Everyone Very Mad, Confused, Losing Lots of Money, Fighting, Crying, Etc.
ConstitutionDAO tried to buy the Constitution. Now it has a $40 million mess on its hands and entire refunds are being wiped out by high fees.

Of the initial $200 we bought in ETH, $90 was eaten up in fees simply to donate to ConstitutionDAO.

to get our ETH back from Juicebox, we would have to pay gas fees again, meaning essentially the entirety of the amount invested would be wiped out.

You "buy" a token - the seller profits from the fees you pay2. The seller offers to refund you - if you accept, they get another fee, if you refuse, they keep your money. They make money either way. Genius!

In most of the civilised world, money transfers are free. I can send boring fiat money to anyone in the UK and it arrives instantly, for free. Faster Payments work for up to £250,000. There's no cost to the sender or receiver. Not even a monthly bank account fee! There's no middle-man taking a cut. The sort of infrastructure that American cryptobores can only dream of.

If I want to send money internationally, most UK banks will charge a flat £20 fee. Or something like Wise transfers will cost as little as a quid, and up to 0.65% of the transfer amount. Sure, there might also be some exchange rate fees and fluctuations, but they're generally tiny.

If there's a problem with my transaction, I usually have strong consumer protection laws to help me get a refund. Either automatically through my payment provider, or through a well established court process.

I'm sure that the people behind ConstitutionDAO truly believed their own hype. And they probably didn't set out to steal money from gullible people. But all the cryptocurrency and DAO projects I've seen so far are barely concealed get-rich-quick pump-and-dump schemes.

There is nothing "democratising" about conning people out of money. There's nothing decentralised about deceiving a large group of ill-informed speculators. There's nothing innovative about these trite scams.

  1. I stole the name of this post from Tom O'Connor. Although the earliest use I can find is from 2018
  2. I assume here that the vendors have a financial stake in the miners profiting from "gas" fees. If not - the surge in interest raises prices of cryptocurrencies, which also benefits the vendors. 

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