Blockchain was an interesting niche tech that was not good for anything practical but was hyped to the rafters by grifters and failed spectacularly.
Generative AI is the new interesting niche tech that's not good for anything practical but is being hyped to the rafters by grifters and will fail spectacularly.
When ordinary people just assume anyone in tech is full of shit, this is why.
@fraying I feel like the Helium network is an exception. Of course that didn't stop it getting "hyped to the rafters by grifters".
I wouldn't call it "failed" yet, but it's frustrating to see it get thrown around at whims of the broader crypto space, with no regard for the actual problem it's trying to solve.
I worry about the same for AI; how many great projects will be caught up in the noise of the AI news cycle.
@fraying yep!
That article is a great example of how great-fit-for-blockchain turned in to crazy hype.
Like, it worked and there is now good coverage. I think that can be called a success, no?
@fraying I've seen scam thrown around a few times, and I just don't get it. Where is the scam?
Some people got greedy and in hindsight spent more money than they had to invest, but I think it's a stretch to say the whole thing is a scam because of that.
Back to your original post, I just think it's a shame that blockchain + greed = blockchain is a scam and a failure.
@davetapley @fraying There is a scam to bilk investors and customers, but only if being very opaque about the structure of the company counts as a scam.
Which, by crypto company standards, it does not. That's why it's usually a very, very bad idea to be an investor or a customer of crypto companies. As such things go, the investors and customers of Helium were only lied to, not rug-pulled completely, and that's surprisingly good.
As you say, barely a scam at all, just failing in obvious lies.
@davetapley @fraying In a *non*-crypto company, you would clearly and definitely call that a scam.
Like, if a more standard software-based finance company reserved 50% profit margin for a small handful of friends and family... for starters they wouldn't, because real VCs have zero tolerance for that kind of thing, and they'd be sued if they tried.
But random crypto investors don't have that kind of leverage, so they get awful terms and lose their money, and it's not even (you say) a "failure"
@codefolio I'd be happy calling it a 'bad deal for late adopters', but I'm still struggling to see where the obvious lies are?
Anyone 'investing' could see all the rewards distributions on the chain, see the roadmap for halving, see the HIPs and vendor onboarding.
All the info was there.
@davetapley By obvious lies, I mean the *really* obvious lies -- "you'll make back your money in X time" sort of thing. The lies so obvious you discount them completely, because of *course* those were lies.
But you're right. If somebody inspected the blockchain and knew the mining capacity Helium would be deploying on behalf of its early investors in 2019, or waited and invested later... They *still* wouldn't know a lot of relevant things, but you can blame them anyway if you like.
@davetapley In non-blockchain companies there are safeguards to prevent a lot of this. In crypto companies, in practice, there are not.
It's a "scam" in the sense that it would break existing laws if they were actually enforced (but it seems likely they won't) and it's a terrible investment (by any non-crypto standards.)
But it's probably not the kind of illegal where they'd get rapidly imprisoned. So, as you say: a success.
@davetapley In the case of tokens -- which are securities and/or speculative investments in all but name -- you could regulate them like that.
You don't let companies issue them, in an opaque way, without the guidance legally required when issuing securities. We *have* laws for these things, they're just not being enforced.
@davetapley Do you mean legally speaking? The problem isn't that it's a security. For instance, paying somebody in stock in a public company is fine. Paying somebody in stock in a non-public company is fine, with some restrictions and you have to give more information.
Paying somebody in an unregistered security with opaque, weird rules about how they pay off and what the financial structure is, is harder because you have to make a bunch of financial disclosures.
@davetapley Gold is considered, in the legal sense, simple. You're allowed to just pay somebody in gold, or sell it. Public shares in a company are okay because the company is under really strict laws about what they have to tell you (e.g. shareholder statements, which they owe to every shareholder.)
Unregistered opaque securities (or possibly weird private shares in a private corporation-or-similar) given to non-accredited investors as payment is where you get into trouble, legally speaking.
@davetapley In the 1920s (and before, and after, but...) there was a lot of robbing people using opaque securities as bad investments, allowing them to do things like rake off all the profits so everybody else loses -- sound familiar?
We passed laws requiring more disclosure of how a security works, especially if it's sold to people who aren't considered sophisticated ("accredited") investors.
Selling opaque securities to rubes is a very old scam, a bad idea, and illegal in the U.S.
@davetapley When we talk about crypto as "speedrunning financial infrastructure", both legally and in terms of auditing/controls/etc, that's the kind of thing we mean. Crypto is rediscovering *why* we passed all these laws and created all these procedures to get money and securities to work reasonably for all concerned.
Crypto has been constantly saying "what if we just didn't do that?"
Students of financial history have been muttering, "guess you'll find out."
We're finding out.
@davetapley One of the most glaring condemnations of crypto that I know is the way that all the principals are either unaware of these things or pretend to be.
Early on, you could say they were ignorant. At this point, there's no excuse not to know. We're talking about the kind of thing that's easy to look up - "what laws apply to derivatives and securities?", or "what is legal to pay people in?" or "what laws exist to prevent scams?"
But no, here we are, with you, also, claiming ignorance.
@davetapley It's maaaaaybe, arguably, civil-law illegal instead of criminal-law illegal. And it's clearly a bad idea. And it's a bunch of lawbreakers, robbing people, while claiming their ignorance makes it okay.
I don't think "scam" is a bad description of that.
And it's being defended by people like yourself, who are either unjustifiably ignorant (dude, Google this shit) and defending scams, or hoping to get a cut and defending scams.
See why people are harsh about it?
@codefolio thanks for all the explanation, that's cleared a lot up.
I think I just have difficulty getting from:
"bought $500 hotspot expecting $1000/mo ROI (but now is $1/mo"), to:
"robbing people using opaque securities as bad investments, allowing them to do things like rake off all the profits so everybody else loses"
... especially in the context of a hype cycle where expectations are set by influencers (not the companies involved, even if they are profiting from it)
@davetapley They reserved 50% of profits for friends and family, mostly *after* launch, by strategically reserving mining opportunities and then selling off tokens.
That's legal in the sense that they didn't specifically promise *not* to do it, but illegal in the sense that to make a registered, legally tradeable security, you have to promise to tell people if you're doing that kind of thing.
It's possible that they're robbing bad/stupid people, but that's illegal too.
@davetapley Also the company clearly *knew* that hype cycle would occur because we had all watched it occur over and over at that point.
So their actions were illegal (issuing unregistered securities.) And their intentions were illegal (robbing people using unregistered securities.) But you're basically saying... what if some of the bad things were done by people who weren't breaking the law at the time?
I mean, their hype-men were awful, but probably only the founders were actually criminals.
@davetapley At least, any hype-men who were HODLing. The ones who waiting for the unregistered securities to be puffed up by the predictable hype cycle and then sold them off were trafficking in unregistered opaque securities.
So *some* of the hype-men were criminals, others were just doing bad things that were not technically illegal. But still things I feel *very* comfortable calling a "scam", given that they clearly *intended* to make money by illegally trafficking unregistered securities.
@codefolio the "reserved 50% of profits", is that the HST? Or the fact that friends & family who got in early got much more because less hotspots in pool being rewarded?
Either way kinda reminded me of kickstarter. I found this article, but not much else 🤔
https://www.theverge.com/2014/3/28/5557120/what-if-oculus-rift-kickstarter-backers-had-gotten-equity
@davetapley It's certainly true that Kickstarter is selling products, not investments - if you back a successful Kickstarter, you don't get rich. They're not selling securities of any kind. The difference between that and a scam is that they say so, up front.
I don't expect to get rich if I buy candy from a successful candy store, either. But one difference is that it's candy, not a bad-investment-plus-lies. It's understood that it's not a financial instrument.
In any case, at this point I'm done. I *really* don't need to explain the same "yes, it's a scam, here's why" again.
Derek Powazek 🐐
Dave Tapley
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