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Ponzi as vocation


This amazing glimpse into the world of crypto, from a forthcoming book on the subject, needs to be read to be believed.

Here is Sam Bankman-Fried, describing in the most straightforward manner possible how this whole world is just a bunch of barely disguised Ponzi schemes:

A day before the start of the Bahamas conference, Bankman-Fried had all but admitted that much of his industry was built on bullshit. During an interview on Bloomberg’s Odd Lots podcast, the columnist Matt Levine asked a straightforward question about a practice called yield farming. As Bankman-Fried attempted to explain how it worked, he more or less laid out the how-to of running a crypto pyramid scheme.

“You start with a company that builds a box,” Bankman-Fried said. “They probably dress it up to look like a life-changing, you know, world-altering protocol that’s gonna replace all the big banks in 38 days or whatever. Maybe for now actually ignore what it does — or pretend it does literally nothing.”

Bankman-Fried explained that it would take very little effort for this box to issue a token that would share in the profits from the box. “Of course, so far, we haven’t exactly given a compelling reason for why there ever would be any proceeds from this box, but I don’t know, you know, maybe there will be,” Bankman-Fried said.

Levine said that the box and its “Box Token” should be worth zero. Bankman-Fried didn’t disagree. But he said, “In the world that we’re in, if you do this, everyone’s gonna be like, ‘Ooh, Box Token. Maybe it’s cool.’” Curious people would start buying Box Token. And the box could start giving out free Box Token to anyone who put money inside, just as Axie had rewarded players with Smooth Love Potions. Crypto investors would see they could earn a higher yield by putting their money in the box than in a bank. Before long, Bankman-Fried said, the box would be stuffed with hundreds of millions of dollars, and the price of Box Token would be rising. “This is a pretty cool box, right? Like, this is a valuable box, as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that?” Sophisticated players would put more and more money in the box, Bankman-Fried said, “and then it goes to infinity. And then everyone makes money.”

After a moment of contemplation, Levine said, “I think of myself as, like, a fairly cynical person. And that was so much more cynical than how I would’ve described farm­ing. You’re just like, ‘Well, I’m in the Ponzi business and it’s pretty good.’”

Bankman-Fried said that was a reasonable response. “I think there’s like a sort of depressing amount of validity …” he said, trailing off.

See, you give me money, and then other people give me more money, and then other people give me even more money, and as long as this process keeps going forever, everyone gets rich.

That’s it. That’s literally it!

What a time to be alive.

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