Deregulation-shrelegulation

Still, Where Are My Funds?

What’s the most challenging part of deregulation? You got nobody to call when it’s you who got scammed or hacked. Remembered we fired the “regulator cop” [Wilson]? That cop might be scary, and it makes life (and UX) complicated as hell with all those KYCs. But it works! [Ledger] Everybody needs a US visa sooner or later. Be it a visit to a family wedding, the Burning Man, an oncologist, or all of the above all together. Or (at least) who wants to be wanted by Interpol?

However, all that is impossible now. Remember, “D” in “DEX” stands for “decentralized.” According to the Cryptocurrency Crime and Anti-Money Laundering Report by CiperTrace [Clegg] released this month, “at $156 million, the amount netted from DeFi-related hacks in the first five months of 2021 already surpasses the $129 million stolen in DeFi-related hacks throughout all of 2020”. This is alarming indeed. While your DeFi launchpad might be honest and good-minded, the hackers going after your funds placed with this launchpad might be not. [Napoletano]

But still, scams are responsible for the major over $1,6bn part of the unrecoverable losses pie in 2021 [Clegg]. For example, on September 9, 2020, the community of a DeFi project called Emerald Mine discovered its founders took $2.5 million with EOS and USDT from its smart contract and tried to exit with that money via one of the stock exchanges [Zhao].

Besides the outright exit scams, there are many more minor quasi scams or “innovation zombie projects” [Siren]. However, in the ICO days of 2017—2018, those were the majority of projects that got financed [Rosic-2].

Quasi scammers don’t walk away with all your money. Instead, they will slowly and patiently burn down all the available resources into a delusional idea that won’t work. Then, they will make you believe in this idea with a series of well-written Medium posts, Telegram AMA, and even an intelligent white paper with some real-life math and cunning black humor (whops).

The team of a zombie project, usually honest and hard-working people, will do their best to render this delusional reality, bolstered by a bold promise of options and the future Vitalk-and-Hayden type of glory. However, their enthusiasm will also burn down one day, sooner or later. The only eternal thing in a zombie project is its founder’s ego [Founderitis].

But what if a founding team and leader are pragmatic, well-motivated, profit-oriented, and observe the holy scriptures of the Securities Exchange Act? They just want to make a profit. Fast. For themselves and for their investors. What a dream! And the x100 profit they make is by selling heroin for Bitcoin... This brings us to externalities.