Home Uncategorized Sam Bankman-Fried: Yield farming is like a pyramid scheme

Sam Bankman-Fried: Yield farming is like a pyramid scheme

0
Sam Bankman-Fried: Yield farming is like a pyramid scheme

A few days ago, on April 25, there was a podcast from Odd Lots, where FTX CEO Sam Bankman-Fried talks with former Goldman-Sachs investment banker Matt Levine.

Levin asked the head of FTX how yield farming works. In response, Bankman-Fried began talking intricately about “token X,” an imaginary token in a box that “literally does nothing.”

Bankman-Fried explained that the so-called X token is completely worthless, but it is supposed to change. The scammers refer to this scheme as a “dream sale.” They use it to attract clients and convert them into true believers.

“It all starts with a company that creates a box and basically wraps it up like it’s a life-changing product or a revolutionary protocol that will replace all the big banks in 38 days or something like that. Maybe at this stage everyone is ignoring what this box really does, or pretending it’s useless. Now it’s just a box…‎”‎,” began Bankman-Fried.

“‎…And then this protocol issues a token, let’s call it whatever you like, “token X”‎. And the company promises that the owners of this X token will be able to vote and decide what to do with all the good things and cool things that will come out of this box. They will choose what to do with the income or other benefits of the box. And, of course, we still don’t know any convincing reason why this box should make any profit at all. Well, maybe something will come of it. Don’t know. Doesn’t matter. This is where it all starts.”

At this point in the description, Bankman-Freed has created a box that does nothing and the tokens created by that box. But what will happen next? In addition to a revolutionary change in the world order?

“So, anyone who takes some money and puts it in the box, every day will receive an airdrop, like 1% of the total issue of token X, which is divided among everyone who put money in the box, in proportion to their contribution. That’s what token X is doing right now – it’s being given away to people associated with the box‎”‎.

Next, Bankman-Freed tried to establish a market capitalization for a box that does nothing.

“Well, token X has some market capitalization, right? It’s probably not zero. Let’s say a market capitalization of $20 million…”‎.

At this point, the former banker Goldman could not stand it. He simply did not understand how, based on Friedman’s description, this notorious X token could be worth more than zero. This is an interesting question. According to Bankman-Fried, such a box with a token can be made in five minutes, it would be an Internet connection. Where the initial capitalization comes from is not entirely clear. But then the magic happens.

“Let’s say that only $100 million was put into the box, and in a year it brought in $16 million in the form of X tokens that will be issued for it. This is 16% profit. Not bad. Let’s add some more, shall we? At some point, there will be $200 million in the box. You know how it is: sophisticated traders or crypto twitter characters go and collectively put $200 million in the box, and they start getting X tokens for it.” “But wait, that’s not all. The more money is put into the box, the more money it keeps giving out to holders and the higher the value of the token grows.”‎

All of a sudden, the market cap of the token goes up to $130 million because of people who thought this box had a future. What’s going on in people’s heads? They think, “Oh wow, this thing is now earning about 60% per annum in X tokens. Surely I will get my 60% return, right?”

“So they go and put another $300 million in the box… and then another and another. The process continues ad infinitum. And everyone is making money.”

Money goes to infinity. For some people, it sounds like voodoo economics, or the slogan “infinity is not the limit”, or even just a good old pyramid scheme. However, according to Bankman-Fried, this is the “magic” money of yield farming from boxes that do nothing.

Stay in touch! Subscribe to World Stock Market in Telegram.

Source: Cryptocurrency

NO COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Exit mobile version