The Reverse Scam (or How the Community Has Failed Crypto) | HackerNoon

Although the exit liquidity narrative is prevalent in a project, sometimes the prioritisation of holder profit is to blame for the sell pressure.

I was there when this new blockchain technology was supposed to improve the world by enhancing everything it touched. It was supposed to make money more effective and better to use and have a way to pay SWs without getting blocked by payment providers or have ownership of data and use a wallet to sign in to services instead of the data harvesting social logins, or even to improve privacy and help to get something back from the MAN by making cash deposits and receiving digital currencies in return, but now that is a distant dream.

When the blockchain bonanza began, I found myself in Amsterdam working in the cannabis industry. I witnessed firsthand the need for privacy and the need for a currency that could somehow circumvent the all-seeing eye of the taxman, who collects a toll for the privilege of doing business on the ground. This led me to the rabbit hole. After jumping in with a concrete purpose, a few years later, rampant decadence and depravity replaced the vision.

Wen Pamp

These two words can make or break a project. With the prevalence of the easy turnover that memecoins, assets based on everything from viral characters to animals (strangely, mostly dogs), political figures, and everything in between, the notion of fundamentals and the basis of a utility in a network has taken the back seat, leaving many projects with legitimate uses and benefits of network effects built in becoming all but forgotten in a landscape that has achieved mass adoption at the sake of losing its soul.

In this short piece, we will cover the example of the SORA network, a misunderstood outlier within Polkadot, an even more misunderstood ecosystem. We will also cover where the crypto space came from what it was trying to achieve, then what it has become. Finally, we will wrap it all up with some food for thought: Is every non-performing asset a scam, or are you just a degenerate eager for easy money? How does this impact the crypto space as a whole?

It is doubtful that when Satoshi wrote the Bitcoin whitepaper, they intended to make it an asset that would eventually be traded as an exchange-traded fund, let alone become such a massively speculated asset. Suppose the main goal was a peer-to-peer electronic cash system™. In that case, it seems the current meta has gone full circle beyond the initial objectives and become what it had set out to replace, further exacerbated by Ethereum and the “waves” that brought us to this point.

The First Wave

With the technology to make finance available to everyone and a lovely group of overnight millionaires who had money to spend, the first wave brought about decentralised lending, perpetual, and other financial instruments that were out of the hands of the masses and reserved for bankers and speculators; this floodgate allowed people to fill their respective bags and reap the benefits of a nascent technology.

The term “tokenomics” was coined, making it so that the tokens are bound to these rules that define how many exist, what their allocations are and how they would be made available.

The term “tokenomics” was coined, making it so that the tokens are bound to these rules that define how many exist, what their allocations are (how many the team keeps, investors, for development runway, marketing, etc.) and how they would be made available (vesting, etc.). People study these aspects and, combined with their fundamentals (raison d’etre), decide whether to buy this token. If the token is new, it is allocated into a presale, which is then put on an exchange, and this will define the base value. The token can be subject to market forces, so put equally with the funds raised as the liquidity pair.

This, combined with a capped supply, would define a token’s value. This was also the time when founders would pull the rug from under eager investors’ feet (RUG), which led to mechanisms like vesting presale tokens and other means to avoid these unfortunate circumstances; just like the third wave, you had to be there to see it, Billy. It was glorious, and when that wave crashed and receded, we were left with something interesting and very low-res.

The Second Wave, JPEG Attacks

Blockchain brought about one of the most controversial eras of intellectual property, which even extended to the carbon footprint of blockchains, in the purest demonstration of the arbitrary nature of ownership, computer-generated, highly pixelated images of characters ranging from women, apes, and flat eric overtook fine arts in value and sales. Michaelangelo was rolling in his grave as punks with four-digit identifiers raked in the six digits, and more “visionaries” filled orders in Lamborghini dealerships.

This era was almost as decadent as the first, but the bubble burst, and all the would-be wealthy had (digital) wallets full of worthless pixels. It is a good point in the story to mention that so far, digital gold, Bitcoin and its silver counterpart, Ethereum, were the key players in the game; there was a third gearing up to take centre stage (for the right reasons), but up until now was known for a series of fundamental face plants in the form of their blockchain stopping. (If you are not acquainted with the blockchain space, one of the main characteristics is that the blockchain must be unstoppable, so if this unfortunate situation were to happen to you, the chain would be the butt of the joke). That didn’t stop the little blockchain that could, so it stood up, brushed off the dust and decided to do something about it.

The Meme Coin Era, Anyone Can Make a Token.

After Solana addressed the issues that made it (in)famous, the focus on speed and ease of use brought about the latest and most impactful wave of them all, the advent of the meme coin. Indeed, “serious” meme coins were already around, but once making a token became as easy as naming it and setting a maximum supply, the third wave has been washing away any traces of “fundamentals” that cryptocurrencies could have brought to the table. To add insult to injury, the resulting flying carpets were unstoppable in nature, none of that vested token release to save you from early liquidity pull-outs, you were on your own, bubba.

The internet is rife with examples of how the blockchain space has gone from being the technology that promised to bring back privacy and foster ownership to dealing with gambling chips on an immutable ledger.

At the risk of getting Baudrillardian in the narrative, meme coins have become the meme themselves, with kids offering their mothers, threatening suicide, or dumping on their current holders only to have them gang up on them and pump and dump back. The internet is rife with examples of how the blockchain space has gone from being the technology that promised to bring back privacy and foster ownership to dealing with gambling chips on an immutable ledger.

Where We Are Now

Read any headline in the several publications dedicated to covering the industry. You’ll find the mention of a meme, a Solana meme, in a few of them every day at the risk of being the old man shouting at the cloud (or chain), the idealistic utilities that blockchains in the first wave brought continue to be washed away by the meme wave. To everyone’s surprise, Solana is one of the top-valued chains, which a blockchain scholar would have scoffed at had you told them this is the outcome.

But what happened to these projects that had a cause? Naturally, unless the reason is fast and furious profit, they have been left on the sidelines, still going through a strong community that believes in the difference the technology makes. Indeed, this was always about the technology, right? Several solutions around the developed world already take care of instant payments, so the average developed-world user would not see the need for such a solution.

Your average crypto degen is somehow against the widespread benefits, citing things like CBDC as a way for the government to have full access to your finances (which, unless you use cash for all your purchases, is already the case) or as a way to implement a social credit that would freeze your access to money if the government deemed you a risk (which has been forbidden from the get-go by the BIS), so we are left with little other uses for a financial technology like this.

Enter the DOT

Of course, this is not the case, as proven by the blockchain of blockchains, now pivoting toward an internet computer (such as EVM or IP), where all of these chains, sharing a common base infrastructure, can focus on their specific applications, things like Polimec to provide VC for projects, Encointer as proof of personhood protocol that doesn’t steal your retinas, NeuroWeb hosts decentralised knowledge, Subsocial is the precursor of an on-chain social media, and many other projects that have utility at their core.

You also find decentralised finance in all its shades, metaverses, the Internet of Things, and network infrastructure like bridges and identity hosts. All of these utilities are available in the ecosystem, which attracts more headlines because of its sponsorship of racecar drivers or football teams than the innovations it provides. Within this ecosystem, there is an outlier that best exemplifies the case it points to: a decentralised central bank…

The Supranational Output Rationalisation Alliance

After WWII, Japan was suffering the aftermath of atomic destruction and the economic toll of war. The people, who have always stood out for their resilience and dedication toward their craft did not stand still and wait for handouts from the winning side, instead, they did what they knew how to do best, work, create and innovate. Thanks to support from the Central Bank, which focused on providing funds for productive output, the Japanese Economic miracle came about ().

Inflation created to back productive endeavours (not just speculation) is “good” because, in the bottom line, the value created by the productive output actually raises the currency’s value, not dilute it.

Based on the principle that resource allocation for productive outputs can provide value, that is, inflation created to back productive endeavours (not just speculation) is “good” because, in the bottom line, the value created by the productive output actually raises the currency’s value, not dilute it.

Back to the Alliance, this token has an elastic supply, which increases through governance and decreases through network effects (more usage means more tokens burnt and eventually less supply), similar to a currency and not a gambling chip token. It is not bound to the retail supply and demand rules, so it is misunderstood and labelled a scam. This leads to less token use, more supply required, and a vicious cycle where the high level of difficulty has left the highly fundamental project on the sidelines while the simple meme is making headlines for the sake of existing.

SCAM, RUG

What can we take from the combination of the waves and the examples of projects with fundamentals? Was this all a long rant by someone with no trading experience and is sour at the market? I won’t blame you for thinking this is the objective, as it certainly comes across this way to the sceptic. Please take a moment to consider that cryptocurrency’s critical mass mainstream adoption utility was for it to replace or at least complement fiat currency; looking at the current application of the highest-valued cryptos, this is a far cry. The primary use case is to sell and eventually dump for fiat. The state of the world, meanwhile, also requires fast outputs of money, higher inflation leading to higher costs and lower salaries, conflicts that alter the prices of market essentials and outbreaks of disease that lead to supply cuts are all part of a more significant problem that is reflected in the current state of crypto as an easy way out from a problem that a salary cannot solve.

Meanwhile, developing countries are making strides, Cambodia has a CBDC and some island in the Pacific with a funny name is doing feasibility testing to implement digital currencies. The supply and demand of generic tokens do not satisfy the needs that blockchain technology sets out to solve because the obstacles are too high. Still, they also demand input and action from those who use them. Decentralisation demands participation in governance and demands skin in the game to make markets; financial inclusion requires a knowledge curve to use a wallet and remember a mnemonic, which can be easily substituted by a custodial account, which offers the same assets and can be easily accessed in case passwords are forgotten. Still, when something happens, there is no recovering what was lost.

The automatic assumption that any token that does not pump is a scam or a rugpull comes across as a degenerate response, akin to a tweaker once the high subsides.

The visionary innovations that have been relegated to the bottom of the ladder are not unique cases; when the user does not go beyond the basic rules of supply and demand nor seeks greater accountability from the world around them, it is easy to project these sentiments to projects that you don’t see moving the needle. The automatic assumption that any token that does not pump is a scam or a rug pull comes across as a degenerate response, akin to a tweaker once the high subsides, the anxious itch and desperate twitch that the void of endorphins has left was once the desire for likes, or the thirst for follows, but when it boils down to it, you are the problem, anon.