Topic: [idea] Ponzi plus. Bet against ponzi's (Read 3042 times)

This will probably collapse in a few weeks.

Agreed, Ponzi schemes should fade away like the background noise that they are.

This is precisely what I expect will happen. But it wouldnt  be a problem for ponzi plus, as we would also pay 0% on our ponzi+ bonds. We dont need an official default date or something, and the market price for Obsi bonds would give us a good indication of how much of the coins we need to keep in reserve. As the market price for these bonds approaches zero, our 10% buyback offer will be used by our depositors, extinguishing our liability and cementing the rest as profit.


He can only do that if the other shares are also fast growing ponzis, in which case we should bet against them equally.

The profit mechanism is that you're betting that the ponzi collapses before you've paid out more interest than the original capital deposited with you.  In theory it could work - in practice there's a bunch of difficulties.

As an example take OBSI.HRPT - which many believe to be a ponzi.  Let's assume, for the purpose of discussion, that it IS a ponzi.  If so, then it's teetering on the verge of collapse - with no new funds coming in.  But it would still be hard to make a profit on it from the means described in the op?  Why?

Becasue OBSI.HRPT doesn't allow withdrawals and DOES allow paying 0% interest.   So even assuming it IS being run as a ponzi it's stll hard to see a point where a scheme such as OP's could claim that it had defaulted.  In theory Obsi could just sit there paying out 0% and refusing to pay out funds forever - without at any stage defaulting from what what was agreed in his contract.  Worse still (from the perspective of the operation described in the OP) the price on his shares  will crash heavily if that happens.  If they drop low enough he can buy a load back cheap then has the option of actually cashing out all remaining investors at their original investment and still keeping a handy profit.  At that stage the operation described in OP would have to refund all its depositors too - in addition to having paid out interest and having had all the funds sit around doing nothing in the meantime.

OBSI.HRPT also has another edge on a competing investment such as the one in OP.  If it's a ponzi/scam (we're assuming it is for this discussion) then he's also pulling in income from his other shares/bonds.  If he drops the rate OBSI.HRPT pays to 0% then he can still continue to suck in cash on the other shares so has no reason to make plain that OBSI.HRPT was a ponzi (allowing the OP's operation to 'win') as that would dry up his other income.

It seems to me that the amount of time investor's funds would be tied up for before they could safely be claimed would degenerate the rate of return so low as not to be worthwhile even if a profit was made.

Thats the beauty of running this on an exchange, there is no out, there is no risk of a bank run. Ask OBSI.HRPT investors, the only way out is selling your bonds (/shares) at market value.


Indeed, this was already brought up and answered. Again its not a problem on an exchange where you can find this data, but it would be a problem for an off exchange ponzi.


Lets hope none ever gets remotely as big as pirate again, but there is no shortage of new and old ponzi's. Have you checked this subforum recently?

Same way as the ponzi operator; if you bet against an actual ponzi, your dividends/coupons would never exceed the sell value of the bonds, and in most cases they will only be a small % of them. Since you only have pay dividends for as long as the original ponzi does, you make a big profit on every winning bet.

I don't see a profit mechanism here. How do you make anything doing this?

-MarkM-

There are some attacks against this.

For one, the Ponzi operator can join your system, and withdraw everything a moment before he shuts down. So you require some sort of lock-in mechanism that's spread out over time. Still, you need to measure the Ponzi's actual size, or else someone can burn you out by using massively inflated numbers. They never offer internal bookkeeping, so that's also an annoying task.

As Pirateat40 said, the market for his kind of operation will be saturated after he leaves. I don't see a big BTC Ponzi coming up any time soon, now that everyone is more skeptical.

The good thing is, if you offer means to bet against Ponzis, you'll always find capital for it.

I was thinking mostly of the ponzi's on glbse and cryptostocks. You are correct of course, for an off-exchange ponzi like pirate's, we would have to try and make a (very conservative) guess; if we cant, we should not be betting against it for the reason you state.

That said, I would want to keep this small anyway, the point would mostly be educating users rather than making large amounts of money. And if I could think of a way to return at least some of our profits to scam victims without creating a moral hazard, I would like to do that, but I fear that will be impossible.  Guaranteeing future victims at least 10% or so seems like a reasonable compromise to me.

Now this would be great 

Even if the outcome is just to destroy ponzies without any earning on our part (because people realize the bank run will end the ponzi, and so they would lose their money with us as well) I would invest something as a service to the community.

Ther's only one problem: how exactly do you estimate the size of a Ponzi, to stay under its 10%? They won't honestly tell you, of course... you can tell how many OBSI.HRPT have been sold, but we only have wild guesses on the amount of coins Pirate put his hook on. How we avoid the risk of the operator making us believe he's 10x bigger, and then paying his coupons with ours indefinitely?

Its very unlikely a ponzi operator would take the risk of paying out more than 100% of his deposits, and also keep in mind we would generally start a lot later, when the actual ponzi  has already spent a fair amount of his investment in paying coupons/dividends.

There are risks of course, the biggest is perhaps if the original ponzi would continue attracting new capital at a faster rate than the payouts, while we would not; then the ponzi might outlast us. Again this seems very unlikely though, since we would sell far less bonds and I cant see why investors would keep spending on the lower paying actual ponzi and not on the lower volume, but guaranteed ponzi plus. All in all,  Id be shocked if we lost one out of 10 bets, and winning just over half of them against rational ponzi's would guarantee a positive ROI.

A bigger concern is probably reassuring depositors that we will not run off with the money. Since we dont need the coins for anything other than paying out  dividends at a predictable rate (and at worst, a known fixed amount for a buy back), I wonder if opentransactions and/or multisig could be used here somehow?

I'm afraid of that the Nefario will not let this security listed on his private owned exchange, and will eat the application fee the stupid OP spend.

No. Think about this. Identify Ponzi X, offer exactly what they offer as long as they offer it, be completely honest and up front that if/when they stop paying so will you. If you don't want to pay any more (decide they aren't ponzi, run out of funds, whatever) you return all money. You offer a little bit extra too, maybe 10%, maybe less. If the original is a ponzi and you are trustworthy enough that everyone believes you will do as you say and pay as long as the original pays then most money will leave the ponzi and it will fail faster and make less money.

You only make money if you identify ponzis really well.

The main risk I see in running this is that if you are transparent about how much capital you have a ponzi could specifically plan to outlast you at which point they'd get a lot of people rushing to them after you pay back principle.

OK, we now still need another 18 post to make the OP looks like a stupid loser.

I know you're being sarcastic, but I do think it's working really well. It teaches greedy people to do their homework and stop deluding themselves. Eventually they'll get used to investing without a safety net, and learn to say "no" to an offer that's too good to be true.

If you make being a fool easier, we'll just have more fools.

I think a lot of the reason is that people look at it, see that it's too good to be true - but then keep looking and looking trying to find something to convince them that it's actually real.  Once they'd seen it was too good to be true they should walk away unless convincing proof is provided of it not being a ponzi.  A 'good' ponzi operator won't try too hard to prove they're not a ponzi - as there's no way they can prove it to someone with any sense, and every post they make is another opportunity for them to accidentally mess-up and contradict themself/be caught in an obvious lie.  Instead they'll be vague - and allow the people who WANT to invest to formulate their own explanations so as their greed/ignorance can overcome their common-sense and make them part with their money.

Once they have a few idiots on the hook, others who were initially marginally less stupid will follow - as they now have fear of "missing an opportunity" to add to their other reasons to invest and tip the scales.

Promises of shockingly high returns will blind the sheep.

The reason that Ponzi schemes work is because there are always people who 'believe the story' and do not do their due diligence.

We can't stop ponzi schemes; we can only attempt to limit their size by attempting to educate others of the risks.

I do agree its morally ambiguous, but I dont think this scheme would promote ponzis. The very fact you create a bet in the other direction and people pour money in it should have a shilling effect on potential investors . Since its more attractive than the original ponzi, it also would cause people to stop buying the original ponzi making it collapse faster.


Yeah thats working really well.

Which is why you must keep the ponzi+ considerably smaller than each original ponzi. The ponzi operator has an incentive to maximize his returns, keeping it running so long that he loses 90% of his potential profits by paying almost all of his deposits as coupons doesnt make much sense.  The investors in the ponzi have no influence over how long it runs.


Investors money would just sit there and slowly be depleted for as long as the ponzi runs to pay for coupons. It wouldnt earn interest obviously, but it would assure depositors  and would earn investors a lot more than any other credible investment if/when the ponzi collapses.


Thats why you have to limit its size to a small fraction of the original ponzi. Just dont issue more than x% bonds as the original ponzi. I suggested 10%.


You would need only as much capital as the amount of bonds your are selling to guarantee the buyback at face value if you lose your bet. The sale of the bonds themselves generates the rest, just like in the original ponzi.  In fact you would even need less if you assume you are betting against a rational ponzi operator, since he wouldnt pay out 100% of his bond sales back as coupons, but only a small fraction of it.

I am against any security that is involved with ponzi schemes.

Even when betting against ponzi schemes, such securities benefit from their existence and promote their existence..

I feel the best way to handle potential ponzi schemes is to highlight all of the concerns and make such information visible to the public and then keep our distance.