Scamming means tricking people to get their money. People won't just give their money to others. If you approach a random person and ask them $100K they would say you're crazy. That's why a bait is needed. Something to trick people. Charles Ponzi used postal coupons for that purpose. Bernie Madoff used a split-strike conversion strategy. And today's scammers use cryptography as bait.
How does that bait work? Scammers first come up with a cryptographic system that shows numbers on the screen. They then claim that these numbers are money. Because nowadays, money, that is fiat money, is just numbers - either on bank accounts or banknotes. So, because their systems show numbers just like banking systems, scammers claim to have invented money. Finally, they claim that their money is better than fiat money because numbers are cryptographically protected and stored in decentralized databases, while the number holders are anonymous. Banks, on the other hand, store their numbers on paper(on banknotes) or in centralized databases, with the number holders being identified by real names.
Once the bait is set, and the scammers have initially and anonymously 'mined' large numbers with negligible electricity consumption, they start spreading propaganda about the revolutionary money of the future. And so people start investing fiat money or useful items - goods, services, etc. However, what the scammers won't tell, is that their systems don't return useful items to number holders. That's the crux of the scams because banks do return useful items. And that's essentially what the scammers want. They want goods, services, labor, real estate, the ability to pay taxes, etc. Because there's no benefit in watching numbers.
How do banks return useful items to number holders? By issuing numbers as debt. A new bank deposit, i.e. a number on a bank account, is created when a commercial bank issues a loan or a central bank subscribes to a government bond. Of course, when that number is paid out in banknotes, nothing essentially changes. It still represents debt but is written on paper instead of on the screen. Once the numbers are created that way, debtors trade them in the market for labor, goods, services and other useful items. However, since they represent debt towards the banks, debtors need the numbers back. That is why they are forced to sell useful items to those that hold the numbers.
If debtors don't sell useful items to number holders they will default on their loans. Then, the collaterals will be activated and the banks will sell debtors' property at auctions. Who will have access to these auctions? Well, the holders of bank-issued numbers. Since the banks issued these numbers as debt, they must accept them to liquidate the unpaid debt. Finally, because governments issue bonds denominated in bank-issued numbers, they must accept these numbers as payment for taxes. Otherwise, they cannot pay off their bonds. That is, therefore, how the banks return goods, services, labor, real estate, the ability to pay taxes, and other useful items to number holders.
Cryptosystems don't have such a return mechanism. After people join a cryptosystem by investing useful items or fiat money, and get numbers on the screen, the only way they can return their investments is if new investors enter the system. So, just like in the schemes organized by Charles Ponzi or Bernie Madoff. Regardless if they invested tons of electricity through 'mining', cars, houses, years of labor, millions of dollars, whatever, cryptosystems can't help them at all. Without new investors, they cannot get anything back.
That's why whenever someone creates a cryptocurrency what they actually created is bait. A bait to attract investors and get fiat money or useful items. By holding fiat money the scammer is in a system that ensures the return of useful items. While victims are left in cryptosystems where they depend on new investors. If new investors stop coming, there is no way for the victims to get their investments back.
And that is how the bait of cryptography is used in today's investment scams. That bait is so good that it tricked even some governments and institutional investors, which has never been seen before. What is also not seen is that the victims defend the scammers and talk only positively about their bait. But this is understandable because they must attract new investors who are their only option to return the investments.
Submitted July 31, 2024 at 02:09AM by OddNefariousness5993 https://ift.tt/Fhd7AX2
