Decentralized finance scams
Alt coins

DeFi ‘will soon run out of victims to fleece’

Messari founder Ryan Selkis went on a twitter rampage yesterday, predicting that the decentralized finance ‘bubble’ will soon pop

Decentralized finance is a bubble filled with scams, and it is about to pop.

So says Ryan Selkis, CEO of crypto data and research firm Messari, who unleashed a Twitter attack on DeFi projects on Sept. 10.

Messari CEO Ryan Selkis (Photo: Messari)

Decrying Ponzi economics, yield hopping, 50% APY yields and “rug pulls”—in which a project’s founder runs off with investors’ funds—Selkis warned that “a good rule of thumb” is that if a project’s promised payout “looks too good to be true, it is.”

He even went off the crypto reservation altogether, suggesting that “a better way to play DeFi” is to invest in blue chip stocks. He added:

“DeFi is just one big pool of capital sloshing around a small group of insiders and mercenaries who will soon run out of victims to fleece.”

That said, Selkis pulled back his criticism in the third of the trio of tweets, saying that yield farming and incentivized liquidity provisioning is a “novel innovation in capital formation,” and that he loved the experimentation.

“Smart people are making a killing,” Selkis said. “But I don’t recommend DeFi to most people because I don’t recommend high-stakes Vegas poker to fish.”

SUBHED: The Autumn of DeFi?

Nothing summed up the Summer of DeFi craze as much as SushiSwap, which forked the Uniswap protocol and drained about 80% of its funds as the SUSHI token’s value skyrocketed from about $0.71 on Aug. 29 to $11.17 on Sept. 1. Its market cap had reached north of $250 million in less than a week, according to CoinMarketCap.

All this for a protocol created and run by a pseudonymous developer going by Chef Nomi

Who promptly sold off his (or her) sushi tokens on Sept. 5, turning them into some $13 million worth of ether.

Before 8 a.m. ET that day, Chef Nomi was already defending his actions, tweeting: “People asked if I exited scam. I did not. I am still here. I will continue to participate in the discussion. I will help with the technical part. I will help ensure we have a successful migration.”

He also pointed to Litecoin founder Charlie Lee, who sold off his LTC and exited the project in late 2017 in order to avoid the appearance of a conflict of interest. Of course, that was six years after he launched Litecoin.

@SatoshiLite did that and Litecoin had no problem surviving,” Chef Nomi added.

He also justified his actions, saying he “deserved” the money:

“I wrote the migration code. I did all the audits. I coordinated the largest LP pools ever. I created a large community. I sprung up 100s of LP scam projects. All in 1 week.”

The goal, Chef Nomi said, was to allow him (or her) to “stop caring about price.”

He added, “I will focus on the technicality of the migration… I will help ensure we have a successful migration.”

Morally flexible Eric Carmen would approve of SushiSwap (Photo: Twitter)

Among the many angry responses to Chef Nomi’s Twitter thread, Blockstream CEO Adam Back predicted, “Mr Sushi will create another sock and do it again. and every other guy with moral flexibility who can use a compiler will presumably now degen this stuff into oblivion exit scam fail.”

Comparing Chef Nomi to South Park’s morally flexible Eric Cartman, Back said it would be “ICOv2 exit, 50x faster.”

Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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