A Crypto Field of Dreams

“The pitcher has got only a ball. I've got a bat. So the percentage in weapons is in my favor and I let the fellow with the ball do the fretting.” – Hank Aaron

I’ve always been a baseball fan. There’s just something about sitting outside on a warm sunny day, a cold beer in one hand and a hot dog in the other, taking in America’s pastime. I know baseball has become passé, an old person’s sport, but I still love it and I’m not that old. By an accident of upbringing, I’m a lifelong Atlanta Braves fan. My favorite player growing up was Hank Aaron. Not because I’d ever seen him play – he retired when I was much too young to remember anything – but because of the legend, the stories, the heroics, and the stats. Bam! Another dinger for Hank. Hank was the man. I wanted to be Hank. I wanted to be the man. Instead, I became a chicken.

The other great thing about baseball is its kinda boring, but in a useful way. It gives you time to think, to ponder, to rest and relax. In short, it’s the anti-Twitter. I was watching my Braves lose to the Boston Red Sox last Wednesday when I begin to drift off and daydream. I thought about the early success of Doomberg and how fascinating it was to learn and write about crypto. I kept coming back to the same question:

“If I wanted to create the perfect crypto machinery to pilfer fiat money from unsuspecting dupes, how would I do it?”

I let my chicken brain do its thing and this is what I came up with. 

Imagine the world has become fascinated with Mittcoin, the ultimate cryptocurrency. Something about digital mitts catching the golden baseballs of future riches, or whatever. Doesn’t really matter, because in the crypto universe, what does? Mittcoin is all the rage. Mittcoin is the coin. Mittcoin is the future. There is no bad news for Mittcoin. 

The first thing I’d need is a fancy crypto trading exchange, a place where dupes from all over the world could deposit their fiat currency for the right to buy and sell Mittcoin. A fancy trading exchange would require a fancy name. I’d call it Mittfinex. 

Now remember, the point of Mittfinex would be to convince dupes to give me their fiat currency permanently. Okay, sure, I couldn’t keep all of it, but my objective would be to pilfer as much of it as possible. To do so, and in order to circumvent pesky know-your-customer and anti-money laundering laws, the second thing I’d need is a stablecoin. I’d boldly proclaim my stablecoin is backed 1:1 with US dollars, or maybe reserves denominated in US dollars, or whatever. Doesn’t really matter, does it? Dupes want Mittcoin so bad, they’ll believe anything. 

I’d want my stablecoin to be the biggest stablecoin in the crypto universe. It would also need a clever name. I know! Baseball mitts are made out of leather! I’d call my stablecoin Leather. Leather is the stablecoin. Luckily for me, and consistent with my intent to pilfer fiat currency from unsuspecting dupes, I’d totally control the amount of Leather printed. I’d have my own counterfeit printing press, so to speak. Excellent. Almost done.

The last thing I’d need is an arms-length partner. Not an official one, or course, we’d write nothing down – no face, no case! He’d have to look the part. Smart, charismatic, unshaven, a little ruffled. A cool kid. This generation’s version of the man. I’d need this arms-length partner to be capable of aggressively trading in Mittcoin, pushing the price around at will. He’d also need a fantastic sounding name, totally fit for purpose. A baseball name. A strong name. Bam Hankman-Slide! I mean, c’mon? Is there a cooler name than that? Bam is the man!

The pieces would all fall into place and I’d be ready for the dupes to file in. 

The first step would be to make it incredibly easy and attractive to deposit fiat into Mittfinex. After all, I can’t pilfer fiat if I don’t first take possession of it. The onramp would be wide open. You’d wire your fiat to Mittfinex, I’d take it and credit your account with Leather. You wouldn’t mind that little technicality because you’d believe me when I tell you Leather is backed 1:1 with US dollars. Not only that, I’d offer you incredible interest rates for parking your fiat at Mittfinex. 8%? 10%? Sure, whatever. Doesn’t matter much to me. I’d pay your interest in Leather anyway, assuming you’d earn any. No skin off my baseball.

The next step would be to hit you hard with fees. The fees are simple enough. I’m the house, after all, so as you traded your Leather in and out of Mittcoin I’d wet my beak with every transaction. This would work to slowly cancel out my Leather obligations to you, freeing up the fiat you originally deposited to keep for myself. 

I’d sugar that pill by offering huge leverage for your trading. The leverage is key. I’d let you trade up to 10 or even 100 times your notional Leather in Mittcoin. There’s no better way to pilfer your fiat than to convince you you’ve lost it! If a dupe levers up 10 times long Mittcoin, and Mittcoin suddenly and unexpected drops 10% in a couple of hours (more on that later), their account would get liquidated. They’re done. There’d be no real risk to the Mittfinex exchange of not liquidating the dupe fast enough, because I could always print more Leather. But don’t worry, I would liquidate very quickly. I’d be in the pilfering business, after all. In this scenario, I’d get to keep all their fiat, and they’d think it’s because they made a bad trade. Perfect! Many would probably reload by injecting more fiat and doubling down.  

The third step would be to create choppy volatility in Mittcoin. The price should rise and fall unexpectedly, on little or no news. Clearly, Mittcoin should have an upward bias in price over time, because nobody would give me their fiat for a coin that isn’t showing hints of its moon phase. But I’d need volatility and lots of it. I’d need to the crush the longs and shorts out of their leveraged Mittcoin positions and cancel out my Leather obligations to them. That’s where Bam Hankman-Slide would come in. 

Bam would be a bad ass trader. He’d move markets. He’d take huge positions, mowing down the unfortunate dupes on the other side of his trades with ruthless regularity. He’d need to have unlimited firepower, of course, but that’s easy enough. I’d print as much Leather as Bam needed, in exchange for IOUs from him ostensibly denominated in US dollars. Commercial paper of the highest quality, wink-wink. I could tell the dupes Leather is backed by US dollar reserves with a semi-straight face. After all, I’d have their deposits, and I’d have these promises from Bam Hankman-Slide. He’d be running a commercial enterprise, and he’d just hand me some paper. Presto! Commercial paper. What more would one need?

Well I’d need one more thing. I’d need to make sure the few lucky dupes who do trade well and accumulate large amounts of Mittcoin could never leave Mittfinex with fiat. That fiat would be for me, after all. While the onramp to Mittfinex would be wide open, the offramp needs to be mostly closed. Not fully closed, of course. Bam would need a moderately generous off ramp, as would key influencers and celebrities. The occasional dupe could take a little bit of fiat out, but the process needs to be onerous. The few no-name big winners would be out of luck. I’d simply freeze their accounts without explanation. What would they do? Call the police?!? Ha! Go ahead, dupes, knock yourself out. 

Sure, the dupes would take to Reddit or Twitter or 4chan and complain about my horrible customer service, but I’d have their fiat and possession is 100% of the law in the crypto universe. Luckily for me, there wouldn’t be many such dupes. Mittcoin would have a cult aspect to it. The dupes would be convinced fiat is worthless and they should HODL! Mittcoin is going to the moon! They’d most likely double down their winnings with Leather leverage and run right into the buzz saw that is Bam Hankman-Slide. 

And that, my fellow chickens, is how I’d create the perfect crypto machinery to pilfer fiat money from unsuspecting dupes. If I were an evil chicken, I’d knock it out of the park. 

I submit that we should stop quoting Bitcoin in US dollars. It is not really transacted in US dollars, it is transacted in stablecoins like Tether, directly or indirectly. Instead of saying the price of Bitcoin is $35,000, we should say the price of Bitcoin is 35,000 Tethers, or 35,000 USDC. It is a distinction with a critical difference. It would focus people on the con. 

I further submit that integrated across the entire crypto universe, the sum of the US dollars people think they have claim to vastly exceeds the amount of actual US dollars in the system. The offramps won’t work when the panic hits. In the crypto universe, the US dollar pipelines have check valves. They only flow in one direction.

If you enjoy Doomberg, email a link to your most paranoid friend!