Yield farming: it sounds like something you do in world of warcraft, but the year is 2022 and the world has changed magic. Internet money is here, ladies and gentlemen, and yield farming. It’S a crypto thing now so buckle up, educate yourselves. This is what it really means. Yield farming is the practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency.
Now. Are you confused yet don’t be because that’s the whole purpose of this article. Sam Bankman, ceo of one of the world’s largest crypto exchanges appeared on a podcast to explain it to the unwashed masses once and for all. What is a yield farm, but it turns out, in the process he accidentally describes a ponzi scheme which is just sort of like really funny, because his one job in situations like this talking to non-crypto people is to reassure them.
This isn’t a ponzi scheme guys
And instead just right out of the gate off rip he’s like yeah. We just kind of keep putting money into this thing, and it just price goes up now as a disclaimer, not all yield. Farming is a ponzi scheme. People have been lending money forever and that’s technically yield farming. That’S not a ponzi scheme.
Now, on the other hand, the point of this video is that what this billionaire crypto ceo is about to describe. That is definitely a ponzi scheme, so uh, let’s just check it out a surprising amount of legitimacy for what farming could mean. You know where’d, you start you start with a company that builds a box and in practice this box they probably dress it up to look like a life-changing. You know world-altering protocol, that’s gon na replace all the big banks in 38 days or whatever, maybe for now. Actually ignore what it does or pretend it does literally nothing.
It’S just a boss, all right step, one we’re already getting some red flags here, pretend you’re life-changing and actually do nothing. Okay, what’s step two sam and then this protocol issues a token we’ll call it whatever x token and x token promises that anything cool that happens because of this box is gon na, ultimately be usable by. You know: governance, vote of holders of the x tokens. They can vote on what to do with any proceeds or other cool things that happen from this box and of course, so far we haven’t exactly given a compelling reason for why there ever would be any proceeds from this box. But i don’t know you know.
Maybe there will be so that’s sort of where you start and now what happens well x. Token. Has some market cap right?
It’S probably not zero. Well, let’s say it’s.
You know 20 million dollar market cap okay step two make a 20 million dollar market cap from nothing. No big deal guys it’s crypto. Now the interviewer, this guy matt levine sort of picks up on the insanity of this he’s like this serious investment banker guy, you have to imagine and he’s like look. No, it can’t be worth nothing you. You can’t do this and sam bankman freed’s, like the hell.
I can’t from like first principles: it should be zero, but okay, uh sure, okay. I i completely reasonable comment like i mean like that’s, not quite true, but it’s like when you describe it in this totally cynical way. It sounds like it should be here, but go describe it this way. You might think, for instance, that in like five minutes with an internet connection, you could create such a box and such a token and that it should reflect like you know, it should be worth like a hundred eighty dollars or something market cap for like that. You know that effort that you put into it in the world that we’re in, if you do this everyone’s gon na, be like oh box token, maybe it’s cool.
If you buy any box token, you know that’s gon na appear on twitter and i’ll. Have a 20 million dollar market cap all right red flag, 3. My man just said: maybe in your world a box that does nothing can’t be worth 20 million, but in my world 20 million minimum – and this is sort of where things go – full ponzi full. We don’t even try to hide it. Money goes up because more money goes in and more money is going in because money goes up, so you know x, tokens being given out each day.
All these like sophisticated firms like huh, that’s interesting like if the total amount of money in the box is 100 million dollars, then it’s gon na yield 16 million dollars this year in x, tokens being given out for it. That’S a 16 return. That’S pretty good! We’Ll put a little bit more in right and and maybe that that happens until there are 200 million dollars in the box. So you know sophisticated traders and or people on crypto, twitter or or other sort of similar parties go and put 200 million dollars in the box collectively, and they start getting these x tokens for it right and now all of a sudden everyone’s, like wow people, just Decide to put 200 million dollars in the box.
This is a pretty cool box.
Right like this. This is a valuable box, as demonstrated by all the money that people have apparently decided should be in the box, and for we to say that they’re wrong about that. Like you know, this is, i i mean boxes can be great. Look, i love boxes as much as the next guy right, and so what happens now all of a sudden people are kind of recalibrating.
It’S like well 20 million dollars. That’S it like that market cap for this box and it’s been like 48 hours, and it already has 200 million dollars and fleeing from like sophisticated players in it. Are you guys hearing this? He literally just described a ponzi scheme unironically and said at the top of this interview, by the way that this is one of the most important things in d5 right now, boxes that do nothing that are in the shape of pyramids and by the way you and I aren’t the only ones who feel stunned by this. The interviewers are just sort of at a loss for words.
I i think of myself as like a fairly cynical person and yep. That was so much more cynical yeah. This should i guess i would have described farming like you’re just like well, i’m in the ponzi business and it’s pretty good did any of this require any sort of like economic case. It’S just like other people make money in the box, and so i’m going to too and then it’s more valuable. So i’m going to put more money in and at no point in the cycle did it seem to like describe any sort of like economic purpose.
Now it was at this point in the interview where i thought: okay. Finally, some sensible people in the room, clearly sam just got called out for pitching ponzi schemes he’s now going to backtrack right wrong. Instead, sam goes um. This is my world and uh. You guys are boomers and just don’t understand how money works and it is sort of like real monetizable stuff in some senses, and you know at some point like if the world never decides that.
We were wrong about this
in like a coordinated way right, like you’re kind of the guy calling, saying no, this thing’s actually worthless. But in what sense are you right? You could see something get mark happened. The way that i don’t know, dogecoin or shibcoin have right where people just kind of like haha and then they buy it, and if you’re like that’s dumb, it has no cash flow. I’M gon na short sell it.
You lose all your money there. It is guys the unironic investment case for memes and ponzi schemes. They have value because people say they have value and who are you to say otherwise i mean what do you even say to this, because on the one hand, this is insane and breaks all monetary theory. On the other hand, that guy has a billion dollars. Well, multiple billions and i have multiple thousands.
We are not the same. Okay, that’s all i’m saying. So what do we even take away from this? I think the answer has to be nothing. I hope you guys learned nothing.
There is no good lesson here, but only maybe a few chuckles and laughs at the inevitable decline of our society into pure ponzinomics.