[Lex Computer & Tech Group/LCTG] Related to Jerry Harris's Talk about Crypto technology and Web3

Wed Jun 8 06:47:20 PDT 2022

Folks,

Here is an interesting paper by Cory Doctorow.  I think the title which
includes the two words "WeWork founder" gives away the conclusion that this
is also a monumental scam...

-- Harry

Wework founder raises $70m for blockchain-based, “voluntary” carbon credits
It’s a scam matrioshka.
[image: A burning landscape. In the foreground is a burned out building
with a charred Wework sign. Over the doorway is a smoke-damaged banner for
Flowcarbon with a picture of the planet Earth. Image: Lorie Shaull
(modified):
https://commons.wikimedia.org/wiki/File:A_man_walks_by_a_burning_building_on_Thursday_morning_after_a_night_of_protests_and_rioting_in_Minneapolis,_Minnesota_(49945327763).jpg
CC BY-SA 2.0: https://creativecommons.org/licenses/by-sa/2.0/deed.en A16Z
(modified): https://a16z.c]

Even crypto’s biggest boosters admit that the industry has a scam problem.
This is especially hard to deny now that hundred of billions of (real)
dollars’ worth of (fake) “stablecoins” have gone up in smoke.

Crypto apologists will tell you that there are scams everywhere, and
they’re not wrong. The productive economy has been systematic dismantled
and replaced with financialized grifts: private equity, REITs, SPACs, MLMs,
ad-fraud, and monopoly. That means the only way to save for retirement,
health emergencies or your kid’s college education is to roll the dice in a
crooked casino where the house always wins:

https://pluralistic.net/2022/05/23/you-got-spacced/#the-house-always-wins

But even at this moment of peak scam, crypto stands out as *especially* scammy.
There are some structural factors behind that. For one thing, crypto is
complex — in fact, it’s doubly complex, because things like smart contracts
can only be truly understood if you can read source-code *and* a
prospectus, and most people understand neither.

Complexity is a fraudster’s best friend. Any time someone adds complexity
to a proposition bet (“I’ll pay you X if Y happens”), you should assume
that the complexity exists solely to obscure the true odds and rope you
into a sucker’s wager:

https://pluralistic.net/2022/05/04/house-always-wins/#are-you-on-drugs

Then there’s pseudonymity and anonymity. Anonymity is key to the right to
privacy, but when you combine anonymity with finance — not the right to
speak anonymously, but the right to run an investment fund anonymously —
you’re rolling out the red carpet for serial scammers, who can run a scam,
get caught, change names, and run it again, incorporating the lessons they
learned.

Go through the Web3 Is Going Great archive for scams and you’ll see that
crypto implosions are rarely one-offs. Typically, the fraudsters who steal
millions from crypto gamblers are repeat offenders who’ve refined their
grifts through a series of crimes that they were able to outrun by assuming
new identities:

https://web3isgoinggreat.com/?theme=hack

When you can’t understand the nature of a financial product, and you can’t
know for sure who is offering it, you need some other rule-of-thumb for
determining whether you should gamble your savings on it. The big one here
is “transitive trust”: I trust this person, and this person says the new
coin or product is great, so I’ll trust that, too.

Maybe you trust Larry David, or Matt Damon, or Madonna, or Reese
Witherspoon, or Gwyneth Paltrow, or Spike Lee, or Bill Self, or Paris
Hilton, or Tom Brady, or Mila Kunis, or Aaron Rodgers, or Stephen Curry, or
Marc Cuban, or Shaquille O’Neal, or Serena Williams, or Justin Bieber, or
Eminem, or Jimmy Fallon, or Logan Paul, or Snoop Dogg, or…

https://www.nytimes.com/2022/05/17/business/media/crypto-gwyneth-paltrow-matt-damon-reese-witherspoon.html-crypto-disney-adds-subscribers-the-wide-shot

Of course, it’s easy to explain why you might not trust celebrities to give
you financial advice — being good at acting or sports or music doesn’t mean
you’re good at finance (think of all those stories of celebs who die in
poverty after squandering their millions).

But it’s not just celebs who endorse cryptocurrency and related products.
Some of the biggest names behind new crypto offerings are A-list investors
whose entire public persona is based on their incredible financial acumen.

These investors — including the all-star A16Z, formerly Andreessen Horowitz
— have firmly established that they back cryptos based on whether they can
make money and get out, not on whether the company they’re investing in is
offering a sound, sustainable product. For A16Z, bets on wildly unstable
“stablecoins” or imploding, wildly un-fun “games” like Axie Infinity are
sound investments — not because these firms have any future, but because
coin offerings are unregulated securities that let investors cash out
before the companies collapse.

Even amid this pump-and-dump ethos, one of A16Z’s investment stands out as
especially cynical. The firm led a $70m Series A investment in Flowcarbon,
a “voluntary carbon market” (VCM) cryptocurrency led by Adam Neumann, the
notorious Wework founder whose unethical conduct and misleading statements
scuttled a $47b IPO.

https://protos.com/flowcarbon-funding-round-proves-reputation-means-nothing-in-crypto/

There were lots of things wrong with Wework, and Neumann was behind all of
them. Protos provides some of Neumann’s greatest hits:

   - Running a business culture shot through with substance abuse

https://archive.ph/C7xS8

   - Rampant self-dealing, including rent real-estate to his own company
   and extracting his investors’ cash by offering himself below-market loans
   out of the company’s coffers:

https://archive.ph/3T5dN

   - Filing a personal trademark on the word “We” and then charging his own
   company a $6m license fee to use it (he eventually refunded this, after
   public outrage):

https://www.businessinsider.com/wework-ceo-gives-back-millions-from-we-trademark-after-criticism-2019-9

Protos doesn’t mention Neumann’s most relevant misconduct, though:
employing a nonstandard valuation scheme that allowed him to falsely claim
that his company was worth $47b. At the time, I felt this was obviously
fraud, and subsequent events bore out this assessment:

https://qz.com/1685919/wework-ipo-community-adjusted-ebitda-and-other-metrics-to-watch-for/

Despite Neumann’s manifest untrustworthiness and his history of
capital-destroying financial shenanigans, A16Z has helped him raise $70m.
Remember: if you don’t understand crypto products, and you don’t know much
about businesspeople, you are forced to rely on the judgments of celebrity
investors like A16Z to guide your financial decisions.

Neumann’s new venture, Flowcarbon, will only be profitable if naive, retail
investors also buy into it. Flowcarbon’s main product is a speculative
crypto asset called the Goddess Nature Token (GNT). What is a GNT? It is
meant to represent “a non-binding, self-created carbon offsets for excess
pollution.”

Basically, a carbon offset. Now, carbon offsets are already
*incredibly* scammy.
Large firms deal in tens of millions of dollars’ worth of carbon credits
that represent — for example — forests whose owners have pledged not to log
them. But in many cases, these are forest that would *never* be logged
(because they’re owned by a wilderness trust, say). In other cases, the
forests have *burned down* but the credits for not logging them are still
being traded:

https://pluralistic.net/2022/03/18/greshams-carbon-law/#papal-indulgences

Flowcarbon’s goal is to take this market for lemons and make it *bigger*
 and *faster*, to facilitate “price transparency, liquidity and
accessibility.” The target customers are DAOs and defi projects, especially
ones using planet-destroying proof-of-work systems like Ethereum and
Bitcoin. These projects will be able to buy carbon credits based on even
shakier promises of carbon offsetting and claim that they are carbon
neutral.

As Protos points out, the traditional finance markets for these voluntary
offsets have failed spectacularly. Companies like the Chicago Climate
Exchange (CCX) tanked and took their investors’ capital with them. The
major distinction between Flowcarbon and CCX is being “web3, bro” and being
helmed by a man whose funny accounting and self-dealing cost his investors
$47b.

A16Z and Flowcarbon insist that this will all be very successful: that
there will be a long line of people with sound carbon offsets converting
them to Goddess Tokens and listing them on Flowcarbon’s exchange, and an
equally long line of environmentally concerned DAOs buying those Goddess
Tokens.

Their pitch to you, the person hoping to retire without freezing or
starving to death, is that you should buy the Goddess Tokens now. Get on
the waiting list, and hold Goddess Tokens against the day that they shoot
up in value as Adam Neumann — the $47b failure who nevertheless walked away
with $480m of his investors’ money — leads the company to glory.

Even worse, the scam at the core of Flowcarbon is carbon offsets.
Flowcarbon’s mission is to allow other businesses to claim to be good for
the planet based on dubious carbon offset projects. On one side of
Flowcarbon’s market, you have investors being lured into buying dubious
tokens. On the other side, you have customers of companies who are lured
into buying their products because they believe them to be good for the
planet.

“Two-sided markets” are the darling of the tech investor set. From Uber to
Amazon, tech investors correctly understand that there are fortunes to be
made from Chokepoint Capitalism, where a firm corners a market and extracts
rent from buyers and sellers who can’t reach each other otherwise.

https://www.penguinrandomhouse.com/books/710957/chokepoint-capitalism-by-cory-doctorow-and-rebecca-giblin/

With Flowcarbon, we see true innovation in two-sided market design. Usually
these markets are only an obviously bad deal for one side of the market.
For example, Spotify gives listeners access to a lot of music at a low
price, while robbing musicians (long-term, Spotify also rips off listeners,
too, of course). But Flowcarbon has proposed a two-sided market that’s a
bad deal for *both* sides.

Seen in that light, Adam Neumann is the perfect leader for this business.
Wework was sold as a platform for other businesses to run on. Flowcarbon is
a scam that is also a platform for scams — scams that roast the planet and
bankrupt desperate retail investors, who naively assume that what’s good
for A16Z is good for them.

Image:

Lorie Shaull (modified):
https://commons.wikimedia.org/wiki/File:A_man_walks_by_a_burning_building_on_Thursday_morning_after_a_night_of_protests_and_rioting_in_Minneapolis,_Minnesota_(49945327763).jpg

CC BY-SA 2.0:
https://creativecommons.org/licenses/by-sa/2.0/deed.en

A16Z (modified):
https://a16z.com/2022/05/24/investing-in-flowcarbon/

Fair use:
https://www.eff.org/issues/bloggers/legal/liability/IP#2

*Cory Doctorow (**craphound.com* <https://craphound.com/>*) is a science
fiction author, **activist* <https://www.eff.org/about/staff/cory-doctorow>*,
and **blogger* <https://pluralistic.net/>*. He has a **podcast*
<http://craphound.com/podcast/>*, a **newsletter*
<https://mail.flarn.com/mailman/listinfo/plura-list>*, a **Twitter feed*
<https://twitter.com/doctorow/>*, a **Mastodon feed*
<https://mamot.fr/@pluralistic>*, and a **Tumblr feed*
<http://mostlysignssomeportents.tumblr.com/>*. He was born in Canada,
became a British citizen and now lives in Burbank, California. His latest
nonfiction book is **How to Destroy Surveillance Capitalism*
<https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59>*.
His latest novel for adults is **Attack Surface*
<http://craphound.com/attacksurface/>*. His latest short story collection
is **Radicalized* <https://craphound.com/radicalized/>*. His latest picture
book is **Poesy the Monster Slayer* <https://craphound.com/category/poesy/>*.
His latest YA novel is **Pirate Cinema* <https://craphound.com/category/pc/>*.
His latest graphic novel is **In Real Life*
<https://us.macmillan.com/books/9781596436589>*. His forthcoming books
include Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and
Get Artists Paid (with Rebecca Giblin), a book about artistic labor market
and excessive buyer power; Red Team Blues, a noir thriller about
cryptocurrency, corruption and money-laundering (Tor, 2023); and The Lost
Cause, a utopian post-GND novel about truth and reconciliation with white
nationalist militias (Tor, 2023).*

Harry Forsdick <http://www.forsdick.com/resume/>
Lexington Photo Scanning <http://lexingtonphotoscan.com/>
Town Meeting Member Precinct 7 <http://lexingtontmma.org/>
harry at forsdick.com
www.forsdick.com
  46 Burlington St.
Lexington, MA 02420 <https://goo.gl/xZXT2F>
(781) 799-6002 (mobile) <callto:17817996002>
meet.jit.si/HarryForsdick (video)
Click <http://forsdick.weebly.com/home/my-websites> to see my other websites
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