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Author Topic: Did the Pirate Ponzi fiasco stunt the growth of Litecoin?  (Read 924 times)
crazy_rabbit
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January 22, 2013, 07:37:19 AM
 #1

This is a repost- I think the original version in another thread will be deleted soon.

For those who remember (how could you not) an unhealthy portion of last year was devoted to the Pirate ponzi fiasco, (among other fiascos) the collapse of which took down a fair number of longtimers here in the bitcointalk forums. Many trusted community members believed in pirate and fell victim to his scam, even Coblee himself (creator of litecoin) ran a pirate pass through fund denominated in Litecoin, which, on the implosion of the scam, he was honorable enough to refund personally out of his own pocket. (forgive me if the details are fuzzy)

My question I am posing somewhat hypothetically is this: Did the Pirate fiasco stunt the growth of Litecoin (and perhaps develop in cryptocoin services) by a) locking up a large amount of investment capital that might have otherwise been invested elsewhere b) erode a certain amount of goodwill through the endless months of speculation, acrimony and heartache?

An enormous amount of available capital went into the Pirate fund, buy some estimates half a million BTC. The return promise was so large that even otherwise smart and reasonable people choose rather to invest their BTC with pirate than in anything else. I am assuming that durring last year the amount of capital available to invest in things like paying developers to build new services was monopolized by Pirate as his return on investment far outweighed the potential of anything else.

We know Coblee invested with Pirate, he ran one of the passthru's and for awhile he seemed to strongly believe in Pirate. I am not sure how much of his personal funds he had invested. While refunding the people who invested in Pirate through Coblee was the right thing for Coblee to do, perhaps combined with his own personal loss in Pirate, he so greatly depleted his coin reserves that his continued involvement in Litecoin was no longer such a worthwhile endeavor.

Although I speak of Coblee as one of the most visible members of the community at the time, this logic extends far beyond him. I also mean him no harm, I only address his as the most visible example.

We tend to think of the Developers as Saints of some sort (as donations don't come close to covering the amount of time they invest) but the reality is that they frequently have large stashes of coins from early mining that provide them with an incentive to continue to invest large amounts of time to development. Without this large stash of coins to appreciate in value with every new feature added to the code, development becomes a truly thankless task. If Coblee were to have lost a large amount of his coins due to Pirate, could the loss have been so great as to make it economically unreasonable to continue to devote a large amount of time towards development? Could this have been the case with other Litecoin developers? Have any Bitcoin developers found themselves in a similar situation?

On top of the financial aspect, I think there is an emotional question as well. The past year was rife with accusations, acrimony, slander and trolling of the lowest, most bitter sort. A certain amount of 'goodwill' in the community was eroded by dragging reputable, productive and upstanding members of the community into endless flamewars and accusations. Certainly many of the early Litecoin champions that really 'rallied the trops' sort-of-speak don't seem to post very often anymore.

This isn't to say that other causes aren't to blame, nor can one say with complete veracity that the growth of Litecoin has even been "stunted". I do however sense a palpable difference in the tenor of the litecoin crowd.

Even if I am totally off base with this question, and even if the reader might be vehemently against alt-coins of any type, it begs consideration as to the nature of investment in development versus investment in speculation, and how a community might have more to lose than just it's coins.

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January 22, 2013, 10:23:03 PM
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https://bitcointalk.org/index.php?topic=137942.0

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January 23, 2013, 12:06:28 AM
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While refunding the people who invested in Pirate through Coblee was the right thing for Coblee to do, perhaps combined with his own personal loss in Pirate, he so greatly depleted his coin reserves that his continued involvement in Litecoin was no longer such a worthwhile endeavor.

i believe Coblee's lenders acted immorally by accepting money from Coblee's pocket, when they were told and aware ahead of time what the terms were.

he's a nice guy, but is it really honourable to dishonour a prior agreement?
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January 23, 2013, 10:54:20 AM
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While refunding the people who invested in Pirate through Coblee was the right thing for Coblee to do, perhaps combined with his own personal loss in Pirate, he so greatly depleted his coin reserves that his continued involvement in Litecoin was no longer such a worthwhile endeavor.

i believe Coblee's lenders acted immorally by accepting money from Coblee's pocket, when they were told and aware ahead of time what the terms were.

he's a nice guy, but is it really honourable to dishonour a prior agreement?


This thread is a duplicate because the mods moved the original here, but I think you have a good point. There was talk of legal action against Pass-Thru operators, as some would claim that were part of the fraud as they profited by using their reputation to bring more people into the ponzi. So it might have been a legal necessity. It's quite unfortunate however- and I agree, users should probably have come to some agreement with Coblee, maybe a portion of the return, since coblee lost his own money in it as well. 

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January 23, 2013, 10:59:53 AM
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but no one probably knows for sure where the bitmoney is/went

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January 23, 2013, 12:40:10 PM
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You've got some good points here and I agree, we did lose Coblee over this. To those of us who have been around it was obviously a Ponzi and it was a shame to see him start the pass-through and even worse to see him lose interest after it all crumbled. But BTC can continue without Satoshi and we all hope LTC can do the same.

There will be more scams to come no doubt about that. Let's hope that cryptocoin community becomes a bit wiser after each hit and not become too paranoid.
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